Kenya has signed a commercial contract for the construction of the next section of the Standard Gauge Railway (SGR) from Naivasha to Malaba, the Ministry of Finance has revealed ahead of next week's return to the Eurobond market.
The disclosure, included in the Treasury's prospectus to foreign investors, sets the stage for the extension of the line to the Ugandan border in the third phase of the project, commonly referred to as Phase 2B.
“Commercial agreements related to Phase 2B have been signed and funding is pending,” the Treasury prospectus states.
Phase 2A of the project will run from Nairobi to Naivasha and phase 1 will run from Mombasa to Nairobi.
The SGR will be extended from the town of Malaba to Kampala, the capital of Uganda, before ending in Kigali, Rwanda in the third phase.
Another line will link the lakeside city of Kisumu with Maraba, with the total cost of these extensions reaching $13 billion (Sh2.08 trillion).
The Ministry of Finance revealed that feasibility and preliminary designs for Phase 3 are also being undertaken.
China reportedly expressed doubts about the project's viability and insisted that Uganda commit to participating in the project before releasing funds for the SGR extension.
The original plan for the Chinese-built SGR was to allow modern railways to reach into the region and pick up more traffic from the three countries.
In December 2022, Road Transport Minister Kipchumba Murkomen unveiled Kenya's plans to extend the SGR to Uganda through a five-year plan. This will be achieved through partnership with the Chinese government, he said.
The modern railway extension from Mai Mahiu in Naivasha to the Ugandan border will see the multi-billion dollar rail line pass through Narok, Bomet, Nyamira, Kisumu and finally Maraba.
“In the long term, we want to complete the SGR connection from Suswa through parts of Bomet, Nyamira and Kisii to Kisumu and then on to Malaba. We would then like to complete the existing MGR via Nakuru to Kisumu. , and possibly upgrading to Maraba via Eldoret,” Markomen said in a statement.
As it stands, SGR, which has gobbled up $5.1 billion (Sh818.5 billion) in loans from the Export-Import Bank of China, is off the road even as it continues to incur heavy costs on China-raised debt. It has not been possible to absorb large amounts of cargo. Build the line.
“With the construction of the SGR from Mombasa to Malaba, the government will ensure that rail transport handles 50 per cent of freight traffic, thereby reducing strain on roads, reducing business costs and boosting trade and regional integration in East Africa. We expect this to strengthen,” the Ministry of Finance said in its prospectus.
According to official data, total cargo traffic through SGR in 2022 was 6.09 million tonnes, which is just five times less than the 31.5 million tonnes of dry bulk, dry bulk and bulk liquids handled by Kenya Ports Authority (KPA). It was less than 1.
While using SGR is efficient, safe, and faster than roads, traders are discouraged by high costs and lack of last-mile connectivity to businesses.
However, the government is using its own funds to upgrade the existing meter gauge rail network to enable seamless connectivity with the SGR.
A 23.5 km MGR rail link has been constructed from Mai Mahiu to connect Longonot Saswa MGR station to Malaba MGR.
Longonot Suswa – Malaba MGR is also being upgraded to provide better connectivity to Kampala.
Kenya's plans to control East Africa's logistics corridors were put to a new test last year when Tanzania moved to extend the SGR to neighboring landlocked countries, months after Kenya's logistics stalled in Naivasha. .
Last year, Tanzania signed a $2.2 billion (Sh352.63 billion) contract with two Chinese contractors to build the final section of the 2,102-kilometre SGR, the longest modern rail line on the continent, by 2026. It is scheduled to be completed in .
Dar es Salaam Port is a major competitor to Kenya's Mombasa Port.
Tanzanian President Samia Suluhu Hassan has said in the past that the completion of SGR, which will eventually be extended to Burundi's nickel hub, will help Tanzania leverage its geographical advantage.
“The main objective was to connect Tanzania with Burundi and the Democratic Republic of Congo,” said President Suluhu, who has already identified a contractor to extend the line from Mwiza, Tanzania, to Gitega, Burundi, near the nickel mining site. he added. .
“This is a railway that opens up Tanzania and connects it to the eastern side of the Democratic Republic of Congo, where there is a large amount of cargo that needs to be transported from Indian Ocean ports to global markets.”
This mineral-rich region of the DRC has the potential to transport 150 million tons of goods.
