Transport investors poke holes in SGR win-win narrative

Forget about a rosy picture where speed combines with efficiency in the cargo haulage to cut production costs as painted by government officials – and to some extent, private sector players.

To a number of transport sector investors, the period after June 1, the date chosen by government for rollout of the first phase of Kenya’s standard gauge railway (SGR) represents an apocalypse of some sort.

They see a ruse that has been carefully designed to conceal their future losses, a mystery that is already covertly redefining rules of competition even as the rest of the economy prepares to take a leap of faith.

Chiraz Yusuf, managing director of Ocean Engineering, a manufacturer of steel trailers and truck bodies in Mombasa, believes his firm is already reeling from the shock of SGR.

“The projection that SGR will cut the travel downtime from Mombasa to Nairobi has already put doubts on cargo business and we have recorded low sales in the number of trailers sold since October last year,” he told the Business Daily. Mr Chiraz, who says his firm has been selling an average 10 trailers a month from October 2016 down from about 30 trailers a month, fears that he will be out business once the railway starts running, and is therefore diversifying to repair works and selling trailer spares.

Truckers were the first group of investors to strongly voice their opposition against the SGR when the government first mooted the idea nearly six years ago. They received the support of clearing and forwarding agents, dock workers union and container freight stations (CFSs).

Mombasa County has lately joined the fray with Governor Hassan Joho accusing the State of scheming to move part of the county’s economy upcountry with plans to build a dry port in Naivasha in the second phase of SGR.

Of all these players, only the CFSs have had their concerns addressed directly after the Kenya Port Authority allocated 40 per cent of its cargo to their facilities.

Data from Kenya National Bureau of Statistics show a decrease in the number of new vehicle registration for trailers last year from previous years by a considerable margin.

By September 2016 new registrations stood at 2,142 compared to 3,905 in 2015 and 2,925 in 2014.

“Most cargo businesses have shelved their plans to expand their fleet waiting to see what the effects of the SGR will be in their sector,” said Mr Yusuf.

Official government information on SGR estimates that cargo transportation by road will decrease to 50 per cent from the current 95 per cent when the project is up and running, therefore reducing the number of trucks on roads.

It also forecasts that this will lower the cost of business due to less transit time while using the train and a higher container loading capacity of 4000 tonnes per train.

Long distance bus companies are also unsure of how the dynamics will play out in their segment of the market with the arrival of fast train from June.

Hashim Abdulrahman Sumra, general manager of Modern Coast Express, is one of the executives grappling with the SGR mystery as the government gets economical with information.

“There are still various unknown factors about the SGR project such as the cost of transportation and if the fare charged will compensate time since a big factor of the journey is time,” he said. At the back of his mind, however, he is hopeful that the SGR will only increase volumes to the Coast region and that every player will have a fair share of customers.

He said the trains might not take away competition as buses have different schedules during the day and compared to other countries where speed trains and subways exists, people still use buses for travel and cargo.

Both the cargo train and passenger trains are expected to be flagged off on June 1 after the Sh.327bn project was commissioned in 2013.

The passenger trains will have the intercity train which will be an express train from Mombasa to Nairobi with a stop at Mtito Andei while the County train will have seven intermediate stations to stop at for those making stops.