Last Saturday, I had the opportunity to ride on the famous Madaraka Express train from Mombasa to Nairobi. The ride was calm, the coaches were neat and there was minimal security risk of being drugged and robbed. There were about 1,000 passengers in 20 coaches of over 100 each. As I enjoyed the ride, I kept wondering how much business bus companies have lost in that one trip.
The Mombasa route has numerous bus companies – Coast Bus, Modern Coast, Mash Bus, Dreamliner, Horizon, Tahmeed and many others. Due to the tourist appeal of Mombasa, most of these companies operate luxury buses complete with air conditioning, reclining seats, Wi-Fi connectivity, movies, snacks and light drinks. These services made the ticket prices shoot up.
From as early 2015, the leading bus liner on the route, Coastline Safaris, popularly known as Coast Bus, has not invested in a new bus. The firm has been in operation since 1956. When the company made this decision, regular patrons wondered what had become of the old lion popular with tourists connecting to and from Jomo Kenyatta International Airport. It turns out, the lion had what the other players in the market didn’t; experience.
The company had operated when Kenya Railways trains were fully operational in colonial and post-colonial times. They knew what it meant to compete with a well-furnished air-conditioned train with sleeping bunkers. Tellingly, the moment the first sleeper was laid out, they knew evening had come and buying extra buses would be a waste of money.
Today, a spot check across Nairobi and Mombasa vindicates the wisdom of Coast Bus; bus companies are struggling to fill their 42-seater buses while Kenya Railways is sending away customers due to overbooking. That there is need to connect from stations to the central business districts is not even discouraging commuters.
One thing is evident; bus companies were not prepared for the arrival of a large, smarter and more attractive competitor in Madaraka Express.
Consequently, the bus companies are doing what the banks did to M-Pesa. First they dismissed it, then they fought it and then they embraced it. For now, many bus firms have lowered their prices to near those of Madaraka Express. I think there is still an opportunity for them to feed into the SGR by having stations near the Syokimau station to connect travellers to the rest of the country.
Currently, Kenya Railways is operating only one train service per day. It is expected that the number of trains will go as high as four per day from each end. This will draw more customers.
When complete, the SGR will contribute at least 2.1 per cent of GDP growth. It will speed up transportation of goods and people, further improving the velocity of money and, as a result, spurring growth.
Nigeria launched its SGR from Abuja to Kaduna last year. The situation with private companies there is the same. The railway has reduced road passenger transport business by half.
Traditionally, transport companies buy their buses on loan from the manufacturer or banks. Given that many of the luxury buses plying the Mombasa route are imports from China, one will expect a huge loan book with the banks. Given that business will shrink significantly, it is going to be a hard time in business both for the bus companies and the banks.
But perhaps the biggest losers will be the cargo transporters. When the train service becomes fully operational, these companies will have little business remaining to scramble for.
For starters, all government imports will be transported by the trains. Most donor agencies will also adopt the railway. Finally, large companies will also use the SGR due to security and reliability. This will leave the cargo companies with commuter business and opportunity for connecting the cargo between Nairobi and the regions.
Heraclitus of Ephesus noted that the only thing that is constant is change. Overnight, the market leader in passenger transport from Mombasa to Nairobi is the Madaraka Express. Change has come to the transport business. The transport companies will be wise to adapt and offer complementary services to the trains or consider other routes. Either way, there is still an opportunity for them to thrive, just not on the Mombasa route.
Odhiambo Ramogi is the chief executive officer of Elim Capital.