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After bumpy start, SGR cargo service gathers pace

SGR cargo train at the Naivasha Inland Container Depot, Nakuru County. [Kipsang Joseph, Standard] 

When it started operations in early 2018, it was hoped that the Standard Gauge Railway’s (SGR) cargo service would offer a much-needed alternative to road transport.

Industries had for years demanded a functioning railway line in the country, which is the preferred mode of transport for cargo globally due to its predictability, the safety of goods being ferried and reduced wear and tear on the roads.

Other than the need for frequent road repairs, heavy truck traffic on the Mombasa-Nairobi Highway has also been blamed for the high number of accidents, some of them fatal.

These objectives, Kenya Railways has said, have been met successfully.

The State agency noted that the SGR has delivered on all parameters of predictability - ensuring the safety of goods as stipulated by the various stakeholders.

It further noted that the modern rail has helped decongest the Mombasa-Nairobi Highway, carrying around 6,000 containers a day on the about 10 SGR freight trains that operate between Mombasa and Nairobi daily.

These containers would need about 6,000 trucks to ferry them between the two cities and beyond.

“Since the inception of the Madaraka Express Freight Service in January 2018, the cargo volumes have continued to register a growth trajectory, enabling improved cargo haulage and efficient performance at the port,” said Kenya Railways, adding that this has been due to how it dealt with bottlenecks at the evacuation hub at the port of Mombasa and in surpassing cargo delivery timeliness to the designated pick-up points.

“The upward trajectory has remained consistent as exemplified by the cargo volumes moved over the last four years. The SGR operator moved 2.93 million tonnes in 2018, 4.16 million tonnes in 2019, 4.42 million tonnes in 2020 and 5.42 million tonnes in 2021.”

Kenya Railways added that over 2022, there has been a steady rise in the cargo moved by SGR.

Transit goods

The service is also banking on the recently refurbished metre gauge railway (MGR) line to move goods beyond Naivasha.

“The link line between the SGR and MGR through Naivasha ICD has enabled end-to-end rail cargo movement, especially on transit goods from the Port of Mombasa to Jinja and Kampala (in Uganda) and beyond destinations has gained momentum”, said Kenya Railways.

Last year, the SGR freight service earned Sh12.97 billion from moving 5.4 million tonnes of cargo.

This is triple the amount earned over its first year of operation in 2018 at Sh4.1 billion, according to data by the Kenya National Bureau of Statistics (KNBS).

Over the six months to June this year, the service had ferried 2.98 million tonnes of cargo and raked in Sh6.2 billion.

SGR has benefited from a previous government directive that all cargo importers use the service as opposed to trucks.

The directive was meant to increase cargo traffic on the then-new railway that started operations in January of the same year. It, however, faced opposition from coastal politicians and other stakeholders, claiming it would ruin the port city’s economy. 

President William Ruto upon his swearing-in in September ordered all port operations to revert to Mombasa, with cargo owners now free to choose between rail and road transport.

This move is likely to increase competition for SGR. Players, however, note that even with competition from road transport, the railway has advantages that could see it continue being a preferred mode of transport for importers.

The Kenya Association of Manufacturers (KAM) notes that SGR has become key to both transport and manufacturing industries in the country.

The SGR service, KAM noted, is more preferred by businesses moving huge volumes of cargo. “From a logistical efficiency point of view, SGR has been the most preferred mode of transport for long distances, especially when transporting high cargo volumes and hence more economical where transport costs are competitive,” said Chief Executive Anthony Mwangi.

The lobby, citing weekly data from Kenya Railways, noted that there was an average of eight trains per day from the port of Mombasa to the Inland Container Depot in Nairobi’s Embakasi between October 19 and 25. Each train carried 643 containers.

This, in turn, reduced congestion at the port as well as took away more than 5,000 trucks off the Mombasa-Nairobi highway daily during the week.

“This means that if all those containers were to be transported for the same distance by road using trucks, there could have been 5,144 single trucks on our roads per day,” said Mr Mwangi.

“We believe that where fair competition exists, there is always enhanced service delivery and efficiencies due to availability of options or alternative ways to achieve the intended outcome, that is, timely delivery to the final destination,” he added

His Shippers Council of East Africa counterpart Gilbert Langat challenged Kenya Railways to leverage SGR’s efficiency and competitive pricing to keep it in business.

“Railway is also predictable and safe. If I find it convenient to move my cargo by railway, then I will move it by rail,” he said.

Ken Gichinga, the chief economist at Mentoria Economics, noted that passengers and cargo owners look at safety and predictability in choosing SGR over road transport.

“The main advantage of the SGR is that it provides safety for passengers and predictability for cargo. The demand for both these attributes is consistently growing, underlying the business case for SGR,” said Mr Gichinga.

He also noted that the competition between the SGR and road transport will result in what is known as consumer surplus, a scenario where the price consumers pay for a service is lower than what they are actually willing to pay.

“It needs to make sense for the government, but it also needs to make sense for the user.”

“There are businesses that use it because of the safety track record as well as predictability. You can imagine how devastating an accident can be either for businesses or individuals. There are people who are willing to pay a premium for safety,” he said.

The 5.4 million tonnes of cargo transported through the SGR in 2021 were mostly imports that included raw materials for industries as well as finished products.

Other than importers, exporters are increasingly using the service to take their products to the Mombasa port.

Kenya Railways and the Kenya Tea Development Agency (KTDA) early this year inked an agreement that saw the latter-managed factories transport their produce through SGR from Nairobi to the port of Mombasa.

KTDA noted that the partnership would decongest roads and streamline flow of tea ahead of export.

Under the partnership, tea from KTDA-managed factories is transported to the Nairobi Freight Terminal from where it is loaded onto SGR wagons and transported to the Port of Mombasa.

Kenya Railways Managing Director Phillip Mainga then said SGR guarantees large volumes of cargo transported over shortened transit times due to high haulage capacity and the high speeds of the trains.

“We have enough capacity to handle all the cargo you can bring our way. At the moment, we are running nine to 11 freight trains every day between Mombasa and Nairobi, and we are able to do even more if need be,” said Mr Mainga.

“But of paramount importance is the promise our service offers. We are always on time and the safety of your cargo is guaranteed.”

Also using the service are companies operating at the Export Processing Zone (EPZ), which use the cargo trains to take their wares, mostly apparel to Mombasa.

Flower farms have recently said they are evaluating the possibility of using the SGR to move to produce to Mombasa as they explore shipping out flowers to Europe and other destinations by sea.

Kenya Flower Council (KFC) Chief Executive Clement Tulezi said flowers would be moved through refrigerated railway containers to the port of Mombasa for export to Europe.

When speaking at the International Floriculture Trade Exhibition (IFTEX) in May this year, Mr Tulezi said flower exporters would by end of this year increase the amount exported by sea.

This is as the industry tries to diversify transportation modes after the hiccups experienced with air freight following the outbreak of Covid-19 when there were mass flight cancellations, leading to a shortage of air cargo capacity.

He explained that moving the flowers and other fresh produce through the SGR is cheaper and faster when compared to using trucks.