One Belt, One Road: an economic roadmap

SGR: a window on Africa opportunities and risks
One of the highest-pro le infrastructure projects in East Africa is Kenya’s Standard Gauge Railway (SGR). At an estimated total cost of KSh1.2trn (US$14bn), the SGR constitutes the largest programme of its kind since Kenya gained independence in 1963. Work began in October 2013 on phase one, a 485-km single-track rail line that connects Mombasa, the largest port city in East Africa, to Nairobi, the Kenyan capital. As noted earlier, a feasibility study currently is under way for SGR extensions connecting Nairobi and Malaba/Kisumu. Of cials ultimately intend the SGR to connect cities in Kenya with those in Uganda, Rwanda and South Sudan as part of a broader strategy for regional integration.

The SGR presents a nearly ideal t for the Africa component of China’s Belt-Road objectives. Connecting a major African port city to inland areas will offer resources and markets for Chinese producers. Construction of the line will create a strategic economic asset that further binds together the economies of East Africa internally and with the world beyond. The project moreover offers a platform to showcase Chinese funding and technology. China Exim Bank has provided 85% of the announced US$3.8bn in nancing for the rst leg of the SGR. China Road and Bridge Corporation is serving as contractor and building the line according to Chinese railway design standards.

Project controversies

Despite such obvious advantages to China’s involvement with the SGR, questions about costs and lack of transparency in the contracting process have aroused scrutiny and elevated project risks. Not long after the SGR’s launch, no less than two parliamentary committees (transport and public investment) and the government’s Ethics and Anti-Corruption Commission began investigations into allegations of improprieties. Controversy surrounds why transportation of cials opted for a single-sourced deal rather than an open tender, potentially a violation of Kenyan law. Questions have also arisen about the economics of the project and its design. Estimates cost out the SGR

at an average of US$5.6m/km, whereas the international norm is about US$2m/km. Neighbouring Ethiopia is laying track at a cost of US$4.8m/km for a more sophisticated electri ed, doubletrack line that covers more dif cult terrain. Stoking concerns of exploitation, China Road and Bridge Corporation stands accused of breaching its commitment to source at least 40% of goods and services from local rms.

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