China not funding SGR good for Kenya

China’s decision in April last year not to fund the Standard Gauge Railway (SGR) line from Naivasha to Uganda through Kisumu at an estimated cost of Sh398 billion is turning out to be a blessing in disguise for Kenya.

First, the loans to build the railway line would have ballooned Kenya’s debt to China to almost a ruinous Sh1 trillion.

Chinese loans are so detrimental to economies not only because of their high interest rates, but also the requirement that all the key materials be sourced from Beijing.

The result is that most of the money loaned out remains in China and barely translates into local jobs through the expansion of a country’s industrial capacity.

The failure to secure the Chinese funding meant that Kenya had to go back to the drawing board, and the announcement that it would spend Sh3.8 billion to rehabilitate the old line from Nakuru to Kisumu has the potential to open up huge economic opportunities for the people living along the route.

But this will only happen if the governors in counties along the railway line create an enabling environment for business.

Additional investiments

This would include coming up with a blueprint on what the local communities can produce for their own consumption and for the outside market.

This would generate so much revenue for the newly refurbished railway line that the money borrowed—hopefully locally—would be repaid without touching revenues derived from other sources.

Perhaps the time has come for the entire country’s leadership to recognise that development of industrial parks and special economic zones does not, in itself, translate into prosperity because they would still require additional investments on farms and industries.

The failure by earlier promoters of such facilities—beginning with the builders of the much-hyped Kenya Industrial Estates soon after independence—should be a cautionary tale.

A look at China and other newly industrialised countries demonstrates that the Government must put money in key industries as it is the only way to attract direct foreign investment.

Second, the failure to secure Chinese funding means that there will not be an influx of Chinese workers with questionable skill sets that are readily available locally.

Instead, Kenya Railways’ engineers will oversee the rehabilitation and will hire thousands of young people. It is also expected that the materials used will be sourced locally thus creating additional jobs.

[Mbatau wa Ngai; nmbatau@gmail.com]