Govt expects SGR to break even in mid 2019
There would have been no better candidate to stand up for Kenya’s largest infrastructure project since independence than sitting transport cabinet secretary James Macharia.
However, following the seemingly public led uproar on the un-sustainability of sizable government infrastructural projects, the transport boss was on no easy stroll when he spoke on Citizen Tv on the viability of the Ksh360 billion standard gauge railway (SGR).
The viability of the project topped concerns following the recent disclosure on the contractual obligations between the China Road & Bridge Corporation (CRBC) and Kenya Railways which show operating costs amounting to Ksh30 million daily, a figure translating to about slightly over Ksh1 billion per month.
CS Macharia was however quick to rubbish concerns on the feasibility of the SGR project noting that the government was due to break even by the close of the financial year by leveraging on additional cargo and passenger trains.
“We are going to break even, revenues will reach Ksh2.2 billion per month against an operating cost of Ksh1.8 billion in just the second year running. By the third year (2019/2020) the revenues will get to Ksh3.3 billion,” he said.
The CS’s response did however elicit more questions than answers given his earlier statement to the National Assembly where he stated that loan repayment for the project would be handled under the newly established railway levy should costs fail to break even by 2020.
Mr Macharia insisted that the ministry was running on calculated projections given the expected additional resources in the form of extra trains on the railway-line.
“We have met the projections so far by including additional trains. We hope to have 12 pairs of trains by December this year. We have not put up the railway levy as a back up to loan repayment but to develop sections of the uncompleted railway line,” he added.
The government will hope the project breaks even within the stipulated timelines or run the risk of falling deeper into debt with the possibility of running an un-sustainable venture coupled with a hefty loan repayment with China seeking to recover its credit support.
The state has already began exercising caution on its infrastructure spending with President Uhuru Kenyatta last week announcing a freeze on new projects pending the completion of all running tasks and approval by the National Treasury.
The country will in the meantime continue to grapple with a rising sovereign debt owing to an expanding expenditure allocation to infrastructural projects under the government’s development agenda.