Trade PS Denies UAE Takeover in SGR Expansion Deal

The deal between Kenya and the United Arab Emirates (UAE) for the expansion of the expansion of the Standard Gauge Railway (SGR) to Uganda will be structured differently from that of the Chinese.

According to Trade Principal Secretary Alfred K’Ombudo, Abu Dhabi Ports will not take over the operations of the railway under the agreement.

While speaking during an interview with Bloomberg Television, the PS refuted any claims that the UAE would take over the operations of the railway.

“There are talks of Abu Dhabi Ports potentially taking it over?” he was asked. He responded, “Not that I am aware of.”

Under the previous agreement, the initial railway section from Mombasa to Nairobi, was constructed by the China Road and Bridge Corporation (CRBC). The Financing for the project amounted to US $3.6 billion, with 90 per cent provided by a loan from the Exim Bank of China and the remaining 10 per cent funded by the Kenyan government.

Upon completion, the Kenya Railways Corporation (KRC) owned the railway infrastructure. However, operations and maintenance were contracted to the Africa Star Railway Operations Company (Afristar), a subsidiary of CRBC.

Afristar was granted the rights to operate the SGR for the first ten years, with an interim review planned after five years. While many Kenyans were employed in various roles, critical positions such as dispatchers and locomotive drivers were predominantly held by Chinese workers during the initial years of operation.

This arrangement led to unease, and although initially a complete transfer was anticipated by 2027, subsequent negotiations expedited this process to May 2022. By June 2021, the Kenya Railways Corporation had already taken over departments including ticketing, security, and refuelling.

There were concerns over a similar structure of the deal, however, according to the PS, there are no discussions held over this. It is, however, important to note that in the China agreement, the systems were new to Kenya, unlike the expansion.

Discussions over the project are ongoing, with an estimated cost of Ksh549 billion to expand the railway from Naivasha to Malaba. The government is silent on whether the expansion will include more trains or just the rail and railway stations.

However, an expansion from Naivasha into Uganda is estimated at a cost of Ksh2.1 trillion for extending the railway to Kisumu, Malaba, and Isiolo by June 2027.

Kenya’s pivot to the UAE comes after the Exim Bank of China expressed willingness to fund the extension of the SGR in May last year. The talks seem to have stalled.

“We look at this cooperation as one that will enable us to potentially finalise the railway to Uganda and therefore strengthen our capabilities for trade,” PS K’Ombudo told Bloomberg.