Kenya’s SGR on the verge of breaking even amidst President’s directive relocate cargo business to Mombasa

NAIROBI, Kenya - The Standard Gauge Railway [SGR] built by the Chinese government as part of a move to decongest the port of Mombasa which was choking by the slow movement of cargo has recorded positive revenue.

Kenya National Bureau of Statistics (KNBS) July data shows that the cargo and passenger revenues from SGR rose by 7.8 percent to Sh7.1 billion in the six months to June, extending recovery from the global Covid-19 disruptions.

The latest KNBS data reveals that the passenger train crossed the Sh1 billion mark in a half-year period for the first time since the train was launched, boosting efforts for the project to break even.

The passenger train raked in Sh1.24 billion in the six months ended June, a 49.6 percent jump from Sh829 million posted in a similar period last year. While cargo service, which mainly subsidizes the passenger line, marginally grew to Sh6.17 billion in the six months from Sh6.04 billion in similar periods last year.

During his inauguration speech earlier this week President William Ruto vowed to return all port operations transferred to Nairobi and Naivasha Inland Container Depots (ICDs) to Mombasa, reversing one of the most controversial policies of Kenyatta’s administration.

“This afternoon, I will be issuing instructions for clearance of all goods and other attendant operational issues to revert to the port of Mombasa. This restores thousands of jobs in the city of Mombasa,” said Dr. Ruto.

To ensure that the SGR has minimum guaranteed business to repay the Ksh450 billion ($3.7 billion) debt taken to build it, the Kenyatta administration forced traders to use the modern railway line, a policy that saw the government transfer clearance to enforce compliance.

In 2019 Kenyatta launched the extended SGR freight services from Mombasa to the Naivasha ICD, promising faster transportation of cargo to western Kenya and on to neighboring countries.

He also put in place various policies to protect the SGR but ended up hurting transporters who lost thousands of jobs on the Kenyan coast.
The directive is also likely to hurt the businesses that had set up in Naivasha after the directive.

The Naivasha ICD was at the heart of Kenya’s ambition to become the transport corridor of choice for neighboring countries like Tanzania and Uganda.

The government is banking on improved performance of the SGR to ease the burden on taxpayers who have in the past been forced to pay for operational costs of the trains as the project struggles to break even.

The country will require additional cash from the railway business to ease the taxpayers’ burden of paying the loan and also from the Chinese firm that runs the SGR passenger and cargo trains.

SGR begins operations in 2017with the growth reflecting a surge in passenger traffic as the SGR sold 1.121 million tickets in the six months to June, a 48.7 percent jump from 754,313 tickets over a similar period a year ago.

Operating costs of the SGR have in the past dwarfed revenues, fueling public outrage over the viability of the landmark project.
The project cost $3.2 billion which was largely borrowed from the Exim Bank of China in May 2014.

They also operate passenger services from Nairobi to Mombasa and an inter-county service with stations at Athi River, Email, Kibwezi, Mtito Andei, Voi, Miasenyi, and Mariakani stations.

Passengers pay Sh1, 000 on economy class seats and Sh3, 000 on fast class seats between Nairobi and Mombasa aboard the express train.

GAROWE ONLINE