Rufiji
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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.
Related Content
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.
Cargo shortage has hit the standard gauge railway’s goods haulage business, forcing Kenya Railways to delay the daily service. PHOTO | NMG
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.
Kenya's Transport and Infrastructure Cabinet Secretary James Macharia. FILE PHOTO | NATION MEDIA GROUP
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
Source: Kenya’s SGR cargo volumes cast doubt on its viability
My Take:
History will judge harshly President Uhuru and his cronies for bamboozling the Kenyan public. The Kenya's SGR cargo has failed miserably to live up to its hyperbolize expectations. Many people in Kenya were made to believe that this project will revolutionize transportation and in turn plays a significant role in streamlining the economy. Unfortunately, the truth is pretty far fetched and many people now are casting doubts on the viability of this experiment. The government, on the other hand, has tried to use all the power at its disposal to mandate traders to use SGR to haul their cargo from Mombasa port to Nairobi to no avail. Currently, only 1/6 of SGR's capacity is being utilized. That means, it will be difficult for SGR to break even let alone makes profit. The Kenya's government should be prepared to bank roll this white elephant, in the form of subsidies, for a foreseeable future.
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.
Related Content
- Goods shortage stalls Kenya SGR cargo business
- Railway set to cut down cargo freight costs
- SGR makes little impact on the counties it traverses
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.
Cargo shortage has hit the standard gauge railway’s goods haulage business, forcing Kenya Railways to delay the daily service. PHOTO | NMG
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.
Kenya's Transport and Infrastructure Cabinet Secretary James Macharia. FILE PHOTO | NATION MEDIA GROUP
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
Source: Kenya’s SGR cargo volumes cast doubt on its viability
My Take:
History will judge harshly President Uhuru and his cronies for bamboozling the Kenyan public. The Kenya's SGR cargo has failed miserably to live up to its hyperbolize expectations. Many people in Kenya were made to believe that this project will revolutionize transportation and in turn plays a significant role in streamlining the economy. Unfortunately, the truth is pretty far fetched and many people now are casting doubts on the viability of this experiment. The government, on the other hand, has tried to use all the power at its disposal to mandate traders to use SGR to haul their cargo from Mombasa port to Nairobi to no avail. Currently, only 1/6 of SGR's capacity is being utilized. That means, it will be difficult for SGR to break even let alone makes profit. The Kenya's government should be prepared to bank roll this white elephant, in the form of subsidies, for a foreseeable future.
