Corruption claims mar Jubilee’s Standard Gauge Railway project

By Paul Wafula

Kenya: Allegations of corruption and breaches in procurement procedures have taken the shine away from the biggest infrustructural project under President Uhuru Kenyatta—the Standard Gauge Railway (SGR).

 The railway line is a regional project that will run from Mombasa to Malaba, proceed to Uganda, Democratic Republic of Congo (DRC), Rwanda and branch off to Southern Sudan and Ethiopia.

The controversy that has rocked what is clearly the biggest undertakings by the Jubilee administration has attracted parallel inquiries from two committees of Parliament. The Auditor General is also preparing an additional audit of the project.

Also of concern has been the feasibility of the project. A dossier tabled in Parliament titled “Separating fact from fiction on Standard Gauge Railway” claims that operators of the SGR will need to charge six times the current road or rail rates or be given at least Sh18 billion in taxpayer subsidies every year to be profitable.

According to the documents, the Sh327 billion railway will require massive public subsidies to remain afloat if it must repay the loan and meet operating costs while returning a profit to the operator.

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The documents, which formed part of the evidence presented by those against the project, dismisses as “Government propaganda” reports of commercial viability of the business. “A simple examination of the current cost of moving a 20ft container by road or rail from Mombasa to Nairobi at $780 ($1,950 to Malaba) shows that simply to repay the debt, the SGR will need to charge six times the current road or rail rates even before counting a profit margin for the (presumably private) operator,” reads the dossier in part.

 This price differential, it argues, is “premised on a very generous assumption that SGR will handle 40 per cent of all current cargo at the port — 23 million tonnes per annum — an extremely tall order given its need to recover costs.”

But Transport Principal Secretary Nduva Muli has dismissed the report, maintaining that the cost of transport will go down by 60 per cent.

 Mr Muli told The Standard that the new railway will not require any Government subsidies to return a profit.

“Currently, it costs about $0.2 to transport one tonne per kilometre. After the new railway is done, we project this to come down to $0.08. This is the figure we have used in cashflows and loan repayments,” Muli said in an interview while defending the contract.

 He said Sh220 billion will be used for civil works and Sh95 billion for rolling stock. Muli said Exim Bank of China had asked for some assurance that the railway line will have business.

Vocal critic

Although, the Transport committee gave the project a clean bill of health, it is only after the inquiry led by Public Investment Committee (PIC), chaired by Adan Keynan, tables its report that Kenyans will know if the project will proceed under the current arrangement or whether it will be re-tendered.  The committee is investigating whether Kenyans will get value for money, establish if the Government broke procurement laws and what the actual cost of the project is. The controversy threatened to derail the project, which is hoped to cement Kenya’s position as East Africa’s transport hub.

Curiously, the most vocal critic of the project, Nandi Hills legislator Alfred Keter, has since gone silent after PIC launched its investigations.

The legislator had been accused of acting on behalf or being a puppet of local businessmen representing Chinese firms.

Mr Keter has, however, denied the allegations, saying he was not in any way opposed to the construction of the railway, but was only opposing the cost of the project that he said had been inflated by unscrupulous officials in government.

At one point, the heat on the project was so high that the President had to offer an official statement from Statehouse flanked by members of his Cabinet. The President assured that the project would go on as planned.

Different government agencies gave information on the cost of the project in bits, at times contradicting each other at the beginning of the investigations, before the Government came up with a uniform position.

 At one point, one of the parliamentary committee’s investigating the project was forced to adjourn to allow the Cabinet Secretary in charge of National Treasury, Mr Henry Rotich, to establish the total cost of the project after he appeared not to know the cost.

First, it was reported to be Sh220 billion. Then the figure rose to Sh327 billion when the contract was expanded to allow the Chinese company building the line, China Roads and Bridges Corporation ( CRBC), to also purchase rolling stock — locomotives, passenger coaches and wagons. CRBC is a Chinese state corporation.

This figure was later revised to Sh447.5 billion after Rotich told the parliamentary committee that the project would attract additional costs, including land acquisition, insurance and cost of the loan, which would push up the cost by another Sh120.5 billion.