Rift Valley Railways is opening up the Mombasa-Kampala line to third-party transport firms who could invest in own trains and wagons.
It would be the first time that private firms, except Indian-owned Magadi Soda, would play a part in the operations of the century-old railway line that runs from Mombasa to Kampala. RVR Chief Executive Officer Isaiah Okoth told The Standard that his firm had taken the strategic decision to reduce on capital investments and generate more business.
“I am opening up the line to private logistics firms to consider buying wagons and locomotives rather than trucks,” said Mr Okoth, who joined the firm in February.
It is only Magadi Soda Company, which mines a bulky mineral from Lake Magadi called trona, which operates a private freight train service after it was granted access in 1997 by the Kenya Railways Corporation. Trona is then processed to make soda ash, an input in the manufacture of glass, detergents and in water treatment.
Magadi Soda, owned by India’s Tata Chemicals, started operating the private line running from Konza to its plant on the shores of Lake Magadi, to evacuate the mineral. The firm owns locomotives which run on the private line that was built at a cost of about Sh540 million, before joining the original line at Konza.
Maintenance costs
RVR has been struggling to return a profit since entering the 25-year concession pact with the Kenya Railways Corporation in 2006. “With these changes, I expect that the company should be making a profit by June next year,” he added, saying the operational costs are elevated by high maintenance costs.
Among the measures he hopes would reduce running costs is a petition the firm has sent to the Government seeking a waiver of Sh18 charged on every litre of diesel as Road Maintenance Levy (RML). Okoth argues in his petition that levying RML on his privately-owned firm was equal to subsidising truckers, who are his rivals in the freight business.
“We do not use the roads yet we have to pay the levy, while no one helps in paying for our maintenance of the old railway line,” said the CEO who was previously the general manager at General Electric and Healthcare Eastern Africa.
The ageing rail track, which was built around 1900, has been prone to breakdowns, often compromising on speeds and safety and effectively putting off prospective clients, who have opted to use trucks on the roads to move freight, to and from the Mombasa Port.
It is estimated that only 5 per cent of the freight business from the port of Mombasa is evacuated through the rail, which should typically be cheaper, safer and faster. Mr Okoth believes his firm has invested sufficiently in the rehabilitation of the railway line to attract private firms in his proposal.
Investment in improving the track is critical for the continued survival of the business, with the completion of the Standard Gauge Railway line expected in June 2017.
Initial estimates indicate that the SGR could cut the costs of freight from Mombasa to Nairobi by half. RVR pays to the government of Kenya 11 per cent of its gross revenues every quarter as concession fees, but has in the recent past struggled to keep up with the “rental” obligations.
