How Africa borrows from China: and why Mombasa Port is not collateral for Kenya's standard gauge railway

In December 2018, a leaked letter from Kenya's Auditor General warned that the Kenya Ports Authority's assets - of which Mombasa Port is the most valuable - risked being taken over by China Eximbank if Kenya defaulted on the Standard Gauge Railway loans. The rumor that Kenya had used Mombasa Port as collateral for the railway became widely accepted globally as another example of "Chinese debt-trap diplomacy." In this Working Paper, Deborah Brautigam, Vijay Bhalaki, Laure Deron, and Yinxuan Wang unpack this case using tools of international contract law and commercial project finance. Their detailed forensic analysis shows why the rumor is wrong. Rather than a deliberate debt trap, the railway project was carefully and creatively designed to reduce the risks of sovereign default and enhance the bankability of an infrastructure project with high costs but significant long-term benefits for Kenya and the region.