24 January 2014

Kenya Getting Value for Money in Rail Deal - Rotich

Nairobi — Kenyans will get value for their money once the multi-billion shilling Standard Gauge Railway (SGR) line from Mombasa to Nairobi is completed, National Treasury Secretary Henry Rotich says.

Rotich told the National Assembly Committee on Transport, Public Works and Housing that the project should not be compared to another one in Ethiopia, arguing that the Addis Ababa project did not include costs for supply of locomotives and facilities such as stations per every 30 kilometres.

"We have looked out, comparing other railway projects and we have seen a range of the cost as low as US$2 billion and US$12 billion per kilometre. So it's a big range depending on the features of the railway," the National Treasury CS stated. "When you look at ours which is in the US$3 billion range, we have satisfaction that there is value for money."

His Principal Secretary Kamau Thugge said the project, once completed, will be able to generate Sh600 billion into the economy annually for the next 10 years.

The country has been given 20 years (with a seven years grace period provision) to settle a US$ 3.8 billion or Sh327 billion loan (calculated at a rate of 1US$=Sh86).

"We are projecting the SGR will add 1.5 percent to GDP growth, currently our GDP is about Sh4 trillion (in round numbers), so one and half (percent of that) is about Sh60 billion. So every year this project could be earning (to the GDP) another 60 billion," he added. "So over 10 years - 60 multiplied by 10 - is about Sh600 billion, so within 10 years one can say the project could have repaid itself."

Rotich said he was concerned that the negative publicity accorded to the project following claims by Nandi Hills MP Alfred Keter that the railway tender is overpriced and was irregularly awarded to a Chinese firm could cause the Chinese government to pull out.

"It all comes down to the Exim Bank who are now going through the loaning facility; and if it turns that it looks like we don't want this money, it can easily go to another country."

"We have tried to explain to them that this is a priority project for us, because we believe it is going to change the way we do things in Kenya in terms of improving the investment climate, reduce the wear and tear of roads," he said.

Rotich had earlier this week told the Public Investment Committee that the total cost of the project adds up to Sh447.5 billion. He explained the variation is because Treasury's figure contained the interest premiums and commitment fees over the next 20 years.

"The condition of the MoU (signed between Kenya Railways Corporation and China Exim Bank) is that the contract will lapse if the Financing Contract is not signed," he said.

The Government of Kenya is still waiting for the Chinese bank to complete it credit processing procedure and send over the Financing Contract for review by Treasury and Attorney General, which then pave way for the signing and then commencement of the construction thereafter.

Committee Chairman Maina Kamanda advised the Treasury officials to embark on a public sensitisation campaign so that Kenyans can understand the benefits of the five year project.

"We don't want to go into the details of this matter because we know where it is coming from, but it is not for this Committee (as of now to disclose). Some of the people who are fighting it, we know what their agenda in this matter is."

"But if you come out, even if someone else comes out and the 40 million Kenyans are with you, I think the project will kick off and the Kenyans will own it," the Starehe MP advised Rotich.

Rotich at the same time, affirmed that no taxpayers' money has been spent on the project because they were still waiting for the China Exim Bank to furnish them with the Financing Contract which outline conditions for the both the concessional and commercial loans to be given to Kenya.

"I don't know where the cost of Sh1.3 trillion is coming from but we will only be paying for what is constructed between Mombasa and Nairobi and then Malaba not all the way to Kigali. Uganda will pay for their own and when it gets to Rwanda they will do the same," Rotich stated.

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