Questions on viability of SGR refuse to go away after China cuts funding

The question of whether the Nairobi-Naivasha-Kisumu Standard Gauge Railway (SGR) section is viable or not came to the fore when the China Exim Bank cut its funding for the Naivasha route by Sh32 billion.

Supplementary budget documents tabled in Parliament in April also showed allocations to the SGR project dropped by Sh42 billion, including the Sh32 billion held back by the bank.

The 120-kilometre Nairobi-Naivasha line that cuts through the Nairobi National Park, traversing several town centres and agricultural areas, will cost Sh150 billion.

The concerns on the fate of the line were heightened when President Uhuru Kenyatta failed to secure funds as had been highly expected during his China visit two weeks ago. Kenya and the China Communications Construction Company had already reached a deal for construction of the Naivasha-Kisumu stretch.

The remaining bits of the agreement were to be finalised during the President’s Beijing visit. However, this did not happen, raising eyebrows of what is in store for the multibillion project.

Transport Cabinet Secretary James Macharia had also said the signing of the funding would be done in Beijing during the China-Africa Forum (Focac).

“All documents are ready. However, when we engaged the Chinese government, it was agreed that they do support it, but we need to complete the feasibility study, not just for Naivasha to Kisumu but also all the way from Mombasa to Kisumu so that we can establish its commercial viability,” CS Macharia told a press briefing in Beijing.

Analysts are now questioning why the issue of viability is being raised when talks on funding had been concluded and all that remained was just putting pen to paper.

Shippers Council of Eastern Africa (SCEA) executive officer Gilbert Lang’at said there was need to market the Nairobi-Naivasha-Kisumu routes “in a more holistic manner” than is the case currently.

“The Mombasa-Nairobi line is basically for evacuation of cargo from the Mombasa port and it could be argued that this section will be financed by this cargo and passengers but the other sections do not have that assurance,” he said.

With the support of the passenger service, the 472-kilometre Mombasa-Nairobi section of the line, built at a cost of Sh327 billion, has largely been hailed as a success operating between two major cities despite teething problems. However, this might not be the case with the other sections.

“The government needs to market the planned industrial park in Naivasha in an export-oriented approach where value addition in fresh produce from horticulture are exported by sea,” Mr Lang’at said, adding that there is also a need to ensure that the procedures for setting up businesses at the park were investor-friendly.

According to Alfayo Otuke, former Kenya Transporters Association (KTA) executive officer, who was a member of the SGR freight service implementation committee, the Naivasha-Kisumu section was likely to be hit by viability question since it was meant to connect to Uganda, which has shifted preference to the Tanzania route.

“Uganda preferred to build its railway through Tanzania, which will provide a shorter route to the Indian Ocean. With Tanzania’s planned railway to Burundi and link to the DRC (Democratic Republic of Congo), the Kisumu line does not look feasible at the moment and there is need to go back to the drawing board,” he said.

Mr Otuke, who is also a director at the Global Maritime — a consultancy firm that specialises in tracking of containers among other functions — argued that the planned industrial park in Naivasha should have been located in Nakuru so that the line could benefit from passenger and cargo transport.

“Since it will take time for the industrial park to be fully operational, the best bet would have been Nakuru, one of the major towns in the country,” he said, adding that poor planning seems to be hurting the mega infrastructure.

Failure to consult

He said poor planning and hurried implementation of the freight service is the cause of the current biting congestion at the Nairobi’s Inland Container Depot (ICD). Failure to consult widely with all transport stakeholders will be bane of the SGR, he noted.

“Trucks cannot access the ICD properly because there is no marshalling yard. During the consultation period where we were asked to give views on how best cargo would be transported to the facility, we raised this concern but it was not taken into consideration,” he added. And went on: “The result is that the same congestion we witnessed in Mombasa when Container Freight Stations (CFSs) were established has now been exported to Nairobi.”

Currently, there are eight trains ferrying goods to the ICD daily, each carrying 108 containers. But one of the initial challenges Kenya Railways faced in the implementation of the freight service was containers being loaded onto the trains without the authority or knowledge of importers.

This resulted to a backlog of empty containers at the ICD after importers abandoned them, citing huge costs in retuning them to shipping lines designated yards in Mombasa.

A week ago, the ICD had more than 10,000 containers, with the Kenya Freight and Warehousing Association (Kifwa) chairman William Ojonyo protesting that delays in clearing of goods at the facility was costing importers to the tune of Sh70 million daily.

Mr Lang’at said it was taking up to 14 days to clear goods at the ICD, which had forced some manufacturers to scale down on production since they were not getting their raw materials on time.
“Systems are not working and importers have resigned to fate, paying millions in demurrage charges,” he said.

However, Kenya Ports Authority general manager operations Captain William Ruto blamed importers for not collecting their cargo. “The problem we have is that importers are not collecting their goods on time as required,” he said.

CFS Association of Kenya also protested overloading of goods onto freight trains, saying it was posing unfair competition. The association cited loss of business as a result of the government’s action.