Opinion: SGR and Kenya’s Debt to China by Alex Kannegiesser-Bailey

Opinion: SGR and Kenya’s Debt to China by
Alex Kannegiesser-Bailey

The Mombasa–Nairobi Standard Gauge Railway (SGR), which was completed in June 2017, connects the large Indian Ocean city of Mombasa with Nairobi, Kenya’s capital and largest city. The second phase of construction, which will link Nairobi to Naivasha, is currently underway and is valued at Sh150 billion ($2 billion). The initial prime contractor, China Road and Bridge Corporation (CRBR), has been taken over by the China Communication Construction Company (CCCC). Media reports claim that the project will cost three times the international standard for a railway, which raises concerns about Beijing’s true motives.

The entire 1,700 kilometre railway project is intended to boost trade between Kenya, South Sudan, eastern parts of the Democratic Republic of Congo, Rwanda and Burundi. The route is part of the East Africa Community (EAC) protocol for development. The EAC is a regional intergovernmental organisation of six partner states, comprising Burundi, Kenya, Rwanda, South Sudan, Tanzania and Uganda. It focuses on regional integration and connection between all member states, to create a sustainable economic and political bloc.

The SGR is Kenya’s largest infrastructure project since independence in 1963. It is the first railway to be built in the country since Britain’s “lunatic line”, which was completed in 1901. In 2014, China signed a contract to fund the project, as part of its immense Belt and Road Initiative. While Kenya might be able to repay the loan for the Mombasa-Nairobi phase in four years, there are reservations about its ability to do so, due to the repercussions from the country’s worst drought in 30 years, which lasted from 2014 into early 2018. The drought raised food prices and led to financial difficulties for many citizens.

The government has also signed off on loans from China for the next two phases of the SGR project. If Kenya defaults on its repayments, there is a chance that China will take ownership of the railway, just as it took control of Hambantota Port in Sri Lanka, when Colombo failed to service the loans that funded its construction. Beijing has also invested in minerals, oil and land in the Democratic Republic of Congo, Angola and Tanzania; the railway could be utilised to fully exploit those investments.

Further hesitations over the project have arisen because the SGR uses diesel-powered rolling stock. Comparing Kenya’s diesel-powered railway to the electric trains in surrounding countries, Transport and Infrastructure Cabinet Secretary, James Wainaina Macharia, stated in July that the railway could be upgraded into an electric line, although not in the near future. He claimed that ‘the power supply that we have in this country is not guaranteed. There are frequent power outages that could derail the running of trains.’ Additional issues about the SGR were raised by members of the Departmental Committee on Transport, who argued that the project unduly benefits the Kenyan elite and has left the common citizen behind. According to figures from the Ministry of Transport, the SGR made a Sh10 billion loss ($140 million) last year, as cargo trains were usually empty travelling back to Mombasa.

Controversies over the railway’s work environment have also caused angst, with negative remarks about the project appearing on social media. A report by Paul Wafula, a Kenyan journalist, caused controversy, by detailing the neo-colonial behaviour and discrimination occurring on the project. He also highlighted wildlife-killings and drew attention to the high taxes being paid by the common citizen to keep the project running. According to his report, Kenyan workers are doing menial jobs and being paid less than a quarter of what their Chinese counterparts earn for doing the same job.

A list of personnel showed that CRBR employed 50 Chinese drivers compared to 38 locals, with the contractor also opting to keep the programming of the trains in Chinese, so that Kenyans are unable to operate the systems and therefore unable to work in higher operational positions. As the railway goes through a national park, promises were made to implement protective measures, such as sensors on the trains. Reports show, however, that at least two lions and five buffaloes were killed during the first stage of construction.

After the release of Wafula’s report, Kenyans went to social media, using the hashtag #IStandWithWafula. They condemned their government for what they said was bullying and a breach of democratic rights, as Wafula was threatened after he wrote about the conditions experienced by local workers on the SGR. Since the outcry, there have been calls for an independent investigation of the railway project. The call for an investigation was countered by the Chinese contractors asking all employees to sign secrecy agreements, to prevent pictures being taken and subsequently being uploaded onto social media.

The SGR project is Kenyan President Uhuru Kenyatta’s legacy. As of June 2017, the country owed Sh722.6 billion ($10 billion) in debt to China. The total debt is now estimated to be around the Sh1 trillion mark. While the SGR project has inevitable hurdles, there is still optimism that it will lead to positive trade outcomes for Kenya and the other countries involved in the project. If it does, that will help to minimise the effects of the country being entangled in this apparent debt trap.

* Alex Kannegiesser-Bailey, is a Research Assistant with Indian Ocean Research Programme of Future Direction International

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