The project a critical component of East Africa’s regional transport ambitions had been halted near the Rift Valley town of Naivasha, leaving the railway hundreds of kilometres short of its intended destination at the Ugandan border.

A Project Stalled by Funding Shifts

The SGR, one of Africa’s most ambitious rail projects, was initially financed under China’s Belt and Road Initiative. The first phase linking Mombasa to Nairobi was completed in 2017, followed by an extension to Naivasha in 2019.

However, construction came to a halt soon after as Beijing began scaling back large infrastructure lending to African nations amid growing concerns about debt sustainability.

The stalled railway became emblematic of broader debates around China’s role in Africa’s infrastructure boom with critics raising concerns over debt exposure, while China has consistently rejected claims of “debt-trap diplomacy.”

New Financing Model Signals Strategic Shift

To revive the project, Kenya has adopted an innovative financing approach based on revenue securitisation, reducing reliance on external borrowing.

Under new legislation, the government will channel proceeds from a railway development levy on cargo transported via the existing SGR line, estimated at about 35 billion Kenyan shillings ($270 million), to fund the next phase of construction.

This approach reflects the government’s constrained fiscal position. With rising debt servicing costs and limited room for additional borrowing, authorities have turned to domestic revenue streams to finance key infrastructure.

The move also follows public resistance to tax hikes, including widespread protests in 2024, which forced policymakers to explore alternative funding mechanisms.

China’s Role Evolves, Not Ends

While Chinese financing has diminished, China remains involved in the project as a contractor, with the state-owned China Road and Bridge Corporation continuing its role in construction.

Analysts say this reflects a broader shift in China-Africa relations away from large sovereign loans toward investment-driven partnerships. At a 2024 Beijing summit, China pledged $50 billion in credit and investment to Africa over three years, signalling a recalibrated approach to infrastructure cooperation.

Strategic Importance for Kenya and the Region

The railway extension is central to Kenya’s long-term economic vision. Once completed, the SGR is expected to link Kenya to Uganda and potentially extend further into Rwanda, South Sudan and the Democratic Republic of Congo, forming part of a wider East African transport corridor.

The project aims to:

• Reduce transport costs for goods moving inland from the Port of Mombasa
• Boost regional trade and integration
• Improve logistics efficiency for landlocked neighbouring countries

The railway is designed to replace older, less efficient metre-gauge systems and serve as a backbone for regional commerce.

Economic and Political Implications

The revival comes at a critical time for Kenya’s economy. Public debt remains high, and infrastructure investments have faced increasing scrutiny over cost, transparency, and returns.

By shifting to a self-financing model, the government is attempting to strike a balance between continuing development and maintaining fiscal discipline. However, questions remain about whether the levy-based funding approach will generate sufficient capital to complete the full extension, which could cost billions of dollars.

Launch and Outlook

President William Ruto is expected to formally launch the renewed construction phase in Naivasha, underscoring the political and economic significance of the project.

Analysts say the success of the revived railway will depend on consistent funding flows, regional cooperation, and sustained political commitment. If completed, the line could transform East Africa’s trade landscape but if delays persist, it risks becoming another costly infrastructure project struggling to deliver on its promise.

A Broader Shift in African Infrastructure Financing

Kenya’s decision to revive the SGR without heavy reliance on Chinese loans may signal a turning point for infrastructure development across Africa. Governments are increasingly exploring hybrid financing models that combine domestic revenue, private investment and strategic partnerships.

As construction resumes, the project stands not only as a test of Kenya’s economic resilience but also as a case study in how African nations are redefining development in a post-debt-boom era.

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