The World Bank has expressed concerns that Kenya's corruption issues may hinder its goal of becoming a developed economy similar to Singapore. In its latest economic update, the bank notes that Kenya performs poorly in corruption compared to its peers. The report cites the Standard Gauge Railway (SGR) as an example of how corruption can lead to inflated costs. The 472-kilometre line connecting Mombasa to Nairobi cost Ksh.987 million per kilometre, despite being diesel-powered.
The World Bank compares the SGR costs to those of similar railway projects in neighbouring countries. The electrified Dar es Salaam-Dodoma line in Tanzania cost Ksh.740 million per kilometre, while the electrified Djibouti-Addis Ababa railway cost Ksh.688 million per kilometre. According to the report, if Kenya had used the same cost metric as the Tanzanian railway, it could have saved up to Ksh.117 billion. The bank attributes at least 30 per cent of the cost differences to factors such as direct contracting, land speculation, and alleged fraud.
The inflated cost of the SGR is not an isolated issue, as the World Bank notes that corruption affects various sectors of Kenya's economy. The report highlights the Port of Mombasa, which ranks 375th out of 403 ports in the World Bank's Global Container Port Performance Index. Multiple inspections and associated corruption risks contribute to the port's low competitiveness. Additionally, the report identifies multiple weighbridge stops and police checks as challenges affecting trade efficiency.
Kenya's high electricity costs are another concern raised by the World Bank. The report notes that power remains expensive compared to structural and aspirational peers, costing businesses more than twice as much as in Vietnam and nearly 50 per cent more than in Uganda. The bank links the high costs to governance challenges, particularly the absence of a comprehensive and competitive framework for awarding Power Purchase Agreements (PPAs).
The World Bank warns that unless Kenya addresses corruption and implements reforms, its competitiveness and economic potential will be limited. The report emphasizes the need for Kenya to tackle corruption and implement public administration reforms, as seen in Asian economies whose success Kenya hopes to replicate. The bank's observations are based on its November Economic Update report.
The SGR project has been a subject of public discourse due to its high costs compared to similar infrastructure in neighbouring countries. Comparisons have been made with infrastructure in Tanzania and Djibouti, fuelling demands for transparency over contract terms. Court proceedings have also been initiated to seek transparency in the contract terms.
The World Bank's report highlights the need for Kenya to address corruption and governance challenges to achieve its economic goals. The bank's observations and recommendations aim to help Kenya improve its competitiveness and economic potential.
Key points
- Kenya could have saved Ksh.117 billion on the SGR project.
- Corruption undermines Kenya's economy and competitiveness.
- Governance challenges contribute to high electricity costs in Kenya.
