Chinese firm to be paid billions before handing over SGR

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Africa Star Railway Operation Company Limited (Afristar) the Chinese firm behind the operations of Kenya’s Standard Gauge Railway (SGR) has demanded billions of unpaid bills from Kenya before it can completely handover the operations of the railway line.

The condition comes amid Kenya’s latest gradual move to fully takeover the SGR from Afristar, a Chinese firm that was contracted to run the train services since May 2017.

The Kenya Railways Corporation (KRC) started by taking over ticketing system, security and fuelling of the SGR.

In 2020, the Kenyan parliamentary reports revealed that at least 38 billion KShs had not been paid to Afristar as part of the KRC agreement, which included clearance of outstanding debt.

“The negotiations between KRC and Afristar commenced in the year 2019 and an agreement has been reached that KRC (Kenya Railways Corporation) takes over obviously with some conditions including clearing of any outstanding payments,” stated Omudho Awitta, KRC chairman.

The Chinese firm that is mostly owned by China Road and Bridge Corporation (CRBC), has been known to manage the ticketing system, landing and off loading of cargo and collection of passenger fares.

As part of the agreement, Kenya will have to pay the outstanding billions of shillings owed to the Chinese firm before it can fully takeover the railway line by May next year.

Kenya which is now facing economic misfortunes amid the COVID-19 pandemic, which has highly affected the country’s GDP and revenue limiting it from accessing commercial loan markets has now been forced back to rely on the International Monetary Fund (IMF) and the World Bank in direct budgetary financing.

According to the IMF forecast, Kenya’s economy is expected to grow up to 7.6 percent in 2021 and up to 5.7 percent by 2022.

The cost of operating the SGR has been worsening since its inception, whereas the Ministry of Transport reports reveal that Kenyan taxpayers spend at least one billion Kenyan Shillings per month on Mombasa-Nairobi SGR operations alone and could rise to almost two billion Kenyan Shillings when affected by the rise of fuel prices and maintenance costs.

According to Business Daily, from 2017 to May 2020, the SGR had accumulated a loss of 21.68 billion Kenyan Shillings, and netting 25.03 billion Kenyan Shillings in revenue over the period against operational costs that add up to 46.71 billion Kenyan Shillings, which has to be paid by Kenyan taxpayers.

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Silvaro D'Silvas

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