More headroom for freight stations in SGR era

There is life after the launch of the standard gauge railway, Container Freight Station (CFS) operators have been told. At least not for now.

With freight trains hauling 216 containers or 4,000 tonnes daily from Mombasa port, there have been fears that little cargo would be available for CFSs.

According to Kenya Railways managing director Atanas Maina, the railway will be extended to cover all the container berths at the port, meaning that cargo will be offloaded from the ship onto the wagons and delivered to the expanded Nairobi Inland Container Depot within eight hours.

Freight trains started ferrying cargo on January 1 when a full load of 216 containers were transported to Nairobi. Two days later, there was a cargo deficit, forcing KR to delay haulage until the right volumes are achieved.

KR started by charging Sh50,000 per twenty foot container with importers having to incur an extra Sh15,000 to shift their goods to the door-step in the last mile transport. Truckers charge between Sh65,000 and Sh80,000 for the same load.

But two weeks ago, Mr Maina announced reduction of the rates from Sh50,000 for the twenty foot container to Sh35,000, sending the CFS owners into panic.

“This now is crazy and we will have to go back to the drawing board because importers are excited by these rates,” said one operator requesting to remain anonymous.

CFS Association of Kenya chief executive officer Daniel Nzeki said they were still taking stock of the effects of the new rates and that they would “wait and see”, adding that it was too early to comment. “But we assure importers that our services will remain competitive,” he said in a phone interview.

However, logistics experts say it’s not all doom and with increased volumes of goods being imported into the region to feed growing economies, the facilities might be here to stay.  

Former Kenya Ports Authority (KPA) managing director Gichiri Ndua says the argument is based on the rate at which cargo passing through the port is growing.

Mombasa port handled 22 million tonnes in 2014, rising to 24.2 million tonnes in 2015. In 2016, it rose to 26 million tonnes. Last year, the port was expected to handle 27 million tonnes and leap to 60 million tonnes by 2030.

READ: Nairobi talks to discuss SGR cargo drought

Besides, Kenya imports Sh1.3 trillion worth of goods annually, Mombasa port also serves Uganda, South Sudan, Rwanda, Burundi, Democratic Republic of Congo and northern Tanzania.

“Volumes have been growing at a rate of more than 10 per cent or 100,000 twenty foot equivalent units (teus) since 2014 when the one million Teu mark was attained, meaning that in about three years when the railway is projected to move 40 per cent of cargo, there will be an extra 300,000 teus,” said Mr Ndua, who is the lead consultant at Maritime Business and Economic Consultants.

He said while the extra cargo will be handled by CFSs, it is not easy to build capacity for all cargo at the port at any given time. The KPA is undertaking an expansion that has seen construction of the first phase of the new terminal with a capacity of 550,000 teus at a cost Sh30 billion.

The second and third phases will create 650,000 teus, totaling to 1.2 million. Funds for the second phase whose completion was projected at end of 2019 have been secured but since construction has not yet started, it is unlikely that this deadline will be met.

When CFSs were set up in 2007 to address congestion at the Mombasa port, they came as the solution to the port’s threatened competitiveness in the region. Choked with cargo, the port was also threatened by shipping lines with the punitive vessel delay surcharge.

READ: Kenya drops bid for electric SGR trains

CFSs involve massive capital investment. An operating licence costs Sh2.1 million while the operator is expected to place a bond to cover duties for the goods at the facility, “as the commissioner may determine”, according to KRA rules. This bond may run to more than Sh500 million.

A CFS, located within 10 kilometre radius of the port, should occupy an area of not less than six acres, have well paved surface and cargo handling equipment. The CFSs association puts total investment for each facility at about Sh2 billion.

According to the KRA rules, there should be a building of not less than 3,000 square feet suitable for use as a customs warehouse; surveillance cameras accessible to the KRA office and a facility to accommodate mobile cargo scanning equipment.

There are 24 CFSs in Mombasa.

According to Siginon Freight Limited managing director Meshack Kipturgo, the notion that CFS and trucking businesses will die in the advent of the SGR, was far-fetched.

“In Europe and America where there is efficient and fast rail network, the trucking industry is thriving,” Mr Kipturgo said, adding everybody will have business.