Africa Star Railway, the Chinese firm that has been running the Standard Gauge Railway line has demanded the full payment of billions owed to it before it can hand over the operations of the SGR to the State in May 2022. Africa Star Railway Operation Company Ltd (Afristar) is demanding over Sh. 40 billion that hasn’t been paid.
In 2020, the National Assembly’s Budget and Appropriations Committee (BAC) raised concern that the SGR risked collapse over Sh. 38 billion unpaid debt to the Chinese firm. Africa Star Railway Operation Company is majority-owned by China Road and Bridge Corporation (CRBC) and was contracted in May 2017 to run the passenger and cargo trains on the SGR. Africa Star manages the ticketing system, landing and offloading of cargo and collection of passenger fares, including non-cash revenues like M-Pesa.
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Africa Star can only foot repair bills of less than Sh. 100,000 under the contract that requires Kenya Railways to pay the maintenance fees. Further, the operator cannot be held responsible for any legal claims from third parties involving damage to property, death, illness or personal injury. The Sh. 38 billion in pending bills add to the Sh. 420 billion that Kenya borrowed to build the modern line from Mombasa to Nairobi and purchase of engines and coaches.
The SGR has been one of the most controversial mega projects to be undertaken by a Kenyan government in the recent past. Critics fear that the project, which stalled after the completion of the Nairobi-Naivasha phase, has no value for money. As of September 2020, the SGR had made over Sh. 21 billion in the three years it has been in operation. The SGR said that in the three years to May 2020, it posted a combined operating loss of Sh. 21.68 billion. This was after the the railway line’s operational costs had hit Sh. 46.71 billion against revenues of Sh. 25.03 billion.