How Government can turn around SGR cargo services

Amid all the shenanigans occupying public discourse in the last few weeks, a number of developments concerning the Standard Gauge Railway (SGR) have taken place but got drowned by political noise. The first was realisation that the cargo service, launched with a lot of fanfare, is struggling to send even a single train inland per day against a projection of four. This is despite flooring of prices for the second time in a month. Then Kenya Railways managing director Atanas Maina announced they were pulling off a plan to electrify the railway line citing high costs and irregular power supply. A few days later the government increased tariffs for passengers traveling to Mombasa saying the current prices are promotional.

And just when we thought the drama was over, the state made a sudden turnaround and secured a Sh25 billion loan for electrifying the railway. Then it declared all imports whose final addresses are not specified will be transported to Nairobi for clearance. Now, when such things happen in quick succession then all may not be well with Kenya’s largest and most expensive piece of infrastructure. After a phenomenal launch of the passenger service, questions are now emerging over viability of the railway line. And it has all to do with cargo which has failed to tick so far. As one of the journalists who have reported on the SGR since its inception I still maintain the SGR was a good project and debt is not bad. If used well borrowed money stimulates economic growth. You don’t need to go far to witness this. If you live in Nairobi just drive along Thika road in the morning. The traffic jam being witnessed every morning that was not there five years ago when the road was opened is enough evidence of massive real estate investment in that section of town.

The problem with cargo is the government hopes that just providing the infrastructure, the service will achieve a ‘sparks effect.’ This is where improvements on rail systems automatically leads to jump in patronage which translates to revenue. This worked well with the Madaraka Express where by the virtue of a new railway, passenger numbers shot up.

Sustainable project

It may also be the reasoning behind the plan to electrify the rail. That faster, smoother and more modern rides will bring in the money the SGR desperately needs through cargo. Obviously the state will argue the electric trains will cost less to run and maintain, which are all good ideas. We however need to ask ourselves some key questions. Does the country have electricity generation capacity to run an electric rail system? And will this solve the cargo deficit the SGR is facing? How much more needs to be done to make the SGR a sustainable project that can pay for its loans?

It is worth remembering that a few years ago Nigerian billionaire Aliko Dangote said he could not put up a cement factory in Kenya because he would require 75MW of stable power which the country does not have. Kenya’s current power generation capacity stands at 1,700MW. The government has not said where it will get the extra power to run the SGR.

Of immediate concern though is sorting out differences between freight operators and manufacturers on one end and the government. From multiple interviews I have held with the three parties it is clear they seem to be talking at each other than with each other. Freight operators want faster clearance of their cargo and involvement in decision. Manufacturers want streamlined clearance of cargo and improvement of SGR’s bulk freight handling capacity. They also want a reduction of interveners on the cargo service and a clarity on tariffs. These are not difficult demands. If the government is looking for ideas on how to turn around its cargo service it should start from here. Then after that it should sort out the little matter of committing itself on completing the line till Malaba. The viability of the SGR heavily depends on it getting connected to Uganda. After all 2023 when we should start paying the Chinese their money is not very far away.

- The writer is a reporter for The Standard