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Why East Africa’s Next Railways Won’t be Built With Chinese Money

A general view shows the Standard Gauge Railway (SGR) train (R) constructed by the Chinese Communications Construction Company (CCCC) and financed by Chinese government stopping at the Nairobi Terminus, on October 16, 2019. SIMON MAINA / AFP

From Ethiopia to Kenya and soon Tanzania, thousands of kilometers of new railways are coming online. And if Tanzanian President John Magufuli is successful, Dar es Salaam will emerge as the hub of a hugely ambitious regional railway network that will stretch across half a dozen countries.

But the Key Question Remains: Who Will Pay for It?

The Chinese were instrumental in the first phase of East Africa’s railway development, providing billions of dollars in concessional loans to the Ethiopian, Djiboutian, and Kenyan governments to build Standard Gauge Railway lines.

But it increasingly appears that Beijing has lost its appetite to fund more railway construction in the region. This week, the China Exim Bank (for a second time) rejected Uganda’s request for a $2.3 billion loan to build a new SGR. This effectively removes China as a potential financier of the project. Similarly, China also turned down Kenya’s request to provide concessional financing for Phase 2B of its SGR, which would connect the inland port city of Naivasha with the Lake Victoria port city of Kisumu.

In both instances, Chinese officials declared, after conducting feasibility studies, that the projects are just not financially viable.

So, if the dream of international railways crisscrossing East Africa is to come true, it’s very likely that somebody other than the Chinese will underwrite it. But given the huge expense, particularly at a time of tremendous economic uncertainty due to the worsening COVID-19 outbreak, it’s not immediately clear where that kind of money will come from.

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