The SGR Premium Was Legal: Kenya's Procurement Law Still Exempts Its Costliest DealsThe SGR Premium Was Legal: Kenya's Procurement Law Still Exempts Its Costliest Deals

On one side, the National Treasury says its electronic procurement platform awarded about KSh 19B ($146M) in contracts between July and September, more than in the whole of the previous financial year.

On the other, the World Bank's November 2026 Kenya Economic Update estimates that the Mombasa to Nairobi Standard Gauge Railway (SGR) cost up to KSh 117B ($900M) more than it would have at Tanzanian prices.

Read together, the figures suggest Kenya has digitised the tenders that were never its largest risk, while the deals that carry the real money still sit outside the rules that would test their price.

One railway premium, six record quarters

The comparison is stark once the numbers sit side by side. As Mwenendo reported, the World Bank puts the SGR's construction cost at about KSh 988M ($7.6M) a kilometre, against KSh 741M ($5.7M) on Tanzania's Dar es Salaam to Dodoma line and KSh 689M ($5.3M) on the Djibouti to Addis Ababa railway. Both of those lines are electrified; Kenya's is diesel.

That puts Kenya's line about 33.33% above Tanzania's per kilometre. Applied across the route, the lender's estimate of the possible saving is up to KSh 117B.

Now set that against the procurement reform. The Treasury's online system awarded about KSh 18.2B ($140M) in all of 2025/26 and about KSh 19B in its record first quarter of 2026/27, as Mwenendo reported on the e-procurement platform's results.

On Mwenendo's arithmetic, the SGR's estimated premium alone equals about six record quarters, or more than six years of the platform's 2025/26 volume.

The World Bank is careful, and so should readers be. Its figure is a benchmark comparison, not a sum proven stolen, and it attributes at least 30% of the potential saving, about KSh 35.1B ($270M), to governance problems including direct contracting and land compensation fraud risks.

The clause that keeps big deals out

The reason the two stories belong together sits in the procurement law itself. Section 4(2)(f) of the Public Procurement and Asset Disposal Act excludes from the Act procurement under bilateral or multilateral agreements between the Government of Kenya and a foreign government, agency or multilateral body, unless the regulations say otherwise.

Section 6 adds that where the Act conflicts with a treaty or agreement Kenya has ratified, the agreement prevails.

That is the gate through which large, loan-backed infrastructure has tended to pass. The first SGR was financed by China's Export-Import Bank and built by China Road and Bridge Corporation, which also carried out the feasibility study. The Court of Appeal found in 2020 that procurement law had been breached; the Supreme Court set that finding aside in 2023 and held that the process conformed with the law.

The figures suggest the more uncomfortable reading. If the SGR's process was lawful and still produced a premium the World Bank links in part to direct contracting, the problem is not only who broke the rules. It is what the rules allow. An e-procurement portal, however well run, cannot test a price that never enters it.

Naivasha to Malaba arrives at KSh 1.76B a kilometre

The question is no longer historical. The extension from Naivasha through Kisumu to Malaba is now priced at KSh 651B ($5.01B) for 369km, up from KSh 502.9B a year earlier, as Mwenendo set out in its editorial on the railway's three price tags. The Treasury expects KSh 618.8B of that to come from outside lenders and has said it is not yet clear how the money will be raised.

That works out at about KSh 1.76B ($13.58M) a kilometre, roughly 1.79 times the Mombasa to Nairobi rate the World Bank has just called expensive. The comparison is not like for like: the newer figure includes the high cost of financing that the Treasury cites, and the route climbs the Rift Valley and reaches Lake Victoria. But it is the only number in public, and Kenyans have no breakdown that separates steel and earthworks from interest and fees.

In the public documents Mwenendo has reviewed, Kenya Railways has not set out how the main works contractor for the extension was chosen. If the financing ends up under a government-to-government agreement, Section 4(2)(f) could again place the procurement outside the Act. At 2025/26 volumes, the e-procurement platform would need more than 35 years to award as much as this single project costs.

The 14.13% price of a costly shilling

Overpricing does not stay on the construction site. It becomes debt, and debt is serviced at the price the state pays to borrow. This week the Central Bank of Kenya sold a 30-year bond at a weighted average yield of 14.13%, according to its auction results.

The first SGR was not funded by that bond, and its loans carry their own terms. As an illustration only: KSh 35.1B of governance-linked premium carried at 14.13% would cost about KSh 4.96B ($38.15M) a year in interest, every year, before a shilling of principal is repaid.

As Mwenendo has explained, railway revenue has never cleared the escrow floor that would let it repay the Chinese loans, so the national budget has carried the bill instead.

Exemption requests before an election year

There is a second warning inside the Treasury's own briefing. Cabinet Secretary John Mbadi said people who benefited from the manual system are resisting the move online, and that some public entities have sought exemptions from procurement rules, especially ahead of the election period.

The pattern the figures suggest is consistent: the competitive system works where it is mandatory, and pressure gathers at the edges where it is not. Daniel Ndirangu, chief executive of the Institute of Public Finance, said the platform's success should be judged by value for money through stronger competition and lower costs. On that test, the largest contracts are the ones that matter most, and they are the ones least likely to pass through it.

Three tests for the KSh 651B extension

The World Bank's own recommendations point to the fix: more competitive procurement, wider access to contract information, publication of project data and disclosure of the beneficial owners of firms that win public work. None of that requires abandoning foreign financing. It requires that a loan's existence stops being a reason a price goes untested.

Three markers will show whether Kenya has learned the SGR lesson. The first is whether the Treasury publishes the cost breakdown behind the KSh 651B extension. The second is whether the regulations under Section 4(2)(f) are amended so that bilateral deals above a set value must still be benchmarked and published. The third is whether the exemption requests the Treasury has flagged are named and refused before the 2027 campaign spending season begins.

Until then, Kenya's procurement reform is measuring itself on the contracts that were easiest to clean, and the World Bank has just put a price on the ones it skipped.