“As demonstrated previously, the most optimistic scenario described in the ESIA would create revenues of Sh34 billion. Even in this scenario, for which sound basis is lacking, the SGR will need huge subsidies until 2036.”
"In Ethiopia a 781 km railway was constructed at a cost of Sh290 billion ($2.8 billion) for 756 km, or Sh384 million ($3.7 million) per km. Tanzania recently signed a contract for Sh934 billion ($9 billion) for 2,560 km, or Sh363 million ($3.5 million) per km. Here, the gross cost of SGR 1 is Sh3.8 billion for 609 km, or Sh643 million ($6.2 million) per km.
All three railways are constructed to Chinese standards and are standard gauge. We have no details about the Tanzanian line yet, but the Ethiopian line is up and running while Phase 1 in Kenya is 90 per cent complete.
The Ethiopian line is electric, which is more expensive per kilometre than the diesel line in Kenya. Moreover, in Ethiopia about 115 km is double-track, against all single-track in Kenya.
The terrain in Ethiopia is more rugged, as the line goes through the volcanic Rift Valley, and it has many tunnels. In Kenya there are more bridges, to allow the passing of wildlife. However, it seems inescapable that Kenya did not get a very good deal at Sh643 million per km against Ethiopia at Sh384 million per km, moreover for a better product. "
"The contract does not include rolling stock or other extras, but the cost has gone up to Sh134.9 billion ($1.3 billion) for 120.8km, equivalent to Sh1.12 billion ($10.8 million) per km or almost three times as much as Ethiopia paid. "
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That would mean that the cost to the company for this low speed single-track line would be Sh43.7 billion ($421 million) or Sh363 million ($3.5 million) per km, but sold to Kenya at a price of Sh134 billion ($1,300 million) or Sh1.1 billion ($10.76 million) per km.
It is significant that the costing model used above comes to a km cost of Sh363 million. This is almost the same as Tanzania and Ethiopia are paying under competitive international tendering with some rolling stock added in."
“This strongly suggests that Kenya is paying Sh134 billion for a product with a value of Sh43.7 billion an over-payment of $879 million (Sh90.5 billion). Put differently, we are paying a price that is three times the value.”
Read the rest of the story here: http://www.businessdailyafrica.com/Opinion-and-Analysis/Nairobi-Naivasha-SGR-line--value-for-money/539548-3509884-item-0-gd4dvj/index.html