Kenya and China Launch $1.5 Billion Highway Expansion Project

Kenya has embarked on a significant infrastructure initiative by partnering with two Chinese state firms to launch a highway expansion project valued at $1.5 billion. This venture, which is set to commence on Friday, represents a notable return of Chinese investment in East African infrastructure after a period of reduced activity.

The highway expansion is divided into two phases, funded through a combination of debt and equity. This financing model has gained traction as concerns regarding the sustainability of traditional Chinese lending practices have increased among borrowing nations. “We don’t have any room to borrow any more money,” stated Kefa Seda, director general of the Public Private Partnerships directorate at Kenya’s finance ministry, in remarks to reporters ahead of the launch.

Upgrading Key Transport Corridors

The project aims to enhance a critical transport corridor that connects the port of Mombasa to Kenya’s western region and facilitates access to neighboring landlocked countries, including Uganda, via the capital city, Nairobi. The first phase, costing approximately $863 million, will see the China Road and Bridge Corporation collaborate with Kenya’s state pension fund, the National Social Security Fund (NSSF), to convert two existing sections of a 139-kilometer single lane highway into four and six-lane dual carriageways, according to the Kenya National Highways Authority (KENHA).

The second phase involves Shandong Hi Speed Road and Bridge International, a subsidiary of the Shandong Hi Speed Group, which will upgrade a 94-kilometer single lane road into a six-lane carriageway at an estimated cost of $678.56 million. KENHA has indicated that both phases’ cost estimates include financing charges.

Funding for the project will be structured with 75 percent sourced from debt and 25 percent from equity. Notably, the NSSF will contribute 45 percent of the equity for the phase where it is a partner, reflecting a shift in financing dynamics in response to previous debt sustainability concerns.

China’s Renewed Commitment to Africa

China’s engagement with Africa has evolved significantly over the past few years. After investing billions into infrastructure across the continent, Chinese lending saw a steep decline around 2019 due to rising debt levels in countries such as Kenya. Nonetheless, at a summit with African leaders in 2022, Beijing pledged $50 billion in credit and investments over three years, signaling its intent to re-establish a prominent presence in the region.

The new highway project comes after Kenya terminated a previous agreement with a consortium led by Vinci SA, a French construction giant, earlier this year. The updated agreement was introduced during a state visit by Kenyan President William Ruto to Beijing in April, marking a significant diplomatic engagement between Kenya and China.

While Kenya is regarded as one of the closest African allies of the United States, the renewed partnership with China has attracted criticism from U.S. officials, including former President Donald Trump. In response to concerns regarding this strategic pivot, President Ruto clarified that Kenya’s focus is on expanding exports to markets like China, emphasizing the economic benefits of such partnerships.

As construction begins, the highway expansion project is poised to enhance regional connectivity and bolster trade links between Kenya and its neighbors, reflecting a broader trend of international investment in African infrastructure development.