Kenya refusing to release loan contracts for Chinese-built railway
Kenya has declined to make public the loan contracts for its Chinese-built railway in response to a court petition by two activists, saying they have non-disclosure clauses and that releasing them would amount to breaching a bilateral agreement, impairing relations between Kenya and China.
This sheds light on the secrecy surrounding Chinese deals with developing countries, which experts say complicates debt renegotiation.
The news is according to an affidavit by public works principal secretary Solomon Kitungu that also states that releasing the documents will undermine Kenya’s national security, “since terms in the contract touch on foreign government information with implications on national security and foreign relations.”
The SGR is Kenya’s most expensive infrastructure project and faces criticism
Built at a cost of more than $4.7 billion, the standard-gauge railway (SGR) is Kenya’s most expensive infrastructure project. Since its inception, the project has been marred by accusations of being overpriced and damaging to the environment. It’s also been criticized for being highly unprofitable.
The 453-mile track connects the country’s capital, Nairobi, with the port city of Mombasa and the Rift Valley town of Naivasha. Construction began in 2014, with the primary contractor being the China Road & Bridge Corporation (CRBC) and most of the funding coming in form of loans from the Export-Import Bank of China.
Passenger and cargo trains operate on the SGR, with passengers welcoming it for reducing travel time when compared to using buses, but cargo owners are avoiding it for reasons including higher fees and more time in clearing goods when compared to using trucks.
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Critics worry about its debt burden on Kenya, its financial viability, and environmental impact. The Africa Star Railway Operation company, a CRBC subsidiary that operates the railway’s passenger and cargo service, has never made a profit in the four years of the SGR’s operation and Kenyan taxpayers have had to fill the gap to sustain the company’s operations.
Environmentalists, meanwhile, say the construction and operation of the railway, which passes through key wildlife areas such as national parks, has destroyed and degraded important ecosystems.
Khalifa and Gikonyo have taken the Kenyan government to court
Two activists—Khelef Khalifa and Wanjiru Gikonyo—last year filed a petition at the High Court in Mombasa seeking to obtain all contracts, agreements, and studies for the construction and operation of the SGR.
Through a coalition called Okoa Mombasa, Khalifa had previously attempted and failed to get the documents through Kenya’s Access to Information Act after the government directed that all containerized cargo at the Port of Mombasa be transported inland through the SGR. This was a move that had negative impact on the Kenyan coast’s port-based economy as it forced logistics companies to move their operations to container depots in the country’s interior.
“We have a right to know the details of the project: how our money is being spent, the consequences of a loan default, and the government’s decision-making processes in signing the deal. Right now, we know none of this – the Kenyan public is completely in the dark,” said Khalifa.
Gikonyo, his co-petitioner, is the national coordinator for The Institute for Social Accountability, a Nairobi-based civil society organization.
Chinese lenders finance huge infrastructure projects in Africa
China is Kenya’s largest bilateral lender, Africa’s largest economic partner and the world’s single largest creditor. In the continent, where its lenders finance huge infrastructure projects, the Asian giant is often accused of debt-trap diplomacy because of the scale of its lending to African countries and the secrecy around its loan contracts. Critics accuse China of using these arrangements to burden developing countries with debt that can make them vulnerable to exploitation on default.
The SGR contract has been a hot and recurrent topic for years in Kenya, with some Kenyans worried that the Port of Mombasa is listed as collateral and that China would seize it on default. In 2018, President Uhuru Kenyatta denied this and said he’d share the contract—a promise that he’s yet to fulfill. In 2019, Chinese ambassador to Kenya Wu Peng said no Kenyan national asset is collateral for the loan.
The Kenyan government’s refusal to provide the Chinese loan contracts gives voice to the accusation that Chinese lenders use contracts to gain advantage over other creditors in developing countries. A report released last year that looked at 100 contracts issued from 2000 and 2020 between Chinese lenders and 24 developing countries, including 11 from Africa, found that Chinese contracts contain confidentiality clauses (pdf) that prevent borrowers from sharing details about the documents.
The research, led by AidData, a US-based development finance research lab, found that the contracts had become more secretive over time, with all since 2014 having a confidentiality clause. Study co-author Scott Morris said the limitations make it difficult for debt renegotiation because such discussions depend on borrowing countries being able to be transparent on their external credit exposure.
