World Bank Says Kenya Could Have Saved KSh 117 Billion on SGR by Matching Tanzania's Railway Construction Costs

Kenya could have saved as much as KSh 117 billion ($900 million) during construction of its Mombasa to Nairobi Standard Gauge Railway if the project had achieved the same construction cost per kilometre as Tanzania's Dar es Salaam to Dodoma railway, according to a new World Bank assessment published on 4 November 2026. The comparison places Kenya's construction cost at $7.6 million per kilometre against $5.7 million for Tanzania and $5.3 million for the railway connecting Djibouti with Addis Ababa, raising questions about how procurement decisions, land acquisition and project governance influenced the cost of one of East Africa's largest transport investments. The findings appear in the World Bank's November 2026 Kenya Economic Update, which examines governance constraints affecting economic growth, public expenditure and job creation. The Bank estimates that at least 30 percent of the potential $900 million savings can be attributed to governance problems, including the preference for direct contracting over competitive procurement, land speculation and fraudulent practices involving land ownership documents, property valuations and compensation payments. The remaining difference reflects a combination of project characteristics and costs that the assessment does not attribute entirely to corruption. The comparison is particularly notable because Kenya's railway operates using diesel locomotives, while Tanzania's Standard Gauge Railway is electrified. Electrification requires additional investment in power supply and related infrastructure, yet the Tanzanian line was constructed at a substantially lower reported cost per kilometre. The World Bank also examined the Djibouti to Addis Ababa railway, another electrified system, which was built through more mountainous terrain and recorded the lowest unit construction cost among the three projects. For Tanzania, the assessment provides an external benchmark for the cost of its railway investment. For Kenya, it raises a fiscal question about the amount of public borrowing that could potentially have been avoided through different procurement and project management arrangements. Kenya's Railway Cost 33 Percent More Per Kilometre Than Tanzania's The World Bank compared three major railway investments undertaken in East Africa over broadly overlapping periods. Kenya's Mombasa to Nairobi SGR was constructed between 2014 and 2017, Tanzania's Dar es Salaam to Dodoma railway between 2017 and 2024, and the Djibouti to Addis Ababa line between 2011 and 2016. All three are single track standard gauge railways, although they differ in technical specifications, terrain, land acquisition requirements and operating systems. Kenya's railway uses diesel traction, while Tanzania and the Djibouti to Addis Ababa system were designed for electric operation. The World Bank's reported construction costs provide the following comparison: RailwayCost per kilometreApproximate KSh equivalentKenya, Mombasa to Nairobi$7.6 millionKSh 988 millionTanzania, Dar es Salaam to Dodoma$5.7 millionKSh 741 millionDjibouti to Addis Ababa$5.3 millionKSh 689 millionKenya therefore spent approximately $1.9 million more per kilometre than Tanzania, equivalent to a difference of about 33.3 percent when measured against the Tanzanian benchmark. The difference with the Djibouti to Addis Ababa railway was approximately $2.3 million per kilometre, or 43.4 percent above that project's reported unit cost. The figures are especially relevant because railway construction costs accumulate over hundreds of kilometres. A difference that appears manageable when expressed per kilometre can become a substantial fiscal burden once multiplied across a national infrastructure project. The World Bank estimates that applying Tanzania's construction cost benchmark to Kenya's initial railway investment would have reduced expenditure by as much as $900 million, equivalent to approximately KSh 116 billion to KSh 117 billion at the exchange rates used in contemporary reporting. That amount represents a hypothetical saving calculated from comparable unit costs. It is not a finding that KSh 117 billion was stolen, nor does it establish that Kenya could have reproduced every aspect of Tanzania's railway at exactly the same price. The estimate identifies the scale of the cost difference and examines the extent to which governance and project implementation contributed to it. The Bank's findings nevertheless establish that the higher cost cannot be explained entirely by Kenya having constructed a technically more demanding railway. Tanzania's electrified system required additional electrical infrastructure, while the Djibouti to Addis Ababa railway faced more challenging elevation changes. The World Bank Attributes at Least $270 Million to Governance Problems The most consequential finding concerns the reasons behind the cost difference. According to the World Bank, at least 30 percent of Kenya's estimated $900 million potential savings is associated with governance challenges. That implies approximately $270 million, equivalent to around KSh 35 billion, in costs that the Bank considers attributable to weaknesses in procurement, land acquisition and related project management arrangements. The assessment identifies the preference for direct contracting rather than competitive tendering as one source of concern. Competitive procurement allows governments to compare bids, examine alternative technical approaches and negotiate prices against offers from different suppliers. Direct contracting can sometimes be justified by technical or commercial circumstances, but it reduces competitive pressure and increases the importance of independent cost verification, contract transparency and effective oversight. Kenya's original SGR was financed principally through loans from the Export Import Bank of China and constructed by China Road and Bridge Corporation. The contractor also undertook the feasibility study, subject to approval by Kenya Railways Corporation. This arrangement placed substantial responsibility for project preparation and implementation within a closely connected financing and contracting structure. The World Bank also identifies problems involving land acquisition. Large railway projects require extensive land corridors, station sites, maintenance facilities and access routes, often involving compensation to thousands of property owners and affected households. The costs can increase substantially where land speculation occurs after a proposed route becomes known, valuations are inflated or compensation systems are vulnerable to fraudulent ownership claims. These risks are especially difficult to control where land administration records are incomplete, ownership is disputed or project information becomes available to politically connected individuals before affected communities and the wider public receive the same information. The World Bank's analysis is consistent with concerns raised by Transparency International Kenya in its June 2026 assessment of corruption risks in major infrastructure projects. That assessment identified vulnerabilities involving procurement transparency, access to information, oversight and public participation, with the SGR among the projects examined. The Bank's attribution of at least 30 percent of potential savings to governance challenges should not be confused with an estimate that 30 percent of the entire railway budget was lost to corruption. The percentage applies to the estimated $900 million difference between Kenya's construction costs and the Tanzanian benchmark. Even on that narrower basis, the amount is substantial. Approximately $270 million represents capital that, under more efficient project arrangements, might have been available to reduce borrowing requirements or finance other public investments. Tanzania Built an Electrified Railway at a Lower Reported Unit Cost Tanzania's Standard Gauge Railway has attracted attention primarily because of its role in connecting Dar es Salaam with the country's interior and eventually with neighbouring economies. The World Bank comparison introduces another dimension by evaluating the cost of constructing the infrastructure itself. The Dar es Salaam to Dodoma sections form part of a wider railway development programme intended to connect the country's principal commercial port with central Tanzania, the Lake Zone and regional transport corridors. The railway was designed for electric operation, distinguishing it from Kenya's diesel powered Mombasa to Nairobi line. Electric traction requires infrastructure beyond the physical railway track. It involves overhead electrical systems, substations, power connections, signalling and associated technical installations. These additional components make the World Bank's finding particularly relevant because the lower reported Tanzanian construction cost cannot be attributed simply to the absence of electrification. There are, however, limits to the comparison. Tanzania's route, land acquisition requirements, bridge structures, station designs and other engineering conditions differ from Kenya's. Construction periods also affect material prices, exchange rates, financing arrangements and the allocation of costs between contracts. The World Bank acknowledges these differences but concludes that topographical and technical characteristics do not fully explain Kenya's higher expenditure. The Djibouti to Addis Ababa railway provides a further reference point. The line was constructed through terrain involving an elevation gain of approximately 2,300 metres, compared with around 1,600 metres for Kenya's railway and 1,060 metres for Tanzania's Dar es Salaam to Dodoma route. Despite the greater elevation change and electrified operation, its reported cost was approximately $5.3 million per kilometre. This does not establish that the Djibouti to Addis Ababa railway is commercially superior or that its construction arrangements were free from difficulties. It demonstrates that higher engineering demands do not necessarily produce higher reported unit costs, and that procurement, design choices, construction management and the scope of included expenditure all require examination. Tanzania's lower cost is therefore a meaningful construction benchmark, although it should not be interpreted as a complete assessment of the country's railway programme. The total economic performance of the investment will also depend on operating costs, passenger demand, freight volumes, maintenance requirements, electricity supply, debt servicing and the ability to attract sufficient traffic away from road transport. Kenya's Higher Construction Costs Have Long-Term Debt Consequences The financial consequences of infrastructure expenditure extend well beyond the year in which construction takes place. Kenya financed its SGR through substantial external borrowing, with the National Treasury reporting three Chinese loan facilities amounting to approximately KSh 650 billion for railway construction and subsequent extensions. The debt has remained a major component of the country's public financing obligations, requiring regular repayment of principal and interest. A railway financed through borrowing must generate economic benefits sufficient to justify its capital cost, even where operating revenues do not directly cover every financial obligation. Those benefits may include lower freight costs, reduced road congestion, improved port efficiency, increased trade and economic activity along the corridor. However, a higher initial construction cost increases the amount of investment that must be justified through those benefits. If a government spends substantially more than necessary to construct comparable infrastructure, it may face higher borrowing requirements, additional interest costs and less fiscal space for other priorities. These effects can continue for decades, particularly where loan maturities extend well beyond the completion of construction. Kenya has already undertaken changes to the financing arrangements for its railway. Reporting in 2025 indicated that the government had extended the repayment period for Chinese SGR loans to 2040 and converted some obligations from dollar denomination into Chinese yuan, with officials expecting lower annual debt servicing costs. Such restructuring can ease immediate cash flow pressures, but it does not retrospectively reduce the original amount spent on construction. The fiscal burden of an infrastructure project is influenced by both the initial capital expenditure and the financing terms agreed over its lifetime. The World Bank's latest assessment places the railway within a wider problem affecting Kenya's public finances. It estimates that corruption and collusion increase the country's annual fiscal deficit by approximately two percentage points of GDP through higher spending and weaker revenue collection. These effects increase borrowing needs and contribute to the cost of public debt. The Bank also raised its forecast for Kenya's economic growth in 2026 to 4.6 percent from 4.3 percent, reflecting stronger activity during the first half of the year, while warning that governance weaknesses continue to restrict productivity, investment and employment growth. The SGR comparison therefore provides a concrete example of how governance can affect economic outcomes. Excessive infrastructure costs do not end when contractors complete construction. They can remain embedded in public debt, transport charges and government financing requirements long after the railway begins operating. The Cost of Construction Is Only One Measure of Railway Success A lower construction cost provides an advantage, but it does not automatically make a railway economically successful. Railway projects are generally justified by their ability to transport large volumes of passengers and freight at lower costs than alternative modes. Their commercial performance depends on demand, reliability, network connections, operating efficiency and the charges paid by customers. Kenya's SGR connects the Port of Mombasa with Nairobi and the inland container depot at Naivasha, serving a transport corridor that carries substantial domestic and regional trade. Tanzania's railway connects Dar es Salaam with central parts of the country and is intended to serve a broader network extending towards the Great Lakes region. The two systems operate in different freight markets and face different competitive conditions. Their economic returns will depend partly on how effectively each railway integrates with ports, road networks, inland terminals and customs systems. For freight customers, the relevant calculation extends beyond the railway tariff. A logistics company compares the total cost of moving goods from origin to destination, including loading, unloading, storage, customs clearance, terminal handling, road connections and the time required to complete the journey. A railway with lower construction costs can still struggle commercially if freight volumes are insufficient, while a more expensive railway can generate substantial economic benefits if it reliably serves a large and growing transport market. This is why construction cost comparisons should be considered alongside operating performance rather than used as the sole measure of infrastructure value. The World Bank's findings do not provide a comprehensive comparison of the financial returns, passenger numbers, freight volumes or economic rates of return of the three railways. Its principal contribution is to identify differences in initial construction expenditure and examine the role of governance in those differences. That narrower finding remains consequential because construction expenditure is one of the few major infrastructure costs governments can influence directly through project design, procurement and implementation arrangements. Kenya's Planned SGR Expansion Makes the Findings More Relevant The World Bank's assessment comes as Kenya prepares further expansion of its railway network towards western Kenya and the Ugandan border. The government has been pursuing plans to extend the SGR from Naivasha through Kisumu towards Malaba, with financing arrangements expected to differ from the original Chinese funded construction programme. The extension is intended to strengthen Kenya's role as a regional transport gateway and improve the movement of freight between the Port of Mombasa and neighbouring markets. The commercial justification is substantial because Uganda, Rwanda, South Sudan and eastern DRC depend on regional transport corridors for imports and exports. Kenya's ability to capture a larger share of this freight will depend on the cost, reliability and efficiency of the railway and associated logistics infrastructure. However, the planned expansion also creates an opportunity to reconsider how major railway contracts are prepared and awarded. Competitive procurement, independent feasibility assessments, transparent land acquisition procedures and public disclosure of financing arrangements can improve the ability of governments to assess whether project costs are reasonable. The World Bank recommends stronger procurement transparency, wider implementation of electronic government procurement, publication of project information and greater scrutiny of beneficial ownership in companies receiving public contracts. These measures are intended to reduce opportunities for collusion and improve the quality of public investment decisions. Kenya has already introduced reforms, including electronic procurement systems and conflict of interest legislation, while officials have acknowledged the need to strengthen expenditure management. Their effectiveness will depend on implementation, institutional independence and the willingness of public authorities to disclose information required for meaningful scrutiny. The comparison with Tanzania also offers a lesson for other governments investing in railways, ports, highways and electricity infrastructure. Project costs should be assessed against technically comparable investments before contracts are signed, with differences in specifications and geography clearly documented. Such comparisons can help identify unusually expensive designs or procurement arrangements while allowing legitimate engineering requirements to be recognised. Tanzania's Cost Advantage Raises a Wider Question About Public Investment Efficiency The World Bank's findings arrive during a period of substantial railway investment across East Africa. Tanzania is expanding its Standard Gauge Railway, Kenya is pursuing extensions towards its western border, Uganda is advancing its own railway plans, and regional governments are investing in transport corridors intended to connect inland production centres with international markets. These projects require large amounts of public and private capital at a time when governments are facing competing demands for expenditure on healthcare, education, energy, water, housing and debt servicing. The difference between $7.6 million and $5.7 million per kilometre may appear technical, but its economic consequences are substantial when applied across hundreds of kilometres of infrastructure. Kenya's estimated KSh 117 billion potential saving illustrates how procurement decisions and project management can affect the amount of borrowing required to deliver national infrastructure. The comparison also shows why the economic value of major projects should be assessed before construction begins and reviewed after completion. Governments need credible estimates of engineering costs, realistic traffic forecasts, transparent financing terms and mechanisms to establish whether the public receives value for the money committed. Tanzania's railway recorded a lower construction cost per kilometre than Kenya's despite incorporating electrification. That is a measurable advantage in the World Bank's assessment, although the country's broader railway investment will still need to demonstrate commercial performance over time. For Kenya, the findings are particularly consequential because the government is preparing another phase of railway expansion while managing substantial public debt. The World Bank has identified governance weaknesses as an explanation for at least $270 million of the estimated cost difference with Tanzania, placing procurement and land compensation arrangements at the centre of the discussion. As East African governments commit billions of dollars to new transport infrastructure, the quality of their investment decisions will determine how much railway capacity they can build with the financial resources available. The World Bank's comparison suggests that differences in governance and project preparation can translate into costs measured not merely in millions per kilometre, but in billions of shillings of additional public expenditure. FAQ How much could Kenya have saved on its SGR? The World Bank estimates that Kenya could have saved up to $900 million, approximately KSh 116 billion to KSh 117 billion, if its initial SGR construction costs had matched Tanzania's railway cost per kilometre. How much did Kenya's SGR cost per kilometre? The World Bank puts the Mombasa to Nairobi railway at approximately $7.6 million, or KSh 988 million, per kilometre. How much did Tanzania's SGR cost per kilometre? The Dar es Salaam to Dodoma railway cost approximately $5.7 million, equivalent to around KSh 741 million, per kilometre under the World Bank's comparison. Is Tanzania's SGR electrified? Yes. Tanzania's Standard Gauge Railway was designed for electric operation, while Kenya's Mombasa to Nairobi SGR operates using diesel locomotives. Did the World Bank say Kenya lost KSh 117 billion to corruption? No. The KSh 117 billion figure is an estimate of potential savings based on Tanzania's construction cost benchmark. The World Bank attributes at least 30 percent of those potential savings to governance problems. What governance problems did the World Bank identify? The assessment identifies direct contracting instead of competitive tendering, land speculation and fraudulent practices involving land titles, valuations and compensation payments. Why was the Djibouti to Addis Ababa railway included? The World Bank used the electrified railway as another regional benchmark. Its reported construction cost was approximately $5.3 million per kilometre despite more challenging elevation changes than the Kenyan line. Does a cheaper railway necessarily perform better economically? No. Construction cost is one measure of investment efficiency. Long term economic performance also depends on freight demand, passenger traffic, operating costs, reliability, maintenance and financing obligations.