Kenya Standard Gauge Railway Project

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Reference no: EM133654821

Project Case Title: Kenya Standard Gauge Railway (SGR) Project

The Kenya Standard Gauge Railway (SGR) is one of the flagship projects of Kenya's national development program 'Vision 2030', which aims to transform Kenya into an industrialised and middle-income country by the end of this decade. This project emerged during a summit of the Eastern African Community in 2004. In 2009, a regional Northern Corridor Initiative between Kenya, Uganda, and Rwanda was formed to promote a sustainable freight transport system, which would later expand to other countries in the Great Lakes Region. The same year, the China Road and Bridge Corporation (CRBC) approached the Government of Kenya to carry out a feasibility study for the project, conditionally 'free of charge', in exchange for a future construction contract. CRBC brought on board the Export-Import Bank of China (China Eximbank), which later agreed to fund the project through concessional loans, with the stipulation that the construction contract be awarded to CRBC. In 2012, the Government of Kenya granted the construction contract, including for civil work and equipment supply, to CRBC. Two years later, during an official visit by Chinese Premier Li Keqiang to Kenya, the two governments signed the loan agreement to finance Phase I (Mombasa-Nairobi SGR). China Eximbank would finance 90% of the project, and CRBC was announced as the main contractor.

Map of the SGR. The solid line represents the sections constructed between Mombasa and Naivasha, and the dashed line indicates sections planned between Naivasha and Kampala. Source: Zhengli Huang, 2022

Phase I of the SGR project links the Port of Mombasa with Nairobi, Kenya's capital. Construction began in October 2014 and was projected to take five years; however, it was completed in two and half, largely due to pressure to deliver the project before the 2017 election. In May 2017, Kenyan President Uhuru Kenyatta (in office from 2013 to 2022) inaugurated the passenger services between Mombasa and Nairobi. The passenger train, named the 'Madaraka Express', opened to fare-paying passengers on Madaraka Day on 1 June 2017, the fifty-fourth anniversary of Kenya's attainment of self-rule from the British colonial power.

In 2014, Kenya Railways Corporation (KRC) signed a memorandum of understanding with China Communications Construction Company Limited (CCCC) for a joint feasibility study for Phase II of the SGR, which would connect Nairobi to the Kenya-Uganda border, thereby completing the master railway plan to advance Kenya's regional economic integration. Phase II was divided into three sections: Nairobi-Naivasha, Naivasha-Kisumu, and Kisumu-Malaba (Uganda). During the 2015 Forum on China-Africa Cooperation (FOCAC), the Chinese and Kenyan governments signed a financing agreement for the extension. China Eximbank agreed to provide a loan of 1.5 billion USD for the Nairobi-Naivasha section (Phase IIA), covering 85% of the financing for the project, while the Kenyan Government would provide the remainder. The construction contract was awarded to CCCC, the parent company of CRBC. Groundbreaking took place in October 2016, and construction was completed in three years. The SGR was extended from Nairobi westward, with new train stations built in Ongata Rongai, Ngong, Mai Mahiu, and Suswa.

In 2017, CCCC restructured its operational department into the Africa Star Railway Operation Company (Afristar), which was awarded the contract to operate the SGR for five years. Again, there was no competitive bidding for the contract. According to the operational agreement, in 2022, Afristar would gradually exit operation of the SGR and hand it over to KRC, including the freight and passenger services. As of August 2022, there is little sign the handover will be completed soon.

Hopes of extending the SGR to Kisumu and Malaba started to fade when regional commitments to complete the network began to fall apart. In 2016, Rwanda pulled out of the SGR, due to shifting relations among East African Community countries, and announced it would focus on building a railway through Tanzania to the Indian Ocean. In 2018, Uganda announced the SGR would be put on hold over unresolved issues such as who would finance the border-crossing segment of the railway. When President Kenyatta failed to secure a proposed loan of US$3.6 billon during his visit to Beijing in 2019, it became clear China Eximbank would not continue to fund the SGR. Faced with these hurdles, the governments of Kenya and Uganda opted to rehabilitate their respective narrow-gauge railways built during colonial times. SGR freight trains now run from Port Reitz in Mombasa straight to the Inland Container Depots in Nairobi and Naivasha, where cargo is cleared or transferred to Uganda and other neighbouring countries.

Assuming you are a professional who has been commissioned to provide expert guidance on project management of the Kenya Standard Gauge Railway (SGR) Project, use proof from the case described above to perform the following tasks:

1. Identify and validate the key challenges that are likely to be faced by those undertaking the risk management of the Kenya Standard Gauge Railway Project.

2. Detect, elucidate and corroborate FIVE possibly positive risks (i.e. opportunities and strengths) in the design and implementation of the Kenya Standard Gauge Railway case presented above.

3. Identify, explain and justify the key factors that can influence the formulation and implementation of policies for managing the Kenya Standard Gauge Railway Project defined above.

4. Spot, expound and substantiate FIVE potentially negative strategic risks (i.e. weaknesses & threats) in the design and implementation of the Kenya Standard Gauge Railway Project described above.

5. Explain why and how the collaborative project management approach may suggestively benefit the Kenya Standard Gauge Railway Project.

Reference no: EM133654821

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