Road transport operators in Kenya worried that SGR will edge them out

Trucks try making their way towards Kenya Ports Authority (KPA) using Berth 18 in Mombasa County on Saturday 13th August 2016. There was a heavy congestion of the trucks that lasted for hours making operations slow at the KPA. PHOTO: KELVIN KARANI/STANDARD

MOMBASA: The first train on the standard gauge railway (SGR) line will make its way from the Port of Mombasa to Nairobi in June next year.

But as this date draws closer, players in road transport are getting increasingly jittery about their future.

Those involved in logistics along the Northern Corridor fear the SGR line will render thousands jobless and waste millions of shillings in investments, as the train replaces the bus and truck.

Truck operators have dominated cargo ferrying from Mombasa to various inland destinations, with rail volumes dropping from about 70 per cent in the 1970s and 80s, to a paltry 5 per cent today.

Competitive rates

But while there is one camp of worried investors, there is another that is optimistic innovation and competitive rates will keep the industry afloat, particularly as trucks offer ‘last mile’ convenience in cargo delivery.

In an interview last week, Kenya Railways Corporation (KR) managing director Atanas Maina said the construction of the SGR track was 90 per cent complete, with 440 kilometres of rail having been laid.

He added that test runs will begin in March next year, with commercial operations set for June, when one train will pull a record 200 containers between the port and the Embakasi Inland Container Depot (ICD) in Nairobi .

It is expected that four trains will haul containers daily, making the trip between the port and the capital in eight hours. Two passenger trains will move an estimated 1,000 people a day in just four and half hours.

Mr Maina added that SGR trains will ferry between 40 and 50 per cent of port-bound cargo, reducing road damage, pollution and accidents.

Construction of the rail, which also passes through Kwale, Taita Taveta, Makueni, Kajiado and Machakos, has created more than 20,000 jobs for Kenyans, and will provide employment for between 2,000 and 3,000 people once operations begin, KR has said.

The railways boss downplayed the anticipated cut-throat competition for cargo and passengers between transport operators, saying SGR would take what used to belong to the rail.

He asked transporters and container freight stations (CFSs), which offer temporary cargo storage, to embrace innovation.

“The key in any business environment is innovation, therefore, the existing transport businesses will survive if they embrace it,” Maina said.

Improved efficiency

A director of the East African Shippers Council, Meshack Kipturgo, added that the SGR was a reality than cannot be avoided, and asked transport stakeholders to prepare to operate alongside it.

According to him, trucking firms may have to relocate to Nairobi and distribute cargo from the capital to other destinations.

Mr Kipturgo, who was formerly the chairman of the Container Freight Stations Association, added that the gamechanger with SGR will be the rates offered to move goods.

Currently, trucks charge between Sh85,000 and Sh90,000 to move a container from Mombasa to Nairobi. The transport industry anticipates lower rates once modern rail services are available.

“Truckers should bank on innovation ... even in countries with modern railway systems, like the USA and UK, there are still trucks on the roads,” Kipturgo said.

According to the managing director of Weston Logistics, Salim Mbarak, while SGR will ensure efficiency in the transportation of cargo from Mombasa, it comes with the burden of triple-lifting goods – from the port, to ICD and then the final destination, which will carry costs. Mr Mbarak is an economist and former KR manager.

Peter Otieno, the chairman of the Kenya Car Importers Association, added that road transporters are likely to face cargo shortages temporarily, but get back to full operations once the port attracts more cargo due to improved efficiency.

“With SGR evacuating cargo efficiently, the port will attract more cargo and even grow into a trans-shipment hub for the region, which will ensure cargo for trucks,” he said.

Cargo volumes at the port, which also serves Uganda, Rwanda, Burundi, South Sudan and parts of Tanzania, Democratic Republic of Congo and Ethiopia, are already on the rise.

Mr Otieno, who is a former Mombasa branch chairman of the Kenya International Freight and Warehousing Association (Kifwa), added that the full impact of SGR will be felt when the line is extended to Kisumu and Malaba. This, he said, may hurt business for operators who distribute cargo across the region.

The investors likely to immediately feel the brunt of the new line, according to Otieno, are CFSs near the port, as more containers will be moved to the ICD in Nairobi.

“CFSs will have to market themselves vigorously to individual cargo owners and offer competitive rates,” he said.

“But overall, the cost of transport and production will go down, which is good news for Kenyans.”

Otieno noted that since Mombasa is a hub for the motor vehicle business, CFSs’ may survive in the interim by offering temporary storage for the vehicles that arrive in their thousands at the port.

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