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January 21, 2019

Engineer Kamau Should Invite the NIS To Vet His Rail Project

The Cabinet Secretary for Transport and Infrastructure Eng. Michael Kamau was highly critical of the National Intelligence Service for failing to gather proper intelligence on foreign companies that take over local state bodies without the capacity to turn them around.

In mind, he had the Sheltam outfit of Roy Puffet that got a the concession to run rail services under the banner Rift Valley Railways.

NIS must return the favour. It must shed scrutiny on the proposed Standard Gauge Railway project that will cost the taxpayer Sh1.2trillion or 40 per cent of Kenya’s GDP.

In particular, it must be established if the cost cited, is reflective of market rates.

Such a probe will begin by informing Engineer Kamau that the company is now called China Communications Construction Company, the designated successor to China Road and Bridge.

The name change did not convince the World Bank to lift an 8-year ban barring the company from participating in road and bridge projects financed by the bank.

For bribing its way to government contracts, China Roads and Bridge was in 2009 banned till the year 2017 by the bank.

Eng. Kamau was recently before Parliament defending the single sourcing of this same company to construct the standard gauge rail line at a cost of Sh1.2 trillion.

Industry murmurs are that this is way too expensive and may not repay itself for ages to come.

There is also talk that a number of Kenyans stand to become immensely rich by “brokering” components of this contract.

The NIS must act.

When you commit an entire year’s national budget to one company which has been accused of bribing officials to get contracts in other parts of the world and development finance institutions do not want to entrust their money with it, there must be scrutiny.

Particularly, remembering that all 47 counties in the country get a mere Sh210 billion for their operations per year while China Road and Bridge will take that plus the interest we will pay on the loan from China’s Exim Bank to finance the project.

In keeping with Eng. Kamau’s script when he earlier accused NIS of not doing due diligence, the intelligence service must first of all rate the capacity of the company and the nature of discussions that led to it being single sourced for this contract.

It must then also, get independent estimates from other railway builders, including the Italfer SPA, an Italian company that had been picked by Kenya Railways Corporation to do a feasibility study of the project to give their estimates.

With no railway building companies in Kenya, we do not know what these projects cost and it is important, even if China is lending us the money, to establish whether we are getting value for the buck.

Secondly, Eng. Kamau must explain why government is involving itself in buying rolling stock (locomotives and wagons).

His ministry should only oversee the building of the rail and let the private sector come in and purchase the trains to run on this road.

It makes absolutely no sense for government after watching Kenya Railways decline and put to bed many locomotives and wagons on its grass overgrown yards before concessioning the operation to come back and get into the same business.

Let an independent operator determine if they will make money from running rail services on the track and commit their money but not taxpayers’ money.

Speaking of taxes, the government has now announced that it has already surpassed its targets with the railway development levy it has been charging on imports for the last three months. Sh5billion has already been collected by the scheme blowing past targets by 61 per cent.

At this rate, it will be raising over Sh20billion annually by making our imports slightly more expensive.

Which should make policy makers to ask themselves, if we are going to spend Sh1.2trillion on this project, how will our people benefit in the meantime?

Government must act.

For starters, we should establish, what materials that will go into this rail project can be sourced from here?

The Chinese have no business importing steel from China when we can produce it here. The only thing they can do is to bring in some technical people, post them to Devki Steel or Mabati Rolling Mills or any other steelmaker identified by government in Kenya and ensure the production is to their specifications.

In so doing, government will also help create major steel making companies that can then begin to serve the regional markets and create employment.

Chinese labour must also be restricted to unique expertise, otherwise, Africans and Indians built the current railway line so there is no special advantage to Kenya to having Chinese labourers come to do this work.

Eng. Kamau must also answer to the question of cost of transport on this railway if it is going to repay itself.

Any private operator, for them to break even, will have to charge a lot more than the current railway line charges for cargo.

Yet, rail transport only captures 10 per cent of cargo inbound to Mombasa.

Given the assurances Eng. Kamau gave that 60 per cent of the 20 million tones that come into Mombasa annually will shift to the standard gauge line, who will enforce this?

As it is, trucking goods on the road costs cheaper than doing so on rail. This is especially given the markup that shipping lines like Maersk add onto what the rail charges.

Since most of these imports are by the private sector, how will government convince them to pay much more to ship their goods by rail rather than use road which is cheaper?

These mathematics don’t add up. Even as the President goes to ground break for the project next Thursday, the NIS must brief on whether the nation is embarking on the most cost-effective course with this project.

NIS must also ensure that cowboy brokers do not enrich themselves by signing Kenya onto an unnecessarily expensive venture.

 In projects like this, it is easy to have cowboy go-between’s who tack on fat consultation fees and kickbacks further inflating the cost of the project as they broker who will be given what contract.


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