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SGR China Debt Why Kenya could be forced to sell SGR to China

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SGR train service in big trouble

President Uhuru Kenyatta flags off one of the SGR trains during the launch of the cargo service play President Uhuru Kenyatta flags off one of the SGR trains during the launch of the cargo service (Nation)

Deputy President William Ruto on Sunday claimed that grandiose SGR project would break even by the end of the year and that it would fully pay its debt by 2020.

Whether by design or by default, NTV journalist Mark Masai did not follow up to challenge the Deputy President to clarify and substantiate the claims that appear ridiculous.

Economist David Ndii, ranked at number 33 in the world’s list of top 100 most influential economists, has already accused Ruto of “lying through the teeth”.

Ndii’s main argument on the unsustainability of the SGR project is based on its high economic cost that does not match its socioeconomic benefits.

SGR does not have the capacity to become viable. It can only carry 8.76 millions tonnes with max revenue of Sh20 million interest. Its a bridge to nowhere… the Jubilee govt is playing politics,” Ndii observes.

 

The main challenge, however, is that the SGR cargo trains do not even meet their targets as placed on paper.

On 1 of January this year, Transport CS James Macharia launched the cargo train which carried 104 containers in its maiden trip.

Despite the hype on the efficiency offered to transporters, the SGR did not get any cargo for the next three days until January 5.

Since then, the government has forced traders to use the SGR in transporting cargo from Mombasa to Nairobi but the numbers still remain low.

The cargo train has a capacity of 216 containers, and with seven trips per day, could carry about ten thousand containers per day.

But the reality is that the service has averaged about six hundred containers per week since its launch in January.

Assuming that the cost of ferrying each container is Sh60, 000, that amounts to a weekly revenue of Sh36 million per week or Sh144 million per month.

This, against a monthly operations bill of Sh1 billion, excluding the interest on the Sh320 billion loan that was granted by the Chinese in 2014.

The loan was borrowed at an estimated annual rate of 4.029 per cent and although Kenya was supposed to start paying for it in 2019, the interest clocked since 2014 when the loan was first given.

Meaning? We will be owing the Chinese nearly 380 billion when we start paying the loan next year.

 

As the figures show, the train service is only breeding losses, reminiscent of a similar Chinese-funded Sh150 billion project for the expansion of Hambantota port.

Like the SGR in Kenya, Sri Lanka was tricked into taking a generous Chinese loan to expand its port.

Unfortunately, the expanded project could not finance the debt owed, ultimately forcing the sell its port to a Chinese state-owned company in 2017.

Could it be that the Chinese have all along planned to pull the Sri Lankan stunt here in Kenya? My gut tells me so.

Those who have used the SGR passenger train may have noted that in every coach, the Chinese flag is placed on the right side while the Kenyan flag is on the left - such small details speak volumes.

The fact that the Chinese have failed to transfer skills to Kenyans as stipulated in the contract eerily suggests that they are here for the long haul

The writer is a journalist and a public comentator. The views expressed here are independent and not reflective of the position held by Pulselive.co.ke

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