China’s debt increases as SGR records Ksh21 Billion loss since 2017

SGR. [Photo courtesy]

President Uhuru’s Kenyatta flagship project, the Standard Gauge Railway (SGR) has made a loss of Sh21 billion in three years since it started operating in May 2017.

The weight of serving its operation costs still sits on the taxpayers’ backs as it failed to hit a projected revenue income of Ksh46.71 billion only giving Ksh25.03 billion.

In a report to Parliament by the Transport Ministry, Kenya Railways Corporation (KRC) has since defaulted in repayment of Ksh40 billion loan to China’s Africa Star Railway Operation Company which runs the SGR’s passenger coaches and cargo trains.

The ministry explained that the dip in revenue from the SGR was due to hesitation by investors to use the SGR in transporting cargo to the Inland Container Depot (ICD) in Embakasi from the Port of Mombasa.

The SGR project gobbled up Ksh323 billion which was financed through a loan by Exim Bank of China in May 2014.

In the first seven months after its launch – May to December 2017 – Ksh7.98 billion was recorded as the operation cost against Ksh969 million revenue from sales.

In 2018, the operating cost was Ksh14.051 billion against sales revenue of Ksh5.6 billion while in 2019, operational costs gobbled Ksh17.976 billion with more than double the sale made in 2018 at Ksh13.581 billion.

The coronavirus pandemic added to Kenya Railways woes as sales remained depressed until July when passenger trains resumed business on low demand though cargo transport remained stable amid the pandemic.

The low revenues have now pressed the government hard in paying the Chinese loan which runs at an operational cost of Ksh1.5 billion a month.

Kenya started the loan repayment in 2019 when a five-year grace period expired.

In June, China’s Africa Star in an announcement by Parliament threatened to walk away from managing the railway line over piling debt.

China Africa star manages SGR’s ticketing system, landing and offloading of cargo and fare collection from passengers.