China had good reasons to deny Kenya loan for SGR extension

The government has denied having — unsuccessfully yet again — sought Chinese funds to extend the standard gauge railway from Naivasha to Kisumu but highly placed diplomatic sources say the embarrassment shows the President may not be receiving sound advice from his top diplomats, economists and other technical experts.

TRANSPARENCY

Yes, there is a need to upgrade our dilapidated railway infrastructure; yet no one thought the Chinese-funded SGR from Mombasa to Nairobi would be among the costliest — at $7 million (Sh700 million) per kilometre on average.

For their electrified rail, Ethiopians paid $4.5 million per kilometre, Nigerians $4.6 million for the Abuja-Kaduna line and Tanzanians $4.0 million for the Dar es Salaam-Morogoro line being developed by a Turkish company.

Evidently, Kenya’s biggest infrastructure project in our lifetime may not have benefitted from honest benchmarking or unbiased study. But Nzioka Waita, Chief of Staff at the State House, contradicted the President on transparency and accountability by asserting that the relevant documents cannot be made public for scrutiny.

And the issue is garnering global attention. Some view this flagship project as an epitome of corruption and incompetence.

The exorbitant Phase I price tag is cited as an example of the predatory lending practices used by China to fleece developing countries that lack capacity to negotiate and oversee large infrastructure projects. The 120km extension to Naivasha comes at a staggering $12.5 million per kilometre while the Kisumu extension would have cost even more — at an unjustifiable $13.6 million!

RENT SEEKING

It is incredible that our government would seek, in good faith, a contract for a project costing three times its value. Besides the difficulty of coming up with suitable collateral to secure the loan, the Chinese may have found it difficult to make such a costly investment in a project of low returns.

In the context of the Belt and Road Initiative, our SGR is not merely a national railroad. Like its antiquated colonial precursor, the metre gauge railway, it is supposed to link the port of Mombasa to the interior of Africa. It is a strategic investment for a China seeking commercial, economic and political interests in Africa.

Had Kenya, Uganda, Burundi, Rwanda, South Sudan and DR Congo negotiated jointly under the auspices of, say, the Northern Corridor Transit and Transport Coordination Authority, they could have extracted, in a win-win arrangement, a modern railroad from Beijing at a minimal cost.

Instead of viewing it as a critical infrastructure meant to connect people and commercial centres, Kenya’s political elites saw opportunities for rent seeking and adopted a narrow focus. They inflated costs, invented land scams and sought grandiose train stations where simple platforms could have sufficed — like what is being built in Suswa or Maai Mahiu.

FRAUDELENT DEALS

The government may have offended the Chinese (and Ugandans) by unilaterally rerouting a centrepiece of BRI in Eastern Africa away from the commercially viable and populous towns of Nakuru, Eldoret and Bungoma to the sparsely settled Narok. The former are interested in tapping into the wealth and minerals of Congo, not what Kisumu offers.

Aware of the fraudulent deals on the Mombasa-Nairobi line, Beijing probably also questioned the need for funds to acquire land when there was enough wayleave to Malaba.

It is often said that the Chinese may be corrupt but by no means foolish. By denying Kenya funds to implement a grossly inflated and poorly-conceived project, Beijing has projected itself as an emerging superpower that is both responsible and pragmatic.

The importance that China attaches to its reputation as the global player capable of delivering complex infrastructure at the lowest cost. Our projects dent that image.

Mr Chesoli is a New York-based development economist and global policy expert. [email protected] @kenchesoli