Kenya has reignited plans to extend the Standard Gauge Railway (SGR) to Kisumu after a six-year stall, awarding the project to China Communications Construction Company amid renewed scrutiny over financing arrangements and procurement transparency. The contractor, which is the parent firm of China Road and Bridge Corporation, has previously handled the construction of the railway line from Mombasa to Naivasha, positioning it as a familiar player in the country’s largest infrastructure project.
The revival of the railway extension marks a significant shift in Kenya’s infrastructure strategy following a slowdown in Chinese lending under the Belt and Road Initiative. Earlier phases of the SGR, including the Mombasa–Nairobi segment completed in 2017, were financed through loans from the China Export-Import Bank. However, reduced appetite for large-scale infrastructure financing from Beijing left the project stranded in Naivasha, more than 350 kilometres short of the Ugandan border.
In response, the government has explored alternative financing mechanisms, including securitisation and public-private partnerships. One proposal involves issuing bonds backed by proceeds from the Railway Development Levy, a 1.5 percent tax on imports that generates approximately Sh39 billion annually. Under this model, Kenya could issue bonds worth up to $3 billion (Sh387 billion), potentially making it the largest bond issuance in the country’s history. Despite these plans, the structure of the financing remains unclear, with no confirmation on whether the securitised bond will proceed.
The revised budget for the financial year ending June has allocated Sh30 billion toward the SGR extension, signalling initial government commitment to the project. However, key details such as the total project cost, funding mix and contractual terms have not been publicly disclosed. This opacity has raised concerns among stakeholders, particularly given indications that the project may be implemented through privately initiated proposals, a model that allows investors to propose projects without competitive bidding.
Kenya’s broader approach reflects a shift away from heavy reliance on sovereign borrowing toward blended financing structures. The government has indicated that while it will fund core railway infrastructure, private investors may be engaged to supply rolling stock such as locomotives, passenger coaches and freight wagons. This approach is designed to reduce upfront capital requirements and limit additional debt exposure, with investors expected to recover costs through freight and passenger charges.
Historical borrowing for the SGR remains significant, with Kenya having secured Sh655 billion ($5.08 billion) from the China Export-Import Bank by the financial year ended June 2015 to construct earlier phases of the railway. Recent restructuring of this debt extended the maturity of the longest tranche from 2035 to 2040 and converted dollar-denominated loans into yuan, reflecting ongoing efforts to manage external debt pressures.
The SGR extension is viewed as a critical infrastructure link aimed at enhancing regional trade by connecting the port of Mombasa to inland markets and neighbouring countries. Uganda remains a key beneficiary of the planned extension, with the project expected to support cross-border commerce and logistics efficiency.
However, the lack of transparency around procurement and financing has attracted legal and public scrutiny, including court action challenging the project’s structure and potential environmental impact. These concerns highlight the tension between accelerating infrastructure development and ensuring accountability in large-scale public investments.
As Kenya advances the SGR extension, the project’s success will depend not only on securing sustainable financing but also on addressing governance concerns and ensuring that the railway delivers long-term economic value.
