LETTERS: Should we begin evaluating viability of the SGR?

Since the construction of the multi-billion shilling standard gauge railway (SGR) and its rollout on June 1 2017, there have been questions about the viability of the investment. SGR is estimated to have cost between $3.2 billion -$3.6 billion for the 472km from Mombasa to Nairobi with the track alone costing $5.6m per km ($2.6 billion).

According to Compass International website site, railroad engineering & construction Benchmark USA Location-2017 cost basis, high speed single track on new stone railroad base is estimated to be between $0.997m to $1.134 per km. Others estimate the cost of building a new railway line at between $ 1m to over $4 per km.

The fact is that it is not easy to establish proper comparison among different tracks in different locations. The railroad cost is a function of many variables; topography, track specifications, land acquisition, available infrastructure, access to site among others.

Projects in Africa are particularly very expensive, the scope can include infrastructure development to support the project. Construction of a new hydropower plant for example may require a contractor to build a brand new road to create access to the site to transport necessary equipment and machineries.

The SGR cost is debatable and many Kenyans feel the government have not convinced them enough how the railway will pay for itself. Some even predict doom if the SGR line does not reach Uganda and Rwanda. There is a narrative that the project can only be viable if Kenya grows its import bill at more than twice the current projected pace and that all Kenyan imports use SGR and that the neighbours Rwanda, Uganda, South Sudan and Eastern DR Congo connect to the line.

I am not sure what time frame is being used to evaluate the viability of SGR. The public is not privy to the content of the contract between Kenya and China government.

However, with the knowledge that themetre gauge railway (MGR) has been in operation since 1901 is it rational to evaluate the viability of SGR on current Kenyan economic performance; a GDP of about $80 billion, growth rate of 5-6 percent per annum, a net importer with 70 percent of cargo terminating in Nairobi and the remaining 30percent going to Western Kenya with a payback period of may be 15-20 years?

Before we debate the viability of SGR, let us travel back in time. In 1896 the British started the construction of then Uganda Railway MGR at the port city of Mombasa to reach Kisumu (Port Florence) on the eastern shore of Lake Victoria in 1901.

The MGR (1-meter gauge) was/is virtually a single-track with passing loops at stations to allow trains travelling on opposite sides to pass each other.

Due to level of technology then, the line meandered around the mountains, has sharp bends, steep gradients that significantly restrict speed, capacity and has been prone to accidents particularly derailment.

The line has been operating below capacity for many years because of this. I am sure if MGR was to be upgraded today, as some had suggested, it would not deliver any significant performance improvement, unless the whole line is overhauled akin to building a new MGR.

The British sourced the material and labour used to construct the MGR mostly from India. To facilitate the receipt of material for MGR a modern port at Kilindini Harbour in Mombasa was built. The project was a huge logistical achievement then, strategically and economically important for opening up and development of both Kenya and Uganda.

One is left wondering if the project evaluation criteria used today; cost-benefit analysis or risk profile assessment, was applied to MGR, would the project been found viable?

Similar to SGR today, the MGR also faced a great deal of criticism in then British parliament. Majority of parliamentarians thought the project was exorbitantly expensive although the cost –benefit analysis did not exist in public spending at the time, which should be the same case today. Despite of all these resistances the railway was constructed and the rest is history.

The private sector with support of government can take lead to invest in railways in Africa.

The continent and Kenya in particular need to make a deliberate move to find out an innovative solution to finance the railways infrastructure with knowledge that this is public investment with the benefit stretching to over 50 -100 years to come. Ethiopia offer a good example, albeit with challenges, they have financed a huge project by mobilizing funds locally.

Oduor Saulo Omolo is Regional and Global Director Beyond Borders Limited.