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Belt and Road Initiative
ChinaDiplomacy

African railways feel pinch of China’s belt and road funding squeeze

  • Ambitious rail project from Kenyan coast to landlocked countries in the Great Lakes region stalled
  • Analysts say Chinese policy banks are taking a more cautious approach to lending in current economic climate

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The first freight train to Naivasha in the Central Rift Valley leaves Nairobi in December 2019. The next phase of the rail project is on hold, pending funding through China’s Belt and Road Initiative. Photo: AFP
Jevans NyabiageandKeegan Elmer

More than six years ago, Kenya, Uganda, South Sudan and Rwanda hatched a grand plan to build an ambitious standard gauge railway line linking their countries from the Kenyan coast and eventually stretching to the mineral-rich Democratic Republic of Congo.

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The rail link was expected to be completed by 2018 but so far only its first phase – from the port city of Mombasa to Kenya’s capital Nairobi and then on to Naivasha, a town in the Central Rift Valley – has been done, with US$4.7 billion funding from the Export-Import (Exim) Bank of China.

Kenya has yet to secure funding for the phase linking the railway to Kisumu and on to the Malaba border crossing with Uganda, where construction is then supposed to continue into it and other landlocked countries in the Great Lakes region.

The Exim Bank, one of China’s top lenders for overseas projects, has asked Kenya to redo a feasibility study for the Malaba extension to prove its commercial viability before funds are released. Uganda too is yet to secure funding from the same bank, with officials in Kampala saying negotiations are ongoing.

Analysts say the railway line – part of the Belt and Road Initiative – is facing challenges like others around the world, as Beijing makes a gradual government-directed paradigm shift within China’s policy banks to a more cautious appraisal of projects.
Sources in Beijing say the tight finance for belt and road projects is partly due to China’s slow economic growth, which has been hit by the pandemic, and increasing debt risks.
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Zambia has already defaulted on a US$42.5 million repayment of one of its dollar-denominated Eurobonds. China recently said it had suspended US$2.1 billion of debt service payments from 23 countries as the pandemic has ravaged economies in Africa.
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