Railway revamp a brave and timely move for Kenya

Early this month Kenya Railways Corporation took a full page advertisement defending its Railways Master Plan.

Their ambitious and brave decision to radically change the shape of the railway system to the Standard Gauge warrants to be given a chance and supported.

A mega project like this one is destined to make a long term difference in the economic destiny of a number of EAC nations.

It is the brave and ambitious decisions that were made in the seventies to construct the JKIA, the Oil Pipeline, the KICC, the Nyali Bridge and others that sustain the economic growth of today.

Even then not all were in full support of such projects, nor will there be no murmurs on the proposed radical railway design.

The existing railway network under capitalised and run down for so long may be out of tune with the technology and needs of today, and revamping it may not offer intelligent solutions for tomorrow.

However, the plan by the Railway Corporation to initially stop the line at Malaba is short-sighted and ignores the role of the rail line to the emerging EAC.

A business and financial model for the project that does not involve Uganda from the onset may miss some essential success factors.

Due to the heavy capital outlay for the project, it needs a critical mass of tonnage to provide the cash flow needed to finance borrowings.

This inevitably means full integration of Uganda, Rwanda, Southern DRC and Southern Sudan requirements by conversion from road tonnage to rail tonnage.

The justifying vision should be to achieve express block trains from Mombasa to Nairobi and destinations in Uganda with minimum Malaba border transit time.

It can happen because we saw it happen during the old EAC days, when all regional haulage was by rail, and EAC countries were virtually borderless.

The basics of the project justification and design must have faith in a functional future EAC.

The ultimate efficiency and unit costs should be such that road haulage will willingly transfer to rail without requiring regulatory intervention by governments.

However, we should not underestimate the strength of the road transport lobby and vested interests, as these will certainly push back.

I see a case where the new railway system has terminals at Jinja and Kampala and possibly extends to Kabale for Rwanda and Kivu region, while another terminal is at Kasese or Fort Portal for the emerging oil fields and the upper part of Eastern DRC.

A terminal at Arua or Gulu will provide easy access to Southern Sudan.

KRA and URA can work out logistics and documentation modalities that safeguard tax revenues for the two countries.

To provide integrated support for the new look rail line initiative, attention should not be immediately diverted from Mombasa Port to a new proposed port at Lamu.

The full potential for Mombasa Port is not exhausted as capacity for development exists to the furthest end of the Harbour.

Modernisation and expansion of Mombasa Port should go hand in hand with the design and development of the high capacity rail line to Uganda.

A business and financial model for the project should invariably have private sector content in it, with probably a 49/51 government/private shareholding.

The venture may not even need to concession if it can professionally operated as a business.

The two governments can raise cash from their Bond markets to supplement their cash input, in addition to getting long term guaranteed finance from international lenders.

A project based on the two countries rail network that outreaches the neighbouring countries is likely to positively attract international and private financing more than a line terminating at Malaba.

A line from Lamu to Southern Sudan is questionable and premature at this moment in time, since the political set up of Southern Sudan is yet to crystallise .

It is more prudent to initially target the Southern Sudan transit business from Mombasa through Uganda, and thus augment the economics of the main Kenya-Uganda rail system.

None at this moment can explicitly tell what political shape and orientation Southern Sudan will take.

South may even decide to make the good political sense of cooperating with the North and make Red Sea their preferred trade route.

Good economics always prevail over bad politics eventually.

Justification for the line from Nairobi to Moyale intended to serve Ethiopia is again misplaced and precarious.

The natural and logical ports to serve Ethiopia are Asmara and Massawa in Eritrea, and it is only because the two countries are in a state of war that Ethiopia is using the longer and more expensive route via port of Djibouti.

For Ethiopia to turn to Mombasa, it will be even more expensive.

Eritrea and Ethiopia will one day (sooner than later) decide to do what is politically and economically sensible and they will be back to using Asmara and Massawa as transit ports for Ethiopia.

That is why we should not be in a hurry to contemplate a project via Moyale justified purely on bad politics between Ethiopia and Eritrea.

Stretch to Uganda

Kenya Railways Corporation plan for a new grass root modern rail line is in keeping with time, and should be progressed with the benefits of EAC in mind.

The initial design should go full stretch to the ends of Uganda to access the full cargo potential in the region.

At the end of it we should see a payback for EAC countries in haulage efficiency, reduced unit transport costs, extended life for our roads, and increased road safety.

A good business and investment model will emerge if Kenya and Uganda work together to form a joint venture financed by the private and public entities of the two countries.

In the meantime Kenya should polish up its political demeanour and assure regional neighbours that Kibera-type of rail disruptions will be a thing of the past.

Wachira works with Petroleum Focus Consultants. Wachira@petroleumfocus.com