Shipping & Logistics

Kenya Railways cuts SGR tariffs in fresh push to woo transporters

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Transshipment cargo at the Naivasha Inland Container Depot. FILE PHOTO | NMG

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Summary

  • Kenya Railways has reduced freight charges from $600 to $480 for a 20-foot container and from $850 to $680 for 40-foot container.
  • This comes at a time when the Court of Appeal has ruled that the award of tender to a Chinese firm was unlawful, casting doubt on the completion of the SGR.
  • The ruling has created uncertainties on whether the project, which is now stuck in Naivasha for lack of funding, will proceed.

Kenya Railways has lowered cargo tariffs in an attempt to make Naivasha dry port economically viable even as a recent court ruling casts doubt on the future of Standard Gauge Railway (SGR).

In the latest move to attract transporters to use the Inland Container Depot (ICD) from Mombasa to Naivasha, Kenya Railways has reduced freight charges from $600 to $480 for a 20-foot container and from $850 to $680 for 40-foot container.

This comes at a time when the Court of Appeal has ruled that the award of tender to a Chinese firm was unlawful, casting doubt on the completion of the SGR. The ruling has created uncertainties on whether the project, which is now stuck in Naivasha for lack of funding, will proceed. China, which is the sole financier of the project may not be willing to give more funds in the wake of the ruling.

Meanwhile the struggle to make SGR and Naivasha depot viable is ongoing.

“We are pleased to inform you that the Kenya Railways has introduced promotional tariffs for transportation of containerised cargo by Madaraka Freight Services between Mombasa and Naivasha ICD,” said Philip Mainga , Kenya Railways Corporation (KRC) managing director in a letter seen by Shipping and Logistics.

The rates, said Mr Mainga will run from June 2 for a period of 90 days, as the government seeks to shore up numbers after Uganda protested the compulsory use of the Naivasha ICD, with court putting an injunction last week on the compulsory use.

However, the Kenya Transporters Association says the move to cut levies is aimed at frustrating truck owners.

“The move by State to offer promotional rates is just but an afterthought to fight road transport,” said Dennis Ombok, KTA chief executive officer.

The success of the ICD is pegged on the cost of transport from Naivasha to Kampala and Mombasa to Kampala as shippers are keen to employ the mode that suits them.

Shippers’ council chief executive officer Gilbert Langat said his body is not concerned with the mode used but rather what will work better for them in terms of cost and efficiency.

“For us it is about the system that will be cost effective and efficient, whether it is road or railway,” said Mr Langat.

Mr Langat said shippers have always supported the ICD, but pointed out that the government should let business people to choose the mode that they find more convenient.

KTA’s recommended rates to Kampala is $2,400, however, most of the trucks are charging $1,900 as a flat Rate for both 20ft and 40ft container while the rates given by Transport ministry recently put the cost from Kenya’s port city to Uganda at $2,180, comprising SGR from Mombasa to Naivasha and Road to Kampala.

While the said charges by trucks are final, Mr Ombaka said there are other levies involved in the use of SGR, making it expensive.

“There are a lot of hidden costs — handling, last mile service providers, return of empties to railways terminals and last mile for empty containers to depots,” he said.

Unlike road transport, which is door-to-door with the fixed rate from point A to B, including the return of empties, rail transport comprises extra charges such as on return of empty containers.

With rail transport a shipper has to sub-contract other parties such as last mile service providers, which, comes along with additional costs.

Uganda has invested heavily at the Kenya’s coast and there have been fears that being forced to use SGR will see their facilities go to waste, or compel them to relocate to Naivasha.

Uganda’s largest business conglomerate, Mukwano Industries warned it could sue Kenya should it incur losses by being forced to use the ICD.

“We have been regular users of the Port of Mombasa for the last 35 years and have never experienced such an act. You and your staff are aware of the contractual carriage obligations that exist between the shipper, consigne, and shipping lines,” said the company last month.

“We are therefore requesting you to observe the above contractual obligations in place and failure to do so shall leave us with no option but to seek legal recourse and hold you liable for all losses, delays and damage that we may suffer as a result of your act,” he added.