SGR service uptake growing, expected to pay for loans in the long run

About two years since actual operations started on the Standard Gauge Railway (SGR) line between Mombasa and Nairobi and the three-letter abbreviation became entrenched in daily Kenyan lexicon, it is an opportune time to take stock of the phenomenal success the service has registered.

The biggest indicator of this success is the fact that in the last three months, the trains operating on the SGR line have attained the initial break-even projections, bringing in 258 freight trains by transiting 23,522 twenty-foot equivalent. This success has been evident both on the passenger and freight components, the latter service having started only in January last year.

The tonnage lifted during the last quarter from Mombasa to Nairobi increased to 1,059,215 from the corresponding quarter’s tonnage of 1,024,220 in 2018.

Today, the SGR line operates an average of eight cargo trains daily, but this is elastic and sometimes goes to as high as 14, depending on the quantum of cargo arriving at the port. Conventional and containerised cargo topped the uptake charts, the line achieving its founding objective of supporting the country’s nascent industrial and agro-processing sectors.

Driving uptake

Still, on the cargo front, the game-changer was the proposal to reduce freight tariff rates from the previous $33.3 per tonne to the current $20.5 per tonne. The upshot of this is that thanks to that single move, the service tariffs are now competitive and stack up quite favourably when compared to road transport costs, further driving uptake.

Equally critical to this success is a joint marketing campaign that we have been executing as Kenya Railways Corporation (KRC) in partnership with the Kenya Ports Authority (KPA) and the contractor, China Road and Bridge Corporation (CRBC).

Greater efficiency at the port of Mombasa and the streamlining of cargo clearance operations at the Inland Container Depot (ICD) have greatly helped in driving uptake and positioning the SGR freight service as a commercially plausible proposition.

Whereas we previously had 24 agencies operating at the ICD sites, this was eventually compressed to just four critical ones: KRC (Kenya Railways Corporation), KRA (Kenya Revenue Authority), KEBS (Kenya Bureau of Standards) and KPA (Kenya Ports Authority), significantly reducing red tape, with turnaround (dual) time reducing in material terms.

Equally critical as a success factor is the improved road network, which has greatly improved cargo evacuation from and delivery to the ICD. These factors were the drivers of the rise in SGR cargo uptake in the first quarter of 2019, with the service time given and consistently achieved at eight hours.

Plans are underway to have truck holding areas so as to improve efficiency in collecting and picking of cargo at the ICD in Embakasi, Nairobi. When freight trains commenced operations in January 2018, it had just one pair of trains daily. The teething problems the operation has experiencing in the past had been surmounted and the service has now become a game-changer.

Having laid out a solid, bankable foundation and support system for freight services, our target is now to be able to operate 10 containerised cargo and four to five conventional trains daily from Mombasa to Nairobi.

Compensation

Growth and continuous service improvement have not been just a preserve of freight services alone. A deliberate effort to align booking systems and more efficient refund procedures have helped in driving passenger uptake and overall efficiency. Some 3,020,889 passengers have used the Madaraka Express since its launch in May 2017.

On SGR infrastructure extension, the Nairobi-Naivasha section is now 98 per cent complete and should be ready for commissioning in the next few weeks, in tandem with project timelines.

This feat has been achieved despite a number of challenges in the line’s construction. Compensation of landowners along the route took longer than expected but this has now been fully concluded with the entire SGR corridor being handed to the contractor.

A critical component of this segment, the Naivasha Industrial Park, is on course and a lot of effort has gone into making it a reality.

With the leadership we have provided as the sector regulator and what we have achieved so far, we believe that the SGR is poised to return the investment Kenya has put in it in the long run, as it becomes entrenched as an integral part of our country’s and the region’s overall transport infrastructure through the seamless connectivity leveraged by the revamping of the meter-gauge railway.

-The author is the acting Managing Director, Kenya Railways Corporation (KRC).