Kenya is quietly negotiating a high-stakes deal that could see a section of the Standard Gauge Railway (SGR) freight operations handed over to the United Arab Emirates’ state-owned Etihad Rail.
If approved, it will mark the first time a foreign company runs SGR freight services.
The plan is tied to a controversial financing strategy for the railway’s expansion, raising questions over sovereignty, transparency, and long-term economic impact.
Supporters say it is a lifeline for the cash-strapped project. Critics warn it could hand too much control to outside players.
Kenya’s SGR Freight Takeover Looms as Govt Strikes Controversial Deal with UAE’s Etihad Rail
Kenya’s Transport Cabinet Secretary Davis Chirchir confirmed talks are underway for Etihad Rail to operate freight services under a concession agreement.
The UAE operator would invest in locomotives and wagons while targeting freight volumes of 17 million metric tonnes a year to break even.
Kenya Railways would keep ownership of the infrastructure and handle engineering and maintenance.
The government believes unbundling ownership from operations will attract more private investment and improve efficiency.
How the Deal is Linked to Railway Expansion
The concession talks come as Kenya seeks Ksh516.92 billion ($4 billion) to extend the SGR from Naivasha to Kisumu and onward to Malaba on the Ugandan border.
To fund the project, the government plans to securitise the 2 percent Railway Development Levy imposed on all imports.
This levy brings in about Ksh50 billion ($387 million) annually.
Securitisation would convert future collections into a lump sum by selling them to investors—effectively borrowing against predictable revenue.
The Risk of Securitisation
Officials say securitization will allow the project to proceed without adding to public debt. However, financial experts warn that selling future revenue streams can lock the country into rigid repayment commitments.
If import volumes fall or the levy is challenged in court, repayment terms could squeeze public finances.
Critics also argue that the government has not been transparent on who the investors would be and how much control they could gain over the levy.
Breaking Away from Chinese Management
The first phase of the SGR—connecting Mombasa to Naivasha—was built with heavy Chinese financing and operated under Chinese management.
That arrangement sparked public anger over debt levels and opaque contracts. A deal with Etihad Rail would signal a move away from Beijing’s dominance in Kenyan infrastructure projects.
However, it also shifts strategic transport operations into the hands of another foreign power, raising new concerns about economic dependence.
Potential Impact on Regional Trade
Extending the SGR to Kisumu and Malaba could transform it into a key East African trade corridor.
It would link Mombasa’s port to Uganda and potentially Rwanda, Burundi, and the Democratic Republic of Congo.
For Etihad Rail, the concession would give the UAE a strong foothold in regional logistics, aligning with its global trade ambitions.
For Kenya, it could boost freight efficiency and lower transport costs if managed well.
Unanswered Questions on Revenue Sharing
The government has not disclosed the revenue-sharing model, concession duration, or performance penalties.
Without such details, it is unclear how much Kenya would actually earn from the deal or how much control it could retain over freight pricing.
Parliamentary committees and civil society groups are already calling for full disclosure before any agreement is signed.
A Broader Trend in Infrastructure Financing
Kenya’s move fits into a global trend where governments turn to private operators to run state infrastructure.
By separating ownership from operations, the state can reduce operational costs while bringing in specialized expertise.
But such arrangements often spark debate over sovereignty, especially when strategic transport routes are involved.
The Urgency of Transparency
Transport projects like the SGR are not just commercial assets—they are national security and economic lifelines.
Handing operational control to a foreign company without public oversight risks eroding public trust.
The public deserves to know the full terms of any concession, including safeguards to protect Kenyan interests in case of disputes.
Five Key Facts the Government Hasn’t Revealed About the SGR Deal
1. Exact Concession Length
No one knows if the agreement will last five years or fifty—a critical factor in long-term control.
2. Revenue Split Between Kenya and Etihad Rail
The percentage Kenya will keep from freight income remains undisclosed, leaving room for speculation and potential exploitation.
3. Dispute Resolution Mechanism
It is unclear whether disagreements will be settled under Kenyan law or in foreign arbitration courts.
4. Investor Identities in the Securitisation Plan
The government has not named who will buy into the Railway Development Levy, raising questions over hidden beneficiaries.
5. Safeguards for National Security
There has been no mention of measures to prevent foreign operators from controlling strategic transport data or infrastructure.
