A $3.8 billion railway project linking Kenya’s largest port Mombasa and the capital Nairobi is doing well, and the railway will reach the break-even point by 2020, an employee of State-owned China Communication Construction Corp (CCCC) has said recently.
The comment came after some foreign media suggested the debt for the line, the country’s first standard-gauge railway, might be too burdensome for the East African country. The railway was built by China Road and Bridge Corp (CBRC), a subsidiary of CCCC.
On Wednesday, tracks were laid for a 120-kilometer extension of the railway – the Nairobi-Naivasha line – toward the Kenya-Uganda border.
“From construction to operation, CBRC has kept the overall cost of the railway at a reasonable level, bearing in mind economic feasibility, and kept the operating profit margin low. The railway will reach the break-even point by 2020, when the loans for the project are due,” an employee at CCCC told the Global Times.
The 480-kilometer railway, also known as the Madaraka Express, marked the first anniversary of passenger services in June. In its first year, the railway carried more than 1.4 million passengers with a utilisation rate of more than 90 per cent. It also reduced the travel time between the port city and Nairobi to about five hours from more than 10 hours. The project is believed to have boosted Kenya’s GDP growth by 1.5 percent.
There are doubts over whether the railway is a worthy investment, as the loans for the project amounted to about 6 per cent of Kenya’s GDP, a BBC report in June said. Passenger business aside, the report suggested that the project needs to attract 20 million to 55 million tons of cargo annually, citing a consultancy report.
According to a China Media Group report in June, the railway’s cargo volume will reach 14 million tonnes annually by the end of 2019, citing James Wainaina Macharia, the Kenyan minister of transport, infrastructure, housing and urban development. In its first year, cargo amounted to 608,000 tons.
The railway line cost about $3.8 billion, and the Export-Import Bank of China reportedly funded 90 percent of the total. The State-owned policy bank was not available for comment as of press time on Thursday.
CRBC said cargo transport demand between the two cities will rise to 5.61 million tons by 2020 and 11.94 million tons by 2025 and the railway is expected to carry 60 per cent of the volume.
The railway will be the first section of a broader plan of a 2,700-kilometer regional rail network to connect countries from South Sudan to Tanzania in East Africa.
“The debt issue is important, but the successful operation and sustainable development of the railway is more important. If this railway can be successfully operated, it will serve as an example for future projects involving East African rail networks,” said Li Zhibiao, a research fellow at the Institute of West Asian and African Studies of the Chinese Academy of Social Sciences in Beijing.