Let’s talk about SGR viability before we load more debts on country

The very first feasibility study done before Kenya went to China to look for funds to build the modern railway returned a disturbing verdict.

It found that the Standard Gauge Railway (SGR) would not be a financially viable project unless a miracle happened. The miracle would include the country growing its import bill at more than twice its projected pace.

It would also need that everything imported into the country must use the railway. It also required the rest of the region to play ball and build similar lines, connecting to Kenya.

And lastly, Kenya had to quickly find enough cargo to fill the train to be taken to the Coast by the time it started operating. And, even after this, there would still be doubts on its bankability.

But it is clear now this is coming to haunt Kenya after it emerged that President Uhuru Kenyatta will be returning home almost empty-handed from his latest China visit.

This will be his second attempt to secure a Sh380 billion loan to extend his government’s pet project beyond Naivasha. This must now be the wake-up call for the country to discuss the viability of the SGR.

The only reason China, which has everything to gain from the railway, would refuse to fund the SGR would be that they know it will be an uphill task for the Kenyan line to break even, unless Uganda and the rest of the east African region is on board. This is the simple reason.

Kenya is a net importer. This means that the country imports more than it exports. To make it even more complicated, 70 per cent of this cargo terminates in Nairobi, leaving the remaining 30 per cent to go towards western Kenya.

Just this week, the Institute of Economic Affairs (IEA) said Kenya will be at risk of defaulting on its debt obligations in a decade if the current appetite for debt continues unchecked.

Kenya must now concede that it is time to face the elephant in the room and first find a way of fixing the viability question before flying again to China to load more debts on the country.

A Sh845 billion loan is not just pocket change for such a small economy as Kenya.

The writer is a financial investigative reporter and the business editor of the Daily Nation