The Chinese are not Santa Claus. The deals we have signed with them are loans, which we will have to repay.
But I must admit I admire the way these deals are arranged, especially the time-frames and project completion dates.
As it is, if things go according to plan, we will have a completely new railway line between Mombasa and Nairobi in 42 months.
Had we sought money from the conventional sources — the World Bank, for instance — we would still be arguing about settlement action plans, sovereign guarantees, letters of no objection and all manner of conditionalities.
Anyone who takes a long-term view will admit that new infrastructure assets, especially those whose operations have a bearing on the cost of doing business such as ports, railways, roads and telecommunications, will always make economic sense, especially in the future.
You can argue and debate whether the feasibility study was conducted at arms-length and whether the project was procured transparently. You can debate the cost of the project and compare prices with similar projects in the region.
But many years later, especially if the project is completed within budget and agreed completion dates, the long-term benefits will outweigh the issues that critics raise during the planning and implementation stages.
Several years ago, we shouted ourselves hoarse over the Turkwell Gorge project. Today, it is an integral part of our hydro-electric power generation capacity. Years ago, we derided former President Moi for creating new universities all over the place haphazardly.
Critics dismissed some of these projects as having been started by the ruling elite merely to create opportunity for kick-backs and back-handers
Yet when you look at trends in demand for university education today, you will admit that Moi was a visionary. The public university system would have been a total mess had Moi not built the institutions.
The lesson here is this: You will not see the viability of a massive infrastructure project of the magnitude of the standard railway gauge if you lock yourself to the mindset and contemporary obsessions of the political class. When it comes to brick and mortar, what may look unviable now may become the game-changer of the future.
In the case of the standard gauge railway, big-picture issues such the likely impact of the massive project on the broader economy has been on the back-burner. Indeed, what has consumed the attention of the chattering classes and the Twitterati are the numbers around the project.
It has been reduced to an academic quibble about whether the figures for the project add up when compared with similar projects in Djibouti and Ethiopia.
As things stand, the horse has bolted. What’s critical now is whether the Chinese contractors will deliver at the prices and quality envisaged within time.
Although a good part of the project will be funded through the new railway levy, the financial model assumes that the cost of servicing the debt will primarily be borne by operational revenues.
What if the project does not pick up enough business in the first five years?
Admittedly, this risk has been mitigated by tying KPA’s hands into giving the new railway designated quantities of cargo. But we must not forget that the cargo ultimately belongs to shippers.
This is going to be a massive undertaking. Acquiring land on which the railway will run alone will cost taxpayers Sh8 billion.
Another major element of the project is expansion of the Embakasi terminal. Both expansion and purchase of new handling equipment will cost a whopping Sh18.6 billion. In addition, Sh1 billion will be required to acquire more land around the container terminal.
The Chinese loan — a massive $3.23 billion — will increase Kenya’s nominal debt from Sh1.95 trillion as at the end of July 2013, to Sh2.23 trillion, with the external component increasing from Sh875 billion to Sh1.16 trillion.
We must get everything right from the start. This project is the kind we need to get businesses expanding again and to get quality well-paying employment opportunities for our people.
Source: Daily Nation
Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of TradeMark Africa.