Cargo firms, truck owners should adapt to SGR reality

By mid-1970s, the East African Railways was the king of long-distance transportation with Mombasa, Nairobi, Nakuru, Eldoret, Kisumu, Jinja and Kampala as the key hubs.

Branches to Moshi, Magadi, Nanyuki, Nyahururu, Solai, Kitale, Lira and Kasese created a web of regional railway networks, and at each railway town, rail sidings provided connections to warehouses, factories and oil depots. Rwanda import and exports including petroleum products were handled though Kampala station.

When the East African Community collapsed in 1977 Tanzania closed borders with Kenya, resulting in loss of transit traffic from Mombasa to Moshi and the lake ports of Mwanza, Moshi and Bukoba which were fed from Mombasa by railways via Kisumu port. The railways name changed to Kenya Railways (KR) in 1977.

About the same time, difficult relationships between Presidents Jomo Kenyatta and Idi Amin of Uganda fractured links between Kenya and Uganda railways resulting in loss of rail synergy between the two countries.

This is when transporters, mainly Italians and Somalis from Mandera, emerged from Somalia where they were engaged in long-distance transportation and populated the highway between Mombasa and Uganda with old Fiat/Iveco trucks. To fill the railways void, Rwanda formed a state company (STIR Kigali) to truck cargo (including petroleum) to and from Kenya.

The coming of Nairobi-Mombasa oil pipeline in 1978 took away from the railway, all bulk products (except fuel oil) transportation to Nairobi. The 1993 pipeline extension from Nairobi to western Kenya took away the remaining petroleum transportation.

The Kenya Tea Development Authority (KTDA) was the largest single upcountry consumer of fuel oil and by late 1980s they started direct road deliveries of fuel oil from Mombasa to their tea factories all over the country.

Previously they picked smaller lots of fuel oil from upcountry oil depots which were fed by KR. It is the KTDA that mostly introduced indigenous Kenyans to long-distance road transportation ferrying fuel oil from Mombasa. Direct deliveries of tea from factories to Mombasa by road was the next major threat to KR business.

By 1990s KR had shrunk to a mere shell of idle infrastructure having lost most of its business to trucks, and this led it to concession its assets to Rift Valley Railways (RVR) in mid 2000s.

By the time the SGR came, it found firmly entrenched stakeholders who included cargo forwarders and transporters who controlled nearly all cargo movements from Mombasa.

New towns had sprung up along the highways to service long-distance trucking. Further, new factories and warehouses had been set up at locations away from railway stations and rail sidings to align with port-to-destination road haulage.

I am a very strong advocate of railway transportation and I have defended the SGR wherever logic permits. However it appears that SGR planners ignored a number of critical factors in their initial studies.

Firstly, they assumed that regional outreach would be there to provide the essential cargo tonne-kilometres. The apparent collapse of the CoW (Coalition of the Willing) which espoused regional infrastructure cooperation may have caught the SGR unprepared and this obviously dented project economics.

Secondly, with high capital costs, assumptions for unit cost modelling should have signalled poor project economics. Finally, a strategy to handle road transport stakeholder impacts and concerns may have been ignored.

Now we have to realistically make the best with the SGR we have. An Internal Container Depot (ICD) in Naivasha will definitely capture nearly all containerised import and export traffic, together with Western Kenya cargo including tea exports. This makes Naivasha ICD a priority project. Indeed Naivasha/Suswa is more about transit cargo than passengers.

The Mombasa-based cargo forwarding and road transport companies will need to face reality and re-model their businesses and gradually relocate to Nairobi and Naivasha ICDs. On their part the SGR has to make it convenient for cargo owners to efficiently clear their goods at Nairobi and Naivasha ICDs.

Finally, the authorities may require biting the bullet and in good faith renegotiate the SGR project financing terms with China focusing on extending loan tenor, slashing interest rates or any other onerous terms that may be impending SGR cash flows. This is for mutual economic and diplomatic benefit of Kenya and China.