DEBT SERVICE

To break even, SGR needs to reach Malaba and Uganda

In Summary

• KPA waived immunity over any of its assets in case of a debt default under the SGR agreement

• The SGR needs to get to Uganda and Central Africa to get sufficient freight cargo to break even on its operations

The SGR Cargo train at the Port of Mombasa, January 4, 2017.
The SGR Cargo train at the Port of Mombasa, January 4, 2017.
Image: FILE

The Treasury has categorically rejected that Mombasa port has been mortgaged to secure three SGR loans totalling Sh364 billion (see P7).

However, the Auditor-General's report makes it clear that, under Clause 17.5, Kenya Port Authority assets could be seized in case Kenya fails to service the SGR loans as KPA and Kenya Railway Corporation "irrevocably waive any right of immunity whether characterised as sovereign immunity or otherwise" over their assets. Therefore China could potentially seize any or all of the assets of the KPA or KRC in case of a debt default.

Perhaps this is not strictly a mortgage but it is certainly a potential liability that could result in a Chinese claim on Mombasa port.

Every loan needs security so it is not surprising that this clause is in the SGR deal. It is therefore essential that the SGR project starts to pay off the Chinese loans and does not become a white elephant. 

For the SGR to become truly profitable, it needs to go all the way to Kampala and even Rwanda and eastern Congo. It needs to be extended to Malaba to reach Uganda.

"It is the duty of a good shepherd to shear his sheep, not to skin them."

- Tiberius Caesar Augustus, The Roman emperor died on March 16, AD 37