The company that is operating the SGR has blocked a planned review of the contractual terms of the project by the government refusing to disclose key information about operational costs and management that would have led a possible renegotiation.
According to the team tasked with the review of contracts to ensure they serve the interests of Kenyans, China Road and Bridge Corporation (CRBC), the contractor, refused to provide key information alleging it was protected by the confidentiality clauses in the controversial contract, on the grounds that it was “sensitive and private”.
“The negotiation for a review of the operation and maintenance contract did not progress because the operator refused to provide information that would enable the team to determine reasonable costs of SGR operations,” a highly-placed source told the Nation.
Kenya is to pay back to Exim back 25 billion in January and another 25billion would fall due by June of next year. Aside from this, Kenya Railways currently owes CRBC 31 billion in operational costs since they are yet to break even in running the SGR. Recent financial reports indicated SGR made 10billion last year against an 18billion annual operating cost.
CRBC, in what is a blueprint of the Chinese takeover of Africa, drafted a feasibility project for the project (which was not even viable). The report was adopted and CRBC contracted to do the job.
They signed up a lender from China and after completing the project, they again ended up winning the contracts to supply the locomotives and operate the SGR.
Trouble is in the fine print of the contract which among many things, says any disputes are to be governed by Chinese laws back in China.
Kenya Railways is to pay the operating company 1.3billion monthly fixed cost (40million daily). The contract put Kenya’s strategic assets at home and abroad at risk of being seized by the Chinese government in the event of a default.
CRBC is operating the trains through its subsidiary, Africa Star Railway Operation Company, which is a shadow company started specifically for this and whose investors are in secret, further impounding fears that some persons in government colluded with the Chinese to win over these contracts.
That’s not all the Chinese get in the contract. CRBC charges variable costs, when it increases trips during peak seasons or when it does more than three return trips a day.
They force Kenya Railaways to pay the fixed monthly service charge, which must be paid quarterly and in advance. This year KR was hit with an 800million bill for late payments.
The contract also made it imperative to start operations by June 1, 2017. Any delay would attract a Sh24.2 million fine daily. A 3 billion special reserve account to cushion the contractor against any losses also had to be opened prior to operations starting.