China rail loan terms behind Kenya ban on road freight, deal shows
- Agreement required Kenya’s port authority to guarantee cargo traffic on Standard Gauge Railway from Mombasa to Nairobi
- The order was made under the previous Kenyan government and rescinded by President William Ruto when he took office
The agreement required Kenya Ports Authority, which owns the port of Mombasa, to guarantee a certain amount of cargo traffic to the SGR, funded and built by China.
Failure to do so would require payment of the difference from its revenues, according to the payment arrangement agreement – also known as take-or-pay (TOPA) – for the Mombasa-Nairobi SGR project, seen by the South China Morning Post.
The railway runs from Mombasa to the capital Nairobi with an extension to Naivasha, a town in central Rift Valley, where it ends abruptly after China dropped its earlier promise to fund construction to Malaba on the border with Uganda.
The project was funded with a US$5 billion loan from China Eximbank, agreed by former president Uhuru Kenyatta just over a year after winning his first term as the country’s fourth president.
Part of China’s transcontinental Belt and Road Initiative, the railway was built by China Road and Bridge Corporation, a subsidiary of China Communications Construction Company, which also won a 10-year contract to run the trains, both passenger and freight.