Govt Mulls Ksh500 Billion Deal to Hand Over SGR Operations to Private Developer

Transport Cabinet Secretary Davis Chirchir has revealed that the government is in talks with Etihad Rail - a UAE firm- to run operations along the SGR line that will be extended from Naivasha to Kisumu.

As reported by Bloomberg, the government is seeking to raise around Ksh500 billion for the project through the securitization of the Railway Development Levy.

As part of the proposed arrangement, the government will be tasked with the engineering and maintenance of the line, as the private firms will run the train and freight operations.

In the deal, the UAE company will run freight services.

In the talks, Etihad Rail is seeking guarantees before accepting the investment. For instance, the firm is seeking a guarantee of freight traffic of at least 17 million tons a year.

“We’re seeking to allow securitization of this levy and use it to raise funds,” the CS stated.

The securitization of government funds has been used by the current administration to secure funding for projects.

Already, the securitization has been implemented with the Fuel Maintenance Levy to borrow Ksh175 billion to pay contractors for stalled road projects.

Plans to extend the SGR have been revived by the Kenya Kwanza administration, even as the government considers linking the SGR line with Uganda to boost trade in the region.

Initially, the SGR was to reach Kisumu during the Jubilee administration; however, owing to financial constraints, the project ended in Naivasha. Notably, Kenya's plan to seek a loan from China for the project was unsuccessful in 2019.

However, during a recent trip to China in April 2025, President William Ruto announced that the government had secured funding for the SGR extension.

It's still unclear whether the Railway Development Levy will be part of the securitization for the funding deal.

"President Ruto and his host, President Xi Jinping, witnessed the signing of the agreements at the Great Hall of the People in Beijing on Thursday," State House stated then.

"The meeting agreed on the extension of the Standard Gauge Railway from Naivasha (Phase II) and from Naivasha to Malaba (Phase III)."

The Railway Development Levy (RDL) is a tax charged by the Kenyan government on all imports, meant to raise funds for railway infrastructure.

Currently, the government collects approximately Ksh50 billion a year through the imposition of the levy.