The Nairobi to Mombasa train is the side of Kenya’s expensively-assembled railway that its government would prefer the world sees.
On a muggy Saturday morning in July, carriage after carriage is packed with Kenyans flocking to the coast. Some are going home, some to work, others to the beaches where they can escape the frenetic buzz of the capital.
At stations along the way, the train slows to a halt and school children in brightly coloured uniforms heading home for the holidays hop aboard and fill up the remaining seats.
Glimpses of Africa’s wildlife – gazelles and antelopes, a lone ostrich, a family of giraffes peaking above the trees, occasional zebras and elephants – puncture the monotony of hundreds of miles of parched scrubland.
Six hours later, more than a thousand passengers spill out onto the polished grey concrete platform of the country’s second largest city, where they jump into mini-buses, cabs, tuk-tuks, and onto boda-bodas – cheap motorbike taxis driven largely by enterprising young Kenyan men.
The line that heads in the opposite direction tells the real story however. Intended to showcase Kenya’s status as one of the continent’s fastest-growing countries, the Standard Gauge Railway was supposed to stretch all the way to Mulaba on the Uganda border and beyond to South Sudan.
With plans to eventually link up the Democratic Republic of Congo, Rwanda and Burundi as well, it was envisioned that the project would unleash a new economic boom across East Africa as regional trade was propelled to new heights.
At the launch party of the railway in May, 2017, the then-Kenya president Uhuru Kenyatta invited his fellow countrymen to “celebrate the laying of one of the key cornerstones to Kenya’s journey of transformation to an industrial, prosperous and middle-income country”.
Yet, the reality of what remains the single largest infrastructure programme Kenya has ever embarked upon has fallen spectacularly short of its grand ambitions.
Bankrolled almost entirely with billions of dollars of Chinese loans, the line is popular with day trippers but it stops several hundred miles short of Uganda in a corn field deep in the Rift Valley after the money suddenly ran out, where it is now watched over by a farmer-cum-security guard living in a nearby rusting shack with his family.
Passengers must disembark at the final station outside of a small village called Suswa, 25 miles from where the track abruptly ends. Killing five hours before the return journey home requires imagination. Many head to the roadside barbecues dotted along the surrounding lanes to eat, drink and capture the experience on Instagram or Tik Tok. Others choose to kill the time at a nearby hotel pool.
Kenya Railways has called the service ‘The Madaraka Express’. Kenyans prefer other less flattering names, most commonly “The Railway to Nowhere” or “The Debt Express”.
Far from symbolising Kenya’s emergence as a regional powerhouse, the SGR has become an embarrassing monument to a debt crisis that threatens to engulf a continent which is now hooked on loans from Beijing as Western creditors and the Bretton-Woods institutions have pulled back.
With the country on the brink of a ruinous debt default, the Kenyan people are restless for change. Last month, anti-government protests led by fearless Gen Z voters exploded into deadly confrontation and a deepening political crisis for Kenya’s ruling elite. Less than three years into his presidency, a panicking William Ruto called for police to maintain a tough stance.
“Don’t kill them, but ensure their legs are broken,” Mr Ruto said, despite confrontations that had already claimed the lives of 51 demonstrators.
Yet, Mr Ruto, it seems, carries the same obsession with ‘legacy building’ that has long tormented other African leaders. Instead of reining in borrowing in a country where interest payments alone swallow close to half of the annual budget, he is preparing to borrow billions more from China to fund the completion of a railway that has been heavily loss-making since the day it opened.
As China continues to push on with realising its own vision for a new global economic order – including by hosting a landmark summit this week attended by Russia and India – Kenya risks tipping into bankruptcy, with ramifications far beyond Nairobi. With an estimated £30bn owed to overseas lenders, the country could be about to turn into a battleground for a tense confrontation between the West and China, as its myriad major creditors scramble to minimise their losses.
Several miles down a bone-shaking stretch of poorly tarmacked motorway outside of Mombasa, sandwiched between corrugated warehouses, repurposed shopping containers, and an endless stream of roadside shacks, sits the makeshift offices of the Kenya Long Distance Truck Drivers and Allied Workers Union.
Built from salvaged wood and tarpaulin, its solitary window propped open precariously with a broom handle, it is from this tiny square room that the union’s chairman Roman Waema is contemplating the possible resumption of a war against the SGR and its architects if work begins on the final leg.
In a desperate bid to make the railway profitable shortly after construction, the authorities issued an edict that all cargo arriving in Kenya had to be transported by rail instead of road. Mr Waema and his members took to the streets in protest at a decision that would quickly decimate Kenya’s truck-driving fraternity.
He estimates 7,000 of his 8,000-strong membership eventually lost their jobs, along with many more in the supply chain, hitting local communities hard.
“It affected a lot of businesses…warehouse workers were terminated from their employment – it was a mess….their families were also collapsing because they were the breadwinners,” Mr Waema said.
Even now, with the order long since lifted and freight traffic on the Mombasa to Nairobi highway restored, the SGR continues to cast a shadow over the area.
You’re killing one sector to pay for another sector. This guy is not employed, the other guy also is not employed,” he said, pointing to two men perched on plastic chairs in the corner.
Mr Waema and some of his colleagues were arrested during the protests but it wouldn’t stop him from doing it again.
“The government tried to intimidate us but we will go back to the streets because it’s our constitutional right. We will not allow it to happen again – mass lay-offs of workers. That cannot be tolerated.”
The demonstrators might want to begin dusting off their placards now. In April, Mr Ruto embarked on a state visit to China – his third since taking office in 2022 – returning five days later with a joint pledge to reject “hegemonism, power politics, and all forms of unilateralism and protectionism”.
The Kenyan president had also signed more than 20 agreements on science and technology cooperation, education, water resources, e-commerce, and intelligent transport systems from Beijing.
But by far the most significant was a promise from Xi Jinping to provide billions of dollars in fresh loans to pay for the SGR to finally be extended to the Ugandan border.
Its proponents insist the SGR will make a huge difference, revitalising industry, improving travel, speeding up freight, and ultimately putting the boosters under growth.
Crucially perhaps, with China back on board, it stands a good chance of being completed. After all, even the harshest critics of the world’s second largest economy can’t dispute its record of delivering major infrastructure projects across Africa.
Reliable independent statistics are hard to come by but research from the marketing wing of China’s Belt and Road Initiative recently sought to quantify its achievements.
The report claims China has funded and helped build more than 10,000 kilometres of railways, nearly 100,000 km of highways, 1,000 bridges, 100 ports, and 66,000 km of power transmission and distribution lines across Africa since its launch in 2013.
Chinese loans also come with some key advantages over Western debt. Beijing’s trick has been not just to offer the money for shiny new projects but the contractors and the materials to deliver them too, in a region where corrupt and inefficient African regimes have too often fallen short.
Often the projects on offer resemble a menu: a major road; a more modern port; an energy-producing dam, for example. These packages also come with a fixed timeline for completion – a tantalising prospect for African politicians with looming elections to consider.
“Global development banks have been slow to invest, especially in big projects that drive growth. China has stepped in to fund roads, railways, and other infrastructure that has boosted growth,” said Kevin Gallagher, professor at Boston University. Chinese lending has also “been more long term and less costly than private sector lending in the region,” he added.
Those spearheading this construction bonanza are the same ones that built modern China. These are the new ‘chartered companies’ of today. In the same way that the Royal African Company, the Royal Niger Company, and the British South Africa Company were granted royal charters by the British Crown to explore, trade, and colonise new territories in the 19th century, China’s state-backed giants are reshaping modern Africa to suit its strategic interests.
Examples of China’s engineering prowess can be found right across Africa. The Maputo suspension bridge in Mozambique was built by China Road and Bridge Corporation, with 95 per cent of the financing coming from China.
In Algeria, the Chinese have helped to build the 1,200km six-lane East-West Highway, the £1.5bn, 120,000 capacity Grand Mosque, and a new £670m terminal at Algiers’ Houari Boumediene Airport.
Ethiopia’s controversial mega hydro-dam, Djibouti’s giant 690 hectare port in Doraleh, and the Mambilla Hydroelectric Power Station in Nigeria all tapped into Chinese funding, know-how and muscle.
This trend looks set to deepen. As Donald Trump takes the axe to the US Agency for International Development, slaps tariffs on African goods and blocks debt renegotiation, China is offering an alluring mix of zero duties and new borrowing.
Yet Kenyans have heard all the talk about China before, and the lessons of the SGR – built with £3.7bn of loans provided by Chinese state-backed lender Exim Bank – is that the reality doesn’t just fail to match the hype, it can come at a heavy price too.
‘We bought their milk but now they’ve bought the cow’
Freight trains at Nairobi station Credit: Ben Marlow
Other Chinese-led projects have been similarly disappointing. A £7.5m Chinese-built bridge collapsed in 2022, two weeks after it was inspected by president Kenyatta during the country’s elections.
The Chinese built-and-operated Nairobi Expressway, opened the same year, has been particularly contentious. Locals were enraged when the government raised toll fees before the road even opened in order to cushion its Chinese backers against exchange losses from a weakening Kenyan shilling.
Even the use of the Mandarin language on signboards during construction provoked anger in some circles.
It’s important to distinguish between “political projects and economic projects,” said Ndindi Nyoro, a prominent Kenyan MP and critic of the Ruto regime.
An example of genuine development is the Thika Superhighway, an eight-lane express way connecting Nairobi to the outskirts of Thika 50km north of the capital, he said from a wood-panelled office high above the buzz of downtown Nairobi.
“It created a multiplier, towns, enterprise, and land went up in terms of value. The reason for a developmental project is not necessarily the project itself. It’s also for the multiplier it creates within the economy: the cement producers, the steel producers, the workers, and the work. That’s the essence of development,” he added.
The SGR is akin to buying something in a supermarket because everything came from China, he said. “That’s why, economically, it wasn’t felt.”
While China eventually reversed a decision to import the cement for the project following uproar from Kenyan manufacturers, the terms of the SGR loans stipulated that other materials such as the steel, along with the machinery, and an army of contractors must come from China. Even the fleet of 500 wagons that service the line are Chinese-made.
China’s growing presence in other parts of the economy has further strained relations. In 2023, the opening of China Square, a Chinese budget retail chain selling cheap household goods, triggered protests among local traders who say they are being unfairly undercut.
Some felt it contravened the spirit of the trade arrangement that had been forged with Beijing, exacerbating an acute imbalance that exists. China is Kenya’s largest trading partner and the biggest source of its imports but Kenya has a large $3.3bn deficit with China.
“The Chinese cannot be importers, retailers, wholesalers and hawkers,” read one placard held aloft during the protest.
Some Kenyan business owners have adopted a new phrase to describe how the Chinese suppliers they once bought goods from become their competitors: “We bought their milk but now they’ve bought the cow.”
Nevertheless, all this raises some difficult questions for the West, challenging some long held assumptions about both Africa and China’s strategic interest there.
Western lenders must also confront the possibility of whether they are about to be wiped out and replaced by their Chinese counterparts. The Telegraph has been handed a cache of secret SGR documents that demonstrates the lengths that its Chinese paymasters were prepared to go to protect their interests.
In the event of any default, Kenya’s assets both at home and abroad are not protected by “sovereignty’ and risk being seized by Beijing, the loan agreement states. What’s the more, the pact is governed by Chinese law and any disputes will be arbitrated in Beijing, the document shows.
In many respects, China’s push into Africa is less a sudden pivot than a doubling down. Launched in 2013, its Belt and Road initiative has long targeted Africa yet it looked as though it was running out of steam.
But as Washington pulls back from the region, China is gearing up again. Africa sits on vast quantities of rare earth materials, it boasts immense green power resources, and abundant agriculture but also a booming and increasingly well-educated population too.
From dawn until dusk Nairobi pulsates with enterprising Kenyans looking to earn a living. Locals joke about the ‘bedrooms’ of Nairobi – surrounding counties where people come from to work in the city during the day but return at night to sleep.
The mobile payments system M-Pesa – “Pesa” is the Swahili word for money – has unleashed a new generation of entrepreneurs. It is now the currency of choice among the traders, hawkers, and roadside kiosks that help keep the economy pumping, even Nairobi’s sprawling Kibera slum.
In a country where less than a fifth of the population have historically had access to formal financial services, it is estimated that more than 90 per cent were using M-Pesa within three years of its launch in 2007.
Donald Trump may see only “s—holes” but China’s Communist Party prefers to think of “Lions” – emerging markets to rival the “Tiger” economies of South-East Asia that exploded between the 1950s and 1990s on the back of a turbo-charged export boom.
Cynics in the West point out we have been here before with much of colonial Britain and Europe’s wealth built on the exploitation of African goods and labour, but that was hundreds of years ago. More recent attempts at reviving the continent have failed as one debt crisis has followed another.
The temptation then might be to just leave China to it. If the conventional wisdom is correct, much of China’s lending has been done at eye-watering interest rates, and is therefore destined to end badly.
Western NGOs and academics warn that China is engaging in little more than “debt trap diplomacy”, a charge that China strongly rejects. “It’s unfair to label Western loans investment and China’s debt,” Guo Haiyan, China’s ambassador to Kenya said on Kenyan radio station Capital FM last month. Nevertheless, Africans have been warned.
But this is not necessarily how many Africans themselves see it. A recent survey conducted by The Pew Research Center, a think-tank in Washington, DC, found that the share of Kenyans who want the government to prioritise economic relations with Beijing has increased by 10 percentage points from 2019 to 48 per cent in 2025 – on a par with the US.
While it is true that Chinese state debt is more expensive than borrowing from the World Bank or its sister organisation the International Development Bank, its loans are often hundreds of basis points cheaper than Western commercial credit, and in Kenya and many other African countries it is these private investors that account for much of the debt. In some cases they represent the majority.
Kenya’s difficulties can be traced back to 2014, Jimi Wanjigi, a prominent Kenyan businessman and arch-critic of his country’s financial profligacy, said. It was the year that the SGR was commissioned, as well as Kenya’s first ever international bond issue, when the Government borrowed £1.5bn from European and American investors in a fund-raising led by Wall Street banking giants JP Morgan and Citi.
“It [the SGR] was one of the biggest cons we have ever seen – the beginning of a long fraud on Kenyans. It laid the foundation for what I call the ‘debt heist’ – that and the first Eurobond,” Mr Wanjigi, who is planning to stand for president in 2027, said.
An audit that Mr Wanjigi conducted of Kenya’s finances shows that it will end up paying more than double what the Government said it would cost to build the SGR, he claimed. If his calculations are correct, “what this principally says is we paid for it out of our own pocket and more – we did not need a loan”.
Since then, Kenya has returned to the international debt markets on multiple occasions, and as its debts have piled up, it has had to borrow on increasingly more punitive terms – often merely to repay existing loans.
As of May this year, Kenya had amassed debts totalling nearly £67bn – a 10 per cent increase in just 12 months – figures from the Central Bank of Kenya show. The country’s debt-to-GDP ratio has rocketed from 42 per cent in 2013 to 65 per cent today, and of its overall debt burden, £30.5bn – a 4 per cent jump over the same period – is owed to external creditors compared to £7.4bn a decade ago.
Accurate figures are hard to obtain but somewhere between a third and a half of Kenya’s external debt has been borrowed from Western investors. While its single biggest creditors are the World Bank, followed by China, the cost of borrowing from international fund managers is much higher than elsewhere.
Last year, Kenya became an unenviable member of the so-called ‘10 per cent club’ – a small group of countries whose credit ratings are so poor they have to swallow double digit interest rates to continue tapping foreign debt markets.
Kenya raised £1.1bn in Eurobonds so that it could buy back most of an outstanding £1.5bn bond that was maturing in June, 2024. Yet, the latest loan came at a much steeper price than previous ones – a 10.4 per cent effective interest rate compared with 6.9 per cent last time around, and less than 4 per cent on the loans taken out to construct the SGR.
It leaves Kenya in questionable company. Six of the 15 countries that have issued bonds with coupons at, or above 9.5 per cent since 2008, have since defaulted including Mozambique and Ghana, analysts at Morgan Stanley have pointed out.
“A 40 per cent default outcome doesn’t bode well,” the bank’s analysts said.
But what does this mean for Western lenders? With multiple African countries now spending more on debt repayments than they do on education and healthcare, a new generation of fearless young voters are demanding change.
As the US takes a chainsaw to its foreign aid budget, and Britain pulls back too – fears are growing that the continent’s debt time bomb is primed to explode as African nations are forced to plug the aid gap with yet more borrowings.
In May, the World Bank issued an alert: Kenya’s public debt “remains at high risk of distress, with interest payments absorbing about a third of tax revenue,” it said. This leaves the East African nation with one of the highest debt interest costs to revenue ratios in the world, credit agency Moody’s said last month.
Yet, according to Nancy Gathungu, the country’s Auditor General, the defaults have already begun after Kenya Railways fell into arrears on the loans it took out from China’s Exim Bank to build the SGR. Having made no repayments in 2024, it has accumulated £235m in outstanding obligations, including a penalty of £20m for falling behind.
The audit also revealed that Kenya Railways’ revenue from its operations was insufficient to cover the maturing loan obligations, leading to additional penalties and a stiff rebuke from Gathungu. She criticised Kenya Railways for failing to justify these defaults, calling them “avoidable”. She also accused it of poor financial controls.
A report from the National Treasury revealed that Kenya Railways racked up a deficit of £286m in 2024, the highest recorded among state corporations in the period. The steep losses explain a visible lack of investment along the line. At the Nairobi terminus, broken seats litter the waiting area, the VIP lounge is closed – possibly permanently – and the toilets in a visible state of disrepair. Several other stations seem unfinished – piles of construction materials scattered around.
Nyoro believes that by Christmas, Kenya’s financial struggles will be so acute that the government will be struggling to meet key domestic spending commitments.
“If they don’t default on either external or internal debt repayments, they’ll default on other things like salaries, development expenditure, and social investment,” he warned. It follows steep cuts to both the healthcare and education budgets in recent months.
Much will rest on crunch discussions with the International Monetary Fund which are expected to begin next month. The Ruto government needs to secure a new financing programme with the International Monetary Fund to help it deal with annual external debt repayments that stand at £2.6bn on average, Moody’s said. Yet, another IMF loan package is far from certain without major reforms that risk provoking further violent demonstrations on the streets of Nairobi.
“We will probably ask them to implement a lot of things up front…short, medium, and long-term measures to address their vulnerabilities,” an IMF source said. At the same time, “we also don’t want to create a public uprising again,” the same source said.
Kenya’s precarious situation leaves Western commercial lenders particularly exposed, because they lend through the so-called ‘London Club” – essentially a cartel whose members operate on shared terms. China however, has never been part of the group, preferring instead to negotiate sovereign debt crises bi-laterally.
“When African countries struggle to repay those loans, PRC [People’s Republic of China] lenders have taken inflexible positions that have delayed and hardened terms in renegotiations,” Timothy Ditter, research scientist at the US government-funded Centre for Naval Analyses, said in a recent report.
They have also “resisted standard loan forgiveness practices and slowed debt negotiations,” Mr Ditter added.
China has gone even further, employing the best commercial lawyers in the world to deliberately structure its sovereign loans so that Chinese lenders get greater protections than other creditors.
The American research lab AidData studied 100 contracts between Chinese state-owned entities and government borrowers in 24 developing countries, and found that “Chinese contracts contain more elaborate repayment safeguards than their peers…alongside elements that give Chinese lenders an advantage over other creditors.
“China is a muscular and commercially-savvy lender to developing countries,” it added.
Echoing calls among campaign groups like Debt Justice, and more recently from the Tony Blair Institute, for a programme of debt relief, Mr Wanjigi argues that Kenya’s external debt should be written off because it hasn’t been properly spent according to Kenyan law, which states that any borrowings must be used for development projects.
In Kenya, China’s legacy continues to divide opinion. Aboard the 8am SGR train from Nairobi to Mombasa, Robert, a credit analyst and property developer travelling to work in Kibwezi, wonders whether Kenya was short-changed. “Couldn’t we have got a better deal like electric trains instead of these diesel ones?,” he asked, gesturing to the carriage we are seated in.
A nearby passenger who travels to Mombasa twice a month for work said the SGR is undeniably quicker than the bus she used to take but the bus was cheaper and “the seats were more comfortable”.
Twenty-five miles north of the final station near Suswa however, the watchman who guards over the end of the line is hoping it is completed. The railway will have to cross his land, opening the door to a big compensation package from the authorities just like others who were affected.
One of his neighbours was awarded a £125,000 payout for surrendering some farmland, he said, drawing the figure in the dirt with a stick for emphasis, but he spent it all on “women and booze”.
The Nairobi to Mombasa train is the side of Kenya’s expensively-assembled railway that its government would prefer the world sees.
On a muggy Saturday morning in July, carriage after carriage is packed with Kenyans flocking to the coast. Some are going home, some to work, others to the beaches where they can escape the frenetic buzz of the capital.
At stations along the way, the train slows to a halt and school children in brightly coloured uniforms heading home for the holidays hop aboard and fill up the remaining seats.
Glimpses of Africa’s wildlife – gazelles and antelopes, a lone ostrich, a family of giraffes peaking above the trees, occasional zebras and elephants – puncture the monotony of hundreds of miles of parched scrubland.
Six hours later, more than a thousand passengers spill out onto the polished grey concrete platform of the country’s second largest city, where they jump into mini-buses, cabs, tuk-tuks, and onto boda-bodas – cheap motorbike taxis driven largely by enterprising young Kenyan men.
The line that heads in the opposite direction tells the real story however. Intended to showcase Kenya’s status as one of the continent’s fastest-growing countries, the Standard Gauge Railway was supposed to stretch all the way to Mulaba on the Uganda border and beyond to South Sudan.
With plans to eventually link up the Democratic Republic of Congo, Rwanda and Burundi as well, it was envisioned that the project would unleash a new economic boom across East Africa as regional trade was propelled to new heights.
At the launch party of the railway in May, 2017, the then-Kenya president Uhuru Kenyatta invited his fellow countrymen to “celebrate the laying of one of the key cornerstones to Kenya’s journey of transformation to an industrial, prosperous and middle-income country”.
Yet, the reality of what remains the single largest infrastructure programme Kenya has ever embarked upon has fallen spectacularly short of its grand ambitions.
Bankrolled almost entirely with billions of dollars of Chinese loans, the line is popular with day trippers but it stops several hundred miles short of Uganda in a corn field deep in the Rift Valley after the money suddenly ran out, where it is now watched over by a farmer-cum-security guard living in a nearby rusting shack with his family.
Passengers must disembark at the final station outside of a small village called Suswa, 25 miles from where the track abruptly ends. Killing five hours before the return journey home requires imagination. Many head to the roadside barbecues dotted along the surrounding lanes to eat, drink and capture the experience on Instagram or Tik Tok. Others choose to kill the time at a nearby hotel pool.
Kenya Railways has called the service ‘The Madaraka Express’. Kenyans prefer other less flattering names, most commonly “The Railway to Nowhere” or “The Debt Express”.
Far from symbolising Kenya’s emergence as a regional powerhouse, the SGR has become an embarrassing monument to a debt crisis that threatens to engulf a continent which is now hooked on loans from Beijing as Western creditors and the Bretton-Woods institutions have pulled back.
With the country on the brink of a ruinous debt default, the Kenyan people are restless for change. Last month, anti-government protests led by fearless Gen Z voters exploded into deadly confrontation and a deepening political crisis for Kenya’s ruling elite. Less than three years into his presidency, a panicking William Ruto called for police to maintain a tough stance.
“Don’t kill them, but ensure their legs are broken,” Mr Ruto said, despite confrontations that had already claimed the lives of 51 demonstrators.
Yet, Mr Ruto, it seems, carries the same obsession with ‘legacy building’ that has long tormented other African leaders. Instead of reining in borrowing in a country where interest payments alone swallow close to half of the annual budget, he is preparing to borrow billions more from China to fund the completion of a railway that has been heavily loss-making since the day it opened.
As China continues to push on with realising its own vision for a new global economic order – including by hosting a landmark summit this week attended by Russia and India – Kenya risks tipping into bankruptcy, with ramifications far beyond Nairobi. With an estimated £30bn owed to overseas lenders, the country could be about to turn into a battleground for a tense confrontation between the West and China, as its myriad major creditors scramble to minimise their losses.
Several miles down a bone-shaking stretch of poorly tarmacked motorway outside of Mombasa, sandwiched between corrugated warehouses, repurposed shopping containers, and an endless stream of roadside shacks, sits the makeshift offices of the Kenya Long Distance Truck Drivers and Allied Workers Union.
Built from salvaged wood and tarpaulin, its solitary window propped open precariously with a broom handle, it is from this tiny square room that the union’s chairman Roman Waema is contemplating the possible resumption of a war against the SGR and its architects if work begins on the final leg.
In a desperate bid to make the railway profitable shortly after construction, the authorities issued an edict that all cargo arriving in Kenya had to be transported by rail instead of road. Mr Waema and his members took to the streets in protest at a decision that would quickly decimate Kenya’s truck-driving fraternity.
He estimates 7,000 of his 8,000-strong membership eventually lost their jobs, along with many more in the supply chain, hitting local communities hard.
“It affected a lot of businesses…warehouse workers were terminated from their employment – it was a mess….their families were also collapsing because they were the breadwinners,” Mr Waema said.
Even now, with the order long since lifted and freight traffic on the Mombasa to Nairobi highway restored, the SGR continues to cast a shadow over the area.
You’re killing one sector to pay for another sector. This guy is not employed, the other guy also is not employed,” he said, pointing to two men perched on plastic chairs in the corner.
Mr Waema and some of his colleagues were arrested during the protests but it wouldn’t stop him from doing it again.
“The government tried to intimidate us but we will go back to the streets because it’s our constitutional right. We will not allow it to happen again – mass lay-offs of workers. That cannot be tolerated.”
The demonstrators might want to begin dusting off their placards now. In April, Mr Ruto embarked on a state visit to China – his third since taking office in 2022 – returning five days later with a joint pledge to reject “hegemonism, power politics, and all forms of unilateralism and protectionism”.
The Kenyan president had also signed more than 20 agreements on science and technology cooperation, education, water resources, e-commerce, and intelligent transport systems from Beijing.
But by far the most significant was a promise from Xi Jinping to provide billions of dollars in fresh loans to pay for the SGR to finally be extended to the Ugandan border.
Its proponents insist the SGR will make a huge difference, revitalising industry, improving travel, speeding up freight, and ultimately putting the boosters under growth.
Crucially perhaps, with China back on board, it stands a good chance of being completed. After all, even the harshest critics of the world’s second largest economy can’t dispute its record of delivering major infrastructure projects across Africa.
Reliable independent statistics are hard to come by but research from the marketing wing of China’s Belt and Road Initiative recently sought to quantify its achievements.
The report claims China has funded and helped build more than 10,000 kilometres of railways, nearly 100,000 km of highways, 1,000 bridges, 100 ports, and 66,000 km of power transmission and distribution lines across Africa since its launch in 2013.
Chinese loans also come with some key advantages over Western debt. Beijing’s trick has been not just to offer the money for shiny new projects but the contractors and the materials to deliver them too, in a region where corrupt and inefficient African regimes have too often fallen short.
Often the projects on offer resemble a menu: a major road; a more modern port; an energy-producing dam, for example. These packages also come with a fixed timeline for completion – a tantalising prospect for African politicians with looming elections to consider.
“Global development banks have been slow to invest, especially in big projects that drive growth. China has stepped in to fund roads, railways, and other infrastructure that has boosted growth,” said Kevin Gallagher, professor at Boston University. Chinese lending has also “been more long term and less costly than private sector lending in the region,” he added.
Those spearheading this construction bonanza are the same ones that built modern China. These are the new ‘chartered companies’ of today. In the same way that the Royal African Company, the Royal Niger Company, and the British South Africa Company were granted royal charters by the British Crown to explore, trade, and colonise new territories in the 19th century, China’s state-backed giants are reshaping modern Africa to suit its strategic interests.
Examples of China’s engineering prowess can be found right across Africa. The Maputo suspension bridge in Mozambique was built by China Road and Bridge Corporation, with 95 per cent of the financing coming from China.
In Algeria, the Chinese have helped to build the 1,200km six-lane East-West Highway, the £1.5bn, 120,000 capacity Grand Mosque, and a new £670m terminal at Algiers’ Houari Boumediene Airport.
Ethiopia’s controversial mega hydro-dam, Djibouti’s giant 690 hectare port in Doraleh, and the Mambilla Hydroelectric Power Station in Nigeria all tapped into Chinese funding, know-how and muscle.
This trend looks set to deepen. As Donald Trump takes the axe to the US Agency for International Development, slaps tariffs on African goods and blocks debt renegotiation, China is offering an alluring mix of zero duties and new borrowing.
Yet Kenyans have heard all the talk about China before, and the lessons of the SGR – built with £3.7bn of loans provided by Chinese state-backed lender Exim Bank – is that the reality doesn’t just fail to match the hype, it can come at a heavy price too.
‘We bought their milk but now they’ve bought the cow’
Freight trains at Nairobi station Credit: Ben Marlow
Other Chinese-led projects have been similarly disappointing. A £7.5m Chinese-built bridge collapsed in 2022, two weeks after it was inspected by president Kenyatta during the country’s elections.
The Chinese built-and-operated Nairobi Expressway, opened the same year, has been particularly contentious. Locals were enraged when the government raised toll fees before the road even opened in order to cushion its Chinese backers against exchange losses from a weakening Kenyan shilling.
Even the use of the Mandarin language on signboards during construction provoked anger in some circles.
It’s important to distinguish between “political projects and economic projects,” said Ndindi Nyoro, a prominent Kenyan MP and critic of the Ruto regime.
An example of genuine development is the Thika Superhighway, an eight-lane express way connecting Nairobi to the outskirts of Thika 50km north of the capital, he said from a wood-panelled office high above the buzz of downtown Nairobi.
“It created a multiplier, towns, enterprise, and land went up in terms of value. The reason for a developmental project is not necessarily the project itself. It’s also for the multiplier it creates within the economy: the cement producers, the steel producers, the workers, and the work. That’s the essence of development,” he added.
The SGR is akin to buying something in a supermarket because everything came from China, he said. “That’s why, economically, it wasn’t felt.”
While China eventually reversed a decision to import the cement for the project following uproar from Kenyan manufacturers, the terms of the SGR loans stipulated that other materials such as the steel, along with the machinery, and an army of contractors must come from China. Even the fleet of 500 wagons that service the line are Chinese-made.
China’s growing presence in other parts of the economy has further strained relations. In 2023, the opening of China Square, a Chinese budget retail chain selling cheap household goods, triggered protests among local traders who say they are being unfairly undercut.
Some felt it contravened the spirit of the trade arrangement that had been forged with Beijing, exacerbating an acute imbalance that exists. China is Kenya’s largest trading partner and the biggest source of its imports but Kenya has a large $3.3bn deficit with China.
“The Chinese cannot be importers, retailers, wholesalers and hawkers,” read one placard held aloft during the protest.
Some Kenyan business owners have adopted a new phrase to describe how the Chinese suppliers they once bought goods from become their competitors: “We bought their milk but now they’ve bought the cow.”
Nevertheless, all this raises some difficult questions for the West, challenging some long held assumptions about both Africa and China’s strategic interest there.
Western lenders must also confront the possibility of whether they are about to be wiped out and replaced by their Chinese counterparts. The Telegraph has been handed a cache of secret SGR documents that demonstrates the lengths that its Chinese paymasters were prepared to go to protect their interests.
In the event of any default, Kenya’s assets both at home and abroad are not protected by “sovereignty’ and risk being seized by Beijing, the loan agreement states. What’s the more, the pact is governed by Chinese law and any disputes will be arbitrated in Beijing, the document shows.
In many respects, China’s push into Africa is less a sudden pivot than a doubling down. Launched in 2013, its Belt and Road initiative has long targeted Africa yet it looked as though it was running out of steam.
But as Washington pulls back from the region, China is gearing up again. Africa sits on vast quantities of rare earth materials, it boasts immense green power resources, and abundant agriculture but also a booming and increasingly well-educated population too.
From dawn until dusk Nairobi pulsates with enterprising Kenyans looking to earn a living. Locals joke about the ‘bedrooms’ of Nairobi – surrounding counties where people come from to work in the city during the day but return at night to sleep.
The mobile payments system M-Pesa – “Pesa” is the Swahili word for money – has unleashed a new generation of entrepreneurs. It is now the currency of choice among the traders, hawkers, and roadside kiosks that help keep the economy pumping, even Nairobi’s sprawling Kibera slum.
In a country where less than a fifth of the population have historically had access to formal financial services, it is estimated that more than 90 per cent were using M-Pesa within three years of its launch in 2007.
Donald Trump may see only “s—holes” but China’s Communist Party prefers to think of “Lions” – emerging markets to rival the “Tiger” economies of South-East Asia that exploded between the 1950s and 1990s on the back of a turbo-charged export boom.
Cynics in the West point out we have been here before with much of colonial Britain and Europe’s wealth built on the exploitation of African goods and labour, but that was hundreds of years ago. More recent attempts at reviving the continent have failed as one debt crisis has followed another.
The temptation then might be to just leave China to it. If the conventional wisdom is correct, much of China’s lending has been done at eye-watering interest rates, and is therefore destined to end badly.
Western NGOs and academics warn that China is engaging in little more than “debt trap diplomacy”, a charge that China strongly rejects. “It’s unfair to label Western loans investment and China’s debt,” Guo Haiyan, China’s ambassador to Kenya said on Kenyan radio station Capital FM last month. Nevertheless, Africans have been warned.
But this is not necessarily how many Africans themselves see it. A recent survey conducted by The Pew Research Center, a think-tank in Washington, DC, found that the share of Kenyans who want the government to prioritise economic relations with Beijing has increased by 10 percentage points from 2019 to 48 per cent in 2025 – on a par with the US.
While it is true that Chinese state debt is more expensive than borrowing from the World Bank or its sister organisation the International Development Bank, its loans are often hundreds of basis points cheaper than Western commercial credit, and in Kenya and many other African countries it is these private investors that account for much of the debt. In some cases they represent the majority.
Kenya’s difficulties can be traced back to 2014, Jimi Wanjigi, a prominent Kenyan businessman and arch-critic of his country’s financial profligacy, said. It was the year that the SGR was commissioned, as well as Kenya’s first ever international bond issue, when the Government borrowed £1.5bn from European and American investors in a fund-raising led by Wall Street banking giants JP Morgan and Citi.
“It [the SGR] was one of the biggest cons we have ever seen – the beginning of a long fraud on Kenyans. It laid the foundation for what I call the ‘debt heist’ – that and the first Eurobond,” Mr Wanjigi, who is planning to stand for president in 2027, said.
An audit that Mr Wanjigi conducted of Kenya’s finances shows that it will end up paying more than double what the Government said it would cost to build the SGR, he claimed. If his calculations are correct, “what this principally says is we paid for it out of our own pocket and more – we did not need a loan”.
Since then, Kenya has returned to the international debt markets on multiple occasions, and as its debts have piled up, it has had to borrow on increasingly more punitive terms – often merely to repay existing loans.
As of May this year, Kenya had amassed debts totalling nearly £67bn – a 10 per cent increase in just 12 months – figures from the Central Bank of Kenya show. The country’s debt-to-GDP ratio has rocketed from 42 per cent in 2013 to 65 per cent today, and of its overall debt burden, £30.5bn – a 4 per cent jump over the same period – is owed to external creditors compared to £7.4bn a decade ago.
Accurate figures are hard to obtain but somewhere between a third and a half of Kenya’s external debt has been borrowed from Western investors. While its single biggest creditors are the World Bank, followed by China, the cost of borrowing from international fund managers is much higher than elsewhere.
Last year, Kenya became an unenviable member of the so-called ‘10 per cent club’ – a small group of countries whose credit ratings are so poor they have to swallow double digit interest rates to continue tapping foreign debt markets.
Kenya raised £1.1bn in Eurobonds so that it could buy back most of an outstanding £1.5bn bond that was maturing in June, 2024. Yet, the latest loan came at a much steeper price than previous ones – a 10.4 per cent effective interest rate compared with 6.9 per cent last time around, and less than 4 per cent on the loans taken out to construct the SGR.
It leaves Kenya in questionable company. Six of the 15 countries that have issued bonds with coupons at, or above 9.5 per cent since 2008, have since defaulted including Mozambique and Ghana, analysts at Morgan Stanley have pointed out.
“A 40 per cent default outcome doesn’t bode well,” the bank’s analysts said.
But what does this mean for Western lenders? With multiple African countries now spending more on debt repayments than they do on education and healthcare, a new generation of fearless young voters are demanding change.
As the US takes a chainsaw to its foreign aid budget, and Britain pulls back too – fears are growing that the continent’s debt time bomb is primed to explode as African nations are forced to plug the aid gap with yet more borrowings.
In May, the World Bank issued an alert: Kenya’s public debt “remains at high risk of distress, with interest payments absorbing about a third of tax revenue,” it said. This leaves the East African nation with one of the highest debt interest costs to revenue ratios in the world, credit agency Moody’s said last month.
Yet, according to Nancy Gathungu, the country’s Auditor General, the defaults have already begun after Kenya Railways fell into arrears on the loans it took out from China’s Exim Bank to build the SGR. Having made no repayments in 2024, it has accumulated £235m in outstanding obligations, including a penalty of £20m for falling behind.
The audit also revealed that Kenya Railways’ revenue from its operations was insufficient to cover the maturing loan obligations, leading to additional penalties and a stiff rebuke from Gathungu. She criticised Kenya Railways for failing to justify these defaults, calling them “avoidable”. She also accused it of poor financial controls.
A report from the National Treasury revealed that Kenya Railways racked up a deficit of £286m in 2024, the highest recorded among state corporations in the period. The steep losses explain a visible lack of investment along the line. At the Nairobi terminus, broken seats litter the waiting area, the VIP lounge is closed – possibly permanently – and the toilets in a visible state of disrepair. Several other stations seem unfinished – piles of construction materials scattered around.
Nyoro believes that by Christmas, Kenya’s financial struggles will be so acute that the government will be struggling to meet key domestic spending commitments.
“If they don’t default on either external or internal debt repayments, they’ll default on other things like salaries, development expenditure, and social investment,” he warned. It follows steep cuts to both the healthcare and education budgets in recent months.
Much will rest on crunch discussions with the International Monetary Fund which are expected to begin next month. The Ruto government needs to secure a new financing programme with the International Monetary Fund to help it deal with annual external debt repayments that stand at £2.6bn on average, Moody’s said. Yet, another IMF loan package is far from certain without major reforms that risk provoking further violent demonstrations on the streets of Nairobi.
“We will probably ask them to implement a lot of things up front…short, medium, and long-term measures to address their vulnerabilities,” an IMF source said. At the same time, “we also don’t want to create a public uprising again,” the same source said.
Kenya’s precarious situation leaves Western commercial lenders particularly exposed, because they lend through the so-called ‘London Club” – essentially a cartel whose members operate on shared terms. China however, has never been part of the group, preferring instead to negotiate sovereign debt crises bi-laterally.
“When African countries struggle to repay those loans, PRC [People’s Republic of China] lenders have taken inflexible positions that have delayed and hardened terms in renegotiations,” Timothy Ditter, research scientist at the US government-funded Centre for Naval Analyses, said in a recent report.
They have also “resisted standard loan forgiveness practices and slowed debt negotiations,” Mr Ditter added.
China has gone even further, employing the best commercial lawyers in the world to deliberately structure its sovereign loans so that Chinese lenders get greater protections than other creditors.
The American research lab AidData studied 100 contracts between Chinese state-owned entities and government borrowers in 24 developing countries, and found that “Chinese contracts contain more elaborate repayment safeguards than their peers…alongside elements that give Chinese lenders an advantage over other creditors.
“China is a muscular and commercially-savvy lender to developing countries,” it added.
Echoing calls among campaign groups like Debt Justice, and more recently from the Tony Blair Institute, for a programme of debt relief, Mr Wanjigi argues that Kenya’s external debt should be written off because it hasn’t been properly spent according to Kenyan law, which states that any borrowings must be used for development projects.
In Kenya, China’s legacy continues to divide opinion. Aboard the 8am SGR train from Nairobi to Mombasa, Robert, a credit analyst and property developer travelling to work in Kibwezi, wonders whether Kenya was short-changed. “Couldn’t we have got a better deal like electric trains instead of these diesel ones?,” he asked, gesturing to the carriage we are seated in.
A nearby passenger who travels to Mombasa twice a month for work said the SGR is undeniably quicker than the bus she used to take but the bus was cheaper and “the seats were more comfortable”.
Twenty-five miles north of the final station near Suswa however, the watchman who guards over the end of the line is hoping it is completed. The railway will have to cross his land, opening the door to a big compensation package from the authorities just like others who were affected.
One of his neighbours was awarded a £125,000 payout for surrendering some farmland, he said, drawing the figure in the dirt with a stick for emphasis, but he spent it all on “women and booze”.
The Nairobi to Mombasa train is the side of Kenya’s expensively-assembled railway that its government would prefer the world sees.
On a muggy Saturday morning in July, carriage after carriage is packed with Kenyans flocking to the coast. Some are going home, some to work, others to the beaches where they can escape the frenetic buzz of the capital.
At stations along the way, the train slows to a halt and school children in brightly coloured uniforms heading home for the holidays hop aboard and fill up the remaining seats.
Glimpses of Africa’s wildlife – gazelles and antelopes, a lone ostrich, a family of giraffes peaking above the trees, occasional zebras and elephants – puncture the monotony of hundreds of miles of parched scrubland.
Six hours later, more than a thousand passengers spill out onto the polished grey concrete platform of the country’s second largest city, where they jump into mini-buses, cabs, tuk-tuks, and onto boda-bodas – cheap motorbike taxis driven largely by enterprising young Kenyan men.
The line that heads in the opposite direction tells the real story however. Intended to showcase Kenya’s status as one of the continent’s fastest-growing countries, the Standard Gauge Railway was supposed to stretch all the way to Mulaba on the Uganda border and beyond to South Sudan.
With plans to eventually link up the Democratic Republic of Congo, Rwanda and Burundi as well, it was envisioned that the project would unleash a new economic boom across East Africa as regional trade was propelled to new heights.
At the launch party of the railway in May, 2017, the then-Kenya president Uhuru Kenyatta invited his fellow countrymen to “celebrate the laying of one of the key cornerstones to Kenya’s journey of transformation to an industrial, prosperous and middle-income country”.
Yet, the reality of what remains the single largest infrastructure programme Kenya has ever embarked upon has fallen spectacularly short of its grand ambitions.
Bankrolled almost entirely with billions of dollars of Chinese loans, the line is popular with day trippers but it stops several hundred miles short of Uganda in a corn field deep in the Rift Valley after the money suddenly ran out, where it is now watched over by a farmer-cum-security guard living in a nearby rusting shack with his family.
Passengers must disembark at the final station outside of a small village called Suswa, 25 miles from where the track abruptly ends. Killing five hours before the return journey home requires imagination. Many head to the roadside barbecues dotted along the surrounding lanes to eat, drink and capture the experience on Instagram or Tik Tok. Others choose to kill the time at a nearby hotel pool.
Kenya Railways has called the service ‘The Madaraka Express’. Kenyans prefer other less flattering names, most commonly “The Railway to Nowhere” or “The Debt Express”.
Far from symbolising Kenya’s emergence as a regional powerhouse, the SGR has become an embarrassing monument to a debt crisis that threatens to engulf a continent which is now hooked on loans from Beijing as Western creditors and the Bretton-Woods institutions have pulled back.
With the country on the brink of a ruinous debt default, the Kenyan people are restless for change. Last month, anti-government protests led by fearless Gen Z voters exploded into deadly confrontation and a deepening political crisis for Kenya’s ruling elite. Less than three years into his presidency, a panicking William Ruto called for police to maintain a tough stance.
“Don’t kill them, but ensure their legs are broken,” Mr Ruto said, despite confrontations that had already claimed the lives of 51 demonstrators.
Yet, Mr Ruto, it seems, carries the same obsession with ‘legacy building’ that has long tormented other African leaders. Instead of reining in borrowing in a country where interest payments alone swallow close to half of the annual budget, he is preparing to borrow billions more from China to fund the completion of a railway that has been heavily loss-making since the day it opened.
As China continues to push on with realising its own vision for a new global economic order – including by hosting a landmark summit this week attended by Russia and India – Kenya risks tipping into bankruptcy, with ramifications far beyond Nairobi. With an estimated £30bn owed to overseas lenders, the country could be about to turn into a battleground for a tense confrontation between the West and China, as its myriad major creditors scramble to minimise their losses.
Several miles down a bone-shaking stretch of poorly tarmacked motorway outside of Mombasa, sandwiched between corrugated warehouses, repurposed shopping containers, and an endless stream of roadside shacks, sits the makeshift offices of the Kenya Long Distance Truck Drivers and Allied Workers Union.
Built from salvaged wood and tarpaulin, its solitary window propped open precariously with a broom handle, it is from this tiny square room that the union’s chairman Roman Waema is contemplating the possible resumption of a war against the SGR and its architects if work begins on the final leg.
In a desperate bid to make the railway profitable shortly after construction, the authorities issued an edict that all cargo arriving in Kenya had to be transported by rail instead of road. Mr Waema and his members took to the streets in protest at a decision that would quickly decimate Kenya’s truck-driving fraternity.
He estimates 7,000 of his 8,000-strong membership eventually lost their jobs, along with many more in the supply chain, hitting local communities hard.
“It affected a lot of businesses…warehouse workers were terminated from their employment – it was a mess….their families were also collapsing because they were the breadwinners,” Mr Waema said.
Even now, with the order long since lifted and freight traffic on the Mombasa to Nairobi highway restored, the SGR continues to cast a shadow over the area.
You’re killing one sector to pay for another sector. This guy is not employed, the other guy also is not employed,” he said, pointing to two men perched on plastic chairs in the corner.
Mr Waema and some of his colleagues were arrested during the protests but it wouldn’t stop him from doing it again.
“The government tried to intimidate us but we will go back to the streets because it’s our constitutional right. We will not allow it to happen again – mass lay-offs of workers. That cannot be tolerated.”
The demonstrators might want to begin dusting off their placards now. In April, Mr Ruto embarked on a state visit to China – his third since taking office in 2022 – returning five days later with a joint pledge to reject “hegemonism, power politics, and all forms of unilateralism and protectionism”.
The Kenyan president had also signed more than 20 agreements on science and technology cooperation, education, water resources, e-commerce, and intelligent transport systems from Beijing.
But by far the most significant was a promise from Xi Jinping to provide billions of dollars in fresh loans to pay for the SGR to finally be extended to the Ugandan border.
Its proponents insist the SGR will make a huge difference, revitalising industry, improving travel, speeding up freight, and ultimately putting the boosters under growth.
Crucially perhaps, with China back on board, it stands a good chance of being completed. After all, even the harshest critics of the world’s second largest economy can’t dispute its record of delivering major infrastructure projects across Africa.
Reliable independent statistics are hard to come by but research from the marketing wing of China’s Belt and Road Initiative recently sought to quantify its achievements.
The report claims China has funded and helped build more than 10,000 kilometres of railways, nearly 100,000 km of highways, 1,000 bridges, 100 ports, and 66,000 km of power transmission and distribution lines across Africa since its launch in 2013.
Chinese loans also come with some key advantages over Western debt. Beijing’s trick has been not just to offer the money for shiny new projects but the contractors and the materials to deliver them too, in a region where corrupt and inefficient African regimes have too often fallen short.
Often the projects on offer resemble a menu: a major road; a more modern port; an energy-producing dam, for example. These packages also come with a fixed timeline for completion – a tantalising prospect for African politicians with looming elections to consider.
“Global development banks have been slow to invest, especially in big projects that drive growth. China has stepped in to fund roads, railways, and other infrastructure that has boosted growth,” said Kevin Gallagher, professor at Boston University. Chinese lending has also “been more long term and less costly than private sector lending in the region,” he added.
Those spearheading this construction bonanza are the same ones that built modern China. These are the new ‘chartered companies’ of today. In the same way that the Royal African Company, the Royal Niger Company, and the British South Africa Company were granted royal charters by the British Crown to explore, trade, and colonise new territories in the 19th century, China’s state-backed giants are reshaping modern Africa to suit its strategic interests.
Examples of China’s engineering prowess can be found right across Africa. The Maputo suspension bridge in Mozambique was built by China Road and Bridge Corporation, with 95 per cent of the financing coming from China.
In Algeria, the Chinese have helped to build the 1,200km six-lane East-West Highway, the £1.5bn, 120,000 capacity Grand Mosque, and a new £670m terminal at Algiers’ Houari Boumediene Airport.
Ethiopia’s controversial mega hydro-dam, Djibouti’s giant 690 hectare port in Doraleh, and the Mambilla Hydroelectric Power Station in Nigeria all tapped into Chinese funding, know-how and muscle.
This trend looks set to deepen. As Donald Trump takes the axe to the US Agency for International Development, slaps tariffs on African goods and blocks debt renegotiation, China is offering an alluring mix of zero duties and new borrowing.
Yet Kenyans have heard all the talk about China before, and the lessons of the SGR – built with £3.7bn of loans provided by Chinese state-backed lender Exim Bank – is that the reality doesn’t just fail to match the hype, it can come at a heavy price too.
‘We bought their milk but now they’ve bought the cow’
Freight trains at Nairobi station Credit: Ben Marlow
Other Chinese-led projects have been similarly disappointing. A £7.5m Chinese-built bridge collapsed in 2022, two weeks after it was inspected by president Kenyatta during the country’s elections.
The Chinese built-and-operated Nairobi Expressway, opened the same year, has been particularly contentious. Locals were enraged when the government raised toll fees before the road even opened in order to cushion its Chinese backers against exchange losses from a weakening Kenyan shilling.
Even the use of the Mandarin language on signboards during construction provoked anger in some circles.
It’s important to distinguish between “political projects and economic projects,” said Ndindi Nyoro, a prominent Kenyan MP and critic of the Ruto regime.
An example of genuine development is the Thika Superhighway, an eight-lane express way connecting Nairobi to the outskirts of Thika 50km north of the capital, he said from a wood-panelled office high above the buzz of downtown Nairobi.
“It created a multiplier, towns, enterprise, and land went up in terms of value. The reason for a developmental project is not necessarily the project itself. It’s also for the multiplier it creates within the economy: the cement producers, the steel producers, the workers, and the work. That’s the essence of development,” he added.
The SGR is akin to buying something in a supermarket because everything came from China, he said. “That’s why, economically, it wasn’t felt.”
While China eventually reversed a decision to import the cement for the project following uproar from Kenyan manufacturers, the terms of the SGR loans stipulated that other materials such as the steel, along with the machinery, and an army of contractors must come from China. Even the fleet of 500 wagons that service the line are Chinese-made.
China’s growing presence in other parts of the economy has further strained relations. In 2023, the opening of China Square, a Chinese budget retail chain selling cheap household goods, triggered protests among local traders who say they are being unfairly undercut.
Some felt it contravened the spirit of the trade arrangement that had been forged with Beijing, exacerbating an acute imbalance that exists. China is Kenya’s largest trading partner and the biggest source of its imports but Kenya has a large $3.3bn deficit with China.
“The Chinese cannot be importers, retailers, wholesalers and hawkers,” read one placard held aloft during the protest.
Some Kenyan business owners have adopted a new phrase to describe how the Chinese suppliers they once bought goods from become their competitors: “We bought their milk but now they’ve bought the cow.”
Nevertheless, all this raises some difficult questions for the West, challenging some long held assumptions about both Africa and China’s strategic interest there.
Western lenders must also confront the possibility of whether they are about to be wiped out and replaced by their Chinese counterparts. The Telegraph has been handed a cache of secret SGR documents that demonstrates the lengths that its Chinese paymasters were prepared to go to protect their interests.
In the event of any default, Kenya’s assets both at home and abroad are not protected by “sovereignty’ and risk being seized by Beijing, the loan agreement states. What’s the more, the pact is governed by Chinese law and any disputes will be arbitrated in Beijing, the document shows.
In many respects, China’s push into Africa is less a sudden pivot than a doubling down. Launched in 2013, its Belt and Road initiative has long targeted Africa yet it looked as though it was running out of steam.
But as Washington pulls back from the region, China is gearing up again. Africa sits on vast quantities of rare earth materials, it boasts immense green power resources, and abundant agriculture but also a booming and increasingly well-educated population too.
From dawn until dusk Nairobi pulsates with enterprising Kenyans looking to earn a living. Locals joke about the ‘bedrooms’ of Nairobi – surrounding counties where people come from to work in the city during the day but return at night to sleep.
The mobile payments system M-Pesa – “Pesa” is the Swahili word for money – has unleashed a new generation of entrepreneurs. It is now the currency of choice among the traders, hawkers, and roadside kiosks that help keep the economy pumping, even Nairobi’s sprawling Kibera slum.
In a country where less than a fifth of the population have historically had access to formal financial services, it is estimated that more than 90 per cent were using M-Pesa within three years of its launch in 2007.
Donald Trump may see only “s—holes” but China’s Communist Party prefers to think of “Lions” – emerging markets to rival the “Tiger” economies of South-East Asia that exploded between the 1950s and 1990s on the back of a turbo-charged export boom.
Cynics in the West point out we have been here before with much of colonial Britain and Europe’s wealth built on the exploitation of African goods and labour, but that was hundreds of years ago. More recent attempts at reviving the continent have failed as one debt crisis has followed another.
The temptation then might be to just leave China to it. If the conventional wisdom is correct, much of China’s lending has been done at eye-watering interest rates, and is therefore destined to end badly.
Western NGOs and academics warn that China is engaging in little more than “debt trap diplomacy”, a charge that China strongly rejects. “It’s unfair to label Western loans investment and China’s debt,” Guo Haiyan, China’s ambassador to Kenya said on Kenyan radio station Capital FM last month. Nevertheless, Africans have been warned.
But this is not necessarily how many Africans themselves see it. A recent survey conducted by The Pew Research Center, a think-tank in Washington, DC, found that the share of Kenyans who want the government to prioritise economic relations with Beijing has increased by 10 percentage points from 2019 to 48 per cent in 2025 – on a par with the US.
While it is true that Chinese state debt is more expensive than borrowing from the World Bank or its sister organisation the International Development Bank, its loans are often hundreds of basis points cheaper than Western commercial credit, and in Kenya and many other African countries it is these private investors that account for much of the debt. In some cases they represent the majority.
Kenya’s difficulties can be traced back to 2014, Jimi Wanjigi, a prominent Kenyan businessman and arch-critic of his country’s financial profligacy, said. It was the year that the SGR was commissioned, as well as Kenya’s first ever international bond issue, when the Government borrowed £1.5bn from European and American investors in a fund-raising led by Wall Street banking giants JP Morgan and Citi.
“It [the SGR] was one of the biggest cons we have ever seen – the beginning of a long fraud on Kenyans. It laid the foundation for what I call the ‘debt heist’ – that and the first Eurobond,” Mr Wanjigi, who is planning to stand for president in 2027, said.
An audit that Mr Wanjigi conducted of Kenya’s finances shows that it will end up paying more than double what the Government said it would cost to build the SGR, he claimed. If his calculations are correct, “what this principally says is we paid for it out of our own pocket and more – we did not need a loan”.
Since then, Kenya has returned to the international debt markets on multiple occasions, and as its debts have piled up, it has had to borrow on increasingly more punitive terms – often merely to repay existing loans.
As of May this year, Kenya had amassed debts totalling nearly £67bn – a 10 per cent increase in just 12 months – figures from the Central Bank of Kenya show. The country’s debt-to-GDP ratio has rocketed from 42 per cent in 2013 to 65 per cent today, and of its overall debt burden, £30.5bn – a 4 per cent jump over the same period – is owed to external creditors compared to £7.4bn a decade ago.
Accurate figures are hard to obtain but somewhere between a third and a half of Kenya’s external debt has been borrowed from Western investors. While its single biggest creditors are the World Bank, followed by China, the cost of borrowing from international fund managers is much higher than elsewhere.
Last year, Kenya became an unenviable member of the so-called ‘10 per cent club’ – a small group of countries whose credit ratings are so poor they have to swallow double digit interest rates to continue tapping foreign debt markets.
Kenya raised £1.1bn in Eurobonds so that it could buy back most of an outstanding £1.5bn bond that was maturing in June, 2024. Yet, the latest loan came at a much steeper price than previous ones – a 10.4 per cent effective interest rate compared with 6.9 per cent last time around, and less than 4 per cent on the loans taken out to construct the SGR.
It leaves Kenya in questionable company. Six of the 15 countries that have issued bonds with coupons at, or above 9.5 per cent since 2008, have since defaulted including Mozambique and Ghana, analysts at Morgan Stanley have pointed out.
“A 40 per cent default outcome doesn’t bode well,” the bank’s analysts said.
But what does this mean for Western lenders? With multiple African countries now spending more on debt repayments than they do on education and healthcare, a new generation of fearless young voters are demanding change.
As the US takes a chainsaw to its foreign aid budget, and Britain pulls back too – fears are growing that the continent’s debt time bomb is primed to explode as African nations are forced to plug the aid gap with yet more borrowings.
In May, the World Bank issued an alert: Kenya’s public debt “remains at high risk of distress, with interest payments absorbing about a third of tax revenue,” it said. This leaves the East African nation with one of the highest debt interest costs to revenue ratios in the world, credit agency Moody’s said last month.
Yet, according to Nancy Gathungu, the country’s Auditor General, the defaults have already begun after Kenya Railways fell into arrears on the loans it took out from China’s Exim Bank to build the SGR. Having made no repayments in 2024, it has accumulated £235m in outstanding obligations, including a penalty of £20m for falling behind.
The audit also revealed that Kenya Railways’ revenue from its operations was insufficient to cover the maturing loan obligations, leading to additional penalties and a stiff rebuke from Gathungu. She criticised Kenya Railways for failing to justify these defaults, calling them “avoidable”. She also accused it of poor financial controls.
A report from the National Treasury revealed that Kenya Railways racked up a deficit of £286m in 2024, the highest recorded among state corporations in the period. The steep losses explain a visible lack of investment along the line. At the Nairobi terminus, broken seats litter the waiting area, the VIP lounge is closed – possibly permanently – and the toilets in a visible state of disrepair. Several other stations seem unfinished – piles of construction materials scattered around.
Nyoro believes that by Christmas, Kenya’s financial struggles will be so acute that the government will be struggling to meet key domestic spending commitments.
“If they don’t default on either external or internal debt repayments, they’ll default on other things like salaries, development expenditure, and social investment,” he warned. It follows steep cuts to both the healthcare and education budgets in recent months.
Much will rest on crunch discussions with the International Monetary Fund which are expected to begin next month. The Ruto government needs to secure a new financing programme with the International Monetary Fund to help it deal with annual external debt repayments that stand at £2.6bn on average, Moody’s said. Yet, another IMF loan package is far from certain without major reforms that risk provoking further violent demonstrations on the streets of Nairobi.
“We will probably ask them to implement a lot of things up front…short, medium, and long-term measures to address their vulnerabilities,” an IMF source said. At the same time, “we also don’t want to create a public uprising again,” the same source said.
Kenya’s precarious situation leaves Western commercial lenders particularly exposed, because they lend through the so-called ‘London Club” – essentially a cartel whose members operate on shared terms. China however, has never been part of the group, preferring instead to negotiate sovereign debt crises bi-laterally.
“When African countries struggle to repay those loans, PRC [People’s Republic of China] lenders have taken inflexible positions that have delayed and hardened terms in renegotiations,” Timothy Ditter, research scientist at the US government-funded Centre for Naval Analyses, said in a recent report.
They have also “resisted standard loan forgiveness practices and slowed debt negotiations,” Mr Ditter added.
China has gone even further, employing the best commercial lawyers in the world to deliberately structure its sovereign loans so that Chinese lenders get greater protections than other creditors.
The American research lab AidData studied 100 contracts between Chinese state-owned entities and government borrowers in 24 developing countries, and found that “Chinese contracts contain more elaborate repayment safeguards than their peers…alongside elements that give Chinese lenders an advantage over other creditors.
“China is a muscular and commercially-savvy lender to developing countries,” it added.
Echoing calls among campaign groups like Debt Justice, and more recently from the Tony Blair Institute, for a programme of debt relief, Mr Wanjigi argues that Kenya’s external debt should be written off because it hasn’t been properly spent according to Kenyan law, which states that any borrowings must be used for development projects.
In Kenya, China’s legacy continues to divide opinion. Aboard the 8am SGR train from Nairobi to Mombasa, Robert, a credit analyst and property developer travelling to work in Kibwezi, wonders whether Kenya was short-changed. “Couldn’t we have got a better deal like electric trains instead of these diesel ones?,” he asked, gesturing to the carriage we are seated in.
A nearby passenger who travels to Mombasa twice a month for work said the SGR is undeniably quicker than the bus she used to take but the bus was cheaper and “the seats were more comfortable”.
Twenty-five miles north of the final station near Suswa however, the watchman who guards over the end of the line is hoping it is completed. The railway will have to cross his land, opening the door to a big compensation package from the authorities just like others who were affected.
One of his neighbours was awarded a £125,000 payout for surrendering some farmland, he said, drawing the figure in the dirt with a stick for emphasis, but he spent it all on “women and booze”.
The Nairobi to Mombasa train is the side of Kenya’s expensively-assembled railway that its government would prefer the world sees.
On a muggy Saturday morning in July, carriage after carriage is packed with Kenyans flocking to the coast. Some are going home, some to work, others to the beaches where they can escape the frenetic buzz of the capital.
At stations along the way, the train slows to a halt and school children in brightly coloured uniforms heading home for the holidays hop aboard and fill up the remaining seats.
Glimpses of Africa’s wildlife – gazelles and antelopes, a lone ostrich, a family of giraffes peaking above the trees, occasional zebras and elephants – puncture the monotony of hundreds of miles of parched scrubland.
Six hours later, more than a thousand passengers spill out onto the polished grey concrete platform of the country’s second largest city, where they jump into mini-buses, cabs, tuk-tuks, and onto boda-bodas – cheap motorbike taxis driven largely by enterprising young Kenyan men.
The line that heads in the opposite direction tells the real story however. Intended to showcase Kenya’s status as one of the continent’s fastest-growing countries, the Standard Gauge Railway was supposed to stretch all the way to Mulaba on the Uganda border and beyond to South Sudan.
With plans to eventually link up the Democratic Republic of Congo, Rwanda and Burundi as well, it was envisioned that the project would unleash a new economic boom across East Africa as regional trade was propelled to new heights.
At the launch party of the railway in May, 2017, the then-Kenya president Uhuru Kenyatta invited his fellow countrymen to “celebrate the laying of one of the key cornerstones to Kenya’s journey of transformation to an industrial, prosperous and middle-income country”.
Yet, the reality of what remains the single largest infrastructure programme Kenya has ever embarked upon has fallen spectacularly short of its grand ambitions.
Bankrolled almost entirely with billions of dollars of Chinese loans, the line is popular with day trippers but it stops several hundred miles short of Uganda in a corn field deep in the Rift Valley after the money suddenly ran out, where it is now watched over by a farmer-cum-security guard living in a nearby rusting shack with his family.
Passengers must disembark at the final station outside of a small village called Suswa, 25 miles from where the track abruptly ends. Killing five hours before the return journey home requires imagination. Many head to the roadside barbecues dotted along the surrounding lanes to eat, drink and capture the experience on Instagram or Tik Tok. Others choose to kill the time at a nearby hotel pool.
Kenya Railways has called the service ‘The Madaraka Express’. Kenyans prefer other less flattering names, most commonly “The Railway to Nowhere” or “The Debt Express”.
Far from symbolising Kenya’s emergence as a regional powerhouse, the SGR has become an embarrassing monument to a debt crisis that threatens to engulf a continent which is now hooked on loans from Beijing as Western creditors and the Bretton-Woods institutions have pulled back.
With the country on the brink of a ruinous debt default, the Kenyan people are restless for change. Last month, anti-government protests led by fearless Gen Z voters exploded into deadly confrontation and a deepening political crisis for Kenya’s ruling elite. Less than three years into his presidency, a panicking William Ruto called for police to maintain a tough stance.
“Don’t kill them, but ensure their legs are broken,” Mr Ruto said, despite confrontations that had already claimed the lives of 51 demonstrators.
Yet, Mr Ruto, it seems, carries the same obsession with ‘legacy building’ that has long tormented other African leaders. Instead of reining in borrowing in a country where interest payments alone swallow close to half of the annual budget, he is preparing to borrow billions more from China to fund the completion of a railway that has been heavily loss-making since the day it opened.
As China continues to push on with realising its own vision for a new global economic order – including by hosting a landmark summit this week attended by Russia and India – Kenya risks tipping into bankruptcy, with ramifications far beyond Nairobi. With an estimated £30bn owed to overseas lenders, the country could be about to turn into a battleground for a tense confrontation between the West and China, as its myriad major creditors scramble to minimise their losses.
Several miles down a bone-shaking stretch of poorly tarmacked motorway outside of Mombasa, sandwiched between corrugated warehouses, repurposed shopping containers, and an endless stream of roadside shacks, sits the makeshift offices of the Kenya Long Distance Truck Drivers and Allied Workers Union.
Built from salvaged wood and tarpaulin, its solitary window propped open precariously with a broom handle, it is from this tiny square room that the union’s chairman Roman Waema is contemplating the possible resumption of a war against the SGR and its architects if work begins on the final leg.
In a desperate bid to make the railway profitable shortly after construction, the authorities issued an edict that all cargo arriving in Kenya had to be transported by rail instead of road. Mr Waema and his members took to the streets in protest at a decision that would quickly decimate Kenya’s truck-driving fraternity.
He estimates 7,000 of his 8,000-strong membership eventually lost their jobs, along with many more in the supply chain, hitting local communities hard.
“It affected a lot of businesses…warehouse workers were terminated from their employment – it was a mess….their families were also collapsing because they were the breadwinners,” Mr Waema said.
Even now, with the order long since lifted and freight traffic on the Mombasa to Nairobi highway restored, the SGR continues to cast a shadow over the area.
You’re killing one sector to pay for another sector. This guy is not employed, the other guy also is not employed,” he said, pointing to two men perched on plastic chairs in the corner.
Mr Waema and some of his colleagues were arrested during the protests but it wouldn’t stop him from doing it again.
“The government tried to intimidate us but we will go back to the streets because it’s our constitutional right. We will not allow it to happen again – mass lay-offs of workers. That cannot be tolerated.”
The demonstrators might want to begin dusting off their placards now. In April, Mr Ruto embarked on a state visit to China – his third since taking office in 2022 – returning five days later with a joint pledge to reject “hegemonism, power politics, and all forms of unilateralism and protectionism”.
The Kenyan president had also signed more than 20 agreements on science and technology cooperation, education, water resources, e-commerce, and intelligent transport systems from Beijing.
But by far the most significant was a promise from Xi Jinping to provide billions of dollars in fresh loans to pay for the SGR to finally be extended to the Ugandan border.
Its proponents insist the SGR will make a huge difference, revitalising industry, improving travel, speeding up freight, and ultimately putting the boosters under growth.
Crucially perhaps, with China back on board, it stands a good chance of being completed. After all, even the harshest critics of the world’s second largest economy can’t dispute its record of delivering major infrastructure projects across Africa.
Reliable independent statistics are hard to come by but research from the marketing wing of China’s Belt and Road Initiative recently sought to quantify its achievements.
The report claims China has funded and helped build more than 10,000 kilometres of railways, nearly 100,000 km of highways, 1,000 bridges, 100 ports, and 66,000 km of power transmission and distribution lines across Africa since its launch in 2013.
Chinese loans also come with some key advantages over Western debt. Beijing’s trick has been not just to offer the money for shiny new projects but the contractors and the materials to deliver them too, in a region where corrupt and inefficient African regimes have too often fallen short.
Often the projects on offer resemble a menu: a major road; a more modern port; an energy-producing dam, for example. These packages also come with a fixed timeline for completion – a tantalising prospect for African politicians with looming elections to consider.
“Global development banks have been slow to invest, especially in big projects that drive growth. China has stepped in to fund roads, railways, and other infrastructure that has boosted growth,” said Kevin Gallagher, professor at Boston University. Chinese lending has also “been more long term and less costly than private sector lending in the region,” he added.
Those spearheading this construction bonanza are the same ones that built modern China. These are the new ‘chartered companies’ of today. In the same way that the Royal African Company, the Royal Niger Company, and the British South Africa Company were granted royal charters by the British Crown to explore, trade, and colonise new territories in the 19th century, China’s state-backed giants are reshaping modern Africa to suit its strategic interests.
Examples of China’s engineering prowess can be found right across Africa. The Maputo suspension bridge in Mozambique was built by China Road and Bridge Corporation, with 95 per cent of the financing coming from China.
In Algeria, the Chinese have helped to build the 1,200km six-lane East-West Highway, the £1.5bn, 120,000 capacity Grand Mosque, and a new £670m terminal at Algiers’ Houari Boumediene Airport.
Ethiopia’s controversial mega hydro-dam, Djibouti’s giant 690 hectare port in Doraleh, and the Mambilla Hydroelectric Power Station in Nigeria all tapped into Chinese funding, know-how and muscle.
This trend looks set to deepen. As Donald Trump takes the axe to the US Agency for International Development, slaps tariffs on African goods and blocks debt renegotiation, China is offering an alluring mix of zero duties and new borrowing.
Yet Kenyans have heard all the talk about China before, and the lessons of the SGR – built with £3.7bn of loans provided by Chinese state-backed lender Exim Bank – is that the reality doesn’t just fail to match the hype, it can come at a heavy price too.
‘We bought their milk but now they’ve bought the cow’
Freight trains at Nairobi station Credit: Ben Marlow
Other Chinese-led projects have been similarly disappointing. A £7.5m Chinese-built bridge collapsed in 2022, two weeks after it was inspected by president Kenyatta during the country’s elections.
The Chinese built-and-operated Nairobi Expressway, opened the same year, has been particularly contentious. Locals were enraged when the government raised toll fees before the road even opened in order to cushion its Chinese backers against exchange losses from a weakening Kenyan shilling.
Even the use of the Mandarin language on signboards during construction provoked anger in some circles.
It’s important to distinguish between “political projects and economic projects,” said Ndindi Nyoro, a prominent Kenyan MP and critic of the Ruto regime.
An example of genuine development is the Thika Superhighway, an eight-lane express way connecting Nairobi to the outskirts of Thika 50km north of the capital, he said from a wood-panelled office high above the buzz of downtown Nairobi.
“It created a multiplier, towns, enterprise, and land went up in terms of value. The reason for a developmental project is not necessarily the project itself. It’s also for the multiplier it creates within the economy: the cement producers, the steel producers, the workers, and the work. That’s the essence of development,” he added.
The SGR is akin to buying something in a supermarket because everything came from China, he said. “That’s why, economically, it wasn’t felt.”
While China eventually reversed a decision to import the cement for the project following uproar from Kenyan manufacturers, the terms of the SGR loans stipulated that other materials such as the steel, along with the machinery, and an army of contractors must come from China. Even the fleet of 500 wagons that service the line are Chinese-made.
China’s growing presence in other parts of the economy has further strained relations. In 2023, the opening of China Square, a Chinese budget retail chain selling cheap household goods, triggered protests among local traders who say they are being unfairly undercut.
Some felt it contravened the spirit of the trade arrangement that had been forged with Beijing, exacerbating an acute imbalance that exists. China is Kenya’s largest trading partner and the biggest source of its imports but Kenya has a large $3.3bn deficit with China.
“The Chinese cannot be importers, retailers, wholesalers and hawkers,” read one placard held aloft during the protest.
Some Kenyan business owners have adopted a new phrase to describe how the Chinese suppliers they once bought goods from become their competitors: “We bought their milk but now they’ve bought the cow.”
Nevertheless, all this raises some difficult questions for the West, challenging some long held assumptions about both Africa and China’s strategic interest there.
Western lenders must also confront the possibility of whether they are about to be wiped out and replaced by their Chinese counterparts. The Telegraph has been handed a cache of secret SGR documents that demonstrates the lengths that its Chinese paymasters were prepared to go to protect their interests.
In the event of any default, Kenya’s assets both at home and abroad are not protected by “sovereignty’ and risk being seized by Beijing, the loan agreement states. What’s the more, the pact is governed by Chinese law and any disputes will be arbitrated in Beijing, the document shows.
In many respects, China’s push into Africa is less a sudden pivot than a doubling down. Launched in 2013, its Belt and Road initiative has long targeted Africa yet it looked as though it was running out of steam.
But as Washington pulls back from the region, China is gearing up again. Africa sits on vast quantities of rare earth materials, it boasts immense green power resources, and abundant agriculture but also a booming and increasingly well-educated population too.
From dawn until dusk Nairobi pulsates with enterprising Kenyans looking to earn a living. Locals joke about the ‘bedrooms’ of Nairobi – surrounding counties where people come from to work in the city during the day but return at night to sleep.
The mobile payments system M-Pesa – “Pesa” is the Swahili word for money – has unleashed a new generation of entrepreneurs. It is now the currency of choice among the traders, hawkers, and roadside kiosks that help keep the economy pumping, even Nairobi’s sprawling Kibera slum.
In a country where less than a fifth of the population have historically had access to formal financial services, it is estimated that more than 90 per cent were using M-Pesa within three years of its launch in 2007.
Donald Trump may see only “s—holes” but China’s Communist Party prefers to think of “Lions” – emerging markets to rival the “Tiger” economies of South-East Asia that exploded between the 1950s and 1990s on the back of a turbo-charged export boom.
Cynics in the West point out we have been here before with much of colonial Britain and Europe’s wealth built on the exploitation of African goods and labour, but that was hundreds of years ago. More recent attempts at reviving the continent have failed as one debt crisis has followed another.
The temptation then might be to just leave China to it. If the conventional wisdom is correct, much of China’s lending has been done at eye-watering interest rates, and is therefore destined to end badly.
Western NGOs and academics warn that China is engaging in little more than “debt trap diplomacy”, a charge that China strongly rejects. “It’s unfair to label Western loans investment and China’s debt,” Guo Haiyan, China’s ambassador to Kenya said on Kenyan radio station Capital FM last month. Nevertheless, Africans have been warned.
But this is not necessarily how many Africans themselves see it. A recent survey conducted by The Pew Research Center, a think-tank in Washington, DC, found that the share of Kenyans who want the government to prioritise economic relations with Beijing has increased by 10 percentage points from 2019 to 48 per cent in 2025 – on a par with the US.
While it is true that Chinese state debt is more expensive than borrowing from the World Bank or its sister organisation the International Development Bank, its loans are often hundreds of basis points cheaper than Western commercial credit, and in Kenya and many other African countries it is these private investors that account for much of the debt. In some cases they represent the majority.
Kenya’s difficulties can be traced back to 2014, Jimi Wanjigi, a prominent Kenyan businessman and arch-critic of his country’s financial profligacy, said. It was the year that the SGR was commissioned, as well as Kenya’s first ever international bond issue, when the Government borrowed £1.5bn from European and American investors in a fund-raising led by Wall Street banking giants JP Morgan and Citi.
“It [the SGR] was one of the biggest cons we have ever seen – the beginning of a long fraud on Kenyans. It laid the foundation for what I call the ‘debt heist’ – that and the first Eurobond,” Mr Wanjigi, who is planning to stand for president in 2027, said.
An audit that Mr Wanjigi conducted of Kenya’s finances shows that it will end up paying more than double what the Government said it would cost to build the SGR, he claimed. If his calculations are correct, “what this principally says is we paid for it out of our own pocket and more – we did not need a loan”.
Since then, Kenya has returned to the international debt markets on multiple occasions, and as its debts have piled up, it has had to borrow on increasingly more punitive terms – often merely to repay existing loans.
As of May this year, Kenya had amassed debts totalling nearly £67bn – a 10 per cent increase in just 12 months – figures from the Central Bank of Kenya show. The country’s debt-to-GDP ratio has rocketed from 42 per cent in 2013 to 65 per cent today, and of its overall debt burden, £30.5bn – a 4 per cent jump over the same period – is owed to external creditors compared to £7.4bn a decade ago.
Accurate figures are hard to obtain but somewhere between a third and a half of Kenya’s external debt has been borrowed from Western investors. While its single biggest creditors are the World Bank, followed by China, the cost of borrowing from international fund managers is much higher than elsewhere.
Last year, Kenya became an unenviable member of the so-called ‘10 per cent club’ – a small group of countries whose credit ratings are so poor they have to swallow double digit interest rates to continue tapping foreign debt markets.
Kenya raised £1.1bn in Eurobonds so that it could buy back most of an outstanding £1.5bn bond that was maturing in June, 2024. Yet, the latest loan came at a much steeper price than previous ones – a 10.4 per cent effective interest rate compared with 6.9 per cent last time around, and less than 4 per cent on the loans taken out to construct the SGR.
It leaves Kenya in questionable company. Six of the 15 countries that have issued bonds with coupons at, or above 9.5 per cent since 2008, have since defaulted including Mozambique and Ghana, analysts at Morgan Stanley have pointed out.
“A 40 per cent default outcome doesn’t bode well,” the bank’s analysts said.
But what does this mean for Western lenders? With multiple African countries now spending more on debt repayments than they do on education and healthcare, a new generation of fearless young voters are demanding change.
As the US takes a chainsaw to its foreign aid budget, and Britain pulls back too – fears are growing that the continent’s debt time bomb is primed to explode as African nations are forced to plug the aid gap with yet more borrowings.
In May, the World Bank issued an alert: Kenya’s public debt “remains at high risk of distress, with interest payments absorbing about a third of tax revenue,” it said. This leaves the East African nation with one of the highest debt interest costs to revenue ratios in the world, credit agency Moody’s said last month.
Yet, according to Nancy Gathungu, the country’s Auditor General, the defaults have already begun after Kenya Railways fell into arrears on the loans it took out from China’s Exim Bank to build the SGR. Having made no repayments in 2024, it has accumulated £235m in outstanding obligations, including a penalty of £20m for falling behind.
The audit also revealed that Kenya Railways’ revenue from its operations was insufficient to cover the maturing loan obligations, leading to additional penalties and a stiff rebuke from Gathungu. She criticised Kenya Railways for failing to justify these defaults, calling them “avoidable”. She also accused it of poor financial controls.
A report from the National Treasury revealed that Kenya Railways racked up a deficit of £286m in 2024, the highest recorded among state corporations in the period. The steep losses explain a visible lack of investment along the line. At the Nairobi terminus, broken seats litter the waiting area, the VIP lounge is closed – possibly permanently – and the toilets in a visible state of disrepair. Several other stations seem unfinished – piles of construction materials scattered around.
Nyoro believes that by Christmas, Kenya’s financial struggles will be so acute that the government will be struggling to meet key domestic spending commitments.
“If they don’t default on either external or internal debt repayments, they’ll default on other things like salaries, development expenditure, and social investment,” he warned. It follows steep cuts to both the healthcare and education budgets in recent months.
Much will rest on crunch discussions with the International Monetary Fund which are expected to begin next month. The Ruto government needs to secure a new financing programme with the International Monetary Fund to help it deal with annual external debt repayments that stand at £2.6bn on average, Moody’s said. Yet, another IMF loan package is far from certain without major reforms that risk provoking further violent demonstrations on the streets of Nairobi.
“We will probably ask them to implement a lot of things up front…short, medium, and long-term measures to address their vulnerabilities,” an IMF source said. At the same time, “we also don’t want to create a public uprising again,” the same source said.
Kenya’s precarious situation leaves Western commercial lenders particularly exposed, because they lend through the so-called ‘London Club” – essentially a cartel whose members operate on shared terms. China however, has never been part of the group, preferring instead to negotiate sovereign debt crises bi-laterally.
“When African countries struggle to repay those loans, PRC [People’s Republic of China] lenders have taken inflexible positions that have delayed and hardened terms in renegotiations,” Timothy Ditter, research scientist at the US government-funded Centre for Naval Analyses, said in a recent report.
They have also “resisted standard loan forgiveness practices and slowed debt negotiations,” Mr Ditter added.
China has gone even further, employing the best commercial lawyers in the world to deliberately structure its sovereign loans so that Chinese lenders get greater protections than other creditors.
The American research lab AidData studied 100 contracts between Chinese state-owned entities and government borrowers in 24 developing countries, and found that “Chinese contracts contain more elaborate repayment safeguards than their peers…alongside elements that give Chinese lenders an advantage over other creditors.
“China is a muscular and commercially-savvy lender to developing countries,” it added.
Echoing calls among campaign groups like Debt Justice, and more recently from the Tony Blair Institute, for a programme of debt relief, Mr Wanjigi argues that Kenya’s external debt should be written off because it hasn’t been properly spent according to Kenyan law, which states that any borrowings must be used for development projects.
In Kenya, China’s legacy continues to divide opinion. Aboard the 8am SGR train from Nairobi to Mombasa, Robert, a credit analyst and property developer travelling to work in Kibwezi, wonders whether Kenya was short-changed. “Couldn’t we have got a better deal like electric trains instead of these diesel ones?,” he asked, gesturing to the carriage we are seated in.
A nearby passenger who travels to Mombasa twice a month for work said the SGR is undeniably quicker than the bus she used to take but the bus was cheaper and “the seats were more comfortable”.
Twenty-five miles north of the final station near Suswa however, the watchman who guards over the end of the line is hoping it is completed. The railway will have to cross his land, opening the door to a big compensation package from the authorities just like others who were affected.
One of his neighbours was awarded a £125,000 payout for surrendering some farmland, he said, drawing the figure in the dirt with a stick for emphasis, but he spent it all on “women and booze”.
The Nairobi to Mombasa train is the side of Kenya’s expensively-assembled railway that its government would prefer the world sees.
On a muggy Saturday morning in July, carriage after carriage is packed with Kenyans flocking to the coast. Some are going home, some to work, others to the beaches where they can escape the frenetic buzz of the capital.
At stations along the way, the train slows to a halt and school children in brightly coloured uniforms heading home for the holidays hop aboard and fill up the remaining seats.
Glimpses of Africa’s wildlife – gazelles and antelopes, a lone ostrich, a family of giraffes peaking above the trees, occasional zebras and elephants – puncture the monotony of hundreds of miles of parched scrubland.
Six hours later, more than a thousand passengers spill out onto the polished grey concrete platform of the country’s second largest city, where they jump into mini-buses, cabs, tuk-tuks, and onto boda-bodas – cheap motorbike taxis driven largely by enterprising young Kenyan men.
The line that heads in the opposite direction tells the real story however. Intended to showcase Kenya’s status as one of the continent’s fastest-growing countries, the Standard Gauge Railway was supposed to stretch all the way to Mulaba on the Uganda border and beyond to South Sudan.
With plans to eventually link up the Democratic Republic of Congo, Rwanda and Burundi as well, it was envisioned that the project would unleash a new economic boom across East Africa as regional trade was propelled to new heights.
At the launch party of the railway in May, 2017, the then-Kenya president Uhuru Kenyatta invited his fellow countrymen to “celebrate the laying of one of the key cornerstones to Kenya’s journey of transformation to an industrial, prosperous and middle-income country”.
Yet, the reality of what remains the single largest infrastructure programme Kenya has ever embarked upon has fallen spectacularly short of its grand ambitions.
Bankrolled almost entirely with billions of dollars of Chinese loans, the line is popular with day trippers but it stops several hundred miles short of Uganda in a corn field deep in the Rift Valley after the money suddenly ran out, where it is now watched over by a farmer-cum-security guard living in a nearby rusting shack with his family.
Passengers must disembark at the final station outside of a small village called Suswa, 25 miles from where the track abruptly ends. Killing five hours before the return journey home requires imagination. Many head to the roadside barbecues dotted along the surrounding lanes to eat, drink and capture the experience on Instagram or Tik Tok. Others choose to kill the time at a nearby hotel pool.
Kenya Railways has called the service ‘The Madaraka Express’. Kenyans prefer other less flattering names, most commonly “The Railway to Nowhere” or “The Debt Express”.
Far from symbolising Kenya’s emergence as a regional powerhouse, the SGR has become an embarrassing monument to a debt crisis that threatens to engulf a continent which is now hooked on loans from Beijing as Western creditors and the Bretton-Woods institutions have pulled back.
With the country on the brink of a ruinous debt default, the Kenyan people are restless for change. Last month, anti-government protests led by fearless Gen Z voters exploded into deadly confrontation and a deepening political crisis for Kenya’s ruling elite. Less than three years into his presidency, a panicking William Ruto called for police to maintain a tough stance.
“Don’t kill them, but ensure their legs are broken,” Mr Ruto said, despite confrontations that had already claimed the lives of 51 demonstrators.
Yet, Mr Ruto, it seems, carries the same obsession with ‘legacy building’ that has long tormented other African leaders. Instead of reining in borrowing in a country where interest payments alone swallow close to half of the annual budget, he is preparing to borrow billions more from China to fund the completion of a railway that has been heavily loss-making since the day it opened.
As China continues to push on with realising its own vision for a new global economic order – including by hosting a landmark summit this week attended by Russia and India – Kenya risks tipping into bankruptcy, with ramifications far beyond Nairobi. With an estimated £30bn owed to overseas lenders, the country could be about to turn into a battleground for a tense confrontation between the West and China, as its myriad major creditors scramble to minimise their losses.
Several miles down a bone-shaking stretch of poorly tarmacked motorway outside of Mombasa, sandwiched between corrugated warehouses, repurposed shopping containers, and an endless stream of roadside shacks, sits the makeshift offices of the Kenya Long Distance Truck Drivers and Allied Workers Union.
Built from salvaged wood and tarpaulin, its solitary window propped open precariously with a broom handle, it is from this tiny square room that the union’s chairman Roman Waema is contemplating the possible resumption of a war against the SGR and its architects if work begins on the final leg.
In a desperate bid to make the railway profitable shortly after construction, the authorities issued an edict that all cargo arriving in Kenya had to be transported by rail instead of road. Mr Waema and his members took to the streets in protest at a decision that would quickly decimate Kenya’s truck-driving fraternity.
He estimates 7,000 of his 8,000-strong membership eventually lost their jobs, along with many more in the supply chain, hitting local communities hard.
“It affected a lot of businesses…warehouse workers were terminated from their employment – it was a mess….their families were also collapsing because they were the breadwinners,” Mr Waema said.
Even now, with the order long since lifted and freight traffic on the Mombasa to Nairobi highway restored, the SGR continues to cast a shadow over the area.
You’re killing one sector to pay for another sector. This guy is not employed, the other guy also is not employed,” he said, pointing to two men perched on plastic chairs in the corner.
Mr Waema and some of his colleagues were arrested during the protests but it wouldn’t stop him from doing it again.
“The government tried to intimidate us but we will go back to the streets because it’s our constitutional right. We will not allow it to happen again – mass lay-offs of workers. That cannot be tolerated.”
The demonstrators might want to begin dusting off their placards now. In April, Mr Ruto embarked on a state visit to China – his third since taking office in 2022 – returning five days later with a joint pledge to reject “hegemonism, power politics, and all forms of unilateralism and protectionism”.
The Kenyan president had also signed more than 20 agreements on science and technology cooperation, education, water resources, e-commerce, and intelligent transport systems from Beijing.
But by far the most significant was a promise from Xi Jinping to provide billions of dollars in fresh loans to pay for the SGR to finally be extended to the Ugandan border.
Its proponents insist the SGR will make a huge difference, revitalising industry, improving travel, speeding up freight, and ultimately putting the boosters under growth.
Crucially perhaps, with China back on board, it stands a good chance of being completed. After all, even the harshest critics of the world’s second largest economy can’t dispute its record of delivering major infrastructure projects across Africa.
Reliable independent statistics are hard to come by but research from the marketing wing of China’s Belt and Road Initiative recently sought to quantify its achievements.
The report claims China has funded and helped build more than 10,000 kilometres of railways, nearly 100,000 km of highways, 1,000 bridges, 100 ports, and 66,000 km of power transmission and distribution lines across Africa since its launch in 2013.
Chinese loans also come with some key advantages over Western debt. Beijing’s trick has been not just to offer the money for shiny new projects but the contractors and the materials to deliver them too, in a region where corrupt and inefficient African regimes have too often fallen short.
Often the projects on offer resemble a menu: a major road; a more modern port; an energy-producing dam, for example. These packages also come with a fixed timeline for completion – a tantalising prospect for African politicians with looming elections to consider.
“Global development banks have been slow to invest, especially in big projects that drive growth. China has stepped in to fund roads, railways, and other infrastructure that has boosted growth,” said Kevin Gallagher, professor at Boston University. Chinese lending has also “been more long term and less costly than private sector lending in the region,” he added.
Those spearheading this construction bonanza are the same ones that built modern China. These are the new ‘chartered companies’ of today. In the same way that the Royal African Company, the Royal Niger Company, and the British South Africa Company were granted royal charters by the British Crown to explore, trade, and colonise new territories in the 19th century, China’s state-backed giants are reshaping modern Africa to suit its strategic interests.
Examples of China’s engineering prowess can be found right across Africa. The Maputo suspension bridge in Mozambique was built by China Road and Bridge Corporation, with 95 per cent of the financing coming from China.
In Algeria, the Chinese have helped to build the 1,200km six-lane East-West Highway, the £1.5bn, 120,000 capacity Grand Mosque, and a new £670m terminal at Algiers’ Houari Boumediene Airport.
Ethiopia’s controversial mega hydro-dam, Djibouti’s giant 690 hectare port in Doraleh, and the Mambilla Hydroelectric Power Station in Nigeria all tapped into Chinese funding, know-how and muscle.
This trend looks set to deepen. As Donald Trump takes the axe to the US Agency for International Development, slaps tariffs on African goods and blocks debt renegotiation, China is offering an alluring mix of zero duties and new borrowing.
Yet Kenyans have heard all the talk about China before, and the lessons of the SGR – built with £3.7bn of loans provided by Chinese state-backed lender Exim Bank – is that the reality doesn’t just fail to match the hype, it can come at a heavy price too.
‘We bought their milk but now they’ve bought the cow’
Freight trains at Nairobi station Credit: Ben Marlow
Other Chinese-led projects have been similarly disappointing. A £7.5m Chinese-built bridge collapsed in 2022, two weeks after it was inspected by president Kenyatta during the country’s elections.
The Chinese built-and-operated Nairobi Expressway, opened the same year, has been particularly contentious. Locals were enraged when the government raised toll fees before the road even opened in order to cushion its Chinese backers against exchange losses from a weakening Kenyan shilling.
Even the use of the Mandarin language on signboards during construction provoked anger in some circles.
It’s important to distinguish between “political projects and economic projects,” said Ndindi Nyoro, a prominent Kenyan MP and critic of the Ruto regime.
An example of genuine development is the Thika Superhighway, an eight-lane express way connecting Nairobi to the outskirts of Thika 50km north of the capital, he said from a wood-panelled office high above the buzz of downtown Nairobi.
“It created a multiplier, towns, enterprise, and land went up in terms of value. The reason for a developmental project is not necessarily the project itself. It’s also for the multiplier it creates within the economy: the cement producers, the steel producers, the workers, and the work. That’s the essence of development,” he added.
The SGR is akin to buying something in a supermarket because everything came from China, he said. “That’s why, economically, it wasn’t felt.”
While China eventually reversed a decision to import the cement for the project following uproar from Kenyan manufacturers, the terms of the SGR loans stipulated that other materials such as the steel, along with the machinery, and an army of contractors must come from China. Even the fleet of 500 wagons that service the line are Chinese-made.
China’s growing presence in other parts of the economy has further strained relations. In 2023, the opening of China Square, a Chinese budget retail chain selling cheap household goods, triggered protests among local traders who say they are being unfairly undercut.
Some felt it contravened the spirit of the trade arrangement that had been forged with Beijing, exacerbating an acute imbalance that exists. China is Kenya’s largest trading partner and the biggest source of its imports but Kenya has a large $3.3bn deficit with China.
“The Chinese cannot be importers, retailers, wholesalers and hawkers,” read one placard held aloft during the protest.
Some Kenyan business owners have adopted a new phrase to describe how the Chinese suppliers they once bought goods from become their competitors: “We bought their milk but now they’ve bought the cow.”
Nevertheless, all this raises some difficult questions for the West, challenging some long held assumptions about both Africa and China’s strategic interest there.
Western lenders must also confront the possibility of whether they are about to be wiped out and replaced by their Chinese counterparts. The Telegraph has been handed a cache of secret SGR documents that demonstrates the lengths that its Chinese paymasters were prepared to go to protect their interests.
In the event of any default, Kenya’s assets both at home and abroad are not protected by “sovereignty’ and risk being seized by Beijing, the loan agreement states. What’s the more, the pact is governed by Chinese law and any disputes will be arbitrated in Beijing, the document shows.
In many respects, China’s push into Africa is less a sudden pivot than a doubling down. Launched in 2013, its Belt and Road initiative has long targeted Africa yet it looked as though it was running out of steam.
But as Washington pulls back from the region, China is gearing up again. Africa sits on vast quantities of rare earth materials, it boasts immense green power resources, and abundant agriculture but also a booming and increasingly well-educated population too.
From dawn until dusk Nairobi pulsates with enterprising Kenyans looking to earn a living. Locals joke about the ‘bedrooms’ of Nairobi – surrounding counties where people come from to work in the city during the day but return at night to sleep.
The mobile payments system M-Pesa – “Pesa” is the Swahili word for money – has unleashed a new generation of entrepreneurs. It is now the currency of choice among the traders, hawkers, and roadside kiosks that help keep the economy pumping, even Nairobi’s sprawling Kibera slum.
In a country where less than a fifth of the population have historically had access to formal financial services, it is estimated that more than 90 per cent were using M-Pesa within three years of its launch in 2007.
Donald Trump may see only “s—holes” but China’s Communist Party prefers to think of “Lions” – emerging markets to rival the “Tiger” economies of South-East Asia that exploded between the 1950s and 1990s on the back of a turbo-charged export boom.
Cynics in the West point out we have been here before with much of colonial Britain and Europe’s wealth built on the exploitation of African goods and labour, but that was hundreds of years ago. More recent attempts at reviving the continent have failed as one debt crisis has followed another.
The temptation then might be to just leave China to it. If the conventional wisdom is correct, much of China’s lending has been done at eye-watering interest rates, and is therefore destined to end badly.
Western NGOs and academics warn that China is engaging in little more than “debt trap diplomacy”, a charge that China strongly rejects. “It’s unfair to label Western loans investment and China’s debt,” Guo Haiyan, China’s ambassador to Kenya said on Kenyan radio station Capital FM last month. Nevertheless, Africans have been warned.
But this is not necessarily how many Africans themselves see it. A recent survey conducted by The Pew Research Center, a think-tank in Washington, DC, found that the share of Kenyans who want the government to prioritise economic relations with Beijing has increased by 10 percentage points from 2019 to 48 per cent in 2025 – on a par with the US.
While it is true that Chinese state debt is more expensive than borrowing from the World Bank or its sister organisation the International Development Bank, its loans are often hundreds of basis points cheaper than Western commercial credit, and in Kenya and many other African countries it is these private investors that account for much of the debt. In some cases they represent the majority.
Kenya’s difficulties can be traced back to 2014, Jimi Wanjigi, a prominent Kenyan businessman and arch-critic of his country’s financial profligacy, said. It was the year that the SGR was commissioned, as well as Kenya’s first ever international bond issue, when the Government borrowed £1.5bn from European and American investors in a fund-raising led by Wall Street banking giants JP Morgan and Citi.
“It [the SGR] was one of the biggest cons we have ever seen – the beginning of a long fraud on Kenyans. It laid the foundation for what I call the ‘debt heist’ – that and the first Eurobond,” Mr Wanjigi, who is planning to stand for president in 2027, said.
An audit that Mr Wanjigi conducted of Kenya’s finances shows that it will end up paying more than double what the Government said it would cost to build the SGR, he claimed. If his calculations are correct, “what this principally says is we paid for it out of our own pocket and more – we did not need a loan”.
Since then, Kenya has returned to the international debt markets on multiple occasions, and as its debts have piled up, it has had to borrow on increasingly more punitive terms – often merely to repay existing loans.
As of May this year, Kenya had amassed debts totalling nearly £67bn – a 10 per cent increase in just 12 months – figures from the Central Bank of Kenya show. The country’s debt-to-GDP ratio has rocketed from 42 per cent in 2013 to 65 per cent today, and of its overall debt burden, £30.5bn – a 4 per cent jump over the same period – is owed to external creditors compared to £7.4bn a decade ago.
Accurate figures are hard to obtain but somewhere between a third and a half of Kenya’s external debt has been borrowed from Western investors. While its single biggest creditors are the World Bank, followed by China, the cost of borrowing from international fund managers is much higher than elsewhere.
Last year, Kenya became an unenviable member of the so-called ‘10 per cent club’ – a small group of countries whose credit ratings are so poor they have to swallow double digit interest rates to continue tapping foreign debt markets.
Kenya raised £1.1bn in Eurobonds so that it could buy back most of an outstanding £1.5bn bond that was maturing in June, 2024. Yet, the latest loan came at a much steeper price than previous ones – a 10.4 per cent effective interest rate compared with 6.9 per cent last time around, and less than 4 per cent on the loans taken out to construct the SGR.
It leaves Kenya in questionable company. Six of the 15 countries that have issued bonds with coupons at, or above 9.5 per cent since 2008, have since defaulted including Mozambique and Ghana, analysts at Morgan Stanley have pointed out.
“A 40 per cent default outcome doesn’t bode well,” the bank’s analysts said.
But what does this mean for Western lenders? With multiple African countries now spending more on debt repayments than they do on education and healthcare, a new generation of fearless young voters are demanding change.
As the US takes a chainsaw to its foreign aid budget, and Britain pulls back too – fears are growing that the continent’s debt time bomb is primed to explode as African nations are forced to plug the aid gap with yet more borrowings.
In May, the World Bank issued an alert: Kenya’s public debt “remains at high risk of distress, with interest payments absorbing about a third of tax revenue,” it said. This leaves the East African nation with one of the highest debt interest costs to revenue ratios in the world, credit agency Moody’s said last month.
Yet, according to Nancy Gathungu, the country’s Auditor General, the defaults have already begun after Kenya Railways fell into arrears on the loans it took out from China’s Exim Bank to build the SGR. Having made no repayments in 2024, it has accumulated £235m in outstanding obligations, including a penalty of £20m for falling behind.
The audit also revealed that Kenya Railways’ revenue from its operations was insufficient to cover the maturing loan obligations, leading to additional penalties and a stiff rebuke from Gathungu. She criticised Kenya Railways for failing to justify these defaults, calling them “avoidable”. She also accused it of poor financial controls.
A report from the National Treasury revealed that Kenya Railways racked up a deficit of £286m in 2024, the highest recorded among state corporations in the period. The steep losses explain a visible lack of investment along the line. At the Nairobi terminus, broken seats litter the waiting area, the VIP lounge is closed – possibly permanently – and the toilets in a visible state of disrepair. Several other stations seem unfinished – piles of construction materials scattered around.
Nyoro believes that by Christmas, Kenya’s financial struggles will be so acute that the government will be struggling to meet key domestic spending commitments.
“If they don’t default on either external or internal debt repayments, they’ll default on other things like salaries, development expenditure, and social investment,” he warned. It follows steep cuts to both the healthcare and education budgets in recent months.
Much will rest on crunch discussions with the International Monetary Fund which are expected to begin next month. The Ruto government needs to secure a new financing programme with the International Monetary Fund to help it deal with annual external debt repayments that stand at £2.6bn on average, Moody’s said. Yet, another IMF loan package is far from certain without major reforms that risk provoking further violent demonstrations on the streets of Nairobi.
“We will probably ask them to implement a lot of things up front…short, medium, and long-term measures to address their vulnerabilities,” an IMF source said. At the same time, “we also don’t want to create a public uprising again,” the same source said.
Kenya’s precarious situation leaves Western commercial lenders particularly exposed, because they lend through the so-called ‘London Club” – essentially a cartel whose members operate on shared terms. China however, has never been part of the group, preferring instead to negotiate sovereign debt crises bi-laterally.
“When African countries struggle to repay those loans, PRC [People’s Republic of China] lenders have taken inflexible positions that have delayed and hardened terms in renegotiations,” Timothy Ditter, research scientist at the US government-funded Centre for Naval Analyses, said in a recent report.
They have also “resisted standard loan forgiveness practices and slowed debt negotiations,” Mr Ditter added.
China has gone even further, employing the best commercial lawyers in the world to deliberately structure its sovereign loans so that Chinese lenders get greater protections than other creditors.
The American research lab AidData studied 100 contracts between Chinese state-owned entities and government borrowers in 24 developing countries, and found that “Chinese contracts contain more elaborate repayment safeguards than their peers…alongside elements that give Chinese lenders an advantage over other creditors.
“China is a muscular and commercially-savvy lender to developing countries,” it added.
Echoing calls among campaign groups like Debt Justice, and more recently from the Tony Blair Institute, for a programme of debt relief, Mr Wanjigi argues that Kenya’s external debt should be written off because it hasn’t been properly spent according to Kenyan law, which states that any borrowings must be used for development projects.
In Kenya, China’s legacy continues to divide opinion. Aboard the 8am SGR train from Nairobi to Mombasa, Robert, a credit analyst and property developer travelling to work in Kibwezi, wonders whether Kenya was short-changed. “Couldn’t we have got a better deal like electric trains instead of these diesel ones?,” he asked, gesturing to the carriage we are seated in.
A nearby passenger who travels to Mombasa twice a month for work said the SGR is undeniably quicker than the bus she used to take but the bus was cheaper and “the seats were more comfortable”.
Twenty-five miles north of the final station near Suswa however, the watchman who guards over the end of the line is hoping it is completed. The railway will have to cross his land, opening the door to a big compensation package from the authorities just like others who were affected.
One of his neighbours was awarded a £125,000 payout for surrendering some farmland, he said, drawing the figure in the dirt with a stick for emphasis, but he spent it all on “women and booze”.
The Nairobi to Mombasa train is the side of Kenya’s expensively-assembled railway that its government would prefer the world sees.
On a muggy Saturday morning in July, carriage after carriage is packed with Kenyans flocking to the coast. Some are going home, some to work, others to the beaches where they can escape the frenetic buzz of the capital.
At stations along the way, the train slows to a halt and school children in brightly coloured uniforms heading home for the holidays hop aboard and fill up the remaining seats.
Glimpses of Africa’s wildlife – gazelles and antelopes, a lone ostrich, a family of giraffes peaking above the trees, occasional zebras and elephants – puncture the monotony of hundreds of miles of parched scrubland.
Six hours later, more than a thousand passengers spill out onto the polished grey concrete platform of the country’s second largest city, where they jump into mini-buses, cabs, tuk-tuks, and onto boda-bodas – cheap motorbike taxis driven largely by enterprising young Kenyan men.
The line that heads in the opposite direction tells the real story however. Intended to showcase Kenya’s status as one of the continent’s fastest-growing countries, the Standard Gauge Railway was supposed to stretch all the way to Mulaba on the Uganda border and beyond to South Sudan.
With plans to eventually link up the Democratic Republic of Congo, Rwanda and Burundi as well, it was envisioned that the project would unleash a new economic boom across East Africa as regional trade was propelled to new heights.
At the launch party of the railway in May, 2017, the then-Kenya president Uhuru Kenyatta invited his fellow countrymen to “celebrate the laying of one of the key cornerstones to Kenya’s journey of transformation to an industrial, prosperous and middle-income country”.
Yet, the reality of what remains the single largest infrastructure programme Kenya has ever embarked upon has fallen spectacularly short of its grand ambitions.
Bankrolled almost entirely with billions of dollars of Chinese loans, the line is popular with day trippers but it stops several hundred miles short of Uganda in a corn field deep in the Rift Valley after the money suddenly ran out, where it is now watched over by a farmer-cum-security guard living in a nearby rusting shack with his family.
Passengers must disembark at the final station outside of a small village called Suswa, 25 miles from where the track abruptly ends. Killing five hours before the return journey home requires imagination. Many head to the roadside barbecues dotted along the surrounding lanes to eat, drink and capture the experience on Instagram or Tik Tok. Others choose to kill the time at a nearby hotel pool.
Kenya Railways has called the service ‘The Madaraka Express’. Kenyans prefer other less flattering names, most commonly “The Railway to Nowhere” or “The Debt Express”.
Far from symbolising Kenya’s emergence as a regional powerhouse, the SGR has become an embarrassing monument to a debt crisis that threatens to engulf a continent which is now hooked on loans from Beijing as Western creditors and the Bretton-Woods institutions have pulled back.
With the country on the brink of a ruinous debt default, the Kenyan people are restless for change. Last month, anti-government protests led by fearless Gen Z voters exploded into deadly confrontation and a deepening political crisis for Kenya’s ruling elite. Less than three years into his presidency, a panicking William Ruto called for police to maintain a tough stance.
“Don’t kill them, but ensure their legs are broken,” Mr Ruto said, despite confrontations that had already claimed the lives of 51 demonstrators.
Yet, Mr Ruto, it seems, carries the same obsession with ‘legacy building’ that has long tormented other African leaders. Instead of reining in borrowing in a country where interest payments alone swallow close to half of the annual budget, he is preparing to borrow billions more from China to fund the completion of a railway that has been heavily loss-making since the day it opened.
As China continues to push on with realising its own vision for a new global economic order – including by hosting a landmark summit this week attended by Russia and India – Kenya risks tipping into bankruptcy, with ramifications far beyond Nairobi. With an estimated £30bn owed to overseas lenders, the country could be about to turn into a battleground for a tense confrontation between the West and China, as its myriad major creditors scramble to minimise their losses.
Several miles down a bone-shaking stretch of poorly tarmacked motorway outside of Mombasa, sandwiched between corrugated warehouses, repurposed shopping containers, and an endless stream of roadside shacks, sits the makeshift offices of the Kenya Long Distance Truck Drivers and Allied Workers Union.
Built from salvaged wood and tarpaulin, its solitary window propped open precariously with a broom handle, it is from this tiny square room that the union’s chairman Roman Waema is contemplating the possible resumption of a war against the SGR and its architects if work begins on the final leg.
In a desperate bid to make the railway profitable shortly after construction, the authorities issued an edict that all cargo arriving in Kenya had to be transported by rail instead of road. Mr Waema and his members took to the streets in protest at a decision that would quickly decimate Kenya’s truck-driving fraternity.
He estimates 7,000 of his 8,000-strong membership eventually lost their jobs, along with many more in the supply chain, hitting local communities hard.
“It affected a lot of businesses…warehouse workers were terminated from their employment – it was a mess….their families were also collapsing because they were the breadwinners,” Mr Waema said.
Even now, with the order long since lifted and freight traffic on the Mombasa to Nairobi highway restored, the SGR continues to cast a shadow over the area.
You’re killing one sector to pay for another sector. This guy is not employed, the other guy also is not employed,” he said, pointing to two men perched on plastic chairs in the corner.
Mr Waema and some of his colleagues were arrested during the protests but it wouldn’t stop him from doing it again.
“The government tried to intimidate us but we will go back to the streets because it’s our constitutional right. We will not allow it to happen again – mass lay-offs of workers. That cannot be tolerated.”
The demonstrators might want to begin dusting off their placards now. In April, Mr Ruto embarked on a state visit to China – his third since taking office in 2022 – returning five days later with a joint pledge to reject “hegemonism, power politics, and all forms of unilateralism and protectionism”.
The Kenyan president had also signed more than 20 agreements on science and technology cooperation, education, water resources, e-commerce, and intelligent transport systems from Beijing.
But by far the most significant was a promise from Xi Jinping to provide billions of dollars in fresh loans to pay for the SGR to finally be extended to the Ugandan border.
Its proponents insist the SGR will make a huge difference, revitalising industry, improving travel, speeding up freight, and ultimately putting the boosters under growth.
Crucially perhaps, with China back on board, it stands a good chance of being completed. After all, even the harshest critics of the world’s second largest economy can’t dispute its record of delivering major infrastructure projects across Africa.
Reliable independent statistics are hard to come by but research from the marketing wing of China’s Belt and Road Initiative recently sought to quantify its achievements.
The report claims China has funded and helped build more than 10,000 kilometres of railways, nearly 100,000 km of highways, 1,000 bridges, 100 ports, and 66,000 km of power transmission and distribution lines across Africa since its launch in 2013.
Chinese loans also come with some key advantages over Western debt. Beijing’s trick has been not just to offer the money for shiny new projects but the contractors and the materials to deliver them too, in a region where corrupt and inefficient African regimes have too often fallen short.
Often the projects on offer resemble a menu: a major road; a more modern port; an energy-producing dam, for example. These packages also come with a fixed timeline for completion – a tantalising prospect for African politicians with looming elections to consider.
“Global development banks have been slow to invest, especially in big projects that drive growth. China has stepped in to fund roads, railways, and other infrastructure that has boosted growth,” said Kevin Gallagher, professor at Boston University. Chinese lending has also “been more long term and less costly than private sector lending in the region,” he added.
Those spearheading this construction bonanza are the same ones that built modern China. These are the new ‘chartered companies’ of today. In the same way that the Royal African Company, the Royal Niger Company, and the British South Africa Company were granted royal charters by the British Crown to explore, trade, and colonise new territories in the 19th century, China’s state-backed giants are reshaping modern Africa to suit its strategic interests.
Examples of China’s engineering prowess can be found right across Africa. The Maputo suspension bridge in Mozambique was built by China Road and Bridge Corporation, with 95 per cent of the financing coming from China.
In Algeria, the Chinese have helped to build the 1,200km six-lane East-West Highway, the £1.5bn, 120,000 capacity Grand Mosque, and a new £670m terminal at Algiers’ Houari Boumediene Airport.
Ethiopia’s controversial mega hydro-dam, Djibouti’s giant 690 hectare port in Doraleh, and the Mambilla Hydroelectric Power Station in Nigeria all tapped into Chinese funding, know-how and muscle.
This trend looks set to deepen. As Donald Trump takes the axe to the US Agency for International Development, slaps tariffs on African goods and blocks debt renegotiation, China is offering an alluring mix of zero duties and new borrowing.
Yet Kenyans have heard all the talk about China before, and the lessons of the SGR – built with £3.7bn of loans provided by Chinese state-backed lender Exim Bank – is that the reality doesn’t just fail to match the hype, it can come at a heavy price too.
‘We bought their milk but now they’ve bought the cow’
Freight trains at Nairobi station Credit: Ben Marlow
Other Chinese-led projects have been similarly disappointing. A £7.5m Chinese-built bridge collapsed in 2022, two weeks after it was inspected by president Kenyatta during the country’s elections.
The Chinese built-and-operated Nairobi Expressway, opened the same year, has been particularly contentious. Locals were enraged when the government raised toll fees before the road even opened in order to cushion its Chinese backers against exchange losses from a weakening Kenyan shilling.
Even the use of the Mandarin language on signboards during construction provoked anger in some circles.
It’s important to distinguish between “political projects and economic projects,” said Ndindi Nyoro, a prominent Kenyan MP and critic of the Ruto regime.
An example of genuine development is the Thika Superhighway, an eight-lane express way connecting Nairobi to the outskirts of Thika 50km north of the capital, he said from a wood-panelled office high above the buzz of downtown Nairobi.
“It created a multiplier, towns, enterprise, and land went up in terms of value. The reason for a developmental project is not necessarily the project itself. It’s also for the multiplier it creates within the economy: the cement producers, the steel producers, the workers, and the work. That’s the essence of development,” he added.
The SGR is akin to buying something in a supermarket because everything came from China, he said. “That’s why, economically, it wasn’t felt.”
While China eventually reversed a decision to import the cement for the project following uproar from Kenyan manufacturers, the terms of the SGR loans stipulated that other materials such as the steel, along with the machinery, and an army of contractors must come from China. Even the fleet of 500 wagons that service the line are Chinese-made.
China’s growing presence in other parts of the economy has further strained relations. In 2023, the opening of China Square, a Chinese budget retail chain selling cheap household goods, triggered protests among local traders who say they are being unfairly undercut.
Some felt it contravened the spirit of the trade arrangement that had been forged with Beijing, exacerbating an acute imbalance that exists. China is Kenya’s largest trading partner and the biggest source of its imports but Kenya has a large $3.3bn deficit with China.
“The Chinese cannot be importers, retailers, wholesalers and hawkers,” read one placard held aloft during the protest.
Some Kenyan business owners have adopted a new phrase to describe how the Chinese suppliers they once bought goods from become their competitors: “We bought their milk but now they’ve bought the cow.”
Nevertheless, all this raises some difficult questions for the West, challenging some long held assumptions about both Africa and China’s strategic interest there.
Western lenders must also confront the possibility of whether they are about to be wiped out and replaced by their Chinese counterparts. The Telegraph has been handed a cache of secret SGR documents that demonstrates the lengths that its Chinese paymasters were prepared to go to protect their interests.
In the event of any default, Kenya’s assets both at home and abroad are not protected by “sovereignty’ and risk being seized by Beijing, the loan agreement states. What’s the more, the pact is governed by Chinese law and any disputes will be arbitrated in Beijing, the document shows.
In many respects, China’s push into Africa is less a sudden pivot than a doubling down. Launched in 2013, its Belt and Road initiative has long targeted Africa yet it looked as though it was running out of steam.
But as Washington pulls back from the region, China is gearing up again. Africa sits on vast quantities of rare earth materials, it boasts immense green power resources, and abundant agriculture but also a booming and increasingly well-educated population too.
From dawn until dusk Nairobi pulsates with enterprising Kenyans looking to earn a living. Locals joke about the ‘bedrooms’ of Nairobi – surrounding counties where people come from to work in the city during the day but return at night to sleep.
The mobile payments system M-Pesa – “Pesa” is the Swahili word for money – has unleashed a new generation of entrepreneurs. It is now the currency of choice among the traders, hawkers, and roadside kiosks that help keep the economy pumping, even Nairobi’s sprawling Kibera slum.
In a country where less than a fifth of the population have historically had access to formal financial services, it is estimated that more than 90 per cent were using M-Pesa within three years of its launch in 2007.
Donald Trump may see only “s—holes” but China’s Communist Party prefers to think of “Lions” – emerging markets to rival the “Tiger” economies of South-East Asia that exploded between the 1950s and 1990s on the back of a turbo-charged export boom.
Cynics in the West point out we have been here before with much of colonial Britain and Europe’s wealth built on the exploitation of African goods and labour, but that was hundreds of years ago. More recent attempts at reviving the continent have failed as one debt crisis has followed another.
The temptation then might be to just leave China to it. If the conventional wisdom is correct, much of China’s lending has been done at eye-watering interest rates, and is therefore destined to end badly.
Western NGOs and academics warn that China is engaging in little more than “debt trap diplomacy”, a charge that China strongly rejects. “It’s unfair to label Western loans investment and China’s debt,” Guo Haiyan, China’s ambassador to Kenya said on Kenyan radio station Capital FM last month. Nevertheless, Africans have been warned.
But this is not necessarily how many Africans themselves see it. A recent survey conducted by The Pew Research Center, a think-tank in Washington, DC, found that the share of Kenyans who want the government to prioritise economic relations with Beijing has increased by 10 percentage points from 2019 to 48 per cent in 2025 – on a par with the US.
While it is true that Chinese state debt is more expensive than borrowing from the World Bank or its sister organisation the International Development Bank, its loans are often hundreds of basis points cheaper than Western commercial credit, and in Kenya and many other African countries it is these private investors that account for much of the debt. In some cases they represent the majority.
Kenya’s difficulties can be traced back to 2014, Jimi Wanjigi, a prominent Kenyan businessman and arch-critic of his country’s financial profligacy, said. It was the year that the SGR was commissioned, as well as Kenya’s first ever international bond issue, when the Government borrowed £1.5bn from European and American investors in a fund-raising led by Wall Street banking giants JP Morgan and Citi.
“It [the SGR] was one of the biggest cons we have ever seen – the beginning of a long fraud on Kenyans. It laid the foundation for what I call the ‘debt heist’ – that and the first Eurobond,” Mr Wanjigi, who is planning to stand for president in 2027, said.
An audit that Mr Wanjigi conducted of Kenya’s finances shows that it will end up paying more than double what the Government said it would cost to build the SGR, he claimed. If his calculations are correct, “what this principally says is we paid for it out of our own pocket and more – we did not need a loan”.
Since then, Kenya has returned to the international debt markets on multiple occasions, and as its debts have piled up, it has had to borrow on increasingly more punitive terms – often merely to repay existing loans.
As of May this year, Kenya had amassed debts totalling nearly £67bn – a 10 per cent increase in just 12 months – figures from the Central Bank of Kenya show. The country’s debt-to-GDP ratio has rocketed from 42 per cent in 2013 to 65 per cent today, and of its overall debt burden, £30.5bn – a 4 per cent jump over the same period – is owed to external creditors compared to £7.4bn a decade ago.
Accurate figures are hard to obtain but somewhere between a third and a half of Kenya’s external debt has been borrowed from Western investors. While its single biggest creditors are the World Bank, followed by China, the cost of borrowing from international fund managers is much higher than elsewhere.
Last year, Kenya became an unenviable member of the so-called ‘10 per cent club’ – a small group of countries whose credit ratings are so poor they have to swallow double digit interest rates to continue tapping foreign debt markets.
Kenya raised £1.1bn in Eurobonds so that it could buy back most of an outstanding £1.5bn bond that was maturing in June, 2024. Yet, the latest loan came at a much steeper price than previous ones – a 10.4 per cent effective interest rate compared with 6.9 per cent last time around, and less than 4 per cent on the loans taken out to construct the SGR.
It leaves Kenya in questionable company. Six of the 15 countries that have issued bonds with coupons at, or above 9.5 per cent since 2008, have since defaulted including Mozambique and Ghana, analysts at Morgan Stanley have pointed out.
“A 40 per cent default outcome doesn’t bode well,” the bank’s analysts said.
But what does this mean for Western lenders? With multiple African countries now spending more on debt repayments than they do on education and healthcare, a new generation of fearless young voters are demanding change.
As the US takes a chainsaw to its foreign aid budget, and Britain pulls back too – fears are growing that the continent’s debt time bomb is primed to explode as African nations are forced to plug the aid gap with yet more borrowings.
In May, the World Bank issued an alert: Kenya’s public debt “remains at high risk of distress, with interest payments absorbing about a third of tax revenue,” it said. This leaves the East African nation with one of the highest debt interest costs to revenue ratios in the world, credit agency Moody’s said last month.
Yet, according to Nancy Gathungu, the country’s Auditor General, the defaults have already begun after Kenya Railways fell into arrears on the loans it took out from China’s Exim Bank to build the SGR. Having made no repayments in 2024, it has accumulated £235m in outstanding obligations, including a penalty of £20m for falling behind.
The audit also revealed that Kenya Railways’ revenue from its operations was insufficient to cover the maturing loan obligations, leading to additional penalties and a stiff rebuke from Gathungu. She criticised Kenya Railways for failing to justify these defaults, calling them “avoidable”. She also accused it of poor financial controls.
A report from the National Treasury revealed that Kenya Railways racked up a deficit of £286m in 2024, the highest recorded among state corporations in the period. The steep losses explain a visible lack of investment along the line. At the Nairobi terminus, broken seats litter the waiting area, the VIP lounge is closed – possibly permanently – and the toilets in a visible state of disrepair. Several other stations seem unfinished – piles of construction materials scattered around.
Nyoro believes that by Christmas, Kenya’s financial struggles will be so acute that the government will be struggling to meet key domestic spending commitments.
“If they don’t default on either external or internal debt repayments, they’ll default on other things like salaries, development expenditure, and social investment,” he warned. It follows steep cuts to both the healthcare and education budgets in recent months.
Much will rest on crunch discussions with the International Monetary Fund which are expected to begin next month. The Ruto government needs to secure a new financing programme with the International Monetary Fund to help it deal with annual external debt repayments that stand at £2.6bn on average, Moody’s said. Yet, another IMF loan package is far from certain without major reforms that risk provoking further violent demonstrations on the streets of Nairobi.
“We will probably ask them to implement a lot of things up front…short, medium, and long-term measures to address their vulnerabilities,” an IMF source said. At the same time, “we also don’t want to create a public uprising again,” the same source said.
Kenya’s precarious situation leaves Western commercial lenders particularly exposed, because they lend through the so-called ‘London Club” – essentially a cartel whose members operate on shared terms. China however, has never been part of the group, preferring instead to negotiate sovereign debt crises bi-laterally.
“When African countries struggle to repay those loans, PRC [People’s Republic of China] lenders have taken inflexible positions that have delayed and hardened terms in renegotiations,” Timothy Ditter, research scientist at the US government-funded Centre for Naval Analyses, said in a recent report.
They have also “resisted standard loan forgiveness practices and slowed debt negotiations,” Mr Ditter added.
China has gone even further, employing the best commercial lawyers in the world to deliberately structure its sovereign loans so that Chinese lenders get greater protections than other creditors.
The American research lab AidData studied 100 contracts between Chinese state-owned entities and government borrowers in 24 developing countries, and found that “Chinese contracts contain more elaborate repayment safeguards than their peers…alongside elements that give Chinese lenders an advantage over other creditors.
“China is a muscular and commercially-savvy lender to developing countries,” it added.
Echoing calls among campaign groups like Debt Justice, and more recently from the Tony Blair Institute, for a programme of debt relief, Mr Wanjigi argues that Kenya’s external debt should be written off because it hasn’t been properly spent according to Kenyan law, which states that any borrowings must be used for development projects.
In Kenya, China’s legacy continues to divide opinion. Aboard the 8am SGR train from Nairobi to Mombasa, Robert, a credit analyst and property developer travelling to work in Kibwezi, wonders whether Kenya was short-changed. “Couldn’t we have got a better deal like electric trains instead of these diesel ones?,” he asked, gesturing to the carriage we are seated in.
A nearby passenger who travels to Mombasa twice a month for work said the SGR is undeniably quicker than the bus she used to take but the bus was cheaper and “the seats were more comfortable”.
Twenty-five miles north of the final station near Suswa however, the watchman who guards over the end of the line is hoping it is completed. The railway will have to cross his land, opening the door to a big compensation package from the authorities just like others who were affected.
One of his neighbours was awarded a £125,000 payout for surrendering some farmland, he said, drawing the figure in the dirt with a stick for emphasis, but he spent it all on “women and booze”.
The Nairobi to Mombasa train is the side of Kenya’s expensively-assembled railway that its government would prefer the world sees.
On a muggy Saturday morning in July, carriage after carriage is packed with Kenyans flocking to the coast. Some are going home, some to work, others to the beaches where they can escape the frenetic buzz of the capital.
At stations along the way, the train slows to a halt and school children in brightly coloured uniforms heading home for the holidays hop aboard and fill up the remaining seats.
Glimpses of Africa’s wildlife – gazelles and antelopes, a lone ostrich, a family of giraffes peaking above the trees, occasional zebras and elephants – puncture the monotony of hundreds of miles of parched scrubland.
Six hours later, more than a thousand passengers spill out onto the polished grey concrete platform of the country’s second largest city, where they jump into mini-buses, cabs, tuk-tuks, and onto boda-bodas – cheap motorbike taxis driven largely by enterprising young Kenyan men.
The line that heads in the opposite direction tells the real story however. Intended to showcase Kenya’s status as one of the continent’s fastest-growing countries, the Standard Gauge Railway was supposed to stretch all the way to Mulaba on the Uganda border and beyond to South Sudan.
With plans to eventually link up the Democratic Republic of Congo, Rwanda and Burundi as well, it was envisioned that the project would unleash a new economic boom across East Africa as regional trade was propelled to new heights.
At the launch party of the railway in May, 2017, the then-Kenya president Uhuru Kenyatta invited his fellow countrymen to “celebrate the laying of one of the key cornerstones to Kenya’s journey of transformation to an industrial, prosperous and middle-income country”.
Yet, the reality of what remains the single largest infrastructure programme Kenya has ever embarked upon has fallen spectacularly short of its grand ambitions.
Bankrolled almost entirely with billions of dollars of Chinese loans, the line is popular with day trippers but it stops several hundred miles short of Uganda in a corn field deep in the Rift Valley after the money suddenly ran out, where it is now watched over by a farmer-cum-security guard living in a nearby rusting shack with his family.
Passengers must disembark at the final station outside of a small village called Suswa, 25 miles from where the track abruptly ends. Killing five hours before the return journey home requires imagination. Many head to the roadside barbecues dotted along the surrounding lanes to eat, drink and capture the experience on Instagram or Tik Tok. Others choose to kill the time at a nearby hotel pool.
Kenya Railways has called the service ‘The Madaraka Express’. Kenyans prefer other less flattering names, most commonly “The Railway to Nowhere” or “The Debt Express”.
Far from symbolising Kenya’s emergence as a regional powerhouse, the SGR has become an embarrassing monument to a debt crisis that threatens to engulf a continent which is now hooked on loans from Beijing as Western creditors and the Bretton-Woods institutions have pulled back.
With the country on the brink of a ruinous debt default, the Kenyan people are restless for change. Last month, anti-government protests led by fearless Gen Z voters exploded into deadly confrontation and a deepening political crisis for Kenya’s ruling elite. Less than three years into his presidency, a panicking William Ruto called for police to maintain a tough stance.
“Don’t kill them, but ensure their legs are broken,” Mr Ruto said, despite confrontations that had already claimed the lives of 51 demonstrators.
Yet, Mr Ruto, it seems, carries the same obsession with ‘legacy building’ that has long tormented other African leaders. Instead of reining in borrowing in a country where interest payments alone swallow close to half of the annual budget, he is preparing to borrow billions more from China to fund the completion of a railway that has been heavily loss-making since the day it opened.
As China continues to push on with realising its own vision for a new global economic order – including by hosting a landmark summit this week attended by Russia and India – Kenya risks tipping into bankruptcy, with ramifications far beyond Nairobi. With an estimated £30bn owed to overseas lenders, the country could be about to turn into a battleground for a tense confrontation between the West and China, as its myriad major creditors scramble to minimise their losses.
Several miles down a bone-shaking stretch of poorly tarmacked motorway outside of Mombasa, sandwiched between corrugated warehouses, repurposed shopping containers, and an endless stream of roadside shacks, sits the makeshift offices of the Kenya Long Distance Truck Drivers and Allied Workers Union.
Built from salvaged wood and tarpaulin, its solitary window propped open precariously with a broom handle, it is from this tiny square room that the union’s chairman Roman Waema is contemplating the possible resumption of a war against the SGR and its architects if work begins on the final leg.
In a desperate bid to make the railway profitable shortly after construction, the authorities issued an edict that all cargo arriving in Kenya had to be transported by rail instead of road. Mr Waema and his members took to the streets in protest at a decision that would quickly decimate Kenya’s truck-driving fraternity.
He estimates 7,000 of his 8,000-strong membership eventually lost their jobs, along with many more in the supply chain, hitting local communities hard.
“It affected a lot of businesses…warehouse workers were terminated from their employment – it was a mess….their families were also collapsing because they were the breadwinners,” Mr Waema said.
Even now, with the order long since lifted and freight traffic on the Mombasa to Nairobi highway restored, the SGR continues to cast a shadow over the area.
You’re killing one sector to pay for another sector. This guy is not employed, the other guy also is not employed,” he said, pointing to two men perched on plastic chairs in the corner.
Mr Waema and some of his colleagues were arrested during the protests but it wouldn’t stop him from doing it again.
“The government tried to intimidate us but we will go back to the streets because it’s our constitutional right. We will not allow it to happen again – mass lay-offs of workers. That cannot be tolerated.”
The demonstrators might want to begin dusting off their placards now. In April, Mr Ruto embarked on a state visit to China – his third since taking office in 2022 – returning five days later with a joint pledge to reject “hegemonism, power politics, and all forms of unilateralism and protectionism”.
The Kenyan president had also signed more than 20 agreements on science and technology cooperation, education, water resources, e-commerce, and intelligent transport systems from Beijing.
But by far the most significant was a promise from Xi Jinping to provide billions of dollars in fresh loans to pay for the SGR to finally be extended to the Ugandan border.
Its proponents insist the SGR will make a huge difference, revitalising industry, improving travel, speeding up freight, and ultimately putting the boosters under growth.
Crucially perhaps, with China back on board, it stands a good chance of being completed. After all, even the harshest critics of the world’s second largest economy can’t dispute its record of delivering major infrastructure projects across Africa.
Reliable independent statistics are hard to come by but research from the marketing wing of China’s Belt and Road Initiative recently sought to quantify its achievements.
The report claims China has funded and helped build more than 10,000 kilometres of railways, nearly 100,000 km of highways, 1,000 bridges, 100 ports, and 66,000 km of power transmission and distribution lines across Africa since its launch in 2013.
Chinese loans also come with some key advantages over Western debt. Beijing’s trick has been not just to offer the money for shiny new projects but the contractors and the materials to deliver them too, in a region where corrupt and inefficient African regimes have too often fallen short.
Often the projects on offer resemble a menu: a major road; a more modern port; an energy-producing dam, for example. These packages also come with a fixed timeline for completion – a tantalising prospect for African politicians with looming elections to consider.
“Global development banks have been slow to invest, especially in big projects that drive growth. China has stepped in to fund roads, railways, and other infrastructure that has boosted growth,” said Kevin Gallagher, professor at Boston University. Chinese lending has also “been more long term and less costly than private sector lending in the region,” he added.
Those spearheading this construction bonanza are the same ones that built modern China. These are the new ‘chartered companies’ of today. In the same way that the Royal African Company, the Royal Niger Company, and the British South Africa Company were granted royal charters by the British Crown to explore, trade, and colonise new territories in the 19th century, China’s state-backed giants are reshaping modern Africa to suit its strategic interests.
Examples of China’s engineering prowess can be found right across Africa. The Maputo suspension bridge in Mozambique was built by China Road and Bridge Corporation, with 95 per cent of the financing coming from China.
In Algeria, the Chinese have helped to build the 1,200km six-lane East-West Highway, the £1.5bn, 120,000 capacity Grand Mosque, and a new £670m terminal at Algiers’ Houari Boumediene Airport.
Ethiopia’s controversial mega hydro-dam, Djibouti’s giant 690 hectare port in Doraleh, and the Mambilla Hydroelectric Power Station in Nigeria all tapped into Chinese funding, know-how and muscle.
This trend looks set to deepen. As Donald Trump takes the axe to the US Agency for International Development, slaps tariffs on African goods and blocks debt renegotiation, China is offering an alluring mix of zero duties and new borrowing.
Yet Kenyans have heard all the talk about China before, and the lessons of the SGR – built with £3.7bn of loans provided by Chinese state-backed lender Exim Bank – is that the reality doesn’t just fail to match the hype, it can come at a heavy price too.
‘We bought their milk but now they’ve bought the cow’
Freight trains at Nairobi station Credit: Ben Marlow
Other Chinese-led projects have been similarly disappointing. A £7.5m Chinese-built bridge collapsed in 2022, two weeks after it was inspected by president Kenyatta during the country’s elections.
The Chinese built-and-operated Nairobi Expressway, opened the same year, has been particularly contentious. Locals were enraged when the government raised toll fees before the road even opened in order to cushion its Chinese backers against exchange losses from a weakening Kenyan shilling.
Even the use of the Mandarin language on signboards during construction provoked anger in some circles.
It’s important to distinguish between “political projects and economic projects,” said Ndindi Nyoro, a prominent Kenyan MP and critic of the Ruto regime.
An example of genuine development is the Thika Superhighway, an eight-lane express way connecting Nairobi to the outskirts of Thika 50km north of the capital, he said from a wood-panelled office high above the buzz of downtown Nairobi.
“It created a multiplier, towns, enterprise, and land went up in terms of value. The reason for a developmental project is not necessarily the project itself. It’s also for the multiplier it creates within the economy: the cement producers, the steel producers, the workers, and the work. That’s the essence of development,” he added.
The SGR is akin to buying something in a supermarket because everything came from China, he said. “That’s why, economically, it wasn’t felt.”
While China eventually reversed a decision to import the cement for the project following uproar from Kenyan manufacturers, the terms of the SGR loans stipulated that other materials such as the steel, along with the machinery, and an army of contractors must come from China. Even the fleet of 500 wagons that service the line are Chinese-made.
China’s growing presence in other parts of the economy has further strained relations. In 2023, the opening of China Square, a Chinese budget retail chain selling cheap household goods, triggered protests among local traders who say they are being unfairly undercut.
Some felt it contravened the spirit of the trade arrangement that had been forged with Beijing, exacerbating an acute imbalance that exists. China is Kenya’s largest trading partner and the biggest source of its imports but Kenya has a large $3.3bn deficit with China.
“The Chinese cannot be importers, retailers, wholesalers and hawkers,” read one placard held aloft during the protest.
Some Kenyan business owners have adopted a new phrase to describe how the Chinese suppliers they once bought goods from become their competitors: “We bought their milk but now they’ve bought the cow.”
Nevertheless, all this raises some difficult questions for the West, challenging some long held assumptions about both Africa and China’s strategic interest there.
Western lenders must also confront the possibility of whether they are about to be wiped out and replaced by their Chinese counterparts. The Telegraph has been handed a cache of secret SGR documents that demonstrates the lengths that its Chinese paymasters were prepared to go to protect their interests.
In the event of any default, Kenya’s assets both at home and abroad are not protected by “sovereignty’ and risk being seized by Beijing, the loan agreement states. What’s the more, the pact is governed by Chinese law and any disputes will be arbitrated in Beijing, the document shows.
In many respects, China’s push into Africa is less a sudden pivot than a doubling down. Launched in 2013, its Belt and Road initiative has long targeted Africa yet it looked as though it was running out of steam.
But as Washington pulls back from the region, China is gearing up again. Africa sits on vast quantities of rare earth materials, it boasts immense green power resources, and abundant agriculture but also a booming and increasingly well-educated population too.
From dawn until dusk Nairobi pulsates with enterprising Kenyans looking to earn a living. Locals joke about the ‘bedrooms’ of Nairobi – surrounding counties where people come from to work in the city during the day but return at night to sleep.
The mobile payments system M-Pesa – “Pesa” is the Swahili word for money – has unleashed a new generation of entrepreneurs. It is now the currency of choice among the traders, hawkers, and roadside kiosks that help keep the economy pumping, even Nairobi’s sprawling Kibera slum.
In a country where less than a fifth of the population have historically had access to formal financial services, it is estimated that more than 90 per cent were using M-Pesa within three years of its launch in 2007.
Donald Trump may see only “s—holes” but China’s Communist Party prefers to think of “Lions” – emerging markets to rival the “Tiger” economies of South-East Asia that exploded between the 1950s and 1990s on the back of a turbo-charged export boom.
Cynics in the West point out we have been here before with much of colonial Britain and Europe’s wealth built on the exploitation of African goods and labour, but that was hundreds of years ago. More recent attempts at reviving the continent have failed as one debt crisis has followed another.
The temptation then might be to just leave China to it. If the conventional wisdom is correct, much of China’s lending has been done at eye-watering interest rates, and is therefore destined to end badly.
Western NGOs and academics warn that China is engaging in little more than “debt trap diplomacy”, a charge that China strongly rejects. “It’s unfair to label Western loans investment and China’s debt,” Guo Haiyan, China’s ambassador to Kenya said on Kenyan radio station Capital FM last month. Nevertheless, Africans have been warned.
But this is not necessarily how many Africans themselves see it. A recent survey conducted by The Pew Research Center, a think-tank in Washington, DC, found that the share of Kenyans who want the government to prioritise economic relations with Beijing has increased by 10 percentage points from 2019 to 48 per cent in 2025 – on a par with the US.
While it is true that Chinese state debt is more expensive than borrowing from the World Bank or its sister organisation the International Development Bank, its loans are often hundreds of basis points cheaper than Western commercial credit, and in Kenya and many other African countries it is these private investors that account for much of the debt. In some cases they represent the majority.
Kenya’s difficulties can be traced back to 2014, Jimi Wanjigi, a prominent Kenyan businessman and arch-critic of his country’s financial profligacy, said. It was the year that the SGR was commissioned, as well as Kenya’s first ever international bond issue, when the Government borrowed £1.5bn from European and American investors in a fund-raising led by Wall Street banking giants JP Morgan and Citi.
“It [the SGR] was one of the biggest cons we have ever seen – the beginning of a long fraud on Kenyans. It laid the foundation for what I call the ‘debt heist’ – that and the first Eurobond,” Mr Wanjigi, who is planning to stand for president in 2027, said.
An audit that Mr Wanjigi conducted of Kenya’s finances shows that it will end up paying more than double what the Government said it would cost to build the SGR, he claimed. If his calculations are correct, “what this principally says is we paid for it out of our own pocket and more – we did not need a loan”.
Since then, Kenya has returned to the international debt markets on multiple occasions, and as its debts have piled up, it has had to borrow on increasingly more punitive terms – often merely to repay existing loans.
As of May this year, Kenya had amassed debts totalling nearly £67bn – a 10 per cent increase in just 12 months – figures from the Central Bank of Kenya show. The country’s debt-to-GDP ratio has rocketed from 42 per cent in 2013 to 65 per cent today, and of its overall debt burden, £30.5bn – a 4 per cent jump over the same period – is owed to external creditors compared to £7.4bn a decade ago.
Accurate figures are hard to obtain but somewhere between a third and a half of Kenya’s external debt has been borrowed from Western investors. While its single biggest creditors are the World Bank, followed by China, the cost of borrowing from international fund managers is much higher than elsewhere.
Last year, Kenya became an unenviable member of the so-called ‘10 per cent club’ – a small group of countries whose credit ratings are so poor they have to swallow double digit interest rates to continue tapping foreign debt markets.
Kenya raised £1.1bn in Eurobonds so that it could buy back most of an outstanding £1.5bn bond that was maturing in June, 2024. Yet, the latest loan came at a much steeper price than previous ones – a 10.4 per cent effective interest rate compared with 6.9 per cent last time around, and less than 4 per cent on the loans taken out to construct the SGR.
It leaves Kenya in questionable company. Six of the 15 countries that have issued bonds with coupons at, or above 9.5 per cent since 2008, have since defaulted including Mozambique and Ghana, analysts at Morgan Stanley have pointed out.
“A 40 per cent default outcome doesn’t bode well,” the bank’s analysts said.
But what does this mean for Western lenders? With multiple African countries now spending more on debt repayments than they do on education and healthcare, a new generation of fearless young voters are demanding change.
As the US takes a chainsaw to its foreign aid budget, and Britain pulls back too – fears are growing that the continent’s debt time bomb is primed to explode as African nations are forced to plug the aid gap with yet more borrowings.
In May, the World Bank issued an alert: Kenya’s public debt “remains at high risk of distress, with interest payments absorbing about a third of tax revenue,” it said. This leaves the East African nation with one of the highest debt interest costs to revenue ratios in the world, credit agency Moody’s said last month.
Yet, according to Nancy Gathungu, the country’s Auditor General, the defaults have already begun after Kenya Railways fell into arrears on the loans it took out from China’s Exim Bank to build the SGR. Having made no repayments in 2024, it has accumulated £235m in outstanding obligations, including a penalty of £20m for falling behind.
The audit also revealed that Kenya Railways’ revenue from its operations was insufficient to cover the maturing loan obligations, leading to additional penalties and a stiff rebuke from Gathungu. She criticised Kenya Railways for failing to justify these defaults, calling them “avoidable”. She also accused it of poor financial controls.
A report from the National Treasury revealed that Kenya Railways racked up a deficit of £286m in 2024, the highest recorded among state corporations in the period. The steep losses explain a visible lack of investment along the line. At the Nairobi terminus, broken seats litter the waiting area, the VIP lounge is closed – possibly permanently – and the toilets in a visible state of disrepair. Several other stations seem unfinished – piles of construction materials scattered around.
Nyoro believes that by Christmas, Kenya’s financial struggles will be so acute that the government will be struggling to meet key domestic spending commitments.
“If they don’t default on either external or internal debt repayments, they’ll default on other things like salaries, development expenditure, and social investment,” he warned. It follows steep cuts to both the healthcare and education budgets in recent months.
Much will rest on crunch discussions with the International Monetary Fund which are expected to begin next month. The Ruto government needs to secure a new financing programme with the International Monetary Fund to help it deal with annual external debt repayments that stand at £2.6bn on average, Moody’s said. Yet, another IMF loan package is far from certain without major reforms that risk provoking further violent demonstrations on the streets of Nairobi.
“We will probably ask them to implement a lot of things up front…short, medium, and long-term measures to address their vulnerabilities,” an IMF source said. At the same time, “we also don’t want to create a public uprising again,” the same source said.
Kenya’s precarious situation leaves Western commercial lenders particularly exposed, because they lend through the so-called ‘London Club” – essentially a cartel whose members operate on shared terms. China however, has never been part of the group, preferring instead to negotiate sovereign debt crises bi-laterally.
“When African countries struggle to repay those loans, PRC [People’s Republic of China] lenders have taken inflexible positions that have delayed and hardened terms in renegotiations,” Timothy Ditter, research scientist at the US government-funded Centre for Naval Analyses, said in a recent report.
They have also “resisted standard loan forgiveness practices and slowed debt negotiations,” Mr Ditter added.
China has gone even further, employing the best commercial lawyers in the world to deliberately structure its sovereign loans so that Chinese lenders get greater protections than other creditors.
The American research lab AidData studied 100 contracts between Chinese state-owned entities and government borrowers in 24 developing countries, and found that “Chinese contracts contain more elaborate repayment safeguards than their peers…alongside elements that give Chinese lenders an advantage over other creditors.
“China is a muscular and commercially-savvy lender to developing countries,” it added.
Echoing calls among campaign groups like Debt Justice, and more recently from the Tony Blair Institute, for a programme of debt relief, Mr Wanjigi argues that Kenya’s external debt should be written off because it hasn’t been properly spent according to Kenyan law, which states that any borrowings must be used for development projects.
In Kenya, China’s legacy continues to divide opinion. Aboard the 8am SGR train from Nairobi to Mombasa, Robert, a credit analyst and property developer travelling to work in Kibwezi, wonders whether Kenya was short-changed. “Couldn’t we have got a better deal like electric trains instead of these diesel ones?,” he asked, gesturing to the carriage we are seated in.
A nearby passenger who travels to Mombasa twice a month for work said the SGR is undeniably quicker than the bus she used to take but the bus was cheaper and “the seats were more comfortable”.
Twenty-five miles north of the final station near Suswa however, the watchman who guards over the end of the line is hoping it is completed. The railway will have to cross his land, opening the door to a big compensation package from the authorities just like others who were affected.
One of his neighbours was awarded a £125,000 payout for surrendering some farmland, he said, drawing the figure in the dirt with a stick for emphasis, but he spent it all on “women and booze”.
The Nairobi to Mombasa train is the side of Kenya’s expensively-assembled railway that its government would prefer the world sees.
On a muggy Saturday morning in July, carriage after carriage is packed with Kenyans flocking to the coast. Some are going home, some to work, others to the beaches where they can escape the frenetic buzz of the capital.
At stations along the way, the train slows to a halt and school children in brightly coloured uniforms heading home for the holidays hop aboard and fill up the remaining seats.
Glimpses of Africa’s wildlife – gazelles and antelopes, a lone ostrich, a family of giraffes peaking above the trees, occasional zebras and elephants – puncture the monotony of hundreds of miles of parched scrubland.
Six hours later, more than a thousand passengers spill out onto the polished grey concrete platform of the country’s second largest city, where they jump into mini-buses, cabs, tuk-tuks, and onto boda-bodas – cheap motorbike taxis driven largely by enterprising young Kenyan men.
The line that heads in the opposite direction tells the real story however. Intended to showcase Kenya’s status as one of the continent’s fastest-growing countries, the Standard Gauge Railway was supposed to stretch all the way to Mulaba on the Uganda border and beyond to South Sudan.
With plans to eventually link up the Democratic Republic of Congo, Rwanda and Burundi as well, it was envisioned that the project would unleash a new economic boom across East Africa as regional trade was propelled to new heights.
At the launch party of the railway in May, 2017, the then-Kenya president Uhuru Kenyatta invited his fellow countrymen to “celebrate the laying of one of the key cornerstones to Kenya’s journey of transformation to an industrial, prosperous and middle-income country”.
Yet, the reality of what remains the single largest infrastructure programme Kenya has ever embarked upon has fallen spectacularly short of its grand ambitions.
Bankrolled almost entirely with billions of dollars of Chinese loans, the line is popular with day trippers but it stops several hundred miles short of Uganda in a corn field deep in the Rift Valley after the money suddenly ran out, where it is now watched over by a farmer-cum-security guard living in a nearby rusting shack with his family.
Passengers must disembark at the final station outside of a small village called Suswa, 25 miles from where the track abruptly ends. Killing five hours before the return journey home requires imagination. Many head to the roadside barbecues dotted along the surrounding lanes to eat, drink and capture the experience on Instagram or Tik Tok. Others choose to kill the time at a nearby hotel pool.
Kenya Railways has called the service ‘The Madaraka Express’. Kenyans prefer other less flattering names, most commonly “The Railway to Nowhere” or “The Debt Express”.
Far from symbolising Kenya’s emergence as a regional powerhouse, the SGR has become an embarrassing monument to a debt crisis that threatens to engulf a continent which is now hooked on loans from Beijing as Western creditors and the Bretton-Woods institutions have pulled back.
With the country on the brink of a ruinous debt default, the Kenyan people are restless for change. Last month, anti-government protests led by fearless Gen Z voters exploded into deadly confrontation and a deepening political crisis for Kenya’s ruling elite. Less than three years into his presidency, a panicking William Ruto called for police to maintain a tough stance.
“Don’t kill them, but ensure their legs are broken,” Mr Ruto said, despite confrontations that had already claimed the lives of 51 demonstrators.
Yet, Mr Ruto, it seems, carries the same obsession with ‘legacy building’ that has long tormented other African leaders. Instead of reining in borrowing in a country where interest payments alone swallow close to half of the annual budget, he is preparing to borrow billions more from China to fund the completion of a railway that has been heavily loss-making since the day it opened.
As China continues to push on with realising its own vision for a new global economic order – including by hosting a landmark summit this week attended by Russia and India – Kenya risks tipping into bankruptcy, with ramifications far beyond Nairobi. With an estimated £30bn owed to overseas lenders, the country could be about to turn into a battleground for a tense confrontation between the West and China, as its myriad major creditors scramble to minimise their losses.
Several miles down a bone-shaking stretch of poorly tarmacked motorway outside of Mombasa, sandwiched between corrugated warehouses, repurposed shopping containers, and an endless stream of roadside shacks, sits the makeshift offices of the Kenya Long Distance Truck Drivers and Allied Workers Union.
Built from salvaged wood and tarpaulin, its solitary window propped open precariously with a broom handle, it is from this tiny square room that the union’s chairman Roman Waema is contemplating the possible resumption of a war against the SGR and its architects if work begins on the final leg.
In a desperate bid to make the railway profitable shortly after construction, the authorities issued an edict that all cargo arriving in Kenya had to be transported by rail instead of road. Mr Waema and his members took to the streets in protest at a decision that would quickly decimate Kenya’s truck-driving fraternity.
He estimates 7,000 of his 8,000-strong membership eventually lost their jobs, along with many more in the supply chain, hitting local communities hard.
“It affected a lot of businesses…warehouse workers were terminated from their employment – it was a mess….their families were also collapsing because they were the breadwinners,” Mr Waema said.
Even now, with the order long since lifted and freight traffic on the Mombasa to Nairobi highway restored, the SGR continues to cast a shadow over the area.
You’re killing one sector to pay for another sector. This guy is not employed, the other guy also is not employed,” he said, pointing to two men perched on plastic chairs in the corner.
Mr Waema and some of his colleagues were arrested during the protests but it wouldn’t stop him from doing it again.
“The government tried to intimidate us but we will go back to the streets because it’s our constitutional right. We will not allow it to happen again – mass lay-offs of workers. That cannot be tolerated.”
The demonstrators might want to begin dusting off their placards now. In April, Mr Ruto embarked on a state visit to China – his third since taking office in 2022 – returning five days later with a joint pledge to reject “hegemonism, power politics, and all forms of unilateralism and protectionism”.
The Kenyan president had also signed more than 20 agreements on science and technology cooperation, education, water resources, e-commerce, and intelligent transport systems from Beijing.
But by far the most significant was a promise from Xi Jinping to provide billions of dollars in fresh loans to pay for the SGR to finally be extended to the Ugandan border.
Its proponents insist the SGR will make a huge difference, revitalising industry, improving travel, speeding up freight, and ultimately putting the boosters under growth.
Crucially perhaps, with China back on board, it stands a good chance of being completed. After all, even the harshest critics of the world’s second largest economy can’t dispute its record of delivering major infrastructure projects across Africa.
Reliable independent statistics are hard to come by but research from the marketing wing of China’s Belt and Road Initiative recently sought to quantify its achievements.
The report claims China has funded and helped build more than 10,000 kilometres of railways, nearly 100,000 km of highways, 1,000 bridges, 100 ports, and 66,000 km of power transmission and distribution lines across Africa since its launch in 2013.
Chinese loans also come with some key advantages over Western debt. Beijing’s trick has been not just to offer the money for shiny new projects but the contractors and the materials to deliver them too, in a region where corrupt and inefficient African regimes have too often fallen short.
Often the projects on offer resemble a menu: a major road; a more modern port; an energy-producing dam, for example. These packages also come with a fixed timeline for completion – a tantalising prospect for African politicians with looming elections to consider.
“Global development banks have been slow to invest, especially in big projects that drive growth. China has stepped in to fund roads, railways, and other infrastructure that has boosted growth,” said Kevin Gallagher, professor at Boston University. Chinese lending has also “been more long term and less costly than private sector lending in the region,” he added.
Those spearheading this construction bonanza are the same ones that built modern China. These are the new ‘chartered companies’ of today. In the same way that the Royal African Company, the Royal Niger Company, and the British South Africa Company were granted royal charters by the British Crown to explore, trade, and colonise new territories in the 19th century, China’s state-backed giants are reshaping modern Africa to suit its strategic interests.
Examples of China’s engineering prowess can be found right across Africa. The Maputo suspension bridge in Mozambique was built by China Road and Bridge Corporation, with 95 per cent of the financing coming from China.
In Algeria, the Chinese have helped to build the 1,200km six-lane East-West Highway, the £1.5bn, 120,000 capacity Grand Mosque, and a new £670m terminal at Algiers’ Houari Boumediene Airport.
Ethiopia’s controversial mega hydro-dam, Djibouti’s giant 690 hectare port in Doraleh, and the Mambilla Hydroelectric Power Station in Nigeria all tapped into Chinese funding, know-how and muscle.
This trend looks set to deepen. As Donald Trump takes the axe to the US Agency for International Development, slaps tariffs on African goods and blocks debt renegotiation, China is offering an alluring mix of zero duties and new borrowing.
Yet Kenyans have heard all the talk about China before, and the lessons of the SGR – built with £3.7bn of loans provided by Chinese state-backed lender Exim Bank – is that the reality doesn’t just fail to match the hype, it can come at a heavy price too.
‘We bought their milk but now they’ve bought the cow’
Freight trains at Nairobi station Credit: Ben Marlow
Other Chinese-led projects have been similarly disappointing. A £7.5m Chinese-built bridge collapsed in 2022, two weeks after it was inspected by president Kenyatta during the country’s elections.
The Chinese built-and-operated Nairobi Expressway, opened the same year, has been particularly contentious. Locals were enraged when the government raised toll fees before the road even opened in order to cushion its Chinese backers against exchange losses from a weakening Kenyan shilling.
Even the use of the Mandarin language on signboards during construction provoked anger in some circles.
It’s important to distinguish between “political projects and economic projects,” said Ndindi Nyoro, a prominent Kenyan MP and critic of the Ruto regime.
An example of genuine development is the Thika Superhighway, an eight-lane express way connecting Nairobi to the outskirts of Thika 50km north of the capital, he said from a wood-panelled office high above the buzz of downtown Nairobi.
“It created a multiplier, towns, enterprise, and land went up in terms of value. The reason for a developmental project is not necessarily the project itself. It’s also for the multiplier it creates within the economy: the cement producers, the steel producers, the workers, and the work. That’s the essence of development,” he added.
The SGR is akin to buying something in a supermarket because everything came from China, he said. “That’s why, economically, it wasn’t felt.”
While China eventually reversed a decision to import the cement for the project following uproar from Kenyan manufacturers, the terms of the SGR loans stipulated that other materials such as the steel, along with the machinery, and an army of contractors must come from China. Even the fleet of 500 wagons that service the line are Chinese-made.
China’s growing presence in other parts of the economy has further strained relations. In 2023, the opening of China Square, a Chinese budget retail chain selling cheap household goods, triggered protests among local traders who say they are being unfairly undercut.
Some felt it contravened the spirit of the trade arrangement that had been forged with Beijing, exacerbating an acute imbalance that exists. China is Kenya’s largest trading partner and the biggest source of its imports but Kenya has a large $3.3bn deficit with China.
“The Chinese cannot be importers, retailers, wholesalers and hawkers,” read one placard held aloft during the protest.
Some Kenyan business owners have adopted a new phrase to describe how the Chinese suppliers they once bought goods from become their competitors: “We bought their milk but now they’ve bought the cow.”
Nevertheless, all this raises some difficult questions for the West, challenging some long held assumptions about both Africa and China’s strategic interest there.
Western lenders must also confront the possibility of whether they are about to be wiped out and replaced by their Chinese counterparts. The Telegraph has been handed a cache of secret SGR documents that demonstrates the lengths that its Chinese paymasters were prepared to go to protect their interests.
In the event of any default, Kenya’s assets both at home and abroad are not protected by “sovereignty’ and risk being seized by Beijing, the loan agreement states. What’s the more, the pact is governed by Chinese law and any disputes will be arbitrated in Beijing, the document shows.
In many respects, China’s push into Africa is less a sudden pivot than a doubling down. Launched in 2013, its Belt and Road initiative has long targeted Africa yet it looked as though it was running out of steam.
But as Washington pulls back from the region, China is gearing up again. Africa sits on vast quantities of rare earth materials, it boasts immense green power resources, and abundant agriculture but also a booming and increasingly well-educated population too.
From dawn until dusk Nairobi pulsates with enterprising Kenyans looking to earn a living. Locals joke about the ‘bedrooms’ of Nairobi – surrounding counties where people come from to work in the city during the day but return at night to sleep.
The mobile payments system M-Pesa – “Pesa” is the Swahili word for money – has unleashed a new generation of entrepreneurs. It is now the currency of choice among the traders, hawkers, and roadside kiosks that help keep the economy pumping, even Nairobi’s sprawling Kibera slum.
In a country where less than a fifth of the population have historically had access to formal financial services, it is estimated that more than 90 per cent were using M-Pesa within three years of its launch in 2007.
Donald Trump may see only “s—holes” but China’s Communist Party prefers to think of “Lions” – emerging markets to rival the “Tiger” economies of South-East Asia that exploded between the 1950s and 1990s on the back of a turbo-charged export boom.
Cynics in the West point out we have been here before with much of colonial Britain and Europe’s wealth built on the exploitation of African goods and labour, but that was hundreds of years ago. More recent attempts at reviving the continent have failed as one debt crisis has followed another.
The temptation then might be to just leave China to it. If the conventional wisdom is correct, much of China’s lending has been done at eye-watering interest rates, and is therefore destined to end badly.
Western NGOs and academics warn that China is engaging in little more than “debt trap diplomacy”, a charge that China strongly rejects. “It’s unfair to label Western loans investment and China’s debt,” Guo Haiyan, China’s ambassador to Kenya said on Kenyan radio station Capital FM last month. Nevertheless, Africans have been warned.
But this is not necessarily how many Africans themselves see it. A recent survey conducted by The Pew Research Center, a think-tank in Washington, DC, found that the share of Kenyans who want the government to prioritise economic relations with Beijing has increased by 10 percentage points from 2019 to 48 per cent in 2025 – on a par with the US.
While it is true that Chinese state debt is more expensive than borrowing from the World Bank or its sister organisation the International Development Bank, its loans are often hundreds of basis points cheaper than Western commercial credit, and in Kenya and many other African countries it is these private investors that account for much of the debt. In some cases they represent the majority.
Kenya’s difficulties can be traced back to 2014, Jimi Wanjigi, a prominent Kenyan businessman and arch-critic of his country’s financial profligacy, said. It was the year that the SGR was commissioned, as well as Kenya’s first ever international bond issue, when the Government borrowed £1.5bn from European and American investors in a fund-raising led by Wall Street banking giants JP Morgan and Citi.
“It [the SGR] was one of the biggest cons we have ever seen – the beginning of a long fraud on Kenyans. It laid the foundation for what I call the ‘debt heist’ – that and the first Eurobond,” Mr Wanjigi, who is planning to stand for president in 2027, said.
An audit that Mr Wanjigi conducted of Kenya’s finances shows that it will end up paying more than double what the Government said it would cost to build the SGR, he claimed. If his calculations are correct, “what this principally says is we paid for it out of our own pocket and more – we did not need a loan”.
Since then, Kenya has returned to the international debt markets on multiple occasions, and as its debts have piled up, it has had to borrow on increasingly more punitive terms – often merely to repay existing loans.
As of May this year, Kenya had amassed debts totalling nearly £67bn – a 10 per cent increase in just 12 months – figures from the Central Bank of Kenya show. The country’s debt-to-GDP ratio has rocketed from 42 per cent in 2013 to 65 per cent today, and of its overall debt burden, £30.5bn – a 4 per cent jump over the same period – is owed to external creditors compared to £7.4bn a decade ago.
Accurate figures are hard to obtain but somewhere between a third and a half of Kenya’s external debt has been borrowed from Western investors. While its single biggest creditors are the World Bank, followed by China, the cost of borrowing from international fund managers is much higher than elsewhere.
Last year, Kenya became an unenviable member of the so-called ‘10 per cent club’ – a small group of countries whose credit ratings are so poor they have to swallow double digit interest rates to continue tapping foreign debt markets.
Kenya raised £1.1bn in Eurobonds so that it could buy back most of an outstanding £1.5bn bond that was maturing in June, 2024. Yet, the latest loan came at a much steeper price than previous ones – a 10.4 per cent effective interest rate compared with 6.9 per cent last time around, and less than 4 per cent on the loans taken out to construct the SGR.
It leaves Kenya in questionable company. Six of the 15 countries that have issued bonds with coupons at, or above 9.5 per cent since 2008, have since defaulted including Mozambique and Ghana, analysts at Morgan Stanley have pointed out.
“A 40 per cent default outcome doesn’t bode well,” the bank’s analysts said.
But what does this mean for Western lenders? With multiple African countries now spending more on debt repayments than they do on education and healthcare, a new generation of fearless young voters are demanding change.
As the US takes a chainsaw to its foreign aid budget, and Britain pulls back too – fears are growing that the continent’s debt time bomb is primed to explode as African nations are forced to plug the aid gap with yet more borrowings.
In May, the World Bank issued an alert: Kenya’s public debt “remains at high risk of distress, with interest payments absorbing about a third of tax revenue,” it said. This leaves the East African nation with one of the highest debt interest costs to revenue ratios in the world, credit agency Moody’s said last month.
Yet, according to Nancy Gathungu, the country’s Auditor General, the defaults have already begun after Kenya Railways fell into arrears on the loans it took out from China’s Exim Bank to build the SGR. Having made no repayments in 2024, it has accumulated £235m in outstanding obligations, including a penalty of £20m for falling behind.
The audit also revealed that Kenya Railways’ revenue from its operations was insufficient to cover the maturing loan obligations, leading to additional penalties and a stiff rebuke from Gathungu. She criticised Kenya Railways for failing to justify these defaults, calling them “avoidable”. She also accused it of poor financial controls.
A report from the National Treasury revealed that Kenya Railways racked up a deficit of £286m in 2024, the highest recorded among state corporations in the period. The steep losses explain a visible lack of investment along the line. At the Nairobi terminus, broken seats litter the waiting area, the VIP lounge is closed – possibly permanently – and the toilets in a visible state of disrepair. Several other stations seem unfinished – piles of construction materials scattered around.
Nyoro believes that by Christmas, Kenya’s financial struggles will be so acute that the government will be struggling to meet key domestic spending commitments.
“If they don’t default on either external or internal debt repayments, they’ll default on other things like salaries, development expenditure, and social investment,” he warned. It follows steep cuts to both the healthcare and education budgets in recent months.
Much will rest on crunch discussions with the International Monetary Fund which are expected to begin next month. The Ruto government needs to secure a new financing programme with the International Monetary Fund to help it deal with annual external debt repayments that stand at £2.6bn on average, Moody’s said. Yet, another IMF loan package is far from certain without major reforms that risk provoking further violent demonstrations on the streets of Nairobi.
“We will probably ask them to implement a lot of things up front…short, medium, and long-term measures to address their vulnerabilities,” an IMF source said. At the same time, “we also don’t want to create a public uprising again,” the same source said.
Kenya’s precarious situation leaves Western commercial lenders particularly exposed, because they lend through the so-called ‘London Club” – essentially a cartel whose members operate on shared terms. China however, has never been part of the group, preferring instead to negotiate sovereign debt crises bi-laterally.
“When African countries struggle to repay those loans, PRC [People’s Republic of China] lenders have taken inflexible positions that have delayed and hardened terms in renegotiations,” Timothy Ditter, research scientist at the US government-funded Centre for Naval Analyses, said in a recent report.
They have also “resisted standard loan forgiveness practices and slowed debt negotiations,” Mr Ditter added.
China has gone even further, employing the best commercial lawyers in the world to deliberately structure its sovereign loans so that Chinese lenders get greater protections than other creditors.
The American research lab AidData studied 100 contracts between Chinese state-owned entities and government borrowers in 24 developing countries, and found that “Chinese contracts contain more elaborate repayment safeguards than their peers…alongside elements that give Chinese lenders an advantage over other creditors.
“China is a muscular and commercially-savvy lender to developing countries,” it added.
Echoing calls among campaign groups like Debt Justice, and more recently from the Tony Blair Institute, for a programme of debt relief, Mr Wanjigi argues that Kenya’s external debt should be written off because it hasn’t been properly spent according to Kenyan law, which states that any borrowings must be used for development projects.
In Kenya, China’s legacy continues to divide opinion. Aboard the 8am SGR train from Nairobi to Mombasa, Robert, a credit analyst and property developer travelling to work in Kibwezi, wonders whether Kenya was short-changed. “Couldn’t we have got a better deal like electric trains instead of these diesel ones?,” he asked, gesturing to the carriage we are seated in.
A nearby passenger who travels to Mombasa twice a month for work said the SGR is undeniably quicker than the bus she used to take but the bus was cheaper and “the seats were more comfortable”.
Twenty-five miles north of the final station near Suswa however, the watchman who guards over the end of the line is hoping it is completed. The railway will have to cross his land, opening the door to a big compensation package from the authorities just like others who were affected.
One of his neighbours was awarded a £125,000 payout for surrendering some farmland, he said, drawing the figure in the dirt with a stick for emphasis, but he spent it all on “women and booze”.
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