Kenyan government to spend $731 million on new trains, SGR revamp

The government of Kenya has stepped up expenditure on the Nairobi-Mombasa standard gauge railway (SGR) with a plan to hit Ksh100 billion ($731.53 million) in the next three years to revamp the line, build new sidings and buy more locomotives and cargo wagons.

A report by Kenya’s National Treasury shows that the country’s Transport ministry will receive an additional Ksh97.7 billion ($714.7 million) for the “Development of Standard Gauge Railway” between July this year and June 2026.

This reverses a trend where the previous government had cut allocations to the SGR and will push the spending related to this line beyond KSh780 billion ($5.7 billion) by June 2026.

Beginning July, the Kenyan government has allocated Ksh37.4 billion ($275.79 million) from the Railway Development Levy Fund (RDLF) for the Nairobi-Mombasa SGR.

The bulk of the allocation, according to the breakdown shared with the Business Daily from transport, has been earmarked for the acquisition of additional locomotives and freight wagons at a cost of Ksh11.9 billion ($87.1 million).

Kenya last bought its 1,620 locomotives and wagons from China in 2018.

State had no plans for extension

The allocations to transport ministry show that the government had no plans to extend the SGR beyond Naivasha to Kisumu and finally Malaba in the next three years.

The rest of the funds, which have been allocated under the “Mombasa to Nairobi SGR” vote will largely be used to build new feeder lines and rehabilitate the old metre gauge railway (MGR) lines.

Charged at the rate of two percent, the Railway Development Fund (RDF) is levied on all goods imported into the country for home use.

“The purpose of the levy shall be to provide funds for the construction of a standard gauge railway network in order to facilitate the transportation of goods,” reads part of the Miscellaneous Fees and Levies Act which establishes the kitty.

Budgetary allocations for the acquisition of locomotives and wagons are projected to increase to Ksh16 billion ($117 million) in Financial Year 2024/25 and Ksh22.2 billion ($162.4 million) in the Financial Year 2025/26 taking the total allocations for the three years to Ksh50.1 billion ($366.5 million).

Another Ksh5.9 billion ($43.16 million) will be spent on the rehabilitation, remanufacturing or overhaul of locomotives, wagons and coaches, according to a breakdown of the Ksh37.4 billion ($273.6 million) allocation.

The new feeder lines will link some of the sections of the modern railway such as the Mombasa SGR Terminus to critical urban centres.

This includes Ksh4.48 billion ($32.77 million) for the construction of the Riruta-Lenana-Ngong Railway Line and Ksh2.96 billion ($21.65 million) for the construction of a Railway Metro Line linking Embakasi Station and Ruai town.

In the next 12 months, the government will also build a new 2.8-kilometre Metre Gauge Railway (MGR) link from Mombasa SGR Terminus to Mombasa MGR station at a cost of Ksh2.5 billion ($18.29 million).

These funds will also be used to construct a railway bridge across the Makupa causeway that links Mombasa Island to the Kenyan mainland.

New MGR line

A new Metre Gauge Railway (MGR) line linking the Naivasha Inland Container Depot to the existing Longonot Railway Station has been allocated Ksh1.6 billion ($11.7 million) in the next financial calendar.

The construction of a Railway Metro Line connecting Athi River Station to the East African Portland Cement has been allocated Ksh400 million ($2.93 million).

This is projected to rise to Ksh1.17 billion ($8.56 million) in the Financial Year starting July next year and Sh1.36 billion in Financial Year 2025/26.

Another Railway Metro Line connecting Athi River Station to NSSF and Mavoko will absorb Ksh450 million ($3.3 million), a figure that is set to increase to Ksh1.56 billion ($11.4 million) and Ksh1.89 billion ($13.83 million) in 2024/25 and 2025/26.

The money will also be used to rehabilitate the line between Longonot and the Western border town of Malaba, which is aimed at facilitating the movement of cargo from the port city of Mombasa to Uganda.

Also in this border town, which is prone to congestion, the State plans to build Malaba Cargo Handling Yard. Around Ksh474 million ($3.45 million) has been set aside for this project.

Other spending items will be the acquisition of plant and equipment, which shall take up Ksh3.8 billion ($27.8 million) in the next fiscal year, Sh1.1 billion in Financial Year 2024/25 and Ksh600 million ($4.4 million) in the Financial Year 2025/26.

Logistics hub

A logistics hub is planned for Athi River with the state putting aside Ksh1.125 billion ($8.23 million).

The allocation for this planned logistics hub will reduce to Ksh375 million ($2.74 million) in the year ending June 2025.

Initial plans were to extend the SGR to Uganda; however, this has since stalled with the Treasury not getting funds for the extension to Kisumu and finally to Malaba.

Murkomen at the beginning of this year said the Kenya Kwanza administration in partnership with the Chinese government is keen on extending the SGR from Naivasha’s Mai Mahiu to the border of Uganda through a five-year plan that will see the multibillion-dollar railway line run through Narok, Bomet, Nyamira, Kisumu, and Malaba.

“In the long run, we would like to complete the connection of the SGR from Suswa to Kisumu through Bomet, Nyamira, parts of Kisii and later to Malaba. Later, we can think of upgrading the existing MGR via Nakuru to Kisumu and via Eldoret to Malaba,” he said on December 15, 2022.

With the additional expenditure, the government hopes the country’s most expensive piece of infrastructure will help to grow the economy and improve the standard of living for Kenyans.

The administration of former President Uhuru Kenyatta borrowed Ksh656.1 billion ($4.8 billion) in three tranches for the construction of the two phases of the SGR, contributing to a major build-up of Kenya’s stock of debt.

Kenya will use Ksh11.9 billion ($87 million) to acquire rolling stock that will be used to ferry cargo on the SGR from Mombasa to Naivasha.