Kenya Takes a Ride on Chinese Rail — With Billions in Debt Aboard
The Madaraka Express
By Paul Ndiho, Enming Liu, and Betty Ayoub
The country’s biggest public works project since colonial times is a $5 billion test of the Belt and Road Initiative’s pledge to be a ‘win-win’ for China and African partners.
It is the biggest public works project ever in Kenya. A $3.8 billion bet on the country’s economic future.
Sealed on a deal with China – to help build a sprawling rail network in east Africa …
They call it the ‘Madaraka Express’ – after Kenyan independence day.
And in its first year of operation, it has given Kenyans new freedom and optimism.
A 10-hour drive time between the coastal city of Mombasa and the capital, Nairobi …… slashed by half or more. Frederick, passenger from Nairobi:
“Really there is no comparison to the transport system that we’re used to.”
Shipping costs slashed by half, too – a shot in the arm for business and – hopefully – new jobs.
The train – more widely called the ‘S-G-R’, for standard-gauge railway – is a critical link in something far bigger:
China’s massive ‘Belt and Road Initiative’ – a trillion-dollar plan to finance and build railroads, ports, roads and other huge projects in nearly 70 countries.
China casts Belt and Road as a friendly effort to help emerging economies like Kenya’s.
But the deals are boon for China, too. Chinese state banks lend the money. Then, Chinese companies cash in on construction deals.
Yunnan Chen, is a research fellow at the China-Africa Research Initiative, Johns Hopkins University
“So these infrastructure projects are not altruistic projects. … What Chinese companies get out of it are lucrative infrastructure contracts, where not only Chinese construction firms win these contracts but they also pull along smaller suppliers and other Chinese companies that also get to participate.’’
Belt and Road projects are certifying China’s ascent to the top trade partner for African states.
“If anything it’s an acceleration of existing trends we’ve already seen for the past decade or more, where China has already overtaken the U.S. in terms of being the primary economic partner for African countries and for the continent as a whole.
“Africa does not take the same priority in U.S. foreign policy as perhaps it used to, and it doesn’t occupy the same sort of attention. Whereas for China, the relationship has become, over a decade or more, very politically institutionalized.” she said.
And African countries are getting a payoff.
An extensive survey by McKinsey consulting found that thousands of Chinese-owned firms – some big, some small – are hiring, training and promoting tens of thousands of African workers. Jackline Kemboi, Train Attendant, SGR
“It’s a win-win for me. If you don’t have the Standard Gauge Railway, you’re going to be losing on the economy. … We’ll go back to the ‘80s and ‘90s. We’ll never grow as an economy.”
Kemboi’s story is one the Kenya government wants to reproduce.
She landed a good-paying job after graduating from the railway’s training school.
Ms. Milly Kiziili-Otieno, Kenya Railway Training Institute Principal
“With the SGR training I think we have trained close to 1,000 graduates who are currently running railroad.
“Our graduates have been handling the cabin crew, the maintenance, the passenger operations – all the people that would help in the running of the train have actually passed through this institution.”
Kenya hired Chinese state-owned companies to build the railroad, then operate and maintain it for up to 10 years, when enough Kenyans will be trained to take over.
“The training period is about 3 to 5 years in China. It takes about 3 years to become an assistant driver and 5 years to become a driver.
“For less than one year of training, the Kenyan trainees are still interns.”
Another success story: Edgar Sirucha, a Mandarin-speaking civil engineer.
He was hired by China Railway Construction Corporation to work on roads.
“I studied in China for my bachelor and master’s degree, and it was in engineering. And to see a country that has been so developed, I carried the dream here. And I hope one day I see a Kenya that is so developed or even further developed than China.”
But the SGR has also become hugely controversial.
Most recently, the arrests of Kenya Railway’s managing director and the country’s land commission chief — accused with others of fraudulent SGR property deals.
And there are complaints that the Chinese kept the best-paying jobs for themselves … mistreated Kenyans in lower-skilled positions … even segregated them in cafeterias.
Kenya Railways and lawmakers are investigating the treatment of workers. The officials accused of land fraud pleaded not guilty.
For his part, Sirucha said tensions sometimes do surface on the job … but they can be overcome.
“Coming here, of course there are challenges. I’ve got people who complain the pay is low; I’ve got people complain the hours are long. I’ve got people who complain the Chinese don’t treat them right. Everyone has a reason to complain.
“But if you have a vision, if you have a driving force – that makes those problems be actually stepping stones.”
Kenya’s economy has been growing – but not as fast as neighboring Ethiopia – where the Chinese also financed and built a railway.
The government is counting on the SGR to deliver. Already the line is being extended to connect with proposed industrial parks and eventually reach into Uganda.
James Macharia is Minister of Transport, Infrastructure, Housing & Urban Development:
“As you know the plan is to have the SGR contribute about 2.5 percent of GDP. You’ve seen the impact of the transport from Mombasa to Nairobi, both for passenger and for freight.
“And so by the time we put the SGR up to Malaba it will be adding another 2.5 percent of the country’s GDP.”
Other Kenya Railway and government officials declined VOA’s interview requests. So did the SGR’s builder, China Road and Bridge Corporation, and the Chinese embassy.
In Mombasa, officials say cargo traffic is growing thanks to the SGR’s lower costs.
Until recently, Catherine Mturi-Wairi was managing director at the Kenya Ports Authority.
“We are looking at $250 for a 20-foot container and $300 for a 40-foot container. Compared to trucks we are looking at $700 US dollars for a 20-footer, and $800 US. So it is definitely cheaper to go by rail.”
But what’s good for the SGR isn’t good for long-haul truckers.
They say the train already has cut into their business. Mahfudh Mbarak Mahfoud is a long distance track driver.
“The business was great in the beginning. The trucks would leave from Mombasa to Kampala, unload the containers and come back. That’s how we worked.
“But since the SRG, our work has been affected.” “The future doesn’t look bright.”
Officials say that in the end, truckers will benefit as container traffic increases at points inland.
“The railway can only take up to 40 percent of cargo. … So you will find that whatever is taken up by the railway line, ultimately has to be trucked to someplace.” The SGR’s economics depend on more than cargo and passengers.
To build the railway’s first leg, Kenya borrowed almost all the $3.8 billion-dollar cost from the Chinese.
Same for the next section – now under construction – another 1.5 billion dollars. The debt makes China far and away Kenya’s biggest lender.
Repayment was forgiven for five years – but in 2019, loan obligations to the Chinese will rise more than 5-fold.
Critics fear the debt will make the SGR a long-term loser – a victim to China’s “debt-trap diplomacy.”
Akshay Vishwanath is an environmental activist who studied SGR finances.
“Any country any business any company uses debt to grow. But the magnitude of that debt, the ability to repay, the magnitude of those loans in comparison to the gross domestic product all does matter.
“And I don’t think that level of analysis has been conducted for this project, and therefore I say we need to worry.”
SGR passengers already are paying 70 percent more for tickets than when the train launched a year ago.
One of the SGR’s fiercest opponents is Okiya Omtatah Okoiti. He has filed lawsuits alleging Kenya failed to do sufficient economic or environmental studies.
Instead, he said the government bowed to the Chinese.
Okiya Omtatah, lawyer and activist
“With the Chinese, everything is negotiated in China, the money is paid in China like the SGR money. What is brought to Kenya is the debt.”
Omtatah said China should be working to lessen financial risk for African states that take part in the Belt and Road Initiative.
“… So you can end up with a developed China and a developed Africa. But we’re going to end up with the corrupt states in Africa, with a thriving China, which is the main problem we have.”
Across Africa, the needs are great. The Africa Development Bank said countries face an annual infrastructure funding gap of some $70 to $108 billion. China has pledged $60 billion in financing for Belt and Road projects in Africa.
“There is some justified skepticism on the part of the World Bank and other economic financiers on the economic viability of these new railways.”
“Estimates for justification of the Kenya railway really depend on whether the target for freight can be met. This will depend in a large part on how well the Chinese and Kenyans can cooperate to localize skills and knowledge to operate and maintain the railway in order to make it sustainable.”
It’s too early to say whether the Madaraka Express will be an engine of progress for all Kenyans.
But there’s no doubt it’s already a win for the Chinese.