Modern railway will lay foundation for Kenya’s belated economic takeoff

Debate on the proposed standard gauge railway line between Mombasa and Nairobi, which is being implemented by the Government, has largely been stuck around the way the project was procured.

While it is proper and in the national interest to have this debate, it obfuscates SGR’s great potential as a catalyst for economic takeoff both in Kenya and indeed the rest of East Africa.

It is, however, heartening to note that this fact was the crux of President Uhuru Kenyatta’s State of the Nation address, and especially his comments on the project.

The region continues to be an economic backwater, largely due to layer upon layer of systemic inefficiency. Regional businesses cannot operate and compete optimally.

The single most important factor that makes trade in East Africa an expensive affair and goods produced in the region uncompetitive when arraigned against alternatives from the rest of the world is the cost of production, of which transport is a major component.

Out of every Sh100 that one pays for a product in Kenya, Sh45 goes into paying for transport. Plainly put, this means subsidising our inefficient transport network.

This is very steep compared to countries like China, Brazil, Russia and India which have been able to manage this key variable and hold it at between five and 15 per cent.

Home turf

The result is that ironically, some goods manufactured elsewhere land in our shops much cheaper than what is produced here. Our companies cannot compete. Our brands cannot win even on their home turf.

An overstretched road transport can barely cope and is suffering severe wear and tear. A poorly serviced railway network is not even an option worth talking about. Yet goods transport is best done by trains the world over.

By offering a viable alternative, the SGR will have done a lot to the Kenyan economy.

Our competitiveness will grow and as a result, Kenyan-made goods are likely to replace the foreign ones on our shelves.

Many new, sustainable jobs will be created, not to mention the other advantages this is likely to spawn down the value chain. Kenya’s strategic location on the eastern seaboard of the Indian Ocean has placed it in a unique position as a gateway to the region.

Mombasa port has traditionally played this role, but its performance has been greatly stymied by the inefficiencies inherent in the transport systems of the rich and growing hinterland it serves, what is normally referred to as the Northern Corridor.

This hinterland includes not just Kenya but Uganda, Rwanda, South Sudan, eastern DR Congo and potentially, Burundi and Ethiopia or at least huge swathes of these countries.

Under the Tripartite Initiative for Fast-Tracking the East African Integration, Kenya, Uganda and Rwanda have lately done a lot to reduce inefficiencies and remove non-tariff barriers (NTBs) to trade on the Northern Corridor road that runs from Kigali to Mombasa. But that is not enough.

Only a seamless and efficient railway transport network can resolve the challenge of cargo haulage on the corridor. Kenya cannot afford to rest on its laurels.

The hinterland states are under no obligation to export and import their goods through Mombasa. Actually, the rate at which competing ports, principally in Tanzania (Dar es Salaam, Tanga and Bagamoyo) and Djibouti are improving their facilities and hinterland transport implies that if Kenya does not move in tandem, other countries will soon be eating its lunch.

Ethiopia is currently implementing a massive and ambitious modernisation of its railway infrastructure, which could make Djibouti a better outlet for lucrative South Sudan oil.

Losing out would be disastrous for an economy in which 80 per cent of all commercial activity is built around the Northern Corridor.

At the micro-level, the SGR will spawn a lot of opportunities for Kenyans: jobs and businesses, during its construction. Besides those working on the project itself, there will be contractors providing such vital services as hospitality, entertainment, security and transport.

Hands-on experience

Few Kenyan engineers or technicians have hands-on experience in the actual building of a railway track, considering that there has been no major physical addition to the line built by the colonialists over 100 years ago.

The SGR presents a great opportunity for technology transfer. The potency of the railway as a magnet for economic activity is evidenced by Nairobi itself.

The city’s choice as capital city in preference over Machakos and growth as centre of commerce was greatly enhanced by its status as a railway hub.

Kenya’s urbanisation has been largely linear, along the railway line. The SGR line has the potential to once again liven up some moribund towns, infuse commerce into them and create more opportunities for the enterprising Kenyans.

The author is a transport and logistics manager.