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Daily Nation : January 26th 2014
18 | Sunday Review Railway tender saga SUNDAY NATION January 26, 2014 PROBE | Two House committees are currently conducting separate and independent investigations into the controversial Making of a mega scandal? Why Senior government officials give conflicting figures of construction of the standard gauge railway line from Mombasa to Malaba, which is already subject to probe by MPs BY VICTOR JUMA firstname.lastname@example.org T he official response to the standard gauge railway saga has raised more questions than answers. So far, top bureaucrats have offered contradictory and insufficient bits of information on key features of the mega project including its cost to the taxpayer. It is now clear that the standard procurement laws were ignored and doubts have been cast on whether the project’s benefits will be worth its burden on Kenyans. The biggest problem is that the full cost of the project remains a mystery. Deputy President William Ruto in a recent television show said it will cost “about $3.9 million (Sh331.5 million)” per kilometre. This would put the cost of the venture at Sh160.8 billion for the Mombasa-Nairobi track covering 485.3 kilometres and another Sh149.1 billion for the NairobiMalaba stretch measuring 450 kilometres. This would bring the total cost to Sh310 billion for the modern railway line to reach Malaba from where it will be extended to Uganda, Rwanda, Burundi and other regional states at their respective cost. Mr Ruto said these cost esti- mates included other extras such as the supply of locomotives and spare parts, making it difficult to arrive at the actual cost of the railway per kilometre. The deputy president then said the pure cost of laying the railway line will be “about $2.6 million (Sh221 million)” per kilometre. This would bring the infrastruc- ture cost to Sh107.2 billion for Mombasa-Nairobi and another Sh99.4 billion for the NairobiMalaba, bringing the total to Sh206.7 billion. These figures differ sub- stantially from those given by Transport Principal Secretary Nduva Muli who said it would cost “about $2.8 million (Sh238 million) per kilometre, indicating a cost of Sh222.6 billion to extend the railway line to Malaba. This leads to a variance of Sh15.9 billion. It remains unclear why the two officials have only offered estimates and no precise figures for either the bundled cost or that of laying the railway line only. The figure of $2.6 million per kilometre of infrastructure works offered by Mr Ruto implies that the extra features of the project will cost Sh103.3 billion or a third of the entire venture. Ideally, the project cost per kilo- metre should exclude the separate procurement of supplies such as FILE | NATION President Uhuru Kenyatta and Deputy President William Ruto with leaders from Coast region during the launch of the standard gauge railway line at Changamwe Marshalling yard in Mombasa in November last year. locomotives, whose price should be itemised separately. Mr Ruto and Mr Muli have said they will include construction of a railway training institute, supply of an unknown number and make of locomotives and supply of spare parts for two years. On a comparative basis, Kenya appears to have signed up for an imprudent deal given that Ethiopia’s double track standard gauge railway cost it $3.8 million per kilometre. This is significantly lower than the $3.9 million per kilometre for Kenya’s single track line. China Roads and Bridges Corporation (CRBC), which was awarded the contract without competitive bidding, negotiated lucrative financing terms on the Sh375.8 billion Chinese loan that have raised the project’s cost even further. Treasury Cabinet Secretary Henry Rotich told a parliamentary committee that the Kenyan government will pay China’s Exim Bank at least Sh120 billion through charges meant to protect the lender from risks such as default and currency risk. Mr Rotich put the total project cost at Sh424.9 billion, adding that Treasury will be providing Sh49 billion or 11.5 per cent of the money. The Chinese loan attracts an interest of two per cent over 20 years, making its terms substantially burdensome compared to those offered by alternative international financiers. The World Bank, for instance, offers a grace period of up to 10 years for long-term financing and charges an interest of 1.4 per cent for 20 to 40-year loans. But Mr Rotich said nobody else was showed interest in financing the project. Attorney-General Githu Muigai said the alleged governmentto-government deal does not preclude the project from being subjected to normal procurement processes. He said the venture “would still 206.7 Amount, in billions of shillings, that Mr Ruto said it will cost to construct railway line from Mombasa to Malaba 226.6 Amount, in billions of shillings, that Transport PS said it will cost to construct the same railway line. This leads to a variance of Sh15.9 billion. need to be crafted around a known tendering procedure.” The fact that CRBC did the feasibility study, designed the railway, determined its cost all by itself has handed critics of the railway their biggest ammunition in the matter that is under investigations by parliament committees. Opponents of the railway project have also accused the government of failing to assess fully the integrity of the Chinese contractor. Nandi Hill MP Alfred Keter told a parliamentary committee probing the controversial standard gauge railway tender that the World Bank had blacklisted CRBC. CRBC, together with its designated successor China Communications Construction Company (CCCC) Limited, was barred from participating in World Bank-funded projects worldwide starting January 2009 until January 2017. Construction of the railway line comes with further monetary and social costs running into billions of shillings. Mr Rotich said the government will spend another Sh22 billion in compulsory acquisition of 2,253 hectares of land for the rail corridor, development of Embakasi Inland Container Depot, and consultancy services. The government is also ex- pected to compensate Rift Valley Railways — which has a 25-year concession for the current KenyaUganda railway — should it lose business to the Standard Gauge Railway. While completion of the new railway will create new jobs and cut cost and time used to transport cargo from the port of Mombasa, it will ramp up unemployment numbers by dismantling the trucking industry and its support services. While the project has kicked up a major controversy in Kenya, neighbouring countries who are to build the railway on their end have kept quiet. The question arises whether all the participating countries signed or are planning to sign a deal similar to that of Kenya, including choice of contractor and financier. The main justification for the project is that it would fast-track cargo movement in the region at a cheaper cost. If the railway line is not extended and used heavily in Uganda, Democratic Republic of Congo, Rwanda, Burundi and South Sudan as envisaged, it risks leaving Kenya with a major white elephant.
October 13th 2013
January 27th 2014