The good, bad and ugly of standard gauge railway service
A showpiece project of the Jubilee government, the standard gauge railway (SGR) provides a classic case of both the doublespeak of politicians, and the development conundrum where advances in one area often mean declines in another.
Emergence of the mobile telephone spelt the death knell for the landline, just as the aeroplane killed the steamship, e-mail killed ‘snail mail’, the motor car killed the horse-drawn carriage, and web-based news platforms threaten the survival of the newspaper.
When the Nairobi-Thika highway was being constructed under the government of President Mwai Kibaki, there were complaints that the elevated sections, inter-changes and elimination of the numerous roundabouts would impact on the livelihoods of traders who depended on business at the various market places along the route.
That might approximate the complaints that the SGR — which snakes its way from the coastal city of Mombasa to the capital city of Nairobi and onward further along to the small town of Naivasha — has destroyed the business of truckers who hauled goods from the port to the hinterland, bus companies that ferried passengers between the two cities, and cargo operations that have shifted to Inland Container Depots in Nairobi and Naivasha.
Business in small centres
Also affected has been business in the small centres along the Mombasa-Nairobi highway that serve as rest stops and refuelling stations for truck and bus operators.
The new rail service launched by President Uhuru Kenyatta in 2017 is owned by the Kenya Railways Corporation, and besides the express passenger trains between Mombasa and Nairobi also runs an inter-county service with stops at Athi River, Emali, Kibwezi, Mtito Andei, Voi, Miasenyi and Mariakani.
Mombasa politicians have long complained that the SGR has ruined business around the port of Mombasa, but the matter was given added impetus when Deputy President William Ruto, the Kenya Kwanza Alliance presidential candidate, joined the chorus.
Kicking off a tour of the coast region in May, he promised, if elected president, to return to Mombasa port operations that had shifted to the Naivasha and Nairobi, and supposedly close down the inland ports. That would, he said, be a way of ending economic deprivation facing local communities.
“We have agreed with the leaders from the Coast. We will return all the port operations that were taken to Nairobi and Naivasha so that the youth can get employment,” he stated.
Critical port business
Dr Ruto was echoing a stand championed by Mombasa leaders such as Nyali MP Mohammed Ali and former Senator Hassan Omar, the Kenya Kwanza candidate for governor, who complain bitterly that SGR has taken away critical business from the port. They have also charged that some remaining port operations have come under the control of businesses associated with the family of outgoing two-term Governor Hassan Joho.
Yet in 2017, Dr Ruto was effusive in his praise of SGR as a game-changer in the development of Mombasa and establishment of fast, efficient transport links from the coast to the interior. And later when Mombasa politicians started complaining about its effect on local business and port operations, he was one of their fiercest critics.
A big problem, however, is that in an attempt to help SGR generate the revenue needed to pay the Sh327 billion loan from China, the government in 2019 issued a directive requiring all importers to haul their cargo from Mombasa using the train service to the Nairobi ICD and on to Naivasha for cargo heading further west, including transit goods to Uganda and other neighbouring countries.
It is not clear why the government had to issue a directive for cargo to be moved on SGR, instead of the service offering attractive rates and incentives that would make business sense to haulage companies.
Ruto’s change of mind
And trying to explain his change of mind on SGR, Dr Ruto put it this way: “Unfortunately, a few people took hostage the whole project and ended up with selfish programmes to the detriment of the coastal people. That was not our intention.”
According to President Kenyatta, however, the SGR and the two inland container terminals reduced congestion at the port of Mombasa, improved hinterland connectivity and spurred economic growth.
Latest data from the Kenya National Bureau of Statistics (KNBS) shows that the passenger and cargo trains generated Sh3.65 billion in the first quarter of 2022, down from Sh3.66 billion between January and March last year, translating to a 0.32 per cent drop.
SGR cargo service accounted for the biggest chunk of the revenue generated in the first quarter of 2022 at Sh3.08 billion, representing 84 per cent of the total revenue, while the passenger service posted Sh569.27 million.
But indeed there is evidence that the SGR service has badly hit truck operators and local container freight stations (CFS).
Trucks lie idle
Trucks around the port lie idle and hundreds of workers have lost their jobs. But the SGR may not be to blame for all this — successful measures aimed at improving efficiency at the port have drastically cut down the turnaround time for goods.
The increase in cargo volumes has been attributed to Kenya Railways Corporation's move to deal with bottlenecks at the evacuation hub at the Port of Mombasa and in surpassing cargo delivery timeliness to designated pick-up points.
SGR operator, Afristar, moved 2,930,698 gross tonnes in 2018, 4,159,605 tonnes in 2019, 4,418,444 tonnes in 2020 and 5,419,508 tonnes in 2021, which was due to the introduction of two double-deck trains and direct haulage of cargo from ship to train.
KRC managing director Philip Mainga says cargo volumes have been boosted by joint efforts with Kenya Ports Authority (KPA) and Kenya Revenue Authority (KRA), enabling smooth loading, delivery and clearance of cargo at destination depots in Nairobi and Naivasha.
“The recently inaugurated linkage line on SGR/MGR through Naivasha Inland Container Depot (ICD), enabling end-to-end rail cargo movement especially on transit goods from the Port of Mombasa to Jinja/Kampala and beyond destinations has gained momentum,” said Mr Mainga.
Transportation costs
Logistics experts say SGR had the potential to bring down transportation costs by as much as 35 per cent.
But on the other hand, property owners, clearing agents, transporters, container freight stations, and clearing agents continue to count losses, with some logistics companies reported to have resorted to restructuring resulting in thousands of job losses.
Truckers are projected to incur Sh2 billion in lost business yearly, whereas for CFSs, the loss is estimated at more than Sh1 billion annually.
Last year, Boss Freight Terminal Limited which used to handle around 2,000 containers, reported it had dropped to 200 when the directive was issued.
According to Container Freight Station Association (CFSA), more than 4,000 workers had lost their jobs since the introduction of SGR.
The lobby notes that long haul trucks have also reduced on the Mombasa-Nairobi highway, leaving families depending on the business destitute.
“We have let go more than half of our workers as businesses struggle. All these job losses have happened here at the Mombasa port as a result of the reduction in trucked cargo volumes,” said CFSA chief executive Daniel Nzeki.
South Sudan cargo
Kenya International Freight and Warehousing Association (Kifwa) national chairman Roy Mwanthi adds: “With the latest development where government issued a new directive that saw South Sudan cargo moved by SGR from Mombasa to a CFS in Nairobi starting July 2022, this will further affect clearing and forwarding business as that was the only remaining business in Mombasa”.
Just one year after the introduction of the SGR freight train, a report by the University of Nairobi’s School of Business indicated that Mombasa County had already lost Sh17.4 billion and 2,987 jobs since the implementation of a government directive on cargo haulage.
The report stated that in the event the proposal to convey all upcountry cargo through SGR is implemented, then the implications to the Port City of Mombasa’s Gross Domestic Product (GDP) and employment sustainability will be serious.
The survey pointed out that the implementation of the SGR freight service did not consider all the socio-economic, cultural and political context.
It indicated that Mombasa’s economy would shrink by 16.1 per cent with 8,111 jobs lost.
Transport cost
Kenya Transporters Association (KTA) also condemned the government’s move.
“It costs Sh80,000 to transport a 20-foot container to and from Nairobi using a truck, but the SGR costs more than Sh90,000,” said KTA in its statement.
Transporters say that SGR levies additional charges, including a Sh5,000 handling fee, Sh25,000 for ferrying the container from the SGR to a nearby CFS, and Sh10,000 to return an empty container.
Apart from Mombasa, other towns along the highway depending on truckers such as Mariakani, Maungu, Voi, Mtito Andei, Masimba, Kibwezi, Mlolongo have been turned into ghost towns.
Deserted restaurants and lodgings, empty parking lots and closed retail shops is what one encounters, describing the lost glory of a once vibrant truck stops along the Mombasa-Nairobi highway.
The move also means that the government will not collect more than Sh675 million advance tax from about 15,000 trucks each year.
But as transporters protested over the introduction of SGR and the January trial run of transit cargo from an SGR train onto an MGR train destined for Malaba, shippers supported the move.
Cargo loss reduced
The Shippers Council of Eastern Africa (SCEA) chief executive Gilbert Lagat said the rail has reduced cases of cargo loss.
The official says once KRC achieves full connectivity from the port to the border town via SGR and MGR, the cost will be minimised which will be to their advantage.
The SGR and MGR also reduces travel time to ferry cargo from Mombasa to Malaba by 62 per cent and cost by 58 per cent and if well-coordinated, reduced transfer delays will be a game changer.
Property owners
The introduction of SGR freight trains did not spare property owners in Mombasa.
Property consultants and real estate agents say there is a diminishing appetite for office spaces in the port city. Landlords have been forced to reduce rents.
However, it is also apparent that the decline in business cannot all be attributed to SGR. Tourism has always been Mombasa’s economic mainstay, and has been in decline for years. In fact SGR worked to boost the numbers of local tourists who became the lifeline for hotels that formerly depended on foreign visitors. BY DAILY NATION
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