China has asked Kenya and Uganda to work on their respective financing modalities for the joint railway in order to receive funding for the project, Ugandan Finance Minister Matia Kasaija has said.
China declined to fund the project, with analysts saying the two states' public debt levels are too high to accumulate more, hence the fear by Beijing over their default risk.
But Mr Kasaija told The EastAfrican that China has always been "ready to give us the funds to start the construction of SGR in Uganda, but there have been some complications between us with our neighbour Kenya. Kenya is supposed to extend the line to Malaba, but they have not been able to do so."
Although Kenya has completed the initial SGR phase linking Mombasa to Nairobi, and has progressed with the second phase from Nairobi to Naivasha, the fate of the subsequent phases from Naivasha to Kisumu and then to Malaba at the Ugandan border hangs in the balance.
The 1,500km railway project, expected to be complete in 2018, was meant to increase the region's competitiveness by lowering transport costs and ultimately the cost of doing business.
Speaking to The EastAfrican on Friday on the sidelines of the First China-Africa Trade Expo in Changsha, the capital of central China's Hunan Province, Mr Kasaija said that a delegation from Kampala led by President Yoweri Museveni held talks with China's Minister for Commerce, officials of Exim Bank and Kenya's Transport Cabinet Secretary James Macharia to see how the project could be implemented.
"We have not yet got the funding and the meeting between us, Kenya and Beijing concluded that there is money but each country needs to work on its financial modalities of the railway project before money is releases," said Mr Kasaija.
In April, when Kenyan and Ugandan government officials visited Beijing for the Forum on China-Africa Co-operation (FOCAC) the public hoped he would secure the funding needed for the SGR project. But they returned empty-handed, raising questions about the future of the SGR.
Before then Uganda had announced that it was revamping its metre gauge line and invested $205 million in restoring it. Kenya then took cue and embarked on a programme to align its old rail with Uganda's.
But Mr Macharia told The EastAfrican in Beijing that the SGR is a regional project, and all hope is not lost.
He said that while the timelines for completing the project may have changed, they are not abandoning it as there is hope of China releasing the funds soon.
"Kenya is the entry of the SGR, which runs from Lamu-Mombasa-Naivasha-Kisumu-Lake Victoria all the way to the Atlantic Ocean in West Africa.
"However, Kenya cannot develop it on its own because it will not be viable due to the fact that 30 per cent of cargo from Mombasa is in transit, of which 85 per cent goes to Uganda. There is a need to harmonise the SGR with what countries in the region are doing," said Mr Macharia, adding that no big infrastructure project can be viable if countries do not work together.
"On the future of the SGR and its status, Kenyans need to know that Phase 2A is 98 per cent complete and will be operational in September. Eventually, the SGR will reach Kisumu and finally Malaba. Only the timing has changed," he said.
"In fact, the funds were approved by the Chinese Ministry of Commerce and are now with Exim Bank, which is looking into financial dynamics of lending according to the structure of each country," he added.