Railroading importers into SGR could hurt businesses

Beginning tomorrow, all imported cargo will be transported from Mombasa to Nairobi via the Standard Gauge Railway (SGR).

According to Kenya Revenue Authority and Kenya Ports Authority, which issued the directive, the move will improve cargo logistics at Mombasa port and the Nairobi Inland Container Depot (ICD).

For a long time, congestion has been a major problem at the port. Things have been so bad that early last year, Ugandan importers threatened to take their business to the port of Dar Es Salaam in protest.

For this reason, any step geared at reducing the congestion and making the port more efficient is highly welcome. This would be in the interest of the importers, who always suffer losses whenever their cargo is not cleared promptly.

SEE ALSO :End of SGR boom hits Bamburi Cement profit

However, they are unlikely to celebrate the Government’s latest order. Although the pace of transporting cargo from Mombasa to Nairobi will improve greatly, the cost will also rise steeply.

In fact, even the Government admitted early this year that SGR is a hard sell to businesses.

And it is not hard to see why.

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While it costs Sh50,000 to move a 20-foot (ft) container from Mombasa to Nairobi, the costs associated with the handling and storage of cargo at the port pushes the amount to Sh142,000. Transporting an equal load by road costs only Sh65,000.

That is why traders’ fears that they will suffer losses if forced to use SGR are not farfetched.

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Besides the traders, the order will drive 20 container freight stations in Mombasa and hundreds of truckers out of business or severely dent their profits. Such a move will also lead to job losses.

All indications are that the Government’s intention is to turn around the fortunes of the loss-making SGR. Last year, SGR raked in Sh10.33 billion, an amount that was inadequate to meet the firm’s annual operating costs.

Clearly, the Government has every reason to ensure its costly investment returns a profit. However, this should not be at the expense of importers and truckers.

What the Government should do is to make SGR attractive by pushing down the cost of transporting cargo. That, coupled with improvement of the port and the ICD’s efficiency, will make importers to rush for the rail service in droves and dump the snail-paced trucks.

Forcing traders to use the expensive SGR will, inevitably, hurt many businesses.

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SGRKenya Revenue AuthorityKenya Ports AuthorityDar Es SalaamMombasa port