advertisement

Economy

Chinese firm managing SGR pockets taxpayers’ billions

SGR Cargo train at the Inland Container Depot, Nairobi
SGR Cargo train at the Inland Container Depot, Nairobi. file photo | nmg  

Taxpayers paid billions to the Chinese firm managing the Nairobi-Mombasa standard gauge railway (SGR) line as the mega rail struggles to raise revenues adequate for its operations.

The Transport committee of the National Assembly says the Treasury reviewed its budget to accommodate an additional Sh59 billion payment that includes management fees for SGR operations.

“Additional allocation made to some projects such as Mombasa-Nairobi SGR of Sh59 billion was to cater for payment for pending certificates and management fees for the operations of the SGR among others,” noted the Transport committee in review of the budget ending this month.

The committee did not give a breakdown of the Sh59 billion.

Kenya services loans taken from China Exim Bank for the construction of the line and is expected pay Sh26.61 billion in the current year and Sh36.24 billion for the next, starting July.

China Communications Construction Company runs the SGR cargo and passenger business on undisclosed management fees.

The SGR ticket sales stood at Sh590.2 million in six months to December, collections that are inadequate to meet the operation costs in the short term. Passenger fares rose to Sh1,000 a seat, from the promotional Sh700 during the launch last June, what is expected to help cover the costs of the SGR line.

A consultant picked by the state to look at SGR fares proposed between Sh1,000 and Sh1,200 on economy class. First Class fares are at Sh3,000.

The promotional tariff was supposed to end on April 4 but Kenya Railways extended it again until June 30. This has seen SGR freighters pay a flat fee of Sh35, 000 for a 20-foot container and Sh40, 000 for a 40-foot container from Mombasa to Embakasi Inland Container Depot (ICD).

The SGR cargo business has struggled for business in the face of competition from road truckers, prompting a fierce State campaign to drive cargo to the new rails.

Kenya in May 2014 entered a deal to borrow $3.233 billion loan (Sh324.01 billion) from China’s Exim Bank, comprising $1.633 billion commercial loan and $1.6 billion concessional lending to build a 385km railway between Mombasa and Nairobi.

The loan, whose interest is 3.6 percentage points above the six months average of Libor that serves as an international benchmark, is to be repaid in 15 years with a grace period of five years.

advertisement