News / Economy

China, East African Leaders Sign Up for New Rail Link

Chinese Premier Li Keqiang and Kenya's President Uhuru Kenyatta applaaChinese Premier Li Keqiang and Kenya's President Uhuru Kenyatta applaud the signing of the Standard Gauge Railway agreement at the State House in Nairobi, May 11, 2014.
Chinese Premier Li Keqiang and Kenya's President Uhuru Kenyatta applaaChinese Premier Li Keqiang and Kenya's President Uhuru Kenyatta applaud the signing of the Standard Gauge Railway agreement at the State House in Nairobi, May 11, 2014.
Reuters
— East African leaders and China formally signed agreements on Sunday related to the construction of a new multi-billion dollar railway to run from the Kenyan port of Mombasa to Nairobi and on to neighboring states.

The deals were signed in Nairobi on the last stage of an Africa tour by Chinese Premier Li Keqiang, although Kenya's president, Uhuru Kenyatta, had already signed up to the deal during his state visit to Beijing last year.

"The costs of moving our people and our goods... across our borders will fall sharply," Kenyatta told a news conference with the Chinese and African leaders on Sunday.

The existing narrow gauge railway in Kenya was built in the 19th century and only runs to Uganda whereas the faster new line is designed to go on to Rwanda and South Sudan and is aimed at cutting the hefty costs of trade between east African nations.

Kenyatta has previously said the new railway will cut freight costs to eight U.S. cents a ton per km from 20 cents now. Journey times will also be shortened.

Work on the 609-km (380-mile) Nairobi to Mombasa stage is due to start on Oct. 1 and be completed in March 2018.

China Road and Bridge Corporation, a subsidiary of China Communications Construction Company, has been appointed to construct the initial Kenyan leg of the new line, despite criticism that there was no competitive tendering for the work.

Kenyan officials said there was no public bidding because that was a condition of securing Chinese financing but some lawmakers said the deal was overpriced.

Officials previously put the price for the railway from Mombasa to Kenya's western border with Uganda at 447.5 billion Kenyan shillings ($5.1 billion), including financing costs.

China has won friends in Africa by building infrastructure across the continent, but critics grumble that it often relies on Chinese labor and is more keen on sucking in African raw materials than passing on skills.

China's premier told the news conference on Sunday that the rail construction company would ensure African workers were trained and laws adhered to.

Meanwhile Kenya signed two financing deals on Saturday with China's Eximbank, although no value was given.

The Nairobi to Mombasa stage will cost $3.6 billion, with China covering 90 percent of the financing, the Kenyan presidency said in a statement. Kenya will fund 10 percent.

Kenya has previously said China is offering a $1.6 billion commercial loan and a $1.63 billion concessional facility to help finance that section of the line.

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