Kenya’s Controversial Plan to Hand Over SGR Freight to UAE’s Etihad Rail

Supporters of the deal argue that the SGR project has struggled financially, and involving Etihad Rail could unlock much-needed capital and operational expertise to get the line running efficiently. They say separating ownership of the rail infrastructure from day-to-day operations will attract private investment and boost the system’s performance.

But critics raise red flags. They worry that handing over operational control to a foreign company might cede too much power and influence over Kenya’s critical transport infrastructure. There are concerns about the lack of clarity around revenue-sharing, the length of the concession, and whether Kenya will retain control over pricing and dispute resolution. Transparency around who the investors behind the securitization plan are remains scant, further fueling suspicion.

Transport Cabinet Secretary Davis Chirchir confirmed that talks with Etihad Rail are underway for a concession agreement. The UAE company reportedly plans to invest in locomotives and wagons, aiming to haul about 17 million metric tonnes of freight annually to break even. Kenya Railways will keep ownership of the tracks and be responsible for maintenance and engineering, while Etihad Rail would handle freight operations.

This arrangement is tightly linked to the government’s ambition to raise roughly Ksh516.92 billion (about $4 billion) to extend the railway from Naivasha to Kisumu and onward to Malaba near the Ugandan border. The plan involves securitizing the 2 percent Railway Development Levy (RDL) a tax on all imports which brings in about Ksh50 billion annually. Securitization means converting this expected revenue stream into upfront capital by selling it to investors, effectively borrowing against future income.

While officials say securitization won’t add to Kenya’s public debt burden, financial experts warn it could lock the country into difficult repayment terms. If freight volumes fall or if the levy faces legal challenges, Kenya’s finances could come under pressure. What’s more, the identity of investors buying into this deal hasn’t been disclosed, raising questions about who really benefits and how much control they might have.

This new deal also signals a break from China’s dominance in the SGR’s first phase, which saw Chinese funding and management lead the line from Mombasa to Naivasha. Many Kenyans have expressed unease about the heavy Chinese influence and opaque contract terms. Now, with the UAE entering the picture, there’s hope for more diversified partnerships , but also fear of swapping one foreign controller for another.

The impact of the SGR’s expansion could be huge for East Africa’s regional trade. If the railway successfully reaches Kisumu and Malaba, it would form a major corridor linking the port of Mombasa with Uganda, and possibly further on to Rwanda, Burundi, and the Democratic Republic of Congo. For Etihad Rail and the UAE, this is a strategic opportunity to establish a foothold in African logistics, boosting their global trade ambitions. For Kenya, efficient management of the freight services could lower transport costs and increase competitiveness.

Yet, many questions remain unanswered. There has been no official disclosure on how revenue will be shared between Kenya and Etihad Rail, nor on the duration of the concession or penalties if terms aren’t met. Parliamentary committees and civil society groups have called for full transparency before the deal is finalized. These details matter deeply because the SGR isn’t just a commercial asset — it’s part of Kenya’s national security and economic backbone.

This deal reflects a wider trend across Africa and the world, where governments separate ownership of infrastructure from its operation, often turning to private or foreign companies to manage complex systems. While this can bring in much-needed efficiency and cost savings, it also raises thorny issues of sovereignty, especially when critical transport routes are involved.

Transport projects like the SGR affect more than just business; they touch on who controls the flow of goods, how much it costs to move them, and ultimately the country’s economic future. Allowing a foreign company operational control without sufficient public oversight could erode public trust and leave Kenya vulnerable to external pressure.

There are five key facts about this SGR deal that many Kenyans may not know but should:

1. Length of the Concession: The government has not revealed whether this is a short-term five-year deal or a long-term fifty-year arrangement. This is crucial for understanding Kenya’s future options.

2. Revenue Sharing: It’s unclear what percentage of freight revenue Kenya will retain versus what Etihad Rail will take. Without this transparency, it’s impossible to assess the deal’s fairness.

3. Dispute Resolution: The mechanism for resolving disagreements whether under Kenyan courts or foreign arbitration—is unknown, which affects legal sovereignty.

4. Identity of Investors: The securitization plan’s backers have not been named, leaving Kenyans in the dark about who stands to profit and what influence they may wield.

5. National Security Controls: There has been no mention of safeguards preventing foreign access to sensitive transport data or infrastructure control, raising serious security concerns.

"Alongside this, the official side of the story features His Highness Sheikh Abdullah bin Zayed Al Nahyan, UAE’s Deputy Prime Minister and Minister of Foreign Affairs, who witnessed the signing of Memorandums of Understanding between Etihad Rail and Kenya Railways. The agreements, signed by Etihad Rail CEO Shadi Malak and Kenya Railways Managing Director Philip J. Mainga in the presence of President William Ruto, focus on technical cooperation, knowledge exchange, and feasibility studies to renew and modernize Kenya’s rail system.

These MoUs form part of the UAE’s broader engagement with East Africa, as it simultaneously signed similar agreements with Uganda, South Sudan, and Chad to enhance transport, energy, and economic partnerships. For the UAE, these partnerships are strategic efforts to promote sustainable infrastructure and regional connectivity, leveraging their expertise from building their own advanced national rail system.

For Kenya and Uganda, these collaborations signal opportunities to tap into international expertise and investment to support regional integration and trade growth. However, these agreements remain frameworks for cooperation rather than binding operational concessions.

The coming months and years will test Kenya’s ability to balance attracting foreign capital and expertise with protecting national interests. Full transparency from the government, robust parliamentary oversight, and active civil society engagement will be essential to ensure that any deal involving Etihad Rail and the SGR truly serves Kenya’s long-term economic and security goals."