Transport and Infrastructure Cabinet Secretary James Macharia says Kenyans will get value for their money from the Standard Gauge Railway (SGR).
He says the project that was financed and constructed by the Chinese to the tune of $3.2b is already making profits, a clear demonstration that it is an economically viable project. Going by the current trend, Macharia says SGR’s return on investment is guaranteed.
“SGR is already making profit. Every month, it makes Ksh. 1.3 billion revenues compared to the cost of Kshs. 800 million. So, every month, SGR is making between Kshs. 300 million and Kshs. 500 million in profit. These are facts.”Macharia said in a TV interview Monday.
The CS disclosed that so far, the revenues have ensured there have been no defaults in the repayment of loan that was extended to Kenya by China for the project.
“It is making profits even before we connect the MGR to Uganda. That is why we have not had an issue in servicing the escrow account, which is where we put money to pay the loan.” He said
Asked whether the money generated from the project is sufficient to repay the loan, Macharia pointed out that what matters for the SGR is that its operational account is positive.
“This is what determines the viability of that business. Upon the repayment of the loan, this cash flow then becomes available to government because it will be there after paying the loan.” He said
While lauding the project as a game changer in the region, Macharia noted that there has been maximum advantage in the use of SGR to move goods from the port city of Mombasa to the country’s capital Nairobi and from Nairobi to Naivasha.
He said the volume of goods transported via the Standard Gauge Railway to Nairobi, which is Kenya’s major industrial hub, could not have been possible by way of the Meter Gauge Railway that existed before.
“For example, currently, we are running between 11 and 14 trains everyday on SGR. Even if you rehabilitate MGR it would not cope with this volume and speed. We want to move industrial activity away from Nairobi to Naivasha. This is why the SGR is a viable investment.” he said
At the same time, Macharia denied claims that the cost of SGR was inflated. He noted that institutions overseeing use of government finances such as the office of the Auditor General conducted a review of the project and its cost and did not find the monies involved overstated as it has been claimed.
“It (the figure) is what was conceptualized during President Mwai Kibaki’s time. Negotiations about the figures were done that time, about Ksh. 327 billion. How it was arrived at is not a secret. It’s there for all to see. It’s been audited.” He said
“The key thing is to differentiate politics from facts and reality. What I can assure you is that in terms of the structures in government which ensures that there is value for money and that public finances are according to what was meant to be; those confirmations are being done by the Public Accounts Committee, Public Investments Committee, the Auditor General. If ever you heard any of those institutions raising issues about the SGR, then come to us,” said the CS
He also sought to clear the air over reasons why the SGR project was terminated in Naivasha instead of the original plan to extend it to the border of Kenya and Uganda.
Noting that the SGR was conceptualized as a regional project connecting three to four countries, Macharia said Kenya’s neighbors had a role to play in order to get it to the border town of Malaba.
“From our end, we wanted to ensure that so long as those countries do the SGR, then we can take the SGR to the border, but if they cannot give us a commitment that they were going to do SGR, we can do the railway line to the border and it becomes a hanging project.”
“It was done jointly and when some countries went slow, in terms of making commitments and getting financing, we decided for the sake of maximizing on our investment, we get to Naivasha, which is Phase 2A.” he clarified
He noted that Kenya decided to revive the existing MGR line from Naivasha because it is much cheaper and that Uganda has also decided to do the MGR from Malaba to its capital Kampala.
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