Let’s adopt open access model for SGR

Opinion and Analysis

One of the six locomotives imported by RVR in 2014. It is expecting 14 more by the end of June. PHOTO | FILE |   NATION MEDIA GROUP

By BITANGE NDEMO

Across the world, countries are grappling with the concepts of infrastructure ownership to enhance access and affordability to the services.

One of these concepts is the open access concept, which opens up ownership of certain elements of public infrastructure to private interests. It is succeeding in the telecommunications sector, but we need to extend the same to other infrastructure.

The standard gauge railway (SGR) is where we must apply this concept. It provides us with the opportunity to encourage innovation and enhance efficiency and effectiveness of such an expensive infrastructure.

The SGR project has been criticised before as unnecessary and expensive to taxpayers. Some economists have even gone to the extent of estimating the project payback period as exceeding 100 years.

Critics of the project see it from the lenses of existing business models and fail to capture the true cost of transportation to our seaport. They fail to see new business models of infrastructure.

The concept of open access, therefore, gives us the opportunity to create new innovative uses that not only benefit citizens and the country but also alleviate problems associated with under-utilisation of infrastructure.

The concept of open access is not new. It has been applied in many areas, including software technologies, research and other forms of infrastructure. It is a method of sharing infrastructure and services to minimise costs and discourage monopolistic tendencies.

As the SGR nears completion, policies must be put in place to encourage open access under an arrangement where the government would own the rail tracks while allowing private investors to own the locomotives.

This will just be like the road network where the government builds the roads and the private sector owns the vehicles.

The concept expands the user base and creates the perception of greater ownership, which in turn serves to protect the infrastructure and endear it to a wider segment of the population.

Given that in the past the rail infrastructure has been sabotaged, the concept would likely lead to sustainable development and operation of the rail.

The investment is likely to lower the travel time from Mombasa to Nairobi to three hours. If that becomes a reality, it will reduce fatalities on the highways, lower the cost of transporting goods to Nairobi, and lower maintenance cost for the highway.

If effectively utilised, SGR could even become the catalyst of deflation since it will lower the cost of transportation, which contributes up to 30 per cent of the cost of goods in Kenya today.

Arrangements to get investors on the locomotives and governance structure should be under way. We certainly would not want to have a great railway line with inadequate locomotives as that would raise the cost of transportation, which the SGR is supposed to reduce.

Giving locals the option of owning the locomotives might also forestall hardball lobbying by truck owners, some of whom might even be tempted to invest in the locomotives.

We must encourage co-operative societies, chamas, investment groups and other related savings groups to consider being part of this infrastructure.

The financial structuring of such investments might take a long time to allow for local investors to aggregate resources. Failure to start early and we may see the entire business being taken up by foreign investors.

Ultimately, the government must see this investment from many locals as a blessing that would vindicate it from the criticism it has faced. To avoid any future criticism, we need many investors owning the locomotives.

The resulting competition would foster greater innovation and productivity that may result in faster payback period. It is perhaps the only surest way of dealing with the monopolistic tendencies of the past that proved unsustainable.

The British, for example, similarly privatised their rail network, separating rail tracks from locomotives and franchised locomotives to 25 different companies initially.

The dictates of entrepreneurship have since reduced the number of franchisees to six. However, passenger numbers have been skyrocketing largely due to congestion on the roads.

For an open access model to succeed, we must put in place an effective governance structure that would manage the operations with strict timelines.

Initially we may have to contract this to some international group with a good track record for this kind of work, otherwise we may end up exporting the matatu culture to the new transport system.

Former UK prime minister Winston Churchill once said: “Success is not final, failure is not fatal: it is the courage to continue that counts.’ We must continue to figure out new models of development for our country.

The writer is an associate professor at University of Nairobi’s Business School.