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Economy

Why Chinese bank imposed SGR line operator on Kenya

Kenya Railways managing director Atanas Maina. PHOTO | FILE
Kenya Railways managing director Atanas Maina. PHOTO | FILE 

A China-based financier forced Kenya and Uganda to pick a Chinese company as the operator of the rail business on the standard gauge railway (SGR) without public bidding.

State-owned China Exim Bank told Uganda that they would only get funding to build their section on condition that it agrees with Kenya to hire the Chinese contractor to run the line from Mombasa to Kampala.

Kenya will now sign a deal with China Communications Construction Company (CCCC) — the firm building the Sh357 billion Mombasa-Nairobi line — to run the rail business.

“Recently Uganda went to engage the China Exim Bank and one of the conditions they were given is that between Uganda and Kenya, we must appoint one operator to do operations and maintenance of SGR between Mombasa and Kampala in order for the bank to consider any financing,” Atanas Maina, the Kenya Railways managing director, said on Tuesday.

The Mombasa-Nairobi railway is expected to be completed in June next year.

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Kenya had initially talked of seeking an operator through an open competitive tender and in March started the search for transaction advisers to help procure an operator for the new line.

RVR, which operates the Kenya-Uganda railway, is expected to face competition from the new railway being built with Chinese financing from Mombasa to Uganda.

The Transport ministry Tuesday said it is already finalising a five-year agreement with CCCC for the Chinese firm to run the SGR operations.

"You see, these investments about bridges, we would like the person who has done them to test them. To make sure we don’t have a train flipping because the contractor did a shoddy job. So it ensures accountability,” James Macharia, the Transport Secretary said.

Offering Chinese firms the contract to operate the standard-gauge line is set to rekindle talk over the award of the contract to build the multibillion-dollar railway line to a firm from China, which sparked widespread criticism over the transparency of the process. 

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