“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 20th 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 23rd 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.
If you were ever thinking that Beijing would loan and build without consequence. Those days should long be gone. The Chinese are planning to earn money on their investments, they don’t care about the Republic’s they are investing in, as long as they are profits on their investments. They want earn on these loans and since the rate of loans are so high. They are now starting to pick collateral for their infrastructure loans, especially the draining of loans to the Standard Gauge Railway (SGR).
“While acknowledging China’s leading role in the Kenyan economy as a trading partner, the President called for increased Chinese investments in the country. “China now ranks as the number one trading partner with Kenya accounting for 17.2% of Kenya’s total trade with the World,” he said. “Kenya is open and safe for business. Kenya has one of the most conducive business environments in Africa,” the President added” (President.Go.Ke – ‘President Kenyatta Asks China To Give Preferential Treatment For African Goods’ 02.11.2018).
While Kenyatta are acting as it all positive, the reality is that the state are having giant issues with their “investments” and loans there. But Kenyatta wants to make it sound positive, when it really isn’t, just the rate of the loans have grown and the consequences of the relationship with China is now starting to cost. It is the Kenyans that has to pay these loans down and with every way possible. As the Chinese has leverage over the Kenyan government. Take a look at these quotes from media recently!
Loan Rate in Kenya:
“Kenya’s current public debt stands at approximately 4.884 trillion Kenyan shillings (USD$49 billion) or 56.4% of the country’s gross domestic product.. This is up from 42.8% in 2008. In other words, the country owes more than half the value of its economic output (GDP)” (…) “China is Kenya’s largest creditor, holding about 72% of the country’s bilateral debt as of March 2017. Studies show that Kenya’s Chinese debt poses a threat because the loan agreements are not transparent, projects are not well prioritised, accounting procedures are weak and it’s not clear what projects are costing” (Odongo Kodongo – ‘Kenya’s public debt is rising to dangerous levels’ 05.08.2018).
Selling State Owned Enterprises:
“The Privatisation Commission has approved sale of 26 state-owned corporations to raise funds to support the budget. The commission, under the Privatisation Act, 2005, was mandated to sell 26 poorly performing state corporations to cut down government spending. Those approved for sale are National Bank of Kenya, Consolidated Bank of Kenya, Kenya Meat Commission, Development Bank of Kenya, East African Portland Cement, Kengen, Kenya Pipeline Corporation, Kenya Ports Authority, and five sugar millers — Chemilil, Sony, Nzoia, Miwani and Muhoroni. Others are Agrochemical and Food Corporation, New Kenya Co-operative Creameries, Numerical Machining Complex and Isolated Power stations, hotels (Kabarnet Hotel, Mt Elgon Lodge Ltd, Golf Hotel Ltd, Sunset Hotel Ltd and Kenya Safari Lodges and Hotels Ltd). Also targetted are Kenya Tourism Development Corporation-associated companies, which include International Hotels Kenya Ltd, Kenya Hotels Properties Ltd, Mountain Lodge Ltd and Ark Ltd” (Cynthia Ilako – ‘State to sell 26 companies to finance current budget’ 03.11.2018, The Star Kenya).
China Selling Infrastructure Loans to Investors:
“The plan will see Hong Kong mortgage insurer Hong Kong Mortgage Corporation (HKMC) buy a diverse basket of infrastructure loans next year and explore the idea of “securitising” or repackaging them into securities for sale to investors, allowing it extra liquidity that it can loan out to finance more infrastructure projects. “This initiative we believe will help ‘recycle’ commercial banks’ capital to be redeployed into other greenfield infrastructure projects, besides enabling wider capital markets participation in infrastructure development under the Road and Belt initiative,” said HKMC Greater China chief executive Helen Wong” (Allan Olingo – ‘China plans to sell off its African infrastructure debt to investors’ 05.11.2018).
We are seeing the growth of loans, that is up 42,8% and the debt level of the 56,4% of the GDP. Because of that, the state are now selling of their State Owned Enterprises. Most likely to Chinese holding companies and investors, who are expecting to gets points on their dollars. As well, as securing their future on the investment. They are selling the central institutions and businesses, which was state controlled, but they will now become para-stalls of the Chinese.
But selling the institutions are not enough for the Chinese. They are planning to take it further. Planning to rehash the loans as sub-prime loans for investors, meaning they are taking the risk instead of the Export-Import Bank of China, where the loans are usually collected and distributed from. Therefore, the loans are another target of more profits as they want to earn on them as well into the Capital Market. Just like the US Banks did with House Loans and mortgages in the past.
While all that is happening and with the knowledge of this, the President is still keeping it cool. Kenyatta is still not saying the brazen truth, that they are a debt-slave to China. Are in such big trouble, that the investment of the SGR are killing the economy and they have to trade-off their assets to keep up with their payments. That is what is happening and this is not really developing, but hurting the economy even more. As this institutions and businesses has been controlling their markets. Now, they will have masters from outside, which are not there to secure the market, but make a direct profit. Therefore, the citizens are not only paying their loans for the railroads, but for destroying their economy. Peace.
The Standard Gauge Railway in the East African Community was all based on if the Chinese counterparts wanted to fund the infrastructure and the grand enterprise of rails in the region. Today, it was revealed, not shockingly that the SGR works in Uganda has been suspended. This after reports in the Daily Monitor revealed this:
“Uganda’s first phase of SGR, the eastern line running from Malaba to Kampala, about 273km (338km rail length), is expected to cost $2.3bn. Mr Kasaija admitted that Uganda has currently taken a back seat on the SGR venture, but will resume “serious discussions once Kenya is about to reach” the Ugandan side. President Museveni, according to sources familiar with the venture, in recent months had been directly involved in discussions on the project, and had hoped to secure financing for the first section of the railway line during his visit to China last month when he attended the seventh Forum on China-Africa Cooperation (FOCAC) summit. But he returned empty-handed. However, Mr Kasaija revealed that during the discussions in Beijing, it was agreed that “Uganda and Kenya will embark on joint financing negotiations” after Kenya has completed the current Nairobi-Naivasha section” (Daily Monitor – ‘Uganda puts SGR on hold over unresolved issues with Kenya’ 30.10.2018, link: https://www.businessdailyafrica.com/news/ea/uganda/Uganda-puts-SGR-over-unresolved-issues-kenya/4003148-4828902-156c5upz/index.html).
I have doubts that it will help reaching more agreements with the Kenyan counterparts at this time. As they have had plenty of agreements, joint communiques and meetings with the Northern Corridor Integrated Project (NCIP), which is going back to 2015. Where there was back in October 2015 on the 11th NCIP Communique, where the document stated: “the summit noted progress made in the finalisation of bankable proposals for some sections and directed the Ministers of Finance, Infrastructure, Attorney Generals, coordinated by the Ministers of Foreign Affairs, to undertake a joint visit to EXIM Bank in China to conclude Financing Agreements” (11th NCIP Summit – Joint Communique’ Safari Park Hotel, Nairobi, Kenya 17.10.2015).
If you follow it clearly, the progress of the 2015 have been stalled or rejected, but the parties still want to pursuit the goal of building the rails. Even as even the Chinese doesn’t believe in it or seeing the lack of fortunes in Kenya to maybe wishing to extend the tracks further at this given moment. What we are seeing is that the Ugandan government has persisted, but not gone through.
They even had the idea of the SGR Railway in the National Development Plan II of 3rd March 2015, which also holds the idea of the rails alive with this statement: “Joint formal agreements for plans to build a new Standard Gauge railway (SGR) have been signed by the EAC Countries. The SGR project starts in Mombasa through Nairobi, Kampala, Kigali and Juba. A cross section of the different routes of the SGR to the South Western, Northern, North Western and Eastern Uganda will aid the mining industry through transportation of equipment and raw materials. The overall objective of the SGR is to jointly develop and operate a modern, fast, reliable, efficient and high capacity regional railway transport system as a seamless single system and as a mechanism to stimulate overall economic development” (NDPII, 03.03.2015). By the way, the implementation of the NDPII is supposed to be between 2015/2016 to 2019/2020 to fulfill the Vision 2020. However, by the SGR failure, this shows the lack of progress and just the major agreements, but not the needed funding or possibility of partners to invest in the huge infrastructure projects the government has.
While on the 3rd of October, the Ministry of Works produced the 14th Joint Transport Sector Review Workshop presentation, where they by June 2018 stated: “The financing agreement for the SGR was not signed. However, negotiations to sign the financing agreement are in advanced stages” (Ministry of Works, 03.10.2018). So, you see, the government knows perfectly well, they cannot and doesn’t have finances for the building of it. It is soon November 2018 and getting closer to Vision 2020, but no sign of a working rails across the Republic. Especially not, when they are waiting for the Chinese to see it as a viable project in the first place.
What the government didn’t tell today or yesterday, is that the Chinese said no a little while ago:
“For it to make business sense, the proposed line has to reach Uganda in order to take over a huge chunk of the haulage business in the landlocked country ahead of the Tanzania-Rwanda SGR line. Uganda is said to have decided to revamp its old metre-gauge railway when it became apparent that the Kenyan line could delay for up to three years. A regional weekly recently reported that the ministers for transport and finance of the two countries were supposed to have engagements with China Exim Bank on the sections of Kisumu to Kampala via Malaba” (…) “This, however, flopped and instead the executives from China Exim Bank flew to Kampala and later Nairobi last November to carry out due diligence on the Uganda project proposal and contract application” (Guguyu Otiato – ‘Worry as China puts SGR funding on hold’ 06.03.2018 link: https://www.standardmedia.co.ke/business/article/2001294667/alarm-as-china-puts-sgr-funding-on-hold).
So, when the government are saying it wasn’t signed, is that the Exim Chinese Bank rejected it and hasn’t accepted the infrastructure project at this point. Certainly, they don’t see it viable or even possible for profits. They have already started in Kenya, but has to finish that part, before they extend to the other Republics in the EAC. Therefore, the SGR is still a dream elsewhere in the Northern Corridor, as they seemed more ready in 2015, than the donors or the development partners ever where. Because the GoU are not ready to finance it self and not have the ability to do so. Without getting funding from the outside. They have to beg for loans and grants to get it. Peace.
The Government of Kenya and the Government of Uganda, should both worry about their arrangements and their growing debts, as the non-sustainable rates of debt and higher interests. As the unnatural growth of the national budget, where the lack of revenue is covered with more state debt. To cover both salaries and development projects. All of this has happen over the recent years. As more and more of the yearly budget goes to pay interest on old loans, as the old loans also mature and the rates will become more dire. As the strength of the economy isn’t going in the same rates as the loans. This is in the end a debt trap. A debt trap China has used in other countries.
Sri Lanka is the recent example, which has come into a debt trap, where the Chinese loans has become so dire, become so big and not able to recover. That the collateral for the state was to favorable lease the harbor of Hambantota to the Chinese. They had too, since they couldn’t repay the creditor from Peking. That should be realization from all the others who borrows big and think that the Chinese will not get something valuable back for their funding.
This should be a warning for the Kenyan and Ugandan counterparts, this should be a warning for President Kenyatta and President Museveni. That is if they care about the state resources, about their minerals and about the possible extractions from their republics. If they want to be debt-slaves, or lease away the crown jewels to the Chinese, because they promised favorable debt plans, that in the end put them in juxtaposition, that they cannot come out off; unless they trade away something very valuable. If that would be licenses to drill oil in Turkana or in Bunyoro.
Who knows what the end-game of these massive loans are and if the Presidents and their parties plans to repay them. Or hope that the next generation will try to invent new way of generating money. If so, then they are saved by rare luck and not by planning ahead. These loans are big and taking bigger and bigger slices of the GDP. They are going far beyond the levels of revenue and possible future forecast of funds. Therefore, the loans can only at this point benefit the ones giving them. They will get the repayments and the interests. If they don’t get that, they will take collateral and take other state entities to get their values back. The Chinese are doing that in Sri Lanka, they could easily do that with Kenya and Uganda too. They are in for the taking and ready to muscled out.
The Chinese doesn’t play and doesn’t play with money, they will recollect and they will recover the funds spent. As they are not playing games, they are really investing and hoping to get paid-in-full. They are waiting for the numbers to go from red to black. They don’t expect to loose, and if they do. They will figure other ways to collect the lost.
President Kenyatta and President Museveni should know this, but I doubt they are thinking in this direction right now. They are eating and not caring, but their states and their economist should worry. As the growing debts has a backside, not only the interests and the lack of development it creates, as they have to find bigger revenue to cover the debt and the mature loans, as they have to settle old affairs and such. They don’t go away or get deleted over nothing. They got to take charge and find a way to solve it.
The Chinese will take advantage if they start to default, if they struggle to pay, which could come, if the loans and the negative spiral of lack of revenue continues. That is if the state doesn’t find ways to repay. Than, the Chinese might take a port, might take state owned enterprise, but surely they will be paid-in-full. Peace.
You know that Kenya Railways Corporation sucks, you know that the Standard Gauge Railways project is fatigued. As the circulations of the Secrecy Agreement that all employees has to sign onto. Which states that the employees cannot tell the truth about the operations or the works of the corporation.
They expect all employees to be strictly confidential about all matters connected with the SGR and the Kenya Railways Corporation. You are not allowed “to record, store copy any information or violating the SGR Operations”. Therefore, the SGR and Corporation are clearly muffling its staff. This includes “participating in negative articles, writings or videoes or photoes on social media or Facebook or Youtube and etc. that involving SGR Operation”. So when the company goes this far, it says how dire the operations are, they cannot be golden, but instead grim.
This is happening after the state orders all Containers from Mombasa to be put on the SGR and also pushing for the public to use the rails. However, it is still not profitable. As the project has been costly and also embarrassing as the grace period for the loans are soon hitting the government. Meaning, the huge loans for the infrastructure investment comes to roost. Therefore, the needs for revenue is even more important. To patch the hurt, before moving on to other projects.
That is why these sort of leaks and showing how far the Company takes it. Shows how bleak the situation is. When they have to muffle and silence the employees. Since the Secrecy Agreement has Chinese signs on them, it could be given by the tendered company, China Communications Construction Company (CCCC), which have the 4 extensions tenders to the previous built railway from Mombasa to Nairobi. Therefore, this could be the direct interference of the contractor CCCC, that would explain why the agreement wrote Youtube as Yutube. Because, that is a site that is banned in China. So, if the CCCC employees wouldn’t know about it and its spelling it would make sense.
Because if the employee was to break the agreement, they would meet the SGR discipline, whatever that means. If that would be termination or put on leave, its hard to know, since their protocols are not out and the KRC/CCCC are not that open on this matter. I am sure they didn’t want the Contracts into the public sphere anyway. Since this is disgusting silencing of the workers and taking away their rights as citizens. This is all communications outside the operations is not allowed. This is not about keeping away company secrets, but keep negative social media impact of the company. However, now that the agreement is out.
I can assure the negative articles will come, not only that the state has order transports of containers directly, that its not profitable and not a wholesome company, instead its a mismanaged State Operated Enterprise (SoE). Surely, the Kenyans should feel betrayed, as they are silenced by outside forces, who are building railways in their republic. The CCCC is acting as kings and they are the servants on the spot. Not allowed to talk or express opinions, just work on the clock and shut-up. That is initially what the contract is saying. Peace.