SGR cargo revenue declines by Sh154m in five months

Revenue generated from transportation of cargo on the standard gauge railway (SGR) dropped 3.3 percent, or Sh154 million, in the first five months of the year, official statistics show, amid continued pressure by the State on importers to use the line to move goods from Mombasa.

Freight services, which informed the decision to build the modern railway from Mombasa to Suswa near Naivasha, earned the country Sh4.51 billion in the January-May 2020 period compared with Sh4.66 billion a year earlier, data by the Kenya National Bureau of Statistics (KNBS) indicate.

Cargo services were not affected when President Uhuru Kenyatta ordered cessation of movement into and out of Mombasa and Nairobi early April. Passenger services were, however, suspended.

The KNBS data shows China Communications Construction Company, the SGR operator, sold 320,730 tickets in January-March 2020 period before the “Madaraka Express” (passenger) services were temporarily paused early April.

Earnings from passenger services in the first quarter of the year amounted to Sh350.33 million, a drop of 17.84 percent compared with the year before when 355,554 seats were booked.

The passenger services only resumed on Monday, albeit on half capacity as part of measures to stem the spread of the coronavirus pandemic.

The KNBS data shows nearly 1.6 million tonnes of cargo were ferried from Mombasa to Nairobi on the SGR line between January and May 2020, a drop of 5.05 percent compared with more than 1.68 million tonnes a year earlier.

Data sourced from the Kenya Railways Corporation indicate transporting a tonne of merchandise on the SGR cost importers Sh2,820.79 on average in the review period, a slight increase from Sh2,769.58.

The SGR line has struggled to attract adequate cargo volumes with investors balking at the tariffs to transport goods from the Port of Mombasa to the inland container depots (ICDs) in Nairobi and Suswa near Naivasha.

The Treasury also expects the SGR business to generate more revenue to help offset loans taken to build the multi-billion shilling railway line, and ease the burden on taxpayers.

The freight services formed the main economic justification for the $3.6 billion (Sh384.84 billion under prevailing exchange rates) President Kenyatta’s administration pumped into the first phase of the project through loans largely contracted from Exim Bank of China from May 2014.

Another $1.5 billion (Sh160.90 billion) loan was spent to link the modern railway line to Naivasha, a section that was completed earlier in the year.

More than 90 percent of Kenya’s merchandise imports are shipped in through the Port of Mombasa.

Latest statistics show goods valued at Sh655.70 billion were ordered from abroad into Kenya in the January-May 2020 period, a drop of 10.11 percent, compared with Sh729.43 billion in the same period of 2019.

The drop is partly linked to depressed domestic demand due to economic shocks of Covid-19.

Kenya had earlier directed that all transit consignment to the landlocked countries such as Uganda, Rwanda, South Sudan, DRC and Burundi using Port of Mombasa, be transported via SGR to Naivasha ICD where they will be collected by owners and loaded onto trucks.

The Kenya Revenue Authority (KRA) had already gazetted Naivasha ICD as a customs station, and had started clearing some of the transit cargo at the new transshipment station.

“The drop in the journey by about 600km will also cut down on accidents and damage to roads by heavy tankers and trucks,” Transport secretary James Macharia had said in an earlier interview.

“We don’t know whether people have got vested interests in this, but we are very clear on what we want and this is a matter which was discussed by the (East African Community) Heads of States’ Summit.”

Ministry of Transport has since climbed down on earlier stance, allowing optional transportation of transit cargo on the SGR to Naivasha through a statement to the National Assembly sought by Mvita legislator Abdulswamad Nassir.

This followed protestation from within the country led by transporters at the Coast, and outside where Uganda had in late May rejected the plan in a letter to Kenya, calling for optional use of the Naivasha transshipment station in what points to a U-turn by Kampala after virtual EAC’s Heads of States’ Summit.