Cost and viability concerns over SGR will not go away

A flyover above the standard gauge railway in Dongo Kundu in Miritini, Mombasa. PHOTO | LABAN WALLOGA | NATION MEDIA GROUP

What you need to know:

  • Were Kenyans taken for a ride?

  • The Economist quoted a consultant as saying this about Kenya’s SGR: “They’re getting a third-rate railway for the cost of a very expensive one”.
  • President Uhuru Kenyatta dismissed the magazine's report.

Ethiopia and Djibouti on Wednesday inaugurated the 756-kilometre Addis Ababa-Djibouti railway line. There is a lot that is similar between this line and Kenya’s Mombasa-Nairobi railway. To begin with, they are both financed by Chinese loans, built by Chinese companies and benefiting from Chinese expertise and technology. Chinese staff will operate the lines for five years before handing them over to local personnel.

They are both standard gauge railway (SGR) lines and are replacing dilapidated or altogether abandoned colonial era metre gauge lines alongside which they run. Addis Ababa and Nairobi say the lines will speed up the transport of goods and people to and from Djibouti and Mombasa respectively and inspire development of urban centres as well as spur economic growth along the respective corridors.

Lastly, Addis has spent slightly under US$4 billion (US$3.4 billion) on its line and Nairobi will also have spent slightly under US$4 billion (or US$3.6 billion) when its line is completed. Now let us look at the differences between the lines.

While both are priced at just under US$4 billion, the Addis Ababa-Djibouti line is longer and, even more importantly, it is electrified. The Mombasa-Nairobi line is 485 kilometres long and will be diesel-powered, with electrification referred to politely as a future possibility.

Indeed media have pointed out that Nairobi is paying US$6.6 million per kilometre of its rail compared to Addis Ababa’s US$4.9 million per kilometre. But there is that crucial matter and difference of diesel and electrical power as well as the fact that the Addis Ababa-Djibouti line is longer by 271 kilometres. Another major difference is that Kenya’s line is single track all the way but Ethiopia’s is dual track for the first 115 kilometres. That is an important detail especially when it is borne in mind that Djibouti’s 100-kilometre single track stretch cost US$505 million.

MAXIMUM SPEEDS

The Addis Ababa-Djibouti line has a maximum speed of 160 kilometres per hour for passenger trains and 120 kilometres per hour for freight trains. Kenya’s passenger trains will cruise at 120 kilometres per hour, with their freight counterparts doing 80 kilometres per hour.

Were Kenyans taken for a ride? The Economist last June quoted a consultant as saying this about Kenya’s SGR: “They’re getting a third-rate railway for the cost of a very expensive one”.

While President Uhuru Kenyatta dismissed The Economist’s report in August, saying such criticism would not deter Nairobi from investing in big infrastructure projects, the cost and viability concerns over SGR will not go away. Four factors account for this. One, the much lower cost of the longer and electrified Addis Ababa-Djibouti line. Two, the fact that Kigali, which initially signed on extending the SGR line originating in Kenya to Rwanda in 2013, abandoned the plan this year in favour of a route through Tanzania. Kampala, also a signatory to the plan, is thought to have gone lukewarm on it. Cost factor is believed to have influenced these changes of mind.

Three, the performance of the line will be closely watched as will be the repayment of the large loan. Addis is meeting 30 per cent of the cost of construction of its line while Nairobi is to meet 10 per cent, with China’s Exim Bank providing the remainder 70 per cent and 90 per cent respectively.

MASSIVE INVESTMENT

Four and related to three, regards the return to the Kenyan taxpayer on a massive investment. I pose three questions. Will SGR help attract investment? Will it spur economic activities and growth along its corridor? Will it be profitable as a business?

If what is produced in Kenya can be on a ship in a day on the way out and what’s coming in is in the hinterland in a day, investments and investors should come in. If trains run regularly the corridor should witness an increase in economic activities.

As regards profits, listen to the CEO of Ethiopian Railways Corporation, Dr Getachew Betru, in an interview with content provider The Worldfolio eight months ago: “If you look at a railway line as a business enterprise and look at its cost-benefit analysis, the cash flow is not immediately positive. It will have a long maturation period of possibly 20 or even 30 years”.

So our SGR’s profitability will be measured in terms of its being an instigator of economic activities and livelihoods along the corridor for decades to come. SGR will be a millstone around the necks of Kenyans for decades.