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Kenya seeks additional funding for completion of Chinese-built railway

October 14, 2023 | by b1og.net

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Kenya seeks additional funding for completion of Chinese-built railway

Kenya’s Chinese-built railway, known as the Standard Gauge Railway (SGR), has encountered obstacles and deviated from its initial intention of connecting landlocked countries in East Africa. While the passenger side of the railway has seen success and is consistently fully booked, it does not generate sufficient revenue to repay the loans. The cargo side of the business, which aimed to transport containers from Mombasa port to inland countries such as Uganda and Rwanda, faces limitations as the railway terminates in Naivasha town. Consequently, many freight trains return empty, resulting in lost potential income. Seeking additional funding to complete the remaining portion of the railway, Kenya is open to exploring options at the upcoming Belt and Road Summit in China. However, concerns about China’s Belt and Road Initiative (BRI), due to opaque bidding processes, inflated costs, and growing debt in recipient countries, raise apprehension among Kenya’s citizens and critics. In response, other African countries like Tanzania are pursuing alternative railway projects and seeking funding from sources other than China. While efforts are being made by Western countries to counter China’s influence in Africa, China still offers more in terms of long-term development. Kenya hopes to convince China that the SGR railway will be profitable if it extends beyond the border.

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Challenges of the Chinese-built railway

The Chinese-built railway in Kenya, known as the Standard Gauge Railway (SGR), has faced several challenges since its inception. One of the major setbacks is that the railway has failed to fulfill its original plan of linking to other landlocked countries in East Africa. This was a significant aspect of the project as it aimed to boost trade and connectivity within the region. Unfortunately, this plan has not been realized, limiting the railway’s potential impact.

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Another challenge lies in the revenue generation of the SGR. While the passenger side of the railway has been successful and is often fully booked, it cannot generate enough revenue to repay the loans that were taken to fund its construction. The high cost of the infrastructure, coupled with the low fares charged to passengers, makes it extremely difficult for the railway to generate significant profits. As a result, the passenger side of the business faces financial difficulties.

On the cargo side, the SGR was intended to bring containers from the Mombasa port to landlocked countries like Uganda and Rwanda. However, the railway only goes as far as Naivasha town in Kenya, limiting its reach and potential impact on the region’s trade. This limitation restricts the railway from fully serving its intended purpose, and alternative transportation methods are still required to transport goods beyond Naivasha. This has been a major setback for the railway’s cargo operations.

Losses incurred by the railway

The limitations faced by the SGR have resulted in significant losses for the railway. One notable loss is the frequent empty return trips of freight trains from Mombasa. Due to the limited extent of the railway and the lack of connectivity to other countries, many freight trains are forced to return to Mombasa empty. This results in a loss of potential income that could have been generated from transporting goods from inland countries back to the port. The inefficiency of these return trips is a major financial burden for the railway.

Furthermore, the SGR’s inability to fulfill its original plan and the consequent limitations imposed on its cargo side have led to a loss of potential income and economic benefits. The railway was expected to play a crucial role in boosting trade and connectivity within the East African region, contributing to economic growth and development. However, the inability to fully utilize the cargo operations has hindered the realization of these potential gains, further adding to the losses incurred by the railway.

Kenya seeks additional funding for completion of Chinese-built railway

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Kenya’s need for additional funding

Given the challenges faced by the SGR and the losses incurred, Kenya is in dire need of additional funding to address these issues. The completion of the remaining portion of the railway is a priority for the government, as it would enhance connectivity and trade within the region. In order to secure funding, Kenya is open to exploring various options, one of which includes seeking assistance at the upcoming Belt and Road Summit in China.

The Belt and Road Initiative (BRI), launched by China in 2013, presents an opportunity for Kenya to secure additional funding for the completion of the railway. The BRI aims to enhance cooperation and connectivity between China and other countries through infrastructure projects. By actively participating in the Belt and Road Summit, Kenya hopes to attract investment and financing from China to support the completion of the railway. This additional funding would play a vital role in addressing the challenges faced by the SGR and ensuring its long-term sustainability.

Concerns regarding the Belt and Road Initiative

While the Belt and Road Initiative offers potential funding opportunities, it also raises certain concerns. One of the criticisms leveled against the initiative is the opaque bidding processes associated with the infrastructure projects. Transparency is crucial in ensuring fair competition and preventing corruption. However, some projects under the BRI have been criticized for lacking transparency in the bidding processes, which has raised concerns among both recipient countries and the international community.

Another concern relates to the inflated costs associated with some infrastructure projects under the BRI. Critics argue that the costs of these projects are often higher than necessary, leading to potential economic inefficiencies. This can result in a burden for the recipient countries, who are required to repay the loans taken to finance these projects. The issue of inflated costs raises questions about the economic viability and sustainability of the infrastructure developments under the BRI.

Furthermore, there are concerns regarding the growing debt in recipient countries as a result of their participation in the Belt and Road Initiative. While the initiative presents opportunities for infrastructure development and economic growth, the high levels of debt incurred by some countries have raised concerns about their ability to repay these loans. The sustainability of the debt burden and its impact on the economic stability of the recipient countries is an important consideration.

Kenya seeks additional funding for completion of Chinese-built railway

Debt profile and concerns about transparency in Kenya

Kenya’s heavy debt profile is a significant concern for the country’s citizens and critics. The construction of the SGR alone has contributed to a substantial increase in Kenya’s debt. This has led to apprehension about the country’s ability to meet its loan obligations and the long-term impact on its financial stability.

Additionally, there are concerns about the transparency of deals made between Kenya and China. Transparency is crucial in ensuring that agreements are fair and in the best interest of the country. However, the lack of transparency in some of the deals made between Kenya and China has raised suspicions among citizens and critics alike. The lack of information surrounding the terms and conditions of these deals fuels concerns about potential negative consequences for Kenya’s economy and long-term development.

Alternative railway projects in African countries

In light of the challenges faced by the SGR and the concerns surrounding the Belt and Road Initiative, some African countries are exploring alternative railway projects. One such example is Tanzania, which has pursued alternative railway projects with funding from sources other than China. By diversifying their funding sources, these countries aim to reduce their dependence on Chinese financing and ensure a more balanced and sustainable approach to infrastructure development.

Seeking funding from sources other than China is a proactive step taken by these countries to mitigate some of the risks associated with the Belt and Road Initiative. By exploring alternative options, they can foster healthy competition and ensure that agreements are reached in a transparent and fair manner. This approach not only reduces the risk of over-reliance on a single source of funding but also promotes greater economic diversity and stability in the region.

Kenya seeks additional funding for completion of Chinese-built railway

Western countries’ attempts to counter China’s influence

China’s involvement in Africa, particularly through initiatives such as the Belt and Road Initiative, has garnered attention and concern from Western countries. These countries have been attempting to counter China’s influence in Africa by offering their own financing and cooperation initiatives. Their aim is to provide African countries with alternative options and foster a more balanced approach to development partnerships.

While Western countries’ attempts to counter China’s influence are commendable, it is important to note that China often offers more in terms of long-term development. China’s infrastructure projects, such as the SGR, have the potential to significantly boost connectivity and trade within the region. The scale and scope of China’s investments in Africa have the ability to deliver long-lasting benefits that contribute to economic growth and development.

Advantages of China’s involvement in Africa

China’s involvement in Africa, despite the challenges and concerns surrounding it, offers several advantages. One of the key benefits is that China provides significant investment and financing for large-scale infrastructure projects. This injection of capital contributes to the development of modern transportation systems, such as the SGR, which enhance connectivity and facilitate trade within the region. China’s investment in infrastructure serves as a catalyst for economic growth and development in African countries.

Furthermore, China’s approach to development partnerships is often characterized by mutually beneficial cooperation. China not only provides funding for infrastructure projects but also offers technical expertise and knowledge transfer. This enables African countries to acquire skills and build capacity in various sectors, contributing to their long-term development. China’s involvement in Africa is not limited to financing; it extends to broader engagement that promotes sustainable growth.

Kenya seeks additional funding for completion of Chinese-built railway

Kenya’s plan to make the SGR railway profitable

Kenya recognizes the potential profitability of the SGR railway and has devised a plan to make it financially sustainable. The government aims to convince China to extend the railway to the border and beyond in order to unlock its full potential. By connecting the SGR to other countries in East Africa, such as Uganda and Rwanda, the railway would be able to generate additional revenue from the transportation of goods and passengers.

Extending the SGR to the border and beyond would significantly enhance the railway’s capacity to serve as a vital trade and transportation corridor in the region. This expansion would address the limitations faced by the cargo side of the railway, allowing for the seamless movement of goods from the Mombasa port to other landlocked countries. The increased connectivity and improved trade facilitation would contribute to the profitability of the SGR and make it an essential driver of economic growth in Kenya and the surrounding region.

In conclusion, the Chinese-built railway in Kenya, the Standard Gauge Railway (SGR), has faced challenges and has yet to fulfill its original plan of linking to other landlocked countries in East Africa. The passenger side of the railway is successful but unable to generate enough revenue, while the cargo side is limited in its reach. The losses incurred by the railway, such as empty return trips and loss of potential income, highlight the urgency for additional funding. Kenya is exploring options at the upcoming Belt and Road Summit in China, while also recognizing concerns regarding the initiative’s opaque bidding processes, inflated costs, and growing debt in recipient countries. Transparency concerns and heavy debt profiles in Kenya further complicate the situation. However, alternative railway projects in African countries and Western countries’ attempts to counter China’s influence present potential solutions. China’s involvement in Africa offers advantages in terms of long-term development, and Kenya’s plan to make the SGR railway profitable involves convincing China to extend the railway to the border and beyond. With thorough evaluation and strategic planning, the SGR has the potential to overcome its challenges and become a key driver of economic growth and regional connectivity in East Africa.

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