The tidy economics of SGR and political tussle on project’s cost

As President Uhuru Kenyatta launched the SGR’s first phase on Wednesday, he was keen to demonstrate that the Jubilee government has delivered on perhaps the most important promise of his 2013 election campaign.

The opposition, will, of course, criticise the project as they have done since the construction of the 472-km railway started in December 2014.

Nasa presidential candidate Raila Odinga has labelled the project as costly and a huge debt burden to the taxpayer.

The cost, a tidy Sh327 billion loan from the Chinese Government, remains the key focus of the development of this grand project.

COST AND BENEFITS

Putting the cost at the centre of the SGR debate overlooks a few other critical things about the project.

Critics imagine what else such funding could have done, but the cost alone does not tell the whole story of a project.

There are other aspects of the standard gauge railway that are as important as its cost and more detailed analysis is needed on the cost and benefits of the project.

A few critical things have been overlooked in the debate about the SGR.

The first one is how much it demonstrates the government’s commitment to quality public service.

DIRECT BENEFITS

The second is the direct benefits. The third is the transformative impact on the economy that will result from its operation.

The delivery of the first phase of the SGR in a record 18 months goes down in history as a major achievement.

The project stands out in a country with a bad reputation of being a graveyard of projects that never delivered any benefits because funds were stolen.

The SGR will be President Kenyatta’s legacy: He personally supervised the delivery of the only railway line that Kenya has built since the Lunatic Express over a century ago.

His passion for it also makes a bold statement about his determination to stop the public funds haemorrhage in the clinically-dead old railway system, which has swallowed up millions of dollars, but carries a mere five per cent of the cargo to and from Mombasa.

MASSIVE FAILURE

The old operation under Rift Valley Railways is a classic case of massive failure.

The SGR benefits are articulated in project documents, regular public updates from presidential visits, reports by government functionaries and the implementing agency, the Kenya Railways Corporation.

The most important aspect of the economic side is not the speed of 80kmh for the goods train with a capacity of 22 million tonnes of cargo a year or the 120kmh for passenger trains ferrying 1,200 passengers at ago.

The bigger story is the impact of these numbers. It is that a single train can replace 19 buses (62-seater) that ply the Nairobi-Mombasa highway, delivering passengers in half the time and at half the cost.

POWER OF CARTELS

The cargo impact is even more profound — it can ferry 61,000 tonnes a day, replacing 2,000 trucks (each with an average payload of 30 tonnes).

Truckers and bus operators may not like the SGR because it will effectively reduce the power of the cartels that control business at Mombasa Port and on the Northern Corridor.

The transformative aspect will be the extent to which business will shift from road to rail transport. It will considerably reduce the road maintenance cost of the highway, reduce road traffic accidents and lower the damage to the environment caused by pollution, oil spillage and waste from the heavy long distance vehicles.

The SGR will need to prove its viability quickly to justify the billions invested in it.

EFFICIENTLY MANAGED

Its success will depend as much on how efficiently it is managed as on the other operators critical to its operations, including the Kenya Ports Authority and Kenya Revenue Authority. Efficiency and reliability will ultimately influence importers and exporters make — whether to use it or stick to road transport.

And that will ultimately translate into more ships discharging and loading cargo much faster, at the port, expanding opportunities for the economy to grow faster.

Mr Warutere is a director of Mashariki Communications Ltd, [email protected]