China’s Belt and Road Initiative: Kenya and a railway to nowhere

The grand opening of the first segment of Kenya’s Chinese-built railway in 2017 was celebrated with great enthusiasm. However, two years later, construction on the railway came to a halt in the middle of the country, casting doubt on the master plan of connecting it to other landlocked East African nations.

As a result, the project has not generated the expected revenue at this stage, and Kenya finds itself burdened with servicing loans of approximately $4.7 billion, primarily borrowed from Chinese banks.

Nonetheless, it’s hard to deny the success of Kenya’s Standard Gauge Railway (SGR) when passengers disembark from a fully occupied 12-carriage train at the Syokimau railway terminus in Nairobi, the final service of the day. These passengers have traveled non-stop from Mombasa, a journey of 470 km (290 miles) along the Indian Ocean.

“It’s great,” says 53-year-old commuter Pauline Echesa. She enjoys the bonus of observing wildlife as the railway cuts through national parks during the four-and-a-half-hour journey.

While some passengers may find the experience slightly less comfortable, the cost savings compared to other modes of travel up the coast make it an attractive option for a 30-year-old commuter.

Although the passenger side of the business is thriving and fully booked, it was never meant to be the sole source of loan repayment. The burden of repayment was meant to fall on the cargo side of the business, which was supposed to transport containers arriving at Mombasa port to Uganda, Rwanda, and the Democratic Republic of Congo.

However, these containers can only reach the Kenyan town of Naivasha, which is 120 km from Nairobi but still far from the Ugandan border. As a result, most freight trains return to Mombasa empty, representing a significant loss of potential income.

Kenya’s Transport Cabinet Secretary, Kipchumba Murkomen, states that the government is exploring options for funding the completion of the railway project during the upcoming Belt and Road Summit in China. This summit, part of China’s Belt and Road Initiative (BRI) launched in 2013, has garnered global attention and transformed infrastructure in Africa.

However, the future of the BRI is now a subject of debate, with China reducing funding while some African countries face mounting debt that could jeopardize their economies. Concerns include opaque bidding processes and the requirement to use Chinese firms, which have led to inflated costs and, in some cases, project cancellations and political backlash.

Internal issues in the Chinese economy have also contributed to diminished funding. Nigeria’s former Deputy Central Bank Governor, Kingsley Moghalu, notes a significant decrease in funding levels across the continent in recent years.

Kenya remains open to options and is willing to engage private sector players in China to support the project’s completion. Potential solutions include grace periods to allow the country to first service the loans taken to finance completed railway sections.

The acknowledgment that the government is seeking additional funding may not sit well with many in Kenya, who are already grappling with tax hikes introduced in the past year. Kenyans are concerned that debt repayments are straining the country’s economy, with China being the third-largest external creditor, accounting for 19.4% of Kenya’s debt.

The lack of transparency in agreements with China has raised concerns among Kenyan citizens and foreign critics. The Council on Foreign Relations has pointed out that loan terms are seldom made public, and the absence of pressure on Chinese banks to cap lending rates or share information has led to significant risks for both the US and recipient countries.

For Kenya’s railway to realize its envisioned benefits, it needs to expand transnationally. Uganda’s involvement is crucial, as originally outlined in the East Africa Transport Master Plan. However, Uganda’s preference may sway toward Tanzania, as its railway project is more cost-effective and offers higher speeds due to electrification.

Tanzania’s former President, John Magufuli, opted to secure funding from Turkey and Portugal for the first leg of the project, cancelling the deal signed with China. Tanzania is also progressing in connecting with Rwanda, Burundi, and DR Congo, with China’s involvement in later phases.

Advocates like Kingsley Moghalu argue that African countries should take charge of their destinies, emphasizing that they should not feel beholden to China.

While Western countries, including the US, have been trying to counter China’s Belt and Road Initiative, there is a consensus that China can offer more in terms of long-term development.

For commuters traveling between Nairobi and Mombasa, such investments in the country’s future are undoubtedly worthwhile. The Kenyan government is striving to convince China and its banks that the SGR railway will be profitable if it extends to the border and beyond.