Demand for steel set to drive up rail cargo volumes
A new locomotive belonging to Rift Valley Railways at the company yard in Mombasa. PHOTO | FILE
What you need to know:
The market is already responding to the improvements in our operations and we’re winning clients in major new sectors.
Rift Valley Railways (RVR) hopes to ride on growing demand for steel and iron in East Africa to double the volume of cargo it is transporting ahead of the March review of its performance by the governments of Kenya and Uganda. RVR officials say their 20 US- built locomotives which they started to receive from September, are attracting road users who face strict loading controls.
“The market is already responding to the improvements in our operations and we’re winning clients in major new sectors,” RVR said in a written response to the Business Daily’s questions.
It adds: “We made specially adapted wagons that enabled us to move large amounts of steel, hitherto a preserve of the roads sector, by rail to Uganda and in Kenya.” The demand for steel and iron has risen sharply as Kenya, Uganda and Rwanda start work on the standard gauge railway (SGR).
The three states have also appointed a consultant (Toyota Tsusho) to oversee the construction of a crude oil pipeline which is expected to further push up demand for steel in the region.
The volume of cargo handled is one of the three indicators that Kenya and Uganda governments use to review performance of the 25 year concession handed to RVR to run the railway line linking the two states.
The countries have currently assigned the RVR haul at between 10 and 12 per cent of the cargo arriving at the port of Mombasa. They have also asked the RVR to pay 11.1 per cent of its revenue as concession fees and invest at least Sh3.6 billion ($40 million) in rail transport.
Unlike previously when a cloud of uncertainty would hang over the future of the 25-year concession agreement ahead of performance reviews, the RVR officials are exuding confidence this time around.
“We are in compliance with current volume targets set by both governments, have paid concession fees of Sh5.4 billion ($60 million) to date and are three times ahead of the investment threshold, having invested more than $125 million to rebuild the company,” the firm said.
Kampala and Nairobi have also been positive about the deal with RVR in the last few months, with Kenya’s transport and infrastructure secretary Michael Kamau describing the recent purchase of General Electric locomotives as a major turning point.
The RVR’s focus on high-profile loads come just weeks after the East African states settled on uniform maximum weight of 56 tonnes spread over seven axles for its roads.
In June, however, Kenya which initially insisted on a lower weight of 48 tonnes, gazetted a new gross vehicle mass of 52 tonnes which has to be distributed on six axles, further reducing the appeal of commercial trucking to shippers moving bulky cargo.
Despite positive official reviews, the industry players say the current low uptake of rail transport has driven up freight charges, raising cost of production in the region.
“The current rail capacity is subject to delays, breakdowns, low speeds and service disruption which result to high inefficiencies for the cargo owner who incurs costs due to delayed shipment,” says the Shipping Council of Eastern Africa CEO Gilbert Langat.
The RVR has already entered into partnership with leading oil marketers to refurbish fuel-ferrying tank wagons, a deal which the company says will see an additional 300 such wagons added to the fleet over the next year.
