Nairobi SGR — debt service vs ridership, six years on

<p>The Mombasa–Nairobi Standard Gauge Railway (SGR) opened in June 2017 — the largest single infrastructure investment in Kenya&#x27;s post-independence history at USD 3.2 billion, financed approximately 90% by China Eximbank. The Nairobi–Naivasha Phase 2A extension added another USD 1.5 billion in 2019. The line was built by China Road and Bridge Corporation (CRBC) and is operated under a long-term contract by Africa Star Railway Operation Company (a CRBC subsidiary).</p> <p>Passenger ridership has held up reasonably well — Madaraka Express runs roughly daily and carries around 2 million passengers annually pre-2023. The freight side is the structural problem. The SGR was justified primarily as a freight corridor that would move container traffic off the Mombasa–Nairobi A104 highway. Actual freight volumes have run at 30–50% of the original projection. Kenyan importers and clearing agents have continued to use the road because (a) the SGR terminates at Naivasha rather than at Kampala or Kigali, requiring trans-shipment back to truck, and (b) the road logistics industry has political weight that resisted the early Kenya Ports Authority directive mandating SGR use.</p> <p>Anzetse Were&#x27;s writing for the Institute of Economic Affairs Kenya, and David Ndii&#x27;s earlier columns before he joined government, made the analysis early: at projected freight volumes the SGR could not service the China Eximbank loan from operating revenue. The Kenya National Bureau of Statistics balance-of-payments data show SGR-related debt service running around USD 350–400 million annually, against operational EBITDA in the USD 80–120 million range. The gap is being filled by the Kenyan exchequer.</p> <p>The 2024 default-rumour cycle around the SGR loan was overstated — China Eximbank has rolled the principal repayment schedule rather than calling default — but the underlying problem is unresolved. The Phase 2B extension from Naivasha to Kisumu has not been financed; the Phase 2C extension to the Ugandan border remains at concept stage. Without the regional extension the freight economics will not work, and without the freight economics the line is, in cost-recovery terms, a passenger amenity priced as freight infrastructure.</p> <p>The instructive comparison is Ethiopia&#x27;s Addis–Djibouti railway, which has comparable Chinese financing structure, comparable underperformance against projected freight volumes, and the same trans-shipment problem at the Ethio-Djibouti border. The Pan-African lesson is that large rail capex needs regional integration before construction, not after. The AU Programme for Infrastructure Development in Africa (PIDA) framework was meant to coordinate this; it has not, in practice, delivered on the coordination.</p>