SGR reveals Sh21bn loss as China firm debt rises

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Taxpayers face a huge bill sustaining services on the standard gauge railway (SGR) after it posted a combined operating loss of Sh21.68 billion in the three years to May.

A report to Parliament by the Transport ministry revealed that the China-built railway netted Sh25.03 billion in revenue over the period against operational costs totalling Sh46.71 billion — a gap that taxpayers have to plug.

The operation loss has already caused the Kenya Railways Company (KRC) to default on an estimated Sh40 billion payout to China’s Africa Star Railway Operation Company, which runs both passenger and cargo services on the SGR.

The below-target performance was attributed to reduced limited storage capacity at the Embakasi Inland Container Depot (ICD), minimum use of the Nairobi Freight Terminal that handles cargo not stored in containers and the rail charges.

The SGR has struggled to attract adequate cargo volumes, with investors balking at the tariffs for transporting goods from the Port of Mombasa to the Inland Container Depot (ICD) in Nairobi.

The freight services formed the main economic justification for the $3.2 billion (Sh323.20 billion) President Uhuru Kenyatta’s administration pumped into the project through loans largely procured from Exim Bank of China from May 2014.

Kenya requires additional cash from the railway business to ease the taxpayers’ burden of paying the Chinese SGR operator. The Chinese firm runs the SGR cargo and passenger business at an undisclosed management fee. The Treasury also expects the SGR business to generate more revenue to help offset loans taken to build the multi-billion shilling railway.

SGR’s operating costs in the first seven months to December 2017 were recorded at Sh7.398 billion against Sh969 million in sales revenue.

SGR operating

The operating costs jumped to Sh14.051 billion the following year, more than double the Sh5.6 billion raised in sales.

In 2019, the cargo and passenger trains’ operational costs hit Sh17.976 billion while the sales rose to Sh13.581 billion.

Source: Business Daily

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