Region lobbying China to jointly finance rail project


Fresh details on how Kenya, Uganda, South Sudan and Rwanda plan to
redraw bloc's infrastructure map. What is in it for households and
businesses? TEA Graphic
By PETERSON THIONG'O The EastAfrican
Posted Saturday, May 10 2014 at 17:05
IN SUMMARY
The region is pitching the financing agenda for the rail project to
the Chinese Premier Li Keqiang who arrived in Nairobi on Friday.
The pressure to abide by the planned project timelines has seen
Kigali, Kampala and Nairobi court different financiers, with Uganda
considering structuring its share of the SGR as a Private Public
Partnership (PPP).
The new thinking to court China as a block comes even as Uganda,
Rwanda and Kenya said they had already agreed on the technical
specifications for infrastructure, rolling stock, operations and the
SGR protocol.
Kenya, Uganda, Rwanda and South Sudan have resolved to lobby China to
jointly fund the construction of the standard gauge railway (SGR), in
an arrangement that will make the project more attractive to
financiers.
The countries, in their latest meeting in Nairobi last week, set
October as the deadline by which construction of all the sections of
the line ought to have started.
The region is pitching the financing agenda for the rail project to
the Chinese Premier Li Keqiang who arrived in Nairobi on Friday.
On Sunday, President Kenyatta will be joined by leaders from the
region — President Museveni (uganda), President Jakaya Kikwete
(Tanzania), President Paul Kagame (Rwanda), and President Salva Kiir
(South Sudan) and a representative of the government of Burundi – for
talks with the Premier Li Keqiang, centred on regional infrastructure.
Thereafter they are expected to sign an agreement in respect of the
SGR, which, when completed, is expected to link the Kenyan port of
Mombasa to the Burundi capital Bujumbura, through Kampala and Kigali.
It will also expand to the South Sudan capital of Juba.
The joint line is to be sold as a single project in a bid to increase
the project's selling point.
A ministers' report from the Nairobi meeting seen by The EastAfrican
shows that individual governments have been negotiating with China on
financing their segment of the proposed railway line, but officials
from these states see a joint approach to Beijing as advantageous, as
it will increase the bankability of the project and thus reduce the
cost of funding.
"In line with previous summits communiqué directives on joint resource
mobilisation, the four earner states should pursue a joint regional
financing mechanism with the People's Republic of China during the
visit," reads the ministers' report.
The pressure to abide by the planned project timelines has seen
Kigali, Kampala and Nairobi court different financiers, with Uganda
considering structuring its share of the SGR as a Private Public
Partnership (PPP).
Finance Minister Maria Kiwanuka said the government is preparing a
bankability report, which it will use to seek a public-private
partnership for the project.
Kenya, Uganda and Rwanda have already signed an MoU with the Africa50,
a company established by the African Development Bank (AfDB) to help
develop and structure financing for infrastructure projects across the
region.
World Bank's financing arm, the International Finance Corporation
(IFC), has already shown interest in financing the SGR and a proposed
crude pipeline from Hoima in western Uganda to Lamu on the Kenyan
coast through the Africa50.
The new thinking to court China as a block comes even as Uganda,
Rwanda and Kenya said they had already agreed on the technical
specifications for infrastructure, rolling stock, operations and the
SGR protocol.
READ: Uganda seeks private investor for SGR
However, concerns over Kenya's ability to generate enough cargo for
the Mombasa-Nairobi segment has seen China impose strict conditions,
including an assurance that Nairobi will guarantee a specific amount
of cargo is lifted through the rail. Nairobi has also been forced to
take insurance on the loan taken from Beijing, increasing the total
cost of the railway.
Selling the railway as a single project will strengthen the business
case — by increasing the amount of cargo it can transport and removing
the probability that an inland country, say Uganda, may lift its
portion faster than Kenya, making the investment useless while at the
same time loading a high amount of debt on the country.
The four countries — and especially Kenya, Uganda and Rwanda — are
under pressure to close financing deals by the third quarter of this
year to ensure that the project remains on track.
"In consideration of the target completion date of March 2018, it's
noted that the construction on all sections ought to start not later
than October 2014..," reads the report.
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