The project, which will be implemented in two phases, will be financed through a mix of debt and equity, a model increasingly used as Beijing shifts away from its earlier approach of extending large sovereign loans to African states.
Kefa Seda, director general of the Public-Private Partnerships Directorate at the Finance Ministry, said the new structure reflects Kenya’s limited borrowing capacity.
“We don’t have any room to borrow any more money,” he told Reuters ahead of the launch.
The expanded highway will improve one of the region’s most important transport corridors, linking the port city of Mombasa to western Kenya and to landlocked neighbors such as Uganda via Nairobi.
China repositions in Africa
China sharply reduced its lending to African governments around 2019 due to concerns over debt sustainability in several countries, including Kenya. However, Beijing pledged $50 billion in credit and investments during a summit with African leaders last year as it recalibrates its engagement on the continent.
Kenya cancelled an earlier agreement with a consortium led by France’s Vinci for the same project.
The new deal with Chinese firms was concluded during President William Ruto’s state visit to Beijing in April.
Kenya maintains close ties with Washington, and the renewed partnership with Beijing had drawn criticism from former U.S. President Donald Trump, prompting Ruto to publicly defend the move as part of a strategy to expand Kenya’s export markets, including China.
Structure of the deal
In the first phase—costing $863 million—China Road and Bridge Corporation will partner with Kenya’s National Social Security Fund (NSSF) to expand two existing single-lane sections of a 139-kilometer highway into four- and six-lane dual carriageways, according to the Kenya National Highways Authority.
The second phase will see Shandong Hi-Speed Road and Bridge International, a subsidiary of Shandong Hi-Speed Group, convert a separate 94-kilometer stretch into a six-lane highway at a cost of $678.56 million.
Both cost estimates include financing charges.
The financing model allocates 75% of funds to debt and 25% to equity, with the NSSF contributing 45% of the equity share in the portion it is involved in. Borrowing is expected to come from Chinese commercial lenders and state institutions such as the Export-Import Bank of China.
Construction is scheduled to be completed by end of 2027, after which the companies will operate the road under a 28-year toll concession to recover their investment.