Kenya will be forced to cough up Ksh40 billion to a Chinese company before taking over the operations of the Standard Gauge Railway (SGR).
Kenya was set to fully take over the SGR in May 2022.
The amount owed to Africa Star Railway Operation Company Ltd (Afristar) is for unpaid bills accrued in handling operations of the railway.
Business Daily reports that AfriStar is a subsidiary company of China Road and Bridge Corporation (CRBC).
“The negotiations between KRC and Afristar commenced in the year 2019 and an agreement has been reached that KRC (Kenya Railways Corporation) takes over obviously with some conditions including clearing of any outstanding payments,” KRC chairman Omudho Awitta as quoted by Business Daily.
At the moment, Afristar runs all operations related to SGR including ticketing system, landing and offloading of cargo and collection of passenger fares.
Earlier this year, Kenya initiated a gradual process of taking over all the operations, which will add to the existing debt burden.
Kenya borrowed at least Ksh420 billion for the construction of the first phase of SGR (Mombasa to Nairobi) and an additional Ksh160 billion for the second phase (Nairobi to Naivasha).
Currently, the government sinks over Ksh1 billion per month on the operations of the Mombasa-Nairobi railway alone, a figure that is expected to rise in the near future due to economic variables.
In the three years to May 2020, the SGR posted a combined operating loss of Ksh21.68 billion. This was after bagging Ksh25.03 billion in revenue over the period against operational costs totalling Ksh46.71 billion.