Author Topic: China and Kenya's Nairobi-Mombasa railway line  (Read 2405 times)

adroth

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China and Kenya's Nairobi-Mombasa railway line
« on: July 04, 2018, 05:09:19 PM »
Why Chinese Infrastructure Loans in Africa Represent a Brand-New Type of Neocolonialism
How will African countries repay massive debts to China?

By Xiaochen Su
June 09, 2017
     
http://thediplomat.com/2017/06/why-chinese-infrastructural-loans-in-africa-represent-a-brand-new-type-of-neocolonialism/
 
Amid much fanfare, the Nairobi-Mombasa railway line opened in Kenya on May 31, 18 months ahead of the schedule. It represents the second major railway undertaken by China on the African continent recently, after the launch of Addis Ababa-Djibouti Railway in January.  Chinese media outlets have spoken glowingly about these African infrastructural investments, often in the context of the One Belt, One Road Initiative that seeks to attain economic development through greater transport connectivity. African leaders seem to concur, as many are taking out massive concessional loans from China to fulfill ambitious projects, such as the East African Railway Master Plan, in the coming decades.

But there is strong doubt as to whether African countries have the financial capabilities to put such ambitious plans in action. In the case of the Addis Ababa-Djibouti Railway, for instance, its total building cost of roughly $4 billion is almost a quarter of Ethiopia’s 2016 government budget of $12.57 billion. Even at concessional rates, servicing and repaying the debt will be a significant burden for the government in the coming years and decades. It is unfathomable how that the government will be able to undertake other infrastructural projects even if the economy, and the government budget, grow at a steady clip, as it has done in recent years.

It begs the question, then, of how African governments will possibly repay the Chinese for all this infrastructure construction. Given the ballooning amount of debt from more and more loans taken on to finance infrastructural developments in the future, African states are likely to require more than just portions of their limited budgets to complete repayment. More likely than not, many states will have to resort to payments in kind.

The concept of “in-kind payments” smacks of colonialism in some ways. The historical precedent of European colonists comes to mind.  Europeans built infrastructure in Africa at the turn of the century, purportedly also for local economic development, but in essence the projects were used for natural resource extraction. The predecessor of both the Nairobi-Mombasa and Addis Ababa-Djibouti railways can be categorized as such. Both connect inland regions with mineral deposits with major ports on the Indian Ocean.

And there is no doubt that some of the same natural resources sought out by European colonists a century or more ago are also desired by the Chinese. While building infrastructure, the Chinese have also invested massively in local mines and processing facilities. At least part of the cargo to be shipped by the new railways and roads constructed with Chinese financing is expected to be natural resources to feed the Chinese industrial machine.

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If almost monopolistic control of Southeast Asian economies by the ethnic Chinese serves as any reference, dominance of the local economic infrastructure through control of banks, real estate, trade networks, and retail space is pivotal for ensuring wealth remains concentrated within Chinese families despite waves after waves of anti-Chinese regulations, protests, and violence. China’s leveraging of sovereign debt stemming from infrastructural investments may greatly accelerate this process and deepen the economic control to one less politically toxic than the Southeast Asian case.

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adroth

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Re: China and Kenya's Nairobi-Mombasa railway line
« Reply #1 on: December 03, 2018, 03:22:35 PM »
Kenya opens Nairobi-Mombasa Madaraka Express railway
31 May 2017

https://www.bbc.com/news/world-africa-40092600

Kenya has opened a major new railway between the port city of Mombasa and the capital, Nairobi, 18 months early.

President Uhuru Kenyatta said during the launch that the $3.2bn (£2.5bn) Chinese-funded line signalled a new chapter in the country.

He warned that he would authorise the execution of vandals after four people were arrested damaging sections of a guardrail.

It is Kenya's biggest infrastructure project since independence.

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A concessionary loan from China will pay for 80% of the cost.

The loan has a 10-year grace period, within which the railway line is expected to have started to generate income. The repayments will then be spread over 30-40 years.

The Mombasa-Nairobi line is the first phase of a 840km (525 mile) line linking the port city of Mombasa to the western border town of Malaba.

The Chinese will be in charge of the new railway line for some time, while Kenyans are being trained to take over.

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« Last Edit: December 03, 2018, 03:24:59 PM by adroth »

adroth

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Re: China and Kenya's Nairobi-Mombasa railway line
« Reply #2 on: July 16, 2022, 12:12:26 PM »
A New Chinese-Funded Railway In Kenya Sparks Debt-Trap Fears
October 8, 20184:35 PM ET

https://www.npr.org/2018/10/08/641625157/a-new-chinese-funded-railway-in-kenya-sparks-debt-trap-fears

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The train runs 293 miles from Kenya's capital city to the port of Mombasa and back twice a day and represents the biggest infrastructure project since Kenya's independence 54 years ago. The Chinese financed it; a Chinese company built it; and the Chinese will operate it for many years to come.

The project, which launched in the summer of 2017, has not only come to signify Kenya's ambitions, but also China's ambitions on the African continent. In the past decade, China has become the biggest lender to governments in Africa. The money has helped build ports, roads, bridges, airports and trains. But critics warn the loans are full of traps that could leave African countries in the lurch. Kenya alone owes $5.3 billion to China.

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In early July, Kenyan media were full of news stories about the railway. The Standard newspaper had published pictures of Kenyans allegedly being physically punished by Chinese managers. "Chinese nationals have created a small kingdom in which they run roughshod over Kenyan workers who say they are experiencing neo-colonialism, racism and blatant discrimination," the paper reported.

The paper revealed that the only time Kenyan workers had taken control of a locomotive was on opening day, a year ago. During a parliamentary hearing, the government defended the railway, saying most workers (nearly 2,679, compared with 841 Chinese) were Kenyan. But the Chinese still hold most supervisory positions.

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adroth

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Re: China and Kenya's Nairobi-Mombasa railway line
« Reply #3 on: July 16, 2022, 12:18:26 PM »
Kenya’s expensive Chinese-built railway is racking up losses even as loans come due
By Carlos Mureithi
East Africa correspondent

Published October 8, 2020

https://qz.com/africa/1915399/kenyas-chinese-built-sgr-railway-racks-up-losses-as-loans-due/

When Kenya secured a $3.2 billion loan from China in 2014 to construct the Standard Gauge Railway (SGR) connecting its capital Nairobi and the port city of Mombasa, critics termed the project costly and worried about its debt burden on Kenya.

The agreement was always deemed overpriced by independent observers and there have long been questions about the how the deal was structured, but now in the middle of a growing global economic crisis those questions have become more pointed and urgent about the very financial viability of the project.

There’s also the question of whether Kenya will be able to repay the Chinese loans which have topped $4.7 billion after the line was expanded in 2015 for another $1.5 billion by 75 miles to Naivasha, a town northwest of Nairobi, in the Rift Valley.

Two weeks ago, Kenyan lawmakers tabled a report in parliament recommending the government renegotiate the terms of the Chinese loan for the SGR “due to the prevailing economic distress occasioned by the effects of Covid 19″. This has precedent, Ethiopia, another recipient of Chinese infrastructure loans, has renegotiated its Chinese railway loans.

In the same report, the lawmakers recommend that the government renegotiate the SGR operation agreement, “by planning to reduce operation costs by at least 50%”. It has been difficult, the SGR operators had to halt its passenger service for nearly three months due to concerns about the potential spread of the pandemic.

The China Road and Bridge Corporation, which constructed the railway, operates the railway’s passenger and cargo service through its subsidiary, the Africa Star Railway Operation company. In the three years the SGR has been in operation, Africa Star Railway Operation’s expenditure has always exceeded revenue, and the Kenyan taxpayer money has to fill the gap to sustain the company’s operations.

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At the time, the government projected a profit of $46.8 million for the following year. However, a report by the ministry this year, also tabled to parliament, says the railway recorded a loss of $200 million over three years. The document says that during this period, the railway generated revenues of $230.7 million but had operational costs of $430.5 million.

The transport ministry has cited reduced limited storage capacity at a Nairobi container depot, minimum use of the city’s freight terminal, and railway charges as reasons for this performance, arguably the kinds of details a thorough appraisal should have raised foreseen.

The SGR operates both passenger and cargo services and while passengers embrace it for reducing travel time compared to buses, cargo owners shun it for reasons including higher fees and tariffs, additional time clearing goods and a lack of last-mile delivery, when compared to trucks.

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Kenya’s debt was 65.7% of its GDP by the end of June. In May, the International Monetary Fund raised the country’s risk of debt distress to “high” from “moderate” due to the impact of Covid-19, “which exacerbated existing vulnerabilities”, it said.

The writing was on the wall for the end of the relatively easy debt when Kenyatta returned home from China empty handed after reportedly failed to get more funding to extend the railway to the western Kenya town of Malaba on the border with Uganda. With rising concerns over a debt burden already, it is hoped financial concessions from China as demanded by the lawmakers may buy Kenya time.
« Last Edit: July 16, 2022, 12:20:42 PM by adroth »