China has said it is ready to finance the construction of the standard gauge railway from Kisumu in Kenya to Uganda and Rwanda as long as the three countries agree to handle the project jointly.
According to Beijing, such an agreement among the three countries would minimise political risks and plug missing links.
There have been fears that the viability of the SGR within Kenya and beyond could be undermined by failing to link landlocked countries to the Mombasa port because of financial or other considerations.
Chinese Prime Minister Li Keqiang told Kenyan President Uhuru Kenyatta at the China Africa Summit in Beijing two weeks ago to discuss the extension of the railway line from Kisumu to Kampala and then Kigali with Presidents Yoweri Museveni and Paul Kagame.
Kenya State House spokesman Manoah Esipisu said Mr Li was clear that China would fund those sections as a regional project.
"The president already spoke with the leaders of Uganda and Rwanda on the possibility of sending a joint team to negotiate for financing of the remaining portion," said Mr Esipisu. He said Kenya was now waiting for Kampala and Kigali's response before planning an SGR beyond Kisumu.
"The viability of the (Nairobi to Kisumu) the line is okay. One feature of the SGR investment to Kisumu is the building of a modern port there. Kisumu to Malaba is viable with Uganda and Rwanda on board," Mr Esipisu said.
On May 31, President Uhuru Kenyatta launched the operations of the first phase of the railway from Mombasa to Nairobi that cost $3.27 billion. He also announced a feasibility study for Phase 2B of the 350km line from Naivasha to Kisumu, for which China has committed a $3.6 billion loan. China is also funding the section from Nairobi to Naivasha at $1.5 billion.
Kenya Transport Cabinet Secretary James Macharia said the terrain in the Rift Valley is the reason it costs more from Nairobi to Kisumu (350km) than Mombasa-Nairobi (472km).
"We have to dig tunnels and construct more bridges across the landscape. That will obviously cost more," he said in a briefing to journalists.
Sources said a joint project was appealing to the three countries. Uganda has been negotiating a $2.9 billion loan deal for the 293km section from Malaba to Kampala.
"We have to wait for our neighbours to decide on the plans for the last phase of this project before we can get the funds. China really doesn't want to fund a white elephant project," Uganda Finance Minister Matia Kasaija said in an interview with Bloomberg.
He said the China Export-Import Bank was only willing to fund the project if it was linked to the Kenya line at Malaba.
A Uganda government report released in April concluded that the Kenya SGR had the most potential to spur growth in the landlocked country. It said an SGR linked to Mombasa was shorter and more dependable because of the ongoing expansion of the Kenya port. Rwanda said last year it would link its SGR to the one proposed in Tanzania.
Port Bell harbour
Uganda was said to have been actively considering the Tanzania route as well having already secured funding for the construction of Port Bell harbour. This would see it build its railway track to the shores of Lake Victoria, where it will feed into a new port harbour that will then connect with the Tanzania line.
The line would connect Uganda via Port Bell all through to Tanzania's Southern Corridor through the Musoma Port on Lake Victoria to Tanga Port at the Indian Ocean, and the Central Corridor via Mwanza/Bukoba ports on Lake Victoria to Dar es Salaam Port.
However, the Uganda government report shows that having the goods reshipped from the Tanzania SGR rails through the lake would be costlier and not viable economically.
"For the Malaba-Kampala SGR, up to 40 trains can be operated in a day, transporting 8,460 containers. If such amount of cargo was going to be transported on the lake, assuming that five wagon ferries are purchased, we would require 40 days to evacuate the cargo of one train. This means that the route may not be viable. This coupled with the fact that oil products cannot be transported on fresh water render the Dar es Salaam-Mwanza-Kampala route a minor alternative to the Mombasa-Kampala route," the report reads in part.
In a bid to attract transporters to the new railway, Kenya has already directed that a third of the cargo to be moved on the SGR up from the current three per cent.
Kenya Railway Corporation has also lowered its price from $0.24 per tonne per kilometre to $0.08. President Kenyatta, however, said Kenya will have to construct more linkages to the main line to realise its maximum potential.
"We haven't set any targets because we still have to move towards the industrial parks in Voi, Athi River, Naivasha and Kisumu. These are what will determine the volume of exports as we move down the path to industrialisation," he said.