SGR makes Sh10 billion loss in first year

Transport CS James Macharia when he appeared before the National Assembly Transport Committee on SGR at Continental House, Nairobi. [Boniface Okendo/Standard]

The Standard Gauge Railway (SGR) made a Sh9.89 billion loss in its first year of operation, according to the latest figures from the Ministry of Transport.

Documents tabled by Transport and Infrastructure Cabinet Secretary James Macharia before National Assembly’s Transport Committee yesterday revealed that the Chinese-built railway averaged a monthly loss of Sh750.7 million in the 2017/18 financial year largely as a result of low cargo business.

However, the Government projects that the railway will make a profit of Sh5.08 billion between now and June next year, averaging Sh424 million earnings per month. “Part of the reason we made the loss last year was that it was a bit difficult to convince people that the railway was good for their cargo businesses,” said Mr Macharia.

“Also, we were in operation for only six months from June 2017 and we were only trying the waters.”

The SGR expects to haul close to nine million tonnes of cargo compared to 990,488 tonnes carried in the last financial year.

Macharia said if the SGR does not break even by the 2019/2020 financial year - when the loan repayment to the Chinese government is scheduled to begin - then the exchequer will have to pay from the newly established Railway Levy.

Kenya signed a Sh324 billion deal in May 2014 with China’s Exim Bank, comprised of Sh160.6 billion commercial loan and Sh163.4 billion concessional loan, to build the modern railway between Mombasa and Nairobi.

The loan, whose interest is 3.6 percentage points above the six-month average of London Inter-Bank Offered Rate (Libor) - which serves as an international benchmark - is to be repaid in 15 years.

Macharia said eight cargo trains were making daily trips to the Port of Mombasa, and the Government was aiming to have 12 trains at year end.

When questioned about under-utilisation of the cargo trains by Committee Chairman David Pkosing, with some of the wagons going back empty, the CS said the Government was in talks with major private sector players such as the Kenya Tea Development Agency and Unilever to see how the trains can be used in a more effective manner. The Government projects that SGR will turn in a profit of Sh15.8 billion in the 2019/20 financial year.