An SGR Cargo train at the Embakasi Inland Container Depot. FILE PHOTO | NATION MEDIA GROUP
The standard gauge railway (SGR) line raked in sales of
Sh10.1billion in its second full year of operations, signalling that the
mega project will take longer to break even.
Freight
services, which started in January 2018, generated Sh8.4 billion in the
year to June, internal performance data from Kenya Railways shows.
The
data shows that China Communications Construction Company, the
operator, increased sales from the passenger service to Sh1.76 billion,
up from Sh1.23 billion a year earlier—reflecting a growth of 43 percent.
The
revenues were not enough to meet the operation costs, which are
estimated at Sh1.5 billion a month or Sh18 billion a year. Kenya
Railways had budgeted to earn some Sh24 billion from the cargo service
in the year to June, falling 65.56 percent below target.
The
below target performance was attributed to reduced limited storage
capacity at the Embakasi Inland Container Depot (ICDN), minimum use of
the Nairobi Freight Terminal that handles cargo not stored in containers
and cost tariff.
“There were several instances when
the ICDN facility was congested, which impacted heavily on turnaround of
resources and thus contributing to movement of low volumes. Closure of
some lines also impacted on loading capacity of trains,” Kenya Railways
wrote on the report.
The freight services formed the main economic justification for
the $3.2 billion (Sh323.20 billion) that President Uhuru Kenyatta’s
administration pumped into the project through loans largely procured
from Exim Bank of China from May 2014.
Kenya Railways
data shows the freight service moved 4,009,386 tonnes of cargo in the
year to June against a target of 8,022,514 tonnes.
In
the first full year operation to June last year, SGR made revenues of
Sh2.4 billion, but this was based on a freight operations of six months.
Cargo
charges on the SGR line from Mombasa to Nairobi were increased by up to
79 percent from January this year in a bid to raise more revenue to pay
the Chinese operator.
But some importers said their
transport costs shot up by nearly 50 percent when they used the rail due
to extra fees, more time spent clearing goods at the Nairobi train
depot and the need to send a truck to collect the goods from there.
The
below target performance comes at a time when businesses based in
Nairobi and upcountry are compelled to use the new railway line because
the Mombasa port is contracted to supply it with a minimum amount of
cargo.
Moving a 40-foot container to Nairobi by rail
costs nearly Sh80,000 - roughly the same as a truck, says the Kenya
Transporters Association.
But importers must also pay
at least Sh25, 000 for a truck to collect the goods from the Nairobi
depot, breaching the Sh100, 000 mark.
The cost of
transporting a 20-foot container from Mombasa to Nairobi increased to
Sh51,275 in January from Sh35,000, a 46.5 percent rise
Kenya
Railways—which acts as the regulator of railway transport—has sought
Cabinet approval to cut the freight charges to boost traffic.
Kenya requires additional cash from the railway business to ease the taxpayers’ burden of paying the Chinese SGR operator.
China Road and Bridge Corporation (CRBC) runs the SGR cargo and passenger business for an undisclosed management fee.
The
Treasury also expects the SGR business to generate more revenue to help
offset loans taken to build the multi-billion shilling railway line.
The Treasury will pay Sh61.2 billion in the year that started July, up from Sh30.9 billion it paid in the year ended June.
Kenya
borrowed Sh324 billion for the project from the bank in May 2014, to be
repaid in 15 years, with a grace period of five years.
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