Uganda promises freight for SGR to win Chinese lenders

June 26, 2017 in Business, Finance, Infrastructure, Transport by Editor

June 26—Chinese funding for the standard gauge railway (SGR) extending from Nairobi and into Uganda looks more certain after top transport officials from the two countries made renewed commitments over the weekend.

Kenya Transport Cabinet Secretary James Macharia and Monica Azuba Ntege, Uganda’s Minister of Works and Transport, were meeting in Nairobi.

In joint statement, Ntege and Macharia said, ‘The Republic of Uganda has committed to ensure that at least 80% of all cargo destined for Uganda will be transported by the SGR. The details of the mechanisms will be discussed.’

China’s Exim Bank is expected to provide the bulk of the money by way of loans to both countries. However sources say the bank required a confirmation by the Kenyan government that it is was ready to take the SGR to the border while Uganda guaranteed regular freight.

This comes a month after President Uhuru Kenyatta requested the Chinese government (through Exim Bank) to provide a further $3.5 billion loan to build the Nairobi-Kisumu SGR line with plans for extending it to Malaba.

However the Chinese were concerned that the Kenya government had been lukewarm in seeking extra funding  for the Kisumu-Malaba line until now. The Mombasa-Nairobi section cost $3.2 billion, but estimates for the Malaba-Kampala section put it at just over $2 billion.

‘The bank has emphasised the need for joint development of the SGR together with the government of Kenya to achieve viability; in particular the synchronisation of the construction timelines of Naivasha-Kisumu-Malaba in Kenya and Malaba-Kampala in Uganda’, the statement reads in part.

According to the SGR secretariat in Kampala, the new line will reduce the transportation time from the average one to two weeks to just a single day between Mombasa and Kampala. It will also stimulate industrialisation reducing Uganda’s cost off freight from Mombasa by 69% from the current $160 to an average $50.