Investors to Own & Run SGR Trains Under New Govt Plan to Sustain Operations

Private investors will now be allowed to own and manage train operations under a new Kenya Kwanza government plan aimed at extending the Standard Gauge Railway (SGR) from Naivasha to Malaba, at the Ugandan border.

Speaking at a meeting of the Northern Corridor Transit and Transportation Coordination Authority (NCTTCA) last week, Transport CS Davis Chirchir explained that privatising locomotive ownership is part of the government's strategy to make SGR operations more sustainable.

He noted that, if successful, the government would focus solely on building the railway infrastructure—including tracks and terminals—while private investors (either companies or a consortium) would purchase locomotives, passenger coaches, and freight wagons. These investors would then recoup their investments from consumers while paying the state a fee to use the infrastructure.

According to the CS, the framework aims to ease the government’s reliance on foreign loans to finance the project, which is estimated to cost Ksh645.95 billion ($5 billion).

Recent Plans

The Kenya Kwanza administration has revived plans to extend the SGR line, which currently terminates in Naivasha—a decision made during the second term of the previous government. Experts argue this has cost Kenya revenue from transit goods destined for landlocked countries linked to Kenya’s port, including the DRC, Uganda, Rwanda, Burundi, and South Sudan.

Initially, the government had planned to raise 30% of the capital and outsource the remaining funding. However, Chirchir indicated that Kenya is now pushing for China to finance the entire project, according to Business Daily.

“We have a framework where we are seeking to commercialise aspects of the project that are profitable. With that $5 billion investment, we’re looking to reduce the portion that would otherwise go to freight—such as buying engines, bogies, and rolling stock,” Chirchir said.

“We are seeking a freight concession. Just like roads are built and users buy their vehicles to operate on them, we will build the rail and invite investors to handle the rolling stock and run freight operations,” he added.

Extension to Uganda

The original SGR framework, initiated under former President Uhuru Kenyatta, aimed to connect the Kenyan port to Uganda and other landlocked countries. However, it stalled after reports that China had shifted its financing priorities away from sovereign loans toward smaller, commercially viable investments.

Uganda’s delay in committing to construct its section of the line between Malaba and Kampala also disrupted progress.

However, during President William Ruto’s visit to China in April this year, talks were revived. Both countries committed to building their respective segments of the railway to resume the regional integration effort.

Mombasa to Nairobi SGR

The SGR project was launched in 2013 to speed up the movement of people and goods. The first phase, from Mombasa to Nairobi, was completed in 2017 and halved travel time compared to road transport.

Phase 1 cost Ksh490.92 billion, 90% of which was funded through Chinese loans. Phase 2A, which extended the line to Naivasha, was completed during President Uhuru’s second term at a cost of Ksh193.78 billion. The terminus in Naivasha has been widely criticised as being "in the middle of nowhere."

As of November 2024, the original Ksh539 billion loan borrowed for Phases 1 and 2A had ballooned to Ksh737.5 billion due to interest accrued from non-payment. Revenues from the existing lines remain insufficient to service the loan and sustain operations.