Standard Gauge Railway (SGR) contract leaked

The year is 2022, and Kenyans are tired of keeping the government in check.

A myriad of huge scandals where public officials walk home with huge sums of money has numbed their senses; a billion-shilling scandal seems like nothing anymore.

Of course, the man at the helm, William Ruto; his life has been documented pretty well for all to see, but then again he got elected, or let’s say, re-elected to continue in the plundering ways.

The SGR scandal doesn’t even register.

In section 13, appendix A of the Standard Gauge Railway (SGR) contract titled “Supply and installation of the facilities. Locomotives and stocks for the Mombasa – Nairobi Standard Gauge Railway Project”, the exorbitant cost of the white elephant project is laid bare. 

Appendix A is titled Non-Binding Bill of Quantities.

It is 44 pages of pure theft. 

Down memory lane

In February 2020, news broke that SGR landscape designers had used a whopping Ksh1 billion on buying grass. Grass; that natural green vegetation that is first to grow in plenty, for free, when plantation burns or soil is shifted. How can it possibly cost a billion shillings to plant it? 

Well, like with many Kenyan scandals, the next is usually more scandalous and thus the noise died down amid the danger posed by the COVID-19 pandemic. Everybody concentrated on their immediate basic need. Kenyans moved on to the next topic.

What most don’t know to date, is that the SGR’s original contract; well, a copy of it, had finally left its lock and key thrown away into the sea cabinet. Kenyans, I mean journalists at the Nation Media Group had got hold of it and had analysed it, therefore confirming the intellectual’s narrative that SGR was overpriced, unnecessary and a cash cow.

It is common knowledge, from online sources and from articles by economists notably David Ndii (From Game Changer to Railway to Nowhere: The Rise and Fall of Lunatic Line 2.0) The Elephant – Speaking truth to power and others like the Ufungamano Group that the SGR project costs were inflated.

Ndii, a force critic of the SGR project has consistently termed it useless.

The Government of Kenya (GoK) and China Road and Bridges Corporation (CRBC) had pushed through with an unnecessary project which made no economic sense to grease the hands of leaders both in Kenya and China.

The intellectuals argued that the Metre Gauge Railway (MGR), which the Lunatic Express runs on should’ve been upgraded at a far cheaper cost.

The SGR contract which has been seen by KenyanBusinessFeed (KBF) says, the level of theft of Kenya money that had been loaned from China was unprecedented, to say the least. The railways runs at a cost of Sh1 billion per month, which is unsustainable and losses are bound to accrue from its running. It is even better, ironically, to stop the trains than to run them.

During its planning and construction, the contract reveals that the managers were the greediest of all greedy of the earth. China which prides itself on a tough stance against corruption had allowed its staff abroad to engage in blatant abuse, disrespect and theft of resources. 

It is in line with President William Ruto’s govt need to expose the theft at SGR and to revive the contracts thereof that KBF makes this story public once more.

According to the contract, there are some information that was left out that was not covered by the mainstream media. The information reveals the level of theft of Kenyan taxpayers’ money, the money was a loan taken in the name of Kenyan taxpayers signed by then Managing Director of Kenya Railways Nduva Muli.

Mr Li Qiang was the General Manager of CRBC and a representative of the Chinese government in Kenya. The contract’s name is: Supply and Installation of The Facilities, Locomotives, and Rolling Stocks for the Mombasa – Nairobi Standard Gauge Railway Project.

(Jacob Juma a once influential billionaire who broke ranks with his peers going on to expose their underworld dealings and would later be assassinated wrote in a memoir about the GM on his page “The Group GM of China Rd & Bridge E.Africa Mr Li Qiang is the MOST CORRUPT Chinese on African soil.)

The claims of inflated costs of the SGR project were in January 2020 supported (not that he didn’t also reveal it in the past) by the African Union High Representative for Infrastructure Hon. Raila Odinga in a local TV station. During the interview, Raila said that he and former President Mwai Kibaki in the coalition government had tendered the SGR project at a lower cost, but when President Uhuru Kenyatta and his deputy William Ruto took over in April 2013, they cancelled the contract and re-tendered a fresh at inflated costs.

“Before we left the government with Mwai Kibaki, we awarded SGR tender to a company at USD2.5billion. But when jubilee came in in 2013, they cancelled the tender and awarded it back to the same company but at USD4.5billion. Obvious inflation of figures”, Raila Odinga, told NTV Journalist Joseph Warungu.

The contract showed people who were in a frenzy to get rich quick. 

Inflating the costs

Perusing the contract, it is not a mean fit, the document is big but one cannot escape the charade of Section 13 Appendix A: Non-Binding Bill of Quantities area. This is 44 pages of pure thuggery.

The looters of our country led by UhuRuto saw it fit to raise the prices of basic commodities to levels unprecedented for example a mere bench cost Ksh180,000. The prices were quoted in United States Dollars (USD) and the conversion rate for this article will be USD 1 for Ksh100.

A battery forklift that costs about Ksh900,000 was bought at Ksh1.37 million. 

Acetylene cylinder normally worth Ksh5,000 was purchased at Ksh38,040.

A good lighting arrester retailing for between Ksh500 and Ksh3000 was sold to Kenya at the price of Ksh11,680.

It is important to note that the prices given already have a markup and that the price quoted by the looters of Kenya, the difference is what they took home.

The level of theft that was carried out in this project makes the government and all those that benefited from the inflated costs term real news as fake.

KenyanBusinessFeed.com is aware that the Chairman of the Transport and Public Works Committee in Parliament who is also the Pokot South Member of the National Assembly David Pkosing told Voice of America (VoA) news that the news about Kenya paying for grass along the SGR route at Ksh1 billion were rumours and fake news. 

“Let them petition parliament and tell us this is inflated for this reason we know. They have no evidence. People when they don’t have evidence, they create rumours and peddle what I call fake news”, Pkosing said.

Though the Kenya government has not made public what they agreed with the Chinese government as pertains to the SGR Project, the contract also revealed as already reported that Digital voice recorders cost as little as Sh2,000 in Nairobi. These small costs here and there multiplied by the number of gadgets being bought added up to billions of shillings.

CRBC also billed Kenyans Sh38 million to install a passenger guiding system, Sh14.6 million for each security system at the railway stations, Sh26 million for each luggage inspection system and Sh14 million for passenger monitoring systems at the stations.

The company also said it bought 46 A3 laser printers at Sh513,700 each for use at the stations during construction. The Nairobi station received five of these printers. These printers currently cost between Sh40,000 and Sh75,000.

Each of the intermediary stations also got a 30KW generator for use in case of a power outage; Mombasa and Nairobi got two. The diesel generators, according to the contracts, were acquired at Sh4.26 million each. When the Nation asked around, we were told we could have one for Sh1.5 million.

Additionally, Kenyans paid Sh5.4 million for each of the 31 boreholes dug by CRBC in the intermediate stations. The Sh5.4 million is for drilling alone minus equipping and commissioning. The entire SGR from Mombasa to Nairobi has seven stations, which means each one was supposed to have three boreholes, a geological impossibility.

CRBC also said it needed to import six ZX7 DC/AC arc-welding machines as each station needed six of these for construction. These, according to CRBC, were bought at Sh442,872 each. We were able to get the same for Sh25,000 from Chinese manufacturers.

The link between current suffering with high commodity prices and fail in initial plans 

The SGR was initially planned to run from the port of Mombasa in Kenya, through to Kisumu and into Uganda. The looters built it in phases, looting huge chunks of money and going for a new loan for the Nairobi – Naivasha line, which apart from paying in cash, they made sure Chinese officials have a bigger stock of Rhino Horns, elephant tusks, lion tooth and leopard hides by passing it through our National Park.

The level of theft in this contract saw a bus that normally costs about Ksh5 or Ksh6 million was purchased at Ksh25 million. A van that cost Ksh2.4 million was bought at Ksh12 million. Mark you, the contract, in the first pages states that all imports were tax-free. 

The Chinese staff, who are mostly derived from the scum of their society, were brought to Africa as punishment and lived like Kings. According to the contract, over Ksh235 million was used for their entertainment. The chief engineer indeed had at his disposal over Ksh5 million in telephone costs/ airtime.

The reality of the leaked contract has since 2020 been buried under a plethora of PR – Public Relations exercises. The mainstream media is not talking much about SGR’s shortcomings, the public debate ended rather prematurely. However, KBF can remember well that, after the Ksh1 billion grass expose’, the same media house accepted an advertisement by Kenya Railways, the co-owners of SGR the next day. One headline the next day read: ‘Kenyans trained to take over SGR operations – official’.

The PR and the denial by the UhuRuto government didn’t suppress the fact that Kenya borrowed more than Sh450 billion from China to build the 472-kilometre railway from Mombasa to Nairobi and additional largely unused routes to Naivasha and Suswa.

The PR in the mainstream media is blind to the fact that many SGR workers in 2018 and 2019 came forward to reveal cases of abuse, racism and mistreatment working alongside or rather under the Chinese.

In July 2018, a local media house revealed how Kenyan workers were suffering under the Chinese, mostly immigrant workers without documentation.

Another expose by a Kenyan blogger also exposed the issues of mistreatment at SGR. The staff among other things decried long unending training. These same training is what the SGR and KRC senior managers are using to appease the many unemployed Kenyan youths. It is a scam, that no one should fall for. Kenyans are very intelligent people and humble too.

Despite the many revelations of slavery at SGR, the Kenyan government’s position has always been “there’s a little misunderstanding”. The issues are swept under the carpet and staff deemed to be rogue are fired.

Job losses and environmental degradation

There’s no doubt that the economy of the coastal city of Mombasa which depended on road transportation of cargo using tracks has suffered.

In their Environmental Social Impact Assessment (ESIA) study done by Kenyan firm Africa Waste and Environment Management Centre (AWEMAC), SGR factors this but scoffs it off. It states: ‘most travellers that use road transport will also find it faster, convenient and safe to travel by train” and that ‘bus companies that operate between Nairobi and Mombasa will have to improve their services to compete with high-quality train services offered”, it also takes a swipe at truckers saying that the over 50,000 drivers and turn boys might be adversely affected and as such ‘they may have to shift their business interests to the new railway in order to survive’.

The deeply flawed and lacklustre AWEMAC ESIA report, some slightly over 200 people decided the fate of 2 million people living along the 385 Kilometre SGR line between Nairobi and Mombasa.  

The study correctly notes that the train will produce exhaust gases which will settle on the vegetation and interfere with photosynthesis. However, their solution is just to state that “the project will put up measure to ensure that there is a reduction in emission of exhaust gases and smoke”.

More below.

No measures were put in place

Morocco easily built their train network, fully electrified (25kV 50Hz ac electrification), high speed (320km/h) at a cost of $1.5 Billion, compared to Kenya’s dirty diesel locomotive at over $4.8 Billion. It was a rip-off. 

The role of other state agencies especially KETRACO under Fernandes Barasa

During the height of the debate on whether SGR should be electric or diesel, or a dual carriage way raged much at some point.

Many people have forgotten that as the debate raged about a diesel vs electric trains, the ever PR-ready and greedy government went ahead and signed a $240 million (Sh24.4 billion) loan to electrify the SGR.

The over Sh400 billion that Kenya has borrowed and used in all the routes of the SGR (Mombasa – Nairobi – Naivasha etc) was enough to construct a dual lane electric train system.

The move was a costly afterthought meant to rival Tanzania and Ethiopia’s SGR.

However, the blunder is that the money was channeled through an incompetent parastatal by the name Kenya Electricity Transmission Company Limited (Ketraco). 

Fernandes Barasa-led parastatal had signed the contract with a Chinese-government owned multinational China Electric Power Equipment and Technology Company Limited (CET) two years ago and the works were supposed to begin.

What happened?

Mr Barasa wrote an opinion piece on a local daily saying that the project was viable but then the Managing Director of Kenya Railways Corporation (KRC) Mr Atanas Maina contradicted him stating that ‘the govt does not have the resources to transform the railway from diesel to electric’.

Ketraco on its part had stated that they will use the money to build 14 substations between the cities of Mombasa and Nairobi on a transmission line with a transfer capacity of “1,500 megawatts (MW) which is 200MW shy of the current national demand of 1,700MW”. 

In all these, no one could explain how Ethiopia had built its 750 Kilometre-long SGR line at a cost of $3.4 billion (Sh346 billion), whereas Kenya’s 472-kilometre-long line had gobbled Sh447 billion.

‘Chop my money’

Though most people have forgotten that SGR is a white elephant whose construction coupled with other blunders and mismanagement by the Jubilee regime now threatens to cost us important installations such as the port of Mombasa, KBF would like to keep the conversation alive.

Well, on Section 7, also titled Non-Binding Bill of Quantities, the first page shows the description of the entire page and their costing to be preliminary and supervisory/support services, site clearance and topsoil stripping, earthworks, protection work for railway and structure, culverts and drainage works, the passage of traffic, temporary work and structure, bridge works, track laying work, and finally building of railway station, management office and subsidiary house.

The total cost of these is given as over Sh201 billion.

Generally, most of the Chinese employed to construct the SGR lived like kings, for example on provision of furnished houses for the employers (China Road and Bridge Corporation – CRBC) and senior staff, the taxpayer coughed up a whopping sh30 million. 

KBF will now share a picture of the rest of the page for you to do your own calculations.

In the second page on the continuation of preliminary and general supervisory/support services, Sh30 million has been set aside for the senior engineer to be ‘spent on’ an unspecified item ‘in whole or part.

It is in this section that we get to see that indeed the engineer’s office was given Sh3.6 million for ‘mobile and telephone charges’. To make matters worse, a temporary accommodation for the engineer was allocated Sh7.6 million.

How much is a simple event like a launch of SGR should cost? Answer, in this section, the contract shows that the budget was Sh20 million.

In the Earthworks section, the famous cost of the billion shilling grass emerges; the exact amount is n true fugure Ksh1,090,704,240.

The above section coupled with Section 13: Appendix A reveals the shocking theft that happened while constructing SGR. 

“Before we left government with Mwai Kibaki, we awarded SGR tender to a company at USD2.5billion. But when jubilee came in in 2013, they cancelled the tender and awarded it back to the same company but at USD4.5billion. Obvious inflation of figures”

Raila Odinga, said in an interview in January 2020.

More on the Environmental impact assessment and other blunders

The Environmental and Social Impact Assessment (ESIA) for the SGR project was carried it by a Kenyan firm Africa Waste and Environment Management Centre (AWEMAC); the worst part in the report is that only 217 people were interviewed as Key Informants for public participation.

The study was rushed and appears to be a formality on the part government of Kenya and their Chinese cronies. The project that had its cost revised upwards would go on and nothing could stop it.

China Road and Bridge Corporation (CRBC), the contractor, in a bid to hide crucial information from the public made the Kenyan government sign confidentiality clauses in the controversial contract making it “sensitive and private”.

By the end of this year, Kenya is expected to have repaid at least Sh50 billion of the exorbitant Chinese loan.

The loan, whose interest is 3.6 percentage points above the six-month average of London Inter-Bank Offered Rate (Libor) which serves as an international benchmark, is to be repaid in 15 years with a grace period of five years.

“The railway has been sold as a commercially viable project, that is, it would pay for itself…I maintained that the railway could not pay, and that the debt would be paid from the public purse. This has now come to pass”. David Ndii repeated this statement that he made in 2014 in 2018 in a hard-hitting article titled, “SGR by the numbers: Some Unpleasant Arithmetic”- David Ndii, Managing Director for Africa Economics

The current one year Libor rate as of December 20, 2019 is two percent, a pointer that the loan comes with an interest rate of 5.6 percent.

This is expensive compared to other concessional loans, especially from the World Bank. Kenya recently agreed a Sh75 billion loan with the World Bank whose interest and other charges stand at two percent annually—matching the Libor rate.

Treasury data tabled in the National Assembly show that loan payments to Exim Bank of China will increase to Sh84.3 billion for the 2020/2021 and Sh111.4 billion in the 2021-22 financial years.

SGR accounts for the largest share of Exim Bank of China loans to Kenya including the Sh150 billion used to build the Nairobi-Naivasha line which has failed to attract business.

In perspective

The government has been forcing truckers out of jobs in order to make arm-twist businessmen to use the SGR. The issues surrounding the Inland Container Depot (ICD) in Nairobi has escalated and recently the Ministry of Transport announced that all cargo going to Western Kenya and the region must be offloaded at the newly built Naivasha ICD.

However, it seems highly unlikely that SGR which runs at a cost of over Sh1 billion per month is going to break even, despite these maneuvers. 

Even as SGR made losses this year, its costs of operations continue to rise.

SGR which is run by China Communications Construction Company (CCCC) raked in sh13.5 billion against Sh18 billion per year.

CCCC has also been accused of importing foreigners who are paid exorbitantly than Kenyans on an already strained train service.

Even to this point in time, over 50,000 truck drivers and turnboys, according to the ESIA report, are staring at job losses. Jubilee govt, even going by the way they’ve behaved up to now, seems to have had no agenda for the people.

Mombasa turned into a ghost town, thanks to the job losses.

Even as Kenyans welcome a new government that is not keen on fighting corruption amid the high unemployment rates. Questions about the money borrowed to finance the electrification of SGR linger because, a year after the loan signing, Ketraco was caught up in a scandal that Sh14.2 billion is said to have been lost through fraudulent payments to landowners.

Will Kenya afford to pay?

Kenya has 15 years to repay the SGR loan.

Kenya loan repayment to China has continued to be stressful. There’s over 130 per cent increase that has been shouldered by the Kenyan taxpayer as SGR trains gobbling more than Sh1 billion per month in operational costs is making losses.

The repayments commence after the end of the 5-year grace period, as per the agreements made with Exim bank in May 2014. Kenya has 15 years to repay the SGR loan.

As things stands, in this economy, repayments will increase in subsequent financial years.

SGR remains a white elephant just like the many other than have left many engineers, govt officials rich, but the country poor.

Comments

comments