China $4.6b railway deal to test Kenya’s relations with Uganda

The Northern Corridor, is anchored by the port of Mombasa in Kenya and has an estimated total cost of $2.1 billion. The top priority project list includes five port projects, five rail projects, and eight road improvement projects. The projects are split almost equally between the Northern and Central corridors in terms of investment cost of US$ 0.9 billion each. 

Chinese construction company, China Roads and Bridge Corporation, has successfully lobbied Kenya to pull out of a bilateral agreement signed with Uganda in October 2008.
The agreement committed the two neighbours to co-operate on the building of a modern railway link between the port of Mombasa and Kampala.

If the proposal by China Roads is accepted, it will not only precipitate diplomatic tensions, but force Uganda into seeking partnership with Tanzania and Rwanda to develop an alternative standard gauge railway link through the Central corridor in Tanzania.
On October 28, 2008, presidents Yoweri Museveni of Uganda and Mwai Kibaki of Kenya at State House, Nairobi, made an official declaration that the two countries would build a high capacity standard gauge railway link between them.
Subsequently, a bilateral agreement was signed by the respective ministries dealing with railways on October, 2, 2009 — with the countries committing to a seamless modern railway between them.
Kenya was — from its own resources — to build a standard gauge railway from Mombasa to Malaba, with Uganda building the link to Kampala.
Last year, Kenya went ahead and provided money in its annual budget to fund preliminary designs and an environmental impact assessment. Technical teams from the Kenya and Uganda governments worked together to harmonise the terms of reference for the feasibility studies in line with what had been agreed on under the bilateral agreement.
In the past two years, both countries have been trying to procure a consultant for a feasibility study on the project. However, as a result of appeals and objections by bidders, procurement of consultants by both countries have suffered major delays.
In March this year, the Kenya Railways Corporation (KRC) which has been procuring a consultant for the Kenyan project was about to award the job to Italian firm Italferr SPA, when the Ministry of Transport ordered them to stop the process immediately.
“Since there is no one in government who is in support of the study, there is no need to proceed with it,” said a letter by Permanent Secretary Dr Cyrus Njiru to the managing direct of KRC, Nduva Muli. “I have been directed to advise you not to go ahead with this study as this is not consistent with the consensus within government.  
These latest developments offer insight into the lobbying tactics and exploits by Chinese companies. It would appear that even as KRC technical officers and their Ugandan counterparts were working on the feasibility study — drawing terms of references and holding joint meetings — the Chinese were quietly plotting their own move.
Away from the limelight, the Chinese had signed a memorandum of understanding with then Transport minister Chirau Ali Mwakwere — in which they promised to assist in facilitating a government-to-government deal supported by concessional loans from the Chinese government.
The deal included an offer by the Chinese to conduct a free feasibility study for a standard gauge railway line between Mombasa and Nairobi on condition that if that study was adopted, China Roads and Bridge Corporation would be involved in the construction of the railway.
By coming up with a feasibility study covering the Nairobi-Mombasa stretch, the Chinese left Uganda out of  the loop.
In a letter dated March 22, 2011, the Ministry of Transport simply dumped the free feasibility study done by China Roads and Bridge Corporation on the Ugandans, and informed them that the Kenya government had decided to go the route of a government-to-government with the Chinese.
KRC has advised the government against going with the Chinese on grounds that the proposal by China Roads is too expensive. The corporation has also argued that standard gauge railway line on the Northern corridor can only be feasible if it is approached regionally by looking at traffic to Uganda, Rwanda, Burundi and Eastern Congo.
KRC has also criticised the proposals by the Chinese on technical grounds. First, that the Chinese have not provided a detailed analysis of transport demand and forecast within the northern corridor,
Second, KRC says that the Chinese study has not provided details such as route options, the key characteristics of the chosen route, physical design investment requirement and operational features.
Third, KRC argues that the figures and methodology used by the Chinese in demand forecasting were old and unreliable. How the events will unfold in the coming weeks remains to be seen.
But Kenya — without a doubt — faces a big dilemma. Should it accept the proposal by the Chinese and risk a diplomatic tiff with its most important trading partner in the region? Or spurn the Chinese offer to appease and keep a worthy trading partner and neighbour.
Since the 2008 post-election violence in Kenya which disrupted movement of goods not only in Kenya but throughout the region, Uganda and Rwanda have been actively seeking alternative sea-bound routes to the Northern corridor.
A decision by Kenya to pull out of the bilateral deal to develop a new standard gauge rail so as to accommodate the Chinese is the kind of move that would definitely add fire to Uganda’s desire to pursue the option of the Central corridor which connects the port of Dar es Salaam with the hinterland of Uganda, Rwanda, Burundi and Eastern DR Congo.
It is noteworthy that a railway line currently exists between Dar es Salaam and Isaka passing through all major towns in the country. That line is also links to Mwanza to the north and Kigoma to the south.
Cargo destined for Uganda, Rwanda, Burundi and DR Congo can be railed to Isaka dry port and transported by road farther inland.
Chinese construction firms now handle over 20 per cent of the construction market on the continent. Indeed, the massive expansion of construction on the continent has provided a stage for a new scramble for Africa between Chinese and European firms.