Agencies between a rock and a hard place in rail travel | So Good News
East African governments are having sleepless nights in their quest to revive and guarantee an efficient rail system to lower the cost of moving cargo.
While Kenya successfully built a standard gauge railway connecting the port of Mombasa and the inland port of Naivasha to facilitate the transport of cargo to neighboring countries, a recent policy shift that gives importers the freedom to choose their mode of transport has left the authorities between a rock and a hard place. place.
For example, a policy change by the Kenyan government aimed at improving logistics services has left the Kenya Railways Corporation sweating to retain customers in the face of a flight from the standard gauge to other transport options.
With declining performance, Kenya Railways is struggling to keep revenue losses afloat with varying degrees of success. There is also uncertainty when the new administration settles down with new political measures aimed at reforming the sector.
This week, sitting before MPs for scrutiny, Roads, Transport and Public Works Secretary-designate Kipchumba Murkomen previewed the President William Ruto administration’s plans for the SGR which reported an operating loss of Ksh3,488,038,551 ($28.8 million) for the financial year 2021/22, according to official data.
The introduction of SGR passenger trains in 2017 and a freight train the following year was part of a wider regional network connecting Kenya, Uganda, Rwanda and South Sudan. Each of the countries was expected to develop the section of the railway line within its borders, and Kenya led the pack.
Most of the cargo handled at Mombasa port is destined for Uganda, Rwanda, South Sudan, Ethiopia, Burundi and the Democratic Republic of Congo, which accounts for 30 percent of the cargo through Mombasa.
Since the introduction of freight trains in 2018, the government made it mandatory to transport cargo from the port to Nairobi and other hinterlands using the SGR, locking truck drivers out. To entice East African countries, Kenya allocated each country using the port 10 acres to establish dry ports in Naivasha in the Central Rift.
But President Ruto’s government has moved ahead with policy changes, a move that potentially puts Nairobi on a collision course with China. The change is said to go against the agreement between Kenya and Beijing on a pick-or-pay agreement to ensure traders use the SGR and use the guaranteed business to repay the $3.7 billion loan taken out to finance the project .
Last week, National Treasury denied reports that China has penalized Kenya Ksh1.312 billion ($10.8 million) for late payment of loans to SGR. Finance Minister Ukur Yatani maintained that Kenya had not defaulted on its public debt, claiming that the country has not accumulated repayments for decades. He was reacting to media reports indicating that the late payments to the Chinese lenders had resulted in penalties.
The end of the mandatory use of the SGR puts Kenya Railways in a difficult situation. With around 400 trucks expected back on the roads, SGR freight revenue is expected to drop by more than half, logistics experts say.
“As we expect more trucks on the Northern Corridor, cargo transported via the SGR is expected to decrease to 20 percent from the current 40 percent,” said Shippers Council of Eastern Africa CEO Gilbert Lagat.
According to data from the Kenya National Bureau of Statistics, in the first six months of this year, SGR recorded $750 million in revenue, of which $610 million was from cargo volumes. The turnover in the last five years is a total of 4.6 billion dollars. Passenger revenue was $160 million in the same period, an indication that SGR is dependent on freight to stay afloat.
To ensure that traders in the region continue to use the SGR, Kenya Railways has launched an intensive campaign to limit the earnings of truck drivers. KRC CEO Philip Mainga and a team from the Business and Corporate Affairs Department this month visited various companies and organizations to try and lobby them to continue using rail services.
KRC has also launched online and offline advertising campaigns and has drawn up plans to improve both cargo handling and passenger services to compete with the truckers.
Northern Corridor Transit and Transport Coordinating Authority (NCTTCA) Executive Secretary, Omae Nyarandi, said KRC remains relevant in the sector they will need to review their fees and improve efficiency.
“KRC must solve the last mile problem by working with truckers and provide one package to attract more users. But while we support the use of trucks, we should consider the effects on the roads and the increasing carbon emissions,” said Nyarandi.
On Friday, businesses met in Mombasa and called on the Kenyan government to extend the SGR line to Malaba to save it.
“The purpose of expanding the SGR is to transport goods from Mombasa to the landlocked countries seamlessly. Tanzania has a plan to work with Rwanda, Burundi and DR Congo to build connectivity through the SGR, but Kenya is lagging behind despite being the first with launching a modern railway.” said general secretary Simon Sang of the Dock Workers Union.
“Considering our geographical position, Kenya has a greater potential, so it has to move quickly.”
Allow businesses to own carts
Kenya Maritime Authority Acting Director General John Omingo suggested that Kenya Railways allow companies to own carriages.
“Kenya can win big by ensuring the port is efficient. All modes of transport should be left to be competitive and the directive from President Ruto will enable this. We have a lot to gain from the blue economy but we need to ensure efficiency,” said Mr Omingo.
But Kenya is not the only EAC partner in a quandary. In Uganda, a mix of corruption scandals, dilapidated railway tracks and political interference have affected Uganda Railways, forcing traders to opt for the more expensive road transport to transport cargo. Business describes Uganda railways as “inefficient and unreliable” with long transit times resulting from low average speeds of less than 30km/h.
Uganda’s Ministry of Works and Transport’s Integrated Transport and Infrastructure Service (ITIS) Program Performance Report 2020/21 financial year confirms business concerns. Instead of being a cheaper and safe mode of transport, using Uganda railways has pushed up costs. Of a route length of around 1,250 km, only 21 percent of the network is in operation, and over 985 km of the railway line is out of use.
Falling shipping volume
– The rest of the railway network was closed due to falling freight volumes which triggered deferred maintenance and then a run-down track with several sections that were vandalised, says the Ministry of Transport.
The URC is also struggling with a shortage of locomotives, now six, down from 43.
Ugandan government efforts to procure new locomotives last year were marred by corruption allegations. The four locomotives procured from the South African manufacturer, Grindrond Rail, and delivered in August 2021 cost US$48 billion ($12.6 million), prompting President Museveni to fire the entire board and CEO and order their prosecution.
President Museveni wondered why $12.6 million was spent on second-hand locomotives “instead of new ones from China”.
“It was even cheaper at six years at $9.4 billion, but they went for eight years at $48 billion,” he said.
Uganda banked on the locomotives to increase rail freight, reduce transit time from Malaba to Kampala from 48 hours to 12 hours, increase volumes from 600 tonnes to 1,500 tonnes and increase expected volume per month to 40,000-60,000 tonnes.
Miriam Tumukunde, assistant coordinator of the SGR project says there is currently more than 18 million tonnes of cargo on the Malaba-Kampala route, projected to grow to around 30 million tonnes by 2028 when the rehabilitation of the MGR will be completed. But she argues that MGR will not be able to move even 10 percent of the available cargo to the railway then.
Uganda’s water transport, which would have enabled the seamless flow of rail freight, is also declining, weighed down by a shortage of marine vessels.
While Uganda has four vessels, only MV Kaawa MV Pamba are operational.
Uganda’s section of Standard Railway (SGR) launched 10 years back by the EAC Heads of State has not moved an inch, raising many questions from the civil society.
In 2013, Kampala embarked on the 273 km line from Malaba to Kampala, as the first section it would develop in its SGR network, contracted to China Harbor Engineering Company, with the Chinese Exim Bank financing 85 percent of the project while the Government of Uganda met 15 percent of the cost. But the Ugandan government says the Chinese continue to weaken, forcing Uganda to hunt for alternative financing.
Meanwhile, Tanzania has been on a fundraising spree to expand its SGR to the Great Lakes. Tanzania’s 1,637 km long SGR line is being built in phases by contractors from Turkey and China. The first phase from Dar es Salaam to Morogoro (300 km) is expected to start next year after successful test runs. Works and Transport Minister Prof Makame Mbarawa said this week that government plans to put Kigoma on the Standard Gauge Railway (SGR) network through a link from Tabora.
“We will then build a new 282km line connecting Uvinza and Gitega in Burundi as we also aim to increase our trade with the Democratic Republic of Congo,” he said.
In August, Dodoma invited bids for the construction of the Uvinza-Gitega line. In an August 12 notice, interested parties were given until November 15 to submit bids to the Tanzania Railways Corporation, to design and build the line from western Tanzania to Burundi’s administrative capital.
The TRC said funds have already been set aside by both governments for the bilateral project to take off by the 2022/2023 financial year.
“It is intended that part of the proceeds from the funds will be used to cover eligible payments for contracts under the D&B [Design and Build] arrangement,” the TRC said in the notice.
The project will involve 282 km of the main line and 85 km of sidings/passing loops. Lot 1 will cover 180 km from Uvinza to Malagarasi in Tanzania, and Lot 2 will cover 187 km across the border to Musongati and then Gitega.
The project has been in the pipeline since January, when the two countries signed a memorandum of understanding on initial cost estimates of $900 million.