Taxis parked at the forecourt of the Mombasa SGR terminus. With the low
cargo volumes and changes in pricing, will SGR become self-sustaining as
soon as projected? PHOTO | NMG
At 5pm on January 1, the first cargo train arrived at the
Nairobi Inland Container Depot (ICD), Embakasi, via the standard gauge
railway, laden with 104 containers.
At hand to receive it were senior officials from Kenya Railways, Kenya Ports Authority (KPA) and the line operator.
Symon Wahome, the KPA head of inland container depots, said the train would revolutionise transportation of cargo in Kenya.
“The
old train used to carry up to 30 containers, but now the new train can
carry 216. Four trains will operate daily and we intend to increase
these to eight,” he said, beaming with pride for reaching another
milestone in the journey to modernise Kenya’s railway services.
Self-sustaining?
For the next three days, there was no cargo so the train did not make the trip. The next journey was on Friday January 5.
Two months on, the operator has started accepting the reality of
teething problems at the project billed as a game-changer in the
transport and logistics sector.
With the low cargo volumes and changes in pricing, will it become self-sustaining as soon as projected?
In recent update, KPA said the volume of cargo transported on the SGR was on the rise.
“We
had some 671 twenty-foot equivalent units (TEUs) delivered upcountry
last week, an increase of 233 TEUs the previous week. We have started
seeing an increase in the usage of the SGR service,” said KPA managing
director Catherine Mturi-Wairi.
Before the launch of
the service in January, the government had indicated that four freight
trains would run daily — with a future outlook of eight daily trains —
each carrying 216 TEUs.
This would mean that on each
day, the ICD would receive a minimum of 800 TEUs, making 5,600 TEUs
weekly and 291,200 TEUs annually. But the train hit its highest number
of more than 600 TEUs mid February, one-tenth of the envisioned
capacity.
But
the government is determined to make the service, which had been
monopolised by truckers, work. Already, shippers and transporters are
accusing the authorities of coercion, intimidation, boardroom intrigues
and enticement.
Twice in the past two months, Kenya
Railways has cut costs and by mid this month, a three-month offer that
has seen the operator halve the cost of transporting goods from Mombasa
to Nairobi will lapse, having attracted only a marginal number of
importers.
William Ojonyo, chairman of the Kenya International Freight and Warehousing Association told The EastAfrican
in Mombasa that achieving the requisite numbers will be a tough task
“even if they decide to offer the freight services for free.”
“Before you place your goods on the SGR, it must make business sense. Under current conditions, it doesn’t,” he said.
Transport
and Infrastructure Cabinet Secretary James Macharia is, however,
confident that the volumes will increase, pointing out that the new
service is just struggling through an initial set of bottlenecks before
it picks up.
On Thursday, Mr Macharia reshuffled 14 out
of 16 heads of department at the port of Mombasa as the country seeks
to see through its directive for imported cargo to be ferried through
the SGR.
No compromise
“We
will not compromise on cargo transportation to Nairobi’s inland
container depot. We are targeting to have six trains leave the port
transporting cargo to the ICD daily beginning end of June. Currently we
have 28 million tonnes of cargo arriving through the port, therefore,
transporters should not be worried about loss of business when cargo is
transported through the SGR. Nobody will be out of business. Even if you
say eight million tonnes belong to Mombasa, 20 million tonnes will go
to Nairobi and the maximum the SGR can take is 10 million tonnes. So we
still have 10 million tonnes of cargo which can go by road,” Mr Macharia
said.
At the outset, the country had planned to haul
4,000 tonnes per trip, peaking at 16,000 tonnes daily; 106,000 tonnes
weekly and 5.5 million tonnes annually to break even and repay its
construction and operational costs.
But, at the
current 12,452 tonnes per week, the SGR will have hauled on average, a
mere 647,504 tonnes by the end of the year, casting doubt on the
viability of the project.
Across the world, rail
transport dynamics are essentially market-driven, with the customer, and
in the SGR case the cargo owners, having a major input. But the Kenya
government last month directed that all imports coming in through the
Mombasa port be transported by the SGR, setting off a round of protests
from businesses.
“We arrived at this decision after
consulting with other players, including container freight station (CFS)
owners, and agreed to have goods moved by train,” said Kenya Railways
managing director, Atanas Maina.
The bottom line
At
the port, CFS owners and the clearing and forwarding agents, say such
orders will kill their business, as importers will have to liaise with
new service providers to access the Embakasi ICD.
“Initially,
we agreed to have the Nairobi CFS mainly handle such cargo as raw
materials and industrial inputs. Now that they have ordered all
un-nominated cargo to be transported by the rail, thereby putting our
businesses at risk,” said James Rarieya, the chairman of the CFS
Association.
The CFS came into operation a decade ago
in a bid to ease congestion at Mombasa port, which saw ships charged for
delayed cargo deliveries, and these costs passed on to clients.
“Our
business is made on volumes moved from port to customers’ premises and
that is why the government directive is hitting our bottom line hard. We
attract clients by not only charging less on storage but also giving
incentives. It is seamless when we work with clearing agents and it is
this wholesome package that endears us to clients,” Mr Rarieya said.
Bulk freight issue
But
Kenya Railways deny intending to kill this element of logistics
services, saying that they are only shifting a point of cargo handling.
“The
Nairobi ICD cannot handle the 28 million tonnes. We still have a lot of
opportunities for them to do business and I am certain that the CFS
owners have identified opportunities at the Nairobi facility too,” Mr
Maina said.
For
freighters and warehousing agents, who have been very vocal against the
directives on cargo, only managing storage costs and improving the
port’s efficiency will lure importers to the SGR.
“It
is more about efficiency and KPA is still very slow. When cargo stays
for more than four days, it goes to storage, which has to be paid for,”
Mr Ojonyo said.
Traditionally, importers negotiate with
clearing agents to get at least a month of free storage of their cargo
and this is what KPA and Kenya Railways need to address to attract the
much needed cargo.
“Within the KPA system, storage is a
very expensive affair. For instance, the fine for a 20-day storage
within the port is $2,100. You cannot attract importers by dangling
cheap freight charges, then force them to pay high storage charges. It
doesn’t make business sense,” Mr Ojonyo said.
Convenience
Manufacturers,
too, who make up a substantial number of the cargo business clientele,
have also noted that outside of the storage costs, the train’s ability
to move bulk freight is limited. Last week, the manufacturers from
Nairobi’s Industrial Area met with Mr Maina and aired their grievances
on the limitations the new cargo service.
“One of the
main challenges we have is that the current line does not have the
capacity to haul bulk cargo which disadvantages us. We are also at a
disadvantage especially that the last mile element is missing. The old
metre gauge line offered direct access to heavy clients’ bulk cargo,”
the manufactures said.
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