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Court Rules Kenya’s Standard Gauge Railway Contract Illegal

Infra News - Published on Tue, 30 Jun 2020

Image Source: Standard Gauge Railway Contract
Kenya’s Court of Appeal has recently declared the KES 500 billion contract between Kenya and China for the construction of Standard Gauge Railway illegal. Court of Appeal Judges Martha Koome, Gatembu Kairu, and Jamila Mohammed ruled that the government failed to follow procurement laws while contracting China Bridges and Railway Corporation for the project. During the appeal, it emerged that Kenya Railways Corporation, which was the implementer of the project on behalf of the government, head-hunted CBRC as a contractor before Kenya and China’s Exim bank sealed a financing deal. This, the judges ruled, went against the procurement law and the Constitution. They found that Kenya Railways failed to comply with Article 227 (1) of the Constitution, which dictates that when a State organ or any other public entity contracts for goods or services, it should do so in accordance with a system that is fair, equitable, transparent, competitive and cost-effective. The judges also found that Kenya Railways contravened section 29 of the Public Procurement and Disposal Act, 2005, which provided for open tendering.

In August 2009, the Ministry of Transport sealed a deal with CRBC that the Chinese entity was to undertake, at its cost, a feasibility study on a railway system between Mombasa and Malaba. The firm was to also consider the technical details of the project, determine the financing required, and how the project was to be implemented. The agreement between the ministry and CBRC also provided that the firm would carry out the preliminary design with the ministry’s help. It further stated that after completion and agreement of the design, both sides would proceed to negotiate on the commercial contract for the project. The feasibility study and preliminary design report were submitted to the Government of Kenya in February 2011 while KRC approved the same on June 26, 2012. The Chinese firm floated financing options which included direct investment from CRBC. It also suggested buyer’s credit from the Kenya Government and seller’s credit from CRBC.

The government has completed phase one of SGR from Mombasa to Nairobi that cost KES 327 billion. Phase two to Naivasha cost KES 150 billion. The final phase from Naivasha to Malaba is projected to cost KES 380 billion.

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Posted By : Yogender Pancholi on Tue, 30 Jun 2020
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