Recent research has debunked claims that Kenya could be forced to surrender its profitable Mombasa port to China, in the event of a Kenyan default on the $3.6 billion Chinese loan used to build the Mombasa-Nairobi Standard Gauge Railway.
A lack of transparency in the contracts allowed this rumor to circulate for over three years, but it is certainly wrong. “The port is not used as collateral for the loans,” writes CARI head Deborah Brautigam. “The Kenya Ports Authority was never a borrower, contrary to assertions by [Kenya’s] auditor general.”
The actual role of the Kenya Ports Authority was as a guaranteed source of income to the railroad. If Mombasa-Nairobi cargo transport dropped below a certain level, the port would make up the difference. In this sense, it would serve as a source of funding for the railroad, but was never collateral.
The SGR loan was largely to be repaid by a special duty levied on all imports into the country.
This was perhaps the second most commonly cited “debt trap,” ranking far behind the Hambantota port in Sri Lanka, whose financial woes have come again to the fore — but without the Chinese debt-trap claims that were falsely leveled several years ago.
