The government of Kenya has backtracked on a recent decree that all cargo imports transported from Mombasa to Nairobi and beyond should be carried on the Standard Gauge Railway
The policy had been mooted since soon after the SGR was completed in 2017 in order to make the project commercially viable and to enable loan repayments to the Chinese, while reducing congestion at Mombasa. The Transport Committee had directed the Infrastructure Cabinet Secretary James Macharia to explain the directive, but the government seems to have backed down before he could do so.
There was widespread opposition to the plan, not least because it has huge political connotations, as many Kenyans on the coast believe that the government favours economic development in Nairobi over Mombasa. Clearing all cargo in Nairobi would see the transfer of hundreds of jobs from the port city to the capital.
In the first six months of this year, the SGR handled 197,000 TEU in comparison compared to 77,020 TEU in the same period last year, which was the start-up period.
Although freight volumes are increasing, it seems likely that revenues are lower than anticipated, and meanwhile growth in passenger traffic over the past year has been slow.
Freight charges on the line were reduced last year in order to encourage uptake: the original average charge of US$33.3/tonne was cut to US$20.5/tonne.
It has been reported in Kenya that the cost of transporting cargo by the SGR is now similar to road freight costs.
The government says that it will be able to start repayments on its KSh324B (US$3.10B) loan by January 2020. In May, the Treasury approved a KSh35B (US$334M) payment to China’s Exim Bank in the current financial year. An average of eight freight trains operate on the line each day, but the Kenya Railways Corporation (KRC) aims to increase this to 10 as soon as possible. Services are being jointly marketed by the KRC, the Kenya Ports Authority and the SGR contractor, China Road and Bridge Corporation.
The SGR project was designed to encourage customers in Uganda, Rwanda, eastern Democratic Republic of Congo and South Sudan to use Mombasa. Some of the cargo carried on the line is bound for those markets, but an agreement on extending the line into Uganda has been repeatedly delayed, although the first section - from Nairobi to Naivasha - is now 98% complete.
Source: WorldCargo News