Motorists and importers to foot the largest part of Sh357bn rail line bill

• Project part of a grand plan by Kenya and Uganda to develop a modern railway system designed for diesel initially but with the capability of being driven by electricity in future, from Mombasa to Kampala with a branch line to Kisumu
• To have the project finance itself, Kenyans should brace for additional charges in the form of a new road transit toll levy, concession entry fees, railway development levy (port container traffic tax) to supplement other operational revenues
• Imposition of various taxes or toll stations is now gaining currency in Kenya, following its turn to Chinese contractors who entice governments with complete packages — from financing to technical work — to win tenders. This was the case with the Thika superhighway project

Motorists and importers stand to carry the biggest burden in footing the Sh357 billion modern railway line between Mombasa and Malaba that has been quietly handed to a Chinese company.

According to an information memorandum of the project covering the first phase, which will see the development of a new standard gauge railway line from Mombasa and Nairobi, various charges will be introduced during and after the project, most of which will target road users.

The line will be built according to Chinese railway design standards and is expected to carry freight trains at speeds of up to 80 kilometres per hour, and passenger trains travelling at up 120 kilometres per hour.

It is part of a grand plan by Kenya and Uganda to develop a modern railway system designed for diesel initially but with the capability of being driven by electricity in future, from Mombasa to Kampala with a branch line to Kisumu.

The Kenya government will build the Mombasa/Kisumu section while the Uganda government will take it up from Malaba to Kampala.

To have the project finance itself, Kenyans should brace for additional charges in the form of a new road transit toll levy, concession entry fees, railway development levy (port container traffic tax) to supplement other operational revenues.

Before enjoying the benefits of the project, Kenyans should also expect to be charged green tax, which will be levied on new vehicle registration, insurance levy and fuel levy, among others.

Imposition of various taxes or toll stations is now gaining currency in Kenya, following its turn to Chinese contractors who entice governments with complete packages — from financing to technical work — to win tenders. This was the case with the Thika superhighway project.

Our sister paper, The EastAfrican, this week reported that construction company China Roads and Bridges had already signed a commercial contract with the Kenya Railways Corporation, under an arrangement that commits the State-owned company to deal only with the Chinese firm.

In justifying the viability of the project, the information memorandum proposes that the government restructures the fuel levy to accommodate a portion of the development.

It says the government can raise Sh773million ($9.1 million) from a standard fuel levy of Sh5 a litre, where Sh99 million ($1.1million) will be raised during the construction phase to run between 2013 and 2017. Another Sh 674 million ($7.9million) will be raised during the railway operation phase (2018 -2032).

“The revenue will initially help to beef up the railway development kitty. After 2023, the funds will go towards servicing the SGR debt, and in rail maintenance,” the memorandum seen by the Nation states.

Port freight levy

The railway development levy (also to be known as the port freight tax) will be charged on all freight handled by Kenya’s ports. It estimates that port freight levy can realise Sh69 billion ($822 million) in the 2013 to 2043 period.

The other money will come from cross modal funding, which refers to use of revenue from other types of transport to develop another.

This means that revenue from the port and road transport will be used to fund the standard gauge railway.

To this end, a port traffic levy of Sh85 ($1) will be imposed on all cargo, both imports and exports, handled at the port. This levy will be administered and collected by Kenya Ports Authority (KPA).

It is projected that port traffic levy will raise Sh765 million ($9 million) towards the project. A road haulage levy will also be introduced between 2013 and 2032, where road users will be charged Sh4 per tonne for every kilometre in the first five years while Sh8.5 will be charged in the remaining period.