As controversy stalks the award of a Ksh327 billion ($3.8 billion) tender for a new standard gauge railway (SGR) railway between Mombasa and Nairobi to a Chinese firm, Kenya is going ahead with implementation.

The EastAfrican has learnt that works for the railway line by China Road and Bridge Corporation have started, while a plan to compensate landowners, whose holdings will be taken up by the project is in the works, with the government estimating that it will need Ksh10b ($117 million) for the exercise.

“We are moving, full steam ahead. Everything has been done above board and with the highest levels of integrity and we see no reason to apply the brakes. This is a project that Kenya and the region need badly, like yesterday. We have strict deadlines to meet,” said Kenya’s Transport principal secretary Nduva Muli.

He said that the contractor was already on site and had started building workshops in Embakasi, Nairobi for the project. Work is also reported to have started on a depot at Mtito Andei, considered the “natural” halfway point between the two cities.

The SGR line takes a totally different route from the existing metre gauge one, in an effort by the project designers to get maximum efficiency, based on the “gradient and curvature” of the route. This will require the re-settlement of those who currently use the affected pieces of land.

READ: Why region went for the SGR option

The SGR project continued to attract controversy with sustained attacks against it by Nandi Hills MP, Alfred Keter.

At issue is the cost of the project to the Kenyan taxpayer; its appropriateness over other options like upgrading the existing line to improve its capacity and speed; its funding model and the integrity of the entire procurement process for the project.

During his personal crusade against what is easily the most ambitious and expensive infrastructural project Kenya has even undertaken, Mr Keter has raised the red flag on the involvement of the Chinese company in all aspects of the project and the fact that it was never subjected to competitive bidding.

The picture that emerges is that Kenya, desperate to get the project off, either negotiated poorly or was at the mercy of the Chinese, who were calling the shots, having provided the financing through their Exim Bank.

There have also been allegations of a memorandum of understanding signed between the contractor and Kenya, long before the country went scouring for funding, which the government denies.

The project, part-financed (85 per cent) by Chinese Eximbank to the tune of Ksh277.95 billion ($3.2 billion)  through two loans, with the government taking care of the rest (15 per cent) or Ksh50 billion ($588 million), largely through a 1.5 per cent levy on all imports, will add to Kenya’s external debt burden.

The Chinese loans — the largest ever taken —will see Kenya’s external debt stock balloon from Ksh1.95 trillion ($22.9 billion) as at July last year to Ksh2.23 trillion ($26.2 billion).  

And in what is likely to provoke a public interrogation of the heavy Chinese involvement in mega infrastructure projects in Kenya, China Road and Bridge Corporation “did the feasibility study, designed the project, determined the cost, sought financing and was then handed the contract to build.”

But according to Julius Ngonga, transactions advisory and infrastructure partner at Ernst & Young, this “all-in-one” approach is typical of the Chinese, which has seen firms from that country snap up almost all the big infrastructural projects in the region.

“The Chinese government has been very strategic in how it has supported its companies to look for investments in Africa, as it seeks markets for its products and resources back home.

Most of these Chinese firms are actually state-owned. Governments also find it easier dealing with China because of the more relaxed conditions,” he argued, saying other countries were actually changing their “tactics” in the face of the Chinese ascendancy.

There have also been allegations of variations in SGR project cost, which are contained in a report by the Parliamentary Budget Office, which questioned the increase in cost from an initial Ksh220 billion ($2.5 billion) to Ksh327 billion ($3.8 billion), largely due to additional money needed to buy rolling stock and locomotives to “operationalise” the line.

The unit wondered why this was necessary for a line that was meant to operate on “open access” terms, meaning private businesses would be allowed to buy rolling stock and locomotives and run freight business on the SGR on commercial terms. 

“There was no variation. There were two contracts signed by Kenya Railways and the contractor. This is what most of the critics have refused to appreciate. There was a contract for the civil works, estimated at Ksh220 billion and one for the provision of rolling stock,” argued Mr Muli.

He said the relatively high cost of the project, compared to other options like upgrading the existing line or the price for similar projects in other countries like Ethiopia, was due to the fact that “we are not just laying a track, but building a viable railway transport infrastructure that will be ready for operations from the very first day.”

Meanwhile, Kenya will be keen to report progress on SGR in Kampala, which was to host a meeting of the Tripartite Initiative for Fast Tracking East African Integration this week (January 21 and 22) which has since been called off over the war in South Sudan.

Uganda, must be keenly watching the unfolding scenario in Kenya as it is also set to kick off its SGR line between Malaba and Kampala, with project design is the first step. Uganda is likely to face higher costs compared to Kenya, whose contracts were signed up in 2012.

The SGR is one of the key projects under the trilateral arrangement, which has been christened Coalition of the Willing (CoW), and brings together Kenya, Uganda and Rwanda, to the exclusion of other EAC partners Tanzania and Burundi.

Under the terms of the agreement, each country is expected to build the segment inside its territory with Kenya tasked with implementing the Mombasa-Nairobi-Kisumu/Malaba lines.