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Investment in SGR bearing fruit with increase in revenue

Sunday August 11 2019

SGR

A standard gauge railway cargo train at Nairobi terminus on April 27, 2019. The SGR line operates an average of eight cargo trains daily. PHOTO | FILE | NATION MEDIA GROUP 

PHILIP MAINGA
By PHILIP MAINGA
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About two years since actual operations started on the standard gauge railway (SGR) line between Mombasa and Nairobi, it is time to take stock of the phenomenal success the service has registered.

The biggest indicator of this is the fact that in the past three months, the SGR trains have attained the initial break-even projections, bringing in 258 freight trains by transiting 23,522 container tonnes.

This success has been evident in the passenger and freight components, the latter service having started only in January last year.

The tonnage lifted during the last quarter from Mombasa to Nairobi increased to 1,059,215 metric tonnes from the corresponding quarter’s tonnage of 1,024,220 in 2018.

Today, the SGR line operates an average of eight cargo trains daily, but this is elastic and sometimes goes to as high as 14, depending on the cargo arriving at the port.

Conventional and containerised cargo topped the uptake charts and the line achieved its objective of supporting the nascent industrial and agro-processing sectors.

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TARIFF RATES

Still on the cargo front, the game-changer was the proposal to cut freight tariff rates from the previous $33.3 per tonne to $20.5 per tonne.

The upshot of this is that thanks to that single move, the service tariffs are now competitive and stack up quite favourably compared to road transport costs, further driving uptake.

Equally critical to this success is a joint marketing campaign that we have been executing as Kenya Railways Corporation in partnership with the Kenya Ports Authority (KPA) and the contractor, China Road and Bridge Corporation.

Greater efficiency at the Mombasa port and the streamlining of cargo clearance operations at the Inland Container Depot (ICD) have helped in driving uptake and positioning the SGR freight service as a commercially plausible proposition.

Whereas we previously had 24 agencies operating at the ICD sites, this was eventually compressed to just four critical ones – Kenya Railways, Kenya Revenue Authority, Kenya Bureau of Standards and the KPA, significantly reducing red tape, with turnaround (dual) time reducing in material terms.

ROAD NETWORK

Equally critical as a success factor is the improved road network, which has improved cargo evacuation from and delivery to the ICD.

These factors were the drivers of a remarkable rise in SGR cargo uptake in the first quarter of 2019, with the service time given and consistently achieved at eight hours.

Plans are underway to have truck holding areas to improve efficiency in collecting and picking of cargo at the ICD in Embakasi, Nairobi.

When freight trains commenced operations in January 2018, it had just one pair daily. The teething problems the operation experienced in the past had been surmounted and the service has now become a game-changer.

The tonnage lifted during the same quarter from Mombasa to Nairobi increased to 1,059,215 metric tonnes from the 1,024,220 metric tonnes in the last quarter of 2018.

BOOKING SYSTEMS

Having laid out a solid, bankable foundation and support system for freight services, our target is now to operate 10 containerised cargo and four to five conventional trains daily from Mombasa to Nairobi.

Growth and continuous service improvement have not been just a preserve of freight services alone.

A deliberate effort to align booking systems and more efficient refund procedures have helped in driving passenger uptake and overall efficiency.

We believe that the SGR is poised to return the investment Kenya has put in it in the long run.

Mr Mainga is acting Managing Director, Kenya Railways Corporation.

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