One year later, SGR struggles to accumulate cargo capacity
SEE ALSO :The Uhuru-Raila 'secret' visits to ChinaAs the SGR freight service enters its second year, Kenya Railways Corporation, the authority tasked with managing the rail, might need to watch out for the challenges that brought the old track to its knees. Chief among the challenges the SGR is staring at, include lack of business, which saw wagons on the old railway return to the port of Mombasa empty. Such capacity, which can be achieved through increased productivity of the agricultural and manufacturing sectors, remains far out of reach. This is even as the clock continues to tick towards the first interest payment for the Sh400 billion Chinese-funded railway by the end of this year. Moreover, trucks which cannibalised the old railway, are yet to be vanquished and continue to give the faster SGR a run for its money.
Quickly shippedThe 3.2 million tonnes of exports include 534,000 tonnes of titanium mined in Kwale and quickly shipped out from the port of Mombasa as well as 477,000 tonnes of flowers, fruits and vegetables that are normally flown to the Netherlands, United Kingdom, Germany, and United Arab Emirates.
SEE ALSO :Mombasa Port registers cargo growthMost of the other products, mostly manufactured goods, are exported to the neighbouring countries from Nairobi using trucks. Such goods include soda ash, iron and steel, cement and salt. Gerrishon Ikiara, an economics lecturer at the University of Nairobi and former PS in the Ministry of Transport between 2003 and 2008, says the old railway failed due to lack of capacity. “The railway had failed, it did not have the right carriage capacity and so people turned to trucks,” he says. In May 1969, the general manager of the then East Africa Railways and Harbours (EAR&H) Ephantus Gakuo prepared a report and account for the performance of the corporation. The railway, which stretched from Mombasa to Kampala was struggling. And Dr Gakuo was worried.
Desired impactWhen it realised that the incentives were not having the desired impact, the Government resorted to coercion. All cargo not meant for the Port of Mombasa was automatically put on the SGR and ferried to Nairobi. In the confusion some cargo inadvertently found its way to Nairobi yet it was not meant to be transported to the hinterland. Transport Principal Secretary Paul Maringa told Weekend Standard that the opposition to hauling cargo on the SGR was expected considering that it would significantly change the business environment. “It is awkward to be a shipper, a shipping agent, owner of a CFS (container freight station) and a tracker…if this is who you are then you do not want any business out of your hands,” Mr Maringa said. And the Government says it has a solution to the problem of capacity. President Uhuru Kenyatta has prioritised the setting up of special economic zones (SEZs) under which investors can establish industrial parks and produce goods under favourable terms - low taxes, constant supply of water and electricity, and other perks. Principal Secretary for the State Department of National Planning, Julius Muia, says that Vision 2030, the country’s development blue-print, envisions Kenya as an export-led economy. As a result, Kenya is looking to diversify its export portfolio beyond the commodity, non-value-add exports of items such as tea, raw coffee beans, flowers, fruits, hides and skins. Kenya, he says, will start manufacturing for exports. “Manufacturing for exports is what is driving the concept of industrial parks,” he told Weekend Standard. Some of the industrial parks in the offing include the Nairobi Industrial and Technology Park, a public-private partnership project of the Industrialisation ministry and Jomo Kenyatta University of Agriculture and Technology. SEZs will also be established in Mombasa (including Dongo Kundu Free Port), Lamu and Kisumu, attracting investments that will result into the production of more goods to be transported by the SGR. Yet, even after the Government believes it has made crucial strides in improving the business environment, investors have been less than enthusiastic. “We have done pretty a lot. The private sector has been slow to take up some of the opportunities that have been created by the Government,” says Mr Muia, citing Kenya’s tremendous jump in World Bank’s ease of doing business report in the last few years. But why was the State hell bent on twisting statistics, and even strong-arming businesses to use the project that should have been a matter of choice? Kenya had committed to a lopsided contract promising a “minimum volumes required for consignment” ferried on the SGR. In its first year, SGR reported a near Sh10 billion loss. It was not paying for itself, not with the massive subsidies being used to lure customers. Now the Government has been forced to revert to the original shipping rates and importers will pay double what they were paying to use SGR.