Inside Kenya's Sh900b plan to transform rail transport

Kenya Railways is embarking on an ambitious Sh948 billion five-year plan that it says will transform railway transport in the country and make it a preferred mode for the movement of cargo and passengers.

The plan, Kenya Railways says, will entail an overhaul of some of the railway infrastructure, construction of more than 2,700 kilometres of new railway lines as well as the setting up of two railway cities in Nairobi and Eldoret.

KRC said different projects under the strategic plan for the five-year period to 2027/28 financial year would cost Sh948 billion. A substantial proportion of the funds will be raised through the Public Private Partnership model.

“In order to effectively implement this Strategic Plan, a budget of Sh948 billion is required majorly comprising Sh803 billion for expansion and integration of the rail network,” said Kenya Railways in the plan that is currently undergoing public participation.

“A total of Sh126.3 billion is expected to be raised internally and from the Railway Development Levy Fund (RDLF). The resource gap for implementation of the programmes and projects outlined in this plan will amount to Sh822 billion which will majorly be bridged through mobilisation of funding from government, development partners and Public Private Partnerships.”

Kenya Railways plans to construct 2,795KM of new Standard Gauge Railway (SGR) over the five-year period, an ambitious target considering that the country so far has 622KM of SGR, that the 472KM Mombasa-Nairobi line and the 150KM Nairobi-Naivasha line. 

Among the new SGR lines Kenya Railways plans to build over the five-year period include the SGR Phase 2B and 2C from Naivasha to Kisumu (269Km) and Kisumu – Malaba (107KM) as well as the railway line along the Lamu Port South Sudan Ethiopia Transit (Lapsset) corridor.

It will also increase the Metre Gauge Railway network by 88 kilometres and upgrade 315 kilometres of MGR and rehabilitate another 1039.6 kilometres of the old railway network.

It also plans to build railway cities in Nairobi and Eldoret and develop commuter rail lines in major cities including Nairobi and Mombasa. The Corporation is currently implementing the Nairobi Railway City project at the central railway station, whose first phase is expected to cost Sh30 billion. The development is expected to be replicated in other towns.

“The key areas of focus for the Corporation in the coming five years include investment in new railway infrastructure including locomotives and rolling stock, revitalisation of operations of the existing Meter Gauge Railway line and development of human capacity to support the execution of the Corporation’s mandate,” said Phillip Mainga managing director Kenya Railways. 

“The coverage of the Nairobi Commuter Rail (NCR) service will also be expanded to include metropolitan areas earmarked for the National Housing Scheme projects such as Ngong, Ruai and Konza.”

The plan is expected to enable Kenya Railways to increase freight market share of Port throughput from 26 per cent in 2022 to 42 per cent by 2027.

KRC also expects to move from an operating loss of Sh2.4 billion in the 2022/2023 financial year to an operating profit of Ksh. 9.09 billion in 2027/28 financial year. 

The plans are coming against the recent government plans to undertake major reforms within the railway sector, including the splitting of Kenya Railways into three entities. 

The Cabinet in January this year approved the Railway Bill 2024, which proposes separating the business of freight, commuter and land development. Among the major changes that the draft law proposes include the introduction of a railway sector regulator – the Railway Regulatory Authority.

Once enacted into law, the Cabinet said, it would open up opportunities for private sector firms to invest in different facilities on railway land across the country that continues to lie idle.

The private sector firms are the ones expected to build such facilities as the railway cities.

In approving the draft law that is yet to to be tabled in Parliament, the Cabinet noted that the railway sector has over the years suffered underinvestments and the proposed law is expected to unlock investments from private sector players.

“To tap on private capital to address the under-investment in the Railway sub-sector, the Cabinet approved The Railway Bill, 2024. Besides fortifying Kenya’s leadership as a regional logistics hub by vertical unbundling (separation) of the management of our nation’s railway sub-sector the proposed reforms further seek to repeal the 1978 - Kenya Railways Act, Chapter 397, Laws of Kenya,” said a despatch from the Cabinet.

“Upon the enactment of the Bill into Law, the Railway Regulatory Authority will be established as the railway and safety regulator, overseeing open access and licensing of operators. The railway sector will operate under an open access system, with the expected outcome of generating business spin-offs in the sub-sector.”

It further explained that the proposed legislation would initiate new ways of running railways and separating the business of freight, commuter and land development.

“Kenya Railways is a big landowner in Kenya and most of the land is lying idle. This will be used to develop railway cities as is happening in Nairobi and will be extended to other major towns. The Bill proposes that the private sector, investors and even county governments run the railway cities. In such cases, Kenya Railways will become a regulator,” said the Cabinet.

Kenya Railways holds large parcels of land, most of them in prime localities in major towns and cities across the country.