The government could lose more than Sh2 billion in revenue while about 100,000 jobs might disappear if the directive requiring all cargo from the port of Mombasa to be transported using the standard gauge railway is implemented. This is according to transport sector players who announced that they are already setting the stage to lay off workers.
The Kenya Association of Manufacturers (KAM), Kenya Transporters Association (KTA), Container Freight Stations Associations of Kenya, Kenya National Chambers of Commerce and Industry, Transport Workers Union and Truck Drivers Union said the directive will deeply hurt many companies, forcing some to even close shop.
During a press briefing, the stakeholders outlined the losses and number of staff they intend to send home and dismissed government’s position that transporting cargo by railway is cheaper than by road.
Transport Cabinet Secretary James Macharia suspended the cargo directive to give toom for further consultation with players in the industry that is facing imminent disruption.
“The government does not want to tell the public the hidden cost while using SGR to ferry containers from Port of Mombasa to Nairobi.
“It costs Sh80,000, including VAT, to transport a 20-foot container using truck to Nairobi from Mombasa and returning the empty container, but using SGR, one has to pay more than Sh90,000,” said KTA chief executive Dennis Ombok.
He said the government only talks about Sh50,000 freight charges using SGR but does not consider that one has to pay Sh5,000 handling fee, Sh25,000 to ferry containers from SGR stations to nearby Container Freight Stations (CFSs) and Sh10,000 for returning empty containers.
KAM also said that more than 800 of their members will be negatively affected by the directive.
CFS owners and chamber of commerce said they have each laid off about 6,000 employees since SGR introduced freight services one year ago.
Mr Ombok said more than 50,000 truck drivers have also lost their jobs.
The SGR carries 108 twenty-foot equivalent units (TEUS) per trip. This means 108 truck drivers are left jobless every time a train leaves Mombasa. On revenue, the players said, the government will this year unlikely collect more than Sh675 million advance tax which it usually gets from more than 15,000 trucks yearly.
The State will also miss 30 percent corporate tax, 16 percent VAT, Pay As You Earn (PAYE), import tax and railway development levy should the stakeholders close shop.
Mr Macharia has in the past insisted that the directive will take effect in the next two weeks as government seeks funds to pay first installment of the Sh324 billion SGR loan in January next year. He, however, said stakeholders will be consulted on the implementation of the directive.
“Once the directive resumes, we expect to haul more than 1,200 containers every day apart from the passenger services and by doing so, we shall break even and have funds to start paying the loan,” said Mr Macharia.
In an article published by the Sunday Nation, the acting Kenya Railways Corporation Managing Director Philip Mainga said the cargo moved from Mombasa to Nairobi by rail had increased to 1,059,215 tonnes in the first quarter of 2019.
SGR which has been billed as the biggest transport infrastructure project in the country's history is expected to haul close to nine million tonnes of cargo in order to make a profit of Sh5.08 billion in a year, averaging Sh424 million earnings monthly. This is compared to 990,488 tonnes carried in the first year where SGR made a loss of close to Sh10 billion.
The Shippers Council of Eastern Africa (SCEA) CEO Gilbert Langat who is also the chair of the Mombasa Port Charter Oversight Committee and KenTrade Board member is pessimistic on the government’s move to exlcusively haul cargo using SGR saying it will cause congestion at the Port of Mombasa.
“Port of Mombasa receives more than 3,500 twenty-foot equivalent units (TEUS) every day and at the moment, SGR can only carry 1,500 TEUS at its maximum so more than 2,000 TEUS will be left at the port uncollected every day and this will have a long-term ripple effect resulting to congestion,” he said. “Ship owners will be negatively affected with this directive as ship port waiting time to berth will increase.”