Home Business news SGR to be shut down over Sh38 Billion debt

SGR to be shut down over Sh38 Billion debt

The standard Gauge Railway (SGR) may soon stop its operations due to Sh8 billion debt Kenyans owes a Chinese firm.

In a report by a local daily, The National Assembly’s Budget and Appropriations Committee revealed that Kenya Railways had delayed settling the pending debts to Africa Star Railway Operation, which runs the day-to-day SGR operations.

The committee, which is chaired by Kikuyu Member of Parliament Kimani Ichung’wa, also indicated that the Chinese firm contracted in May 2017 risks pulling down its contract if the debts remain unsettled.

According to the committee, pending bills increasing from operations of the SGR have accrued to Sh38 Billion, and this may prompt Africa Star Railway Operation to pull out of the daily activities of the project.

The firm is tasked with landing and offloading cargo, ticketing, and managing passenger fares.

The Sh38 billion in question is part of Sh420 billion that Kenya borrowed from China to help in the construction of the railway line, which has since been making losses.

Statistics from the Kenya Bureau of Statistics indicated that the passenger arm of SGR generated Sh39 billion in the first quarter of 2020, down from Sh4.2 billion it made the same period the previous year.

Kenya Railways, on the other side, stated that it had not received a protest letter from the Africa Star company, and there was also no formal communication addressed to it from the Budget Committee.

This follows almost immediately after Kenya parted ways with another Chinese contractor after allegations that the contractor quoted in excess Sh50 billion in the Malaba- Naivasha Metre Gauge Railway project.

The government dropped its plan to extend the SGR to Western Kenya was over financial reasons; instead, it opted to upgrade the MGR, which will connect with SGR in Naivasha.

In 2017, SGR, which is president’s flagship project, made Sh10 billion losses and, in the 2018/19 financial year, made another Sh6.8 billion losses, costing taxpayers Sh18.6 million daily.

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