Link maker

East Africa rail link plan is irrelevant

East African governments are spending sleepless nights in their quest to revive and ensure an efficient rail system to reduce the cost of transporting goods.

While Kenya has successfully built a standard gauge railway, linking the port of Mombasa and the inland port of Naivasha to facilitate the movement of goods to neighboring countries, a recent policy change that gives importers the freedom to choosing the mode of transport placed the authorities between a hammer and a hard place.

For example, a Kenyan government policy change to improve logistics services has left the Kenya Railways Corporation sweating to retain customers in the face of flight from the standard gauge railway to other transport options.

With plummeting performance, Kenya Railways is struggling to maintain revenue with varying degrees of success. There is also uncertainty as the new administration settles in with new policy measures aimed at reforming the sector.

This week, as he sat before MPs for a vetting, candidate for Roads, Transport and Works Cabinet Secretary Kipchumba Murkomen gave an overview of the President’s administration’s plans William Ruto for SGR who reported an operating loss of Kshs 3,488,038,551 ($28.8 million). for the 2021/22 financial year, according to official data.

The introduction of the SGR passenger train in 2017 and a freight train the following year was part of a wider regional network linking Kenya, Uganda, Rwanda and South Sudan. Each of the countries had to develop the part of the railway line within their borders and Kenya went ahead of the pack.

Most of the goods handled at the port of Mombasa are destined for Uganda, Rwanda, South Sudan, Ethiopia, Burundi and the Democratic Republic of Congo, which account for 30% of the goods passing through Mombasa.

Since the introduction of the freight train in 2018, the government has made it compulsory to transport goods from the port to Nairobi and other hinterlands using the RMS, blocking truckers. To attract East African countries, Kenya has allocated each country using the port 10 acres to establish dry ports at Naivasha in the Central Rift.

But President Ruto’s government has changed its policy, a move that could put Nairobi on a collision course with China. The change would run counter to Kenya’s agreement with Beijing on a pick-or-pay deal to ensure traders use the SGR and use the guaranteed business to repay the $3.7 billion loan taken out to fund the project.

Last week, the National Treasury denied reports that China had penalized Kenya 1.312 billion Kenyan shillings ($10.8 million) for late payment of loans for the SGR. Treasury Secretary Ukur Yatani maintained that Kenya had not defaulted on its public debt, arguing that the country had not accumulated repayment arrears for decades. He was reacting to media reports that said late payments to Chinese lenders had resulted in sanctions.

The end of the mandatory use of the RMS puts Kenya Railways in a difficult situation. With around 400 trucks expected back on the roads, SGR’s freight revenue is expected to fall by more than half, according to logistics experts.

“While we expect more trucks on the Northern Corridor, freight transported via SGR is expected to be reduced to 20% from the current 40%,” said Gilbert Lagat, CEO of Shippers Council of Eastern Africa.

According to data from the Kenya National Bureau of Statistics, in the first six months of this year, SGR recorded $750 million in revenue, of which $610 million came from cargo volumes. Revenue for the past five years is $4.6 billion. Passenger revenue was $160 million over the same period, indicating that SGR depends on cargo to stay afloat.

To ensure that traders in the region continue to use the RMS, Kenya Railways has launched an intensive campaign to protect its revenue from truckers. KRC Managing Director Philip Mainga and a team from the Commercial and Corporate Affairs Department have visited various companies and organizations this month trying to persuade them to continue using rail services.

KRC also launched online and offline advertising campaigns and put in place plans to improve both cargo handling and passenger services to compete with truckers.

The Executive Secretary of the Northern Corridor Transit and Transport Coordination Authority (NCTTCA), Omae Nyarandi, said that for the KRC to remain relevant in the sector, it will need to review its tariffs and improve its efficiency.

“KRC needs to solve the last mile problem by partnering with truckers and offering a package to attract more users. But, even though we support the use of trucks, we have to take into account the effects on the roads and the increase in carbon emissions,” Mr Nyarandi said.

On Friday, the companies gathered in Mombasa and demanded the Kenyan government to extend the SGR line to Malaba to save it.

“The purpose of SGR expansion is to seamlessly transport goods from Mombasa to landlocked countries. Tanzania has a plan to partner with Rwanda, Burundi and DR Congo to establish connectivity through SGR, but the Kenya is lagging behind despite being the first to launch a modern rail,” said Dock Workers Union General Secretary Simon Sang.

“Given our geographical position, Kenya has more potential so it needs to move fast.”

Allow companies to own wagons

Kenya Maritime Authority Acting Chief Executive John Omingo has suggested that Kenya Railways allow companies to own railcars.

“Kenya can win big by making sure the port is efficient. All modes of transport must be left to competition and President Ruto’s directive will open that up. We have a lot to gain from the blue economy but we need to ensure efficiency,” says Omingo.

But Kenya is not the only EAC partner in a dilemma. In Uganda, a mixture of corruption scandals, dilapidated railways and political interference has impacted Ugandan Railways, forcing traders to opt for more expensive road transport to transport goods. The business community describes Uganda’s railways as “inefficient and unreliable” with long transit times due to low average speeds of less than 30 km/h.

The Uganda Ministry of Works and Transport’s Integrated Transport and Infrastructure Service (ITIS) program performance report for the financial year 2020/21 confirms the concerns of the business community. Instead of being a cheaper and safer mode of transport, the use of Ugandan Railways has driven up costs. Over a length of approximately 1,250 km, only 21% of the network is operational, which leaves more than 985 km of track out of use.

Lower freight volumes

“The rest of the rail network was closed due to falling freight volumes which precipitated deferred maintenance and subsequently dilapidated track with several sections vandalized,” says the Department of Transport.

The URC is also struggling with a shortage of locomotives, now six, down from 43.

The Ugandan government’s efforts to procure new locomotives last year have been marred by allegations of corruption. The four locomotives purchased from South African manufacturer Grindrond Rail and delivered in August 2021 cost Ush48 billion ($12.6 million), prompting President Museveni to sack the entire board and of the Director General and to order their prosecution.

President Museveni questioned why $12.6 million was spent on second-hand locomotives “instead of new ones from China”.

“There were even cheaper six-year-olds at $9.4 billion, but they went for the eight-year-olds at Ush48 billion,” he said.

Uganda was betting on locomotives to increase rail freight, reduce transit time from Malaba to Kampala from 48 hours to 12 hours, increase volumes from 600 tons to 1,500 tons and increase planned volume per month to 40,000- 60,000 tons.

Miriam Tumukunde, deputy coordinator of the SGR project, says there are currently over 18 million tonnes of freight on the Malaba-Kampala route, which is expected to grow to around 30 million tonnes by 2028 when the rehabilitation of the MGR is completed. . But she maintains that the MGR will not be able to move even 10% of the available freight on the rails by then.

Uganda’s water transport, which would have facilitated a steady flow of rail freight, is also sinking, weighed down by a lack of ships.

While Uganda has four vessels, only MV Kaawa and MV Pamba are operational.

The Uganda Section of the Standard Railway (SGR) launched 10 years ago by EAC Heads of State has not budged an inch, raising many questions from civil society.

In 2013, Kampala embarked on the 273 km line from Malaba to Kampala, as the first section it would develop in its SGR network, under contract with China Harbor Engineering Company, with Chinese bank Exim financing 85% of the project while the Ugandan government encountered 15%. Cost. But the Ugandan government says the Chinese continue to dither, forcing Uganda to seek alternative financing.

Meanwhile, Tanzania has embarked on a fundraising spree to expand its RMS to the Great Lakes. The 1,637 km SGR line in Tanzania is being built in phases by Turkish and Chinese contractors. The first phase from Dar es Salaam to Morogoro (300 km) is expected to start operating next year after successful trials. Public Works and Transport Minister Prof. Makame Mbarawa said this week that the government plans to put Kigoma on the Standard Gauge Railway (SGR) network via a link from Tabora.

“We will then build another 282 km line linking Uvinza and Gitega in Burundi, as we also aim to develop our trade with the Democratic Republic of Congo,” he said.

In August, Dodoma launched a call for tenders for the construction of the Uvinza-Gitega line. In an August 12 notice, interested parties had until November 15 to submit their bids to the Tanzania Railways Corporation to design and build the line linking western Tanzania to the administrative capital of Burundi.

The TRC said funds have already been earmarked by the two governments for the bilateral project to start in the 2022/2023 financial year.

“It is intended that part of the proceeds of the funds will be used to cover eligible payments for contracts under the D&B [Design and Build] arrangement,” TRC said in the notice.

The project will involve 282 km of the main line and 85 km of sidings/bypasses. Lot 1 will cover 180 km from Uvinza to Malagarasi in Tanzania, and Lot 2 will cover 187 km across the border to Musongati and then Gitega.

The project has been in the pipeline since January, when the two countries signed a memorandum of understanding on initial cost estimates of $900 million.

Reporting by Anthony Kitimo and Kabona Esiera