A scathing new audit has ripped the veil off the opaque financial dealings at Kenya Railways, revealing billions in penalties, questionable dollar transactions, and a operational black hole that continues to suck in public funds.

The Standard Gauge Railway (SGR), once heralded as the crown jewel of Kenya's infrastructure, is back in the headlines for all the wrong reasons. Auditor General Nancy Gathungu has issued a damning report that pins Kenya Railways Corporation (KRC) against the wall, citing massive breaches in public finance management laws and a shocking lack of transparency in its dealings with the operator, Africa Star Railway Operations Company (Afristar).

The Sh3.5 Billion Penalty

The headline figure is eye-watering: Kenya Railways has been slapped with a KES 3.5 billion penalty for defaulting on its loan obligations to the China Exim Bank. This penalty is not just a bookkeeping error; it is real money lost—funds that could have built hospitals or schools. The audit reveals that KRC failed to service the loan on time, triggering punitive interest rates. "The penalties represent an avoidable charge to public funds," Gathungu stated bluntly, pointing to a culture of negligence at the corporation.

The Afristar Conundrum

At the heart of the rot is the relationship with Afristar, the Chinese firm contracted to run the SGR. The audit highlights "unsatisfactory explanations" regarding operational costs and revenue management. Despite the SGR generating billions in revenue, the corporation reported a staggering KES 50 billion loss in the period under review—the highest among all state corporations. Where is the money going? The audit suggests a complex web of dollar-denominated payments to Afristar that may not align with the actual service delivery.

The Dollar Drain

The report also flags "dollar dealings" that have exacerbated the corporation's forex losses. At a time when the Kenyan Shilling was depreciating, KRC's exposure to dollar-based contracts with Afristar meant that operational costs ballooned overnight. The management's failure to hedge against this risk or renegotiate terms has left the taxpayer holding the bag. It is a classic case of a sovereign entity signing contracts that it cannot afford to service.

A History of Opacity

This is not the first time the SGR has been questioned. From its inception, the project has been shrouded in secrecy. Activists and whistleblowers, including former government auditor Bernard Muchere, have long alleged that the project costs were inflated. This latest audit vindicates those fears. It paints a picture of a corporation that is "insolvent in all but name," kept alive only by continuous injections from the Exchequer.

The Call for Accountability

The Public Investments Committee (PIC) in Parliament is now expected to summon the KRC management to explain these breaches. However, Kenyans are weary of summons that lead nowhere. The demand is for criminal culpability. Who authorized the defaults? Who signed off on the dollar payments? Until these questions are answered, the SGR will remain a symbol of debt rather than development.

"We are paying for a train that is taking us to poverty," remarks an economist. "The tracks are standard gauge, but the losses are broad gauge."