A look into the leaked SGR Agreement

“Transport CS Kipchumba Murkomen releases SGR agreement for public scrutiny. Some key loan terms:

~ Loan amount not exceeding $1.6Bn

~ 2.0% per annum interest

~ 0.25% management fee

~ 20-year tenure with a 7yr grace period

~ preference for the purchase of goods from China” (Kenyan Wallstreet, 06.11.2022).

The SGR Agreement decides that the Kenyan Government has 13 years to repay the loans for the Standard Gauge Railway (SGR). This is happening after the 7 year grace period. The agreement was signed off on the 14^th May 2014 and 7 years after that is last year May 2021.

There been speculations about this agreement ever since the Jubilee government signed it and accepted it’s terms. It was even at one point, rumours that the Kenyan government had signed off the Mombasa Port operations to the China EXIM Bank.

What it instead says in addition to the terms of the direct financial manner. It says something very interesting…

A key parts of the SGR Agreement is this, as well as the other mentioned terms: “The Borrower undertakes to procure that the Government of Kenya or the relevant authorities of Kenya shall stipulate and issue preferential policies, regulations or approvals in relation to RDF which could be applied in priority to make the repayment of loans in relation to the Project as owning to the Lender, the Long Term Service Agreement and its due performance, the revenues generated from the Project which will be applied in priority to make the repayment of loans in relation to the Project as owing to the Lender (except for the expenditures of operation and management of the Project), the Inlander Container Depot (inland port) established in Nairobi and its mandatory customs clearance, and all other necessary policies or approvals, with an aim to ensuring the due operation of the Project and the repayment of such loans in relation to the Project as owing to the Leader” (SGR Agreement, 2014).

Here the borrower is setting the terms of usage and how the transport policies are set. This is now in print and in public. It now makes perfect sense why the authorities and the government ordered all goods or movement of cargo is directed to the SGR. That is done in accordance with the agreement actually. Because the stipulation is actually there…

Certainly, you can wonder if Beijing or the China Exim Bank is happy with the leakage of the agreement between them and the Kenyan Government. They would most likely be happy to have it under seal and hidden from the public space. Because, now the realities of this agreement is in the public domain.

The SGR is already a sort of failure and lack of creating revenue. That’s why the SGR haven’t been profitable or had the ability be viable. That’s why the Kenyan Government had to direct all cargo to go through the SGR and to the Navisha or Inland Port in Nairobi. Therefore, this agreement is just showing how bad this deal was.

The one winning here is China and they are getting lots of interests out of it. They are able to get the Kenyan government on their side. The Kenyan Government accepted a huge loan for an expensive railway. A railway that will take forever to be a feasible enterprise. That’s why these terms will be a liability and an expensive expense for the taxpayers in the years to come. While the SGR will not deliver or be able to re-coup the debt. That’s what is tragic here… Peace.

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The SGR Trick: Which was all based on, if Beijing blessed Nairobi!

“I will be part of the delegation to accompany the President to the Asian country next week. The new SGR line will extend from Naivasha, Narok, Bomet, Sondu and finally Kisumu” – Raila Odinga on the 20^th April 2019

We are now surely living in interesting days. Not enough that the “opposition” leader and Building Bridges Initiative leader Raila Odinga was stringing along with President Uhuru Kenyatta to Beijing and the Belt and Road Initiative Summit in Beijing this week. It was a grand summit with all the partners who are cooperating with the Chinese on their mission. Clearly, the Kenyan government officials had to go. As they have substantial investments, loans and projects already done in Kenya.

This being the Standard Gauge Railway (SGR) from Mombasa to Nairobi, now the second extension is to Naivasha. Clearly, that is not as golden as getting it to Kisumu. Then it would be a better deal to get the railway from Uganda connected too. The reason why President Museveni even took the ride in Kenya during the last month or so. Therefore, the trip to China now, seems abysmal. Even if they get to sell avocados. It is at least something.

I will first show you the two reports from the day before the Kenyan Officials flew to Beijing as they were scheduled to meet and negotiate a loan for an extension of the SGR to Kisumu. Alas, that has clearly not gone to plan. That is why I will show what one media house in Kenya wrote today and what the State House claims after failing.

CTGN reported on the 23^rd April 2019:

“Kenya’s president Uhuru Kenyatta will today travel to China to secure a Sh368 billion loan for the extension of the Standard Gauge Railway (SGR)” (Christine Maema – ‘Kenya’s President travels to China to secure Sh368b SGR loan’ 23.04.2019, link: https://africa.cgtn.com/2019/04/23/kenyas-president-travels-to-china-to-secure-sh368b-sgr-loan/).

Standard Media on the same day:

“President Uhuru Kenyatta will today travel to China to negotiate a Sh368 loan billion for extension of the Standard Gauge Railway (SGR), a State House official has confirmed. Uhuru will be flanked by African Union’s High Representative for Infrastructure Development in Africa, Raila Odinga” (Moses Nyamori – ‘ Uhuru leaves for China to secure Sh368bn loan for SGR extension’ 23.04.2019, link: https://www.standardmedia.co.ke/article/2001322214/uhuru-goes-to-china-for-more-loans).

Citizen Kenya reports today:

“However, there was no word from the Kenya – China talks on the Naivasha – Kisumu SGR extension. Instead, Kenya signed an operation and maintenance service agreement for the Nairobi to Naivasha segment of the SGR. “.. the most important investment right now is to connect the SGR to Naivasha MGR so that come August there will be seamless connectivity,” CS Macharia said, the government choosing to hold its head high despite not achieving the much sought after Ksh.368billion” (Citizen Kenya – ‘ SGR construction to end in Naivasha as China loan bid flops’ 27.04.2019, link: https://citizentv.co.ke/news/sgr-construction-to-end-in-naivasha-as-china-loan-bid-flops-242884/).

State House Press Statement:

“It is important to note that the question of funding for the extension of the Standard Guage Railway from Naivasha to Kisumu was not on the agenda of the meeting between the two President’s. It therefore follows that the President cannot be said to be returning home empty handed for something he did not request. It further goes without saying that these headlines are are not only factually incorrect, they are misleading and extremely damaging to the reputation of the People and the Government of the Republic of Kenya. Whilst making it clear that the Government of Kenya did not discuss any funding proposals for the extension of the SGR at this meeting, it is very critical to state at this point that the SGR project is a regional project and the complexities in negotiating its completion involve several countries and securing financing for its completion could take several years of intricate negotiations” (State House – Press Statement, 27.04.2019).

First be first, the delegation from Kenya was a bit to excited and well prepared to come home with a giant loan. To a state and republic already high on the old loans. Where the SGR is already a losing money project and it is well established. As well, as the levels of loans compared to the budgets are already hitting the economy too. Therefore, that they were so pleased to travel for more loans is a crazy idea, but in the sphere of Jubilee, its just another Tuesday.

Secondly, the media showed and mirrored the events before, where both Raila Odinga and Uhuru Kenyatta was preparing for the loans. Kenyatta even had visit from Museveni to ensure his support and willingness to add the stakes for an extension. Because, that would mean, the same sort of deal and arrangement could be done with Kampala as well. Alas, the Northern Corridor Integration Projects with the SGR between the Republic is surely on hold. As the Republics are not capable or able to configure the stakes, the leverage or collateral for the Chinese to accept the conditions of a possible loan.

Third, when the State House comes out with a Press Release like today. It is sort of thinking that people have the memory of a gold-fish. Because, the statements of Odinga before leaving. Was all praising and willing to build a Industrial Zone in Kisumu in combination of the extended SGR. However, that dream is gone in the wind. The Jubilee and the President couldn’t fix another giant loan for the state to eat. Clearly, he missed the mark. Even if the State House claims he never intended to get it. Why have the meeting and greeting with Museveni before and later travel with a giddy Odinga? That doesn’t make sense to me? Can someone explain that to me, I don’t speak the language of gibberish.

We know there is more than what they say. The State House is trying to deflect it, surely soon Odinga is defending the State House. As the loyal subject he has become. He was planning not only to build a bridge, but also be a part of the belt and road initiative too. That would mean a double pay-off. Kenyatta nevertheless, will surely find another scheme to trick money to his businesses. We are just awaiting it.

The SGR Trick have been the same all along, awaiting the blessing and the nod from Beijing. Hopefully the Jubilee follows this old Chinese Proverb: “Timely return of a loan makes it easier to borrow a second time”.

If not, they might loose more than the good favours and possible loans from them. They might even loose, whatever collateral they made in previous engagement. Also, make it twice as harder to get more loans. Peace.

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