Opinion and Analysis
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.
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