Why Kenya may not reap the full benefits of SGR

The punditry party on Kenya’s knight in shining armour — the 470km Mombasa-Nairobi standard gauge railway line worth $3.2 billion — may have started long ago but is certainly far from closure.

Judging by the little information available in the public domain this far, the huge public investment, which is Kenya’s largest and most expensive infrastructure project, seems not to have been properly structured to meet its objectives.

Let’s begin by addressing the argument that Kenya moving away from the metre gauge (Lunatic Express) to the standard gauge (Madaraka Express) is in line with the latest rail technology standards and therefore deserving of the huge $5.6 million per km price.

The fact of the matter is that the standard gauge is as old as the metre gauge and pre-existed close to 50 years before the British built the Lunatic Express metre gauge line in 1896.

When the French revolution took King Louis XVI by surprise in 1789, he found it difficult fleeing due to the paved narrow roadways of Paris. It took him 21 hours to cover the 150 miles from Paris to Varennes.

But her neighbour Italy had already pre-planned for such eventualities centuries earlier during the Roman Empire.

They built their roads using paving stones together with a rut in the stones on both ends of the road that were 4ft 8.5 inches apart along the way. The ruts were created specifically to act as rails for the war chariots pulled by war horses to run with ease and speed.

Later in the 19th Century, the gauge of 4ft 8.5 inches apart was borrowed as the standard setting for railroads, starting from the famous flying Scotsman that operated between Edinburgh and London. The question is then why the British didn’t build the Lunatic Express as a standard gauge railway.

The most certain answer is that the British colonialists only needed a cargo railway network to ship out natural resources and the metre gauge was their best option.

The standard gauge railway due to its accommodation of high speeds of more than 120km/hr is primarily used in passenger transport — as a backbone of urban transport system linking regions.

In Kenya, we seem to have reversed the logic and built the standard gauge railway for cargo services, negating the fact that most freight tend to have a low-value of time and therefore benefit little from cargo trains that run at speeds of more than 60-80km/hr.

Second, most urban rail lines are designed as double-track with each direction having a separate rail track so that trains in different direction do not interact. Since trains get similar performance speed because they don’t overtake each other, having a double-track makes its easy in scheduling a train timetable.

A good train timetable schedule basically should achieve considerable service quality to customers (shortest travel time possible and passenger safety guaranteed) and little or low costs to operators, an efficiency point economists call the pareto-optimal.

Unfortunately for Kenya, SGR is a single track servicing both passenger and cargo trains. This is despite extensive rail research and analysis showing that single tracks are better used for cargo but not passenger transport or both.

With the four- to five-hour travel time hallmark as the selling point for the SGR over road transport that is its main competitor, optimising the operation becomes a more complex affair.

With the single line, and maintaining a time of four to five hours, the track between Mombasa and Nairobi can only accommodate a maximum capacity of eight trains a day with a split of four coming from opposite directions. Anything above that will be putting passengers at risk of head-on collisions or long stop-over delays.

Third, the fact that the SGR has ballooned the public debt to GDP by six percentage points makes it not only prudent but also incumbent upon Kenya Railways to ensure that more value and revenue are created out of this public investment.

The best practice in railway management is to liberalise the infrastructure and the British rail model has always been used as the benchmark.

When privatisation revolution led by Margaret Thatcher in the 1980s swept the world, the government she led chose to fragment the rail network by keeping the track and franchising operation of trains at the regional level.

This part-privatisation framework is a top-down model of competition economics best placed to deal with the problems of natural monopoly like poor cost-control, rent-seeking, endemic misallocation of resources, ferreting out incompetence, and lack of entrepreneurship spirit.

Therefore, it should be a mainstream cause of Kenya Railways to establish a contestable market through intra-rail competition where multiple operating firms run wagons and locomotives are given equal access to the SGR track while at the same time offering track capacity in a way that permits operating companies to survive and prosper.

With more operators on the track, SGR can therefore find itself at the centre of East African overall transport and logistics sector since operators will have to scramble to find customers at the right price, quality and cost while at the same time competing with other transport modes (mostly roads trucks) aggressively and defending and expanding their market share.

But what we have is an insidious approach that falls short of the promise of economic wisdom. In our case, a Chinese financier, the Exim Bank of China, which paid 90 per cent of project cost, has imposed an operator on Kenya and Uganda to solely run the rail track from Mombasa to Kampala.

The contractor, Chinese Road and Bridge Corporation, seems to have been granted 10 years to manage the track and has already brought in 400 Chinese personnel to take charge of operations until it is handed over to Kenya.

What we seem to have done here is that we have fragmented the infrastructure and then monopolised it back to the Chinese at the expense of the Kenyan taxpayer who is already paying for the huge loan extended to this project.

Ultimately, the future record of this knight in shining armour is likely to disgrace its past as a white elephant.