Kenya, in partnership with two Chinese state firms, is set to launch construction of a $1.5 billion highway expansion on Friday, marking Beijing’s return to major infrastructure projects in the East African economy after a multi-year pause.
As per Reuters, the project, divided into two phases, will be financed through a mix of debt and equity, a model increasingly favored after concerns over China’s traditional lending approach and the debt burden it placed on borrowers.
“We don’t have any room to borrow any more money,” Kefa Seda, director general of the Public-Private Partnerships directorate at Kenya’s finance ministry, told Reuters ahead of the official launch.
The highway will improve a critical transport corridor linking Kenya’s port of Mombasa with its western regions and landlocked neighbors, including Uganda, via Nairobi.
China, after investing billions in African infrastructure, reduced its lending around 2019 over debt sustainability concerns in countries like Kenya. Last year, Beijing pledged $50 billion in credit and investment over three years to reposition itself on the continent.
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Kenya terminated a prior highway deal with a consortium led by France’s Vinci SA earlier this year.
The new agreement was announced during a state visit by Kenya’s President William Ruto to Beijing in April.
The partnership drew criticism from former U.S. President Donald Trump, prompting Ruto to defend the strategy as a move to boost Kenyan exports to markets like China.
The first phase of the project, costing $863 million, will see China Road and Bridge Corporation partner with Kenya’s state pension fund NSSF to expand two existing stretches of a 139-kilometre (86-mile) single-lane highway into four- and six-lane dual carriageways, the Kenya National Highways Authority said.
In the second phase, Shandong Hi-Speed Road and Bridge International, a subsidiary of Shandong Hi-Speed Group, will upgrade a 94-kilometre single-lane stretch into a six-lane highway at a cost of $678.56 million. Both estimates include financing costs.
The financing for both phases will be split 75% debt and 25% equity, with NSSF contributing 45% of the equity in its phase.
Borrowing may come from Chinese commercial lenders and state entities such as the Export-Import Bank of China, Seda said.
Construction is expected to be completed by the end of 2027, followed by a 28-year toll concession for the firms to recoup investments and earn returns.
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Image Credit: Arise News
