Business Daily (Nairobi)
Zeddy Sambu
9 June 2008
Continued pile up of cargo at the Port of Mombasa is wearing the patience of rail users thin as costs rise in an economy that is grappling with hyper inflation.
More than 19 months after the Kenya-Uganda railway's operations were concessioned to a consortium of private operators led by South Africa's Sheltam Corporation, concern is rising that only limited gains have been made on efficiency and cost improvement fronts.
The consortium, that includes local investment fund Trans Century Group, has a 20 per cent stake in the consortium while Centum Investments has 10 per cent and Australia's logistics company Babcock and Brown has 10 per cent.
The two railway lines were handed over to the consortium team of investors, trading as Rift Valley Railways, in November 2006.
The failure to deliver improvement has kicked off a spirited campaign for the review of the contract to save transporters from further losses.
Last week, a crisis meeting between port users, port authorities and Kenya Revenue Authority agreed that transporters be allowed to divert cargo from rail to roads should the pile-up go beyond the current 90 per cent level.
Reports indicate that Kenya's tax collector has agreed to a Sh500 million joint security bond for untaxed goods to be moved and that the bond be jointly managed by the Kenya Ports Authority and cargo importers and exporters.
Kenya Institute for Freight Forwarders Association (Kifwa), says the performance of the Rift Valleys Railways (RVR) consortium has slipped below that of the Kenya Railways Corporation in the run up to the concessioning.
"It has increasingly become clear that RVR cannot cope with the upsurge in traffic. We have written to the Transport minister on, especially, the creeping congestion at the Kenya Ports Authority (KPA's) container yard."We are pushing for an immediate and urgent intervention from Kenyan authorities," said Mr Gerald Kagumo, the national chairman for freight forwarders.
Efforts to decongest
Grain Bulk Handlers, another major customer of RVR, says it has been forced to invest in 15 new trucks in efforts to decongest its storage silos at KPA because of failure of the rail system.
Already, Maersk Shipping Line - the world's largest cargo shipping firm - has written to KRA asking that its containers, especially transit cargo, be cleared at KPA's internal container depots (ICDs) in Nairobi's Embakasi area.
KPA also operates two other ICDs in Kisumu and Eldoret.
KPA officials have complained that use of the three depots, all of which are rail- bound, is far below their designed capacities.
By last Friday, for instance, the number of rail-bound containers at KPA's storage yard stood at 1,300 20'Foot Total Equivalent Units (TEUs/boxes). By the close of that day's business, RVR had managed to move only 70 containers.
"KPA wants a serious concessionaire. The performance of RVR is worse than that of KRC's 10 per cent share. The private company has between six and eight per cent share of total cargo volumes," KPA technical services manager Joseph Atonga told Business Daily in a recent interview.
Mr Atonga says the current rail system is wanting, with parts of the system especially the stretch between Rift Valley's Londiani area and Kisumu area, being weak, meaning limited capacity of cargo can be transported through the phase.
"Cargo owners are not interested in excuses by RVR, but want service. There has been no marked investment by RVR to improve rail transport.
"They are basically managing the former KRC system. The two governments should look for a way to allow other investors to buy/lease train engines and wagons and use the existing rail system just as it is allowed for our road network to be used by many other players," Kenya Shippers Council CEO, Gilbert Lang'at, said.
KPA says that way back in 2004, its efforts to acquire more train engines and wagons were frustrated, but that it would revert to the plans if the Transport ministry gives them permission.
The railway is pivotal in cargo transit from the Port of Mombasa to the six landlocked countries in the region.
Concern has been rife about slow turn around at the RVR.
According to RVR, major rehabilitation works on the rail line can only be undertaken within realistic timelines, as outlined in the concession agreement.
Mr Roy Puffet, the RVR managing director, in a paid up advertisement admits that the performance percentage of goods and speed trains is below expectations, as is the injection of more resources to improve the current rail system.
"The financing structure of loans required for a concession that is inherently complex by nature and which are compounded by the fact that the concession involves two governments and two international financiers - all of whom have unique requirements - have resulted in unexpected delays in accessing the required funding to start the required capital expenditure programmes that are vital for this type of project," he says.
RVR says it inherited 100 locomotives in Kenya.
Out of this, only 50 were operational on the Kenyan side, while of the 40 engines from the Uganda Railways Corporation, only 24 were operational. Worse still, only 46 per cent of the 7,400 conceded wagons were operational.
The main engineering workshop in Nairobi was also below par and could not facilitate rapid rehabilitation works.
Tremendous growth
Experts hold the view that with the tremendous economic growth in Kenya and other East Africa countries, reliance on the port would stretch KPA's and RVR's capability if the two do not have long term plans.
According to Mr Puffet, RVR has also placed orders for the delivery of more locomotives, which are expected in the country in coming months as part of a lease from Sheltam Grindrod of South Africa.
It has also started the rehabilitation work on serviceable locomotives, passenger coaches and wagons, and it recently rolled out its Nairobi workshops.
RVR says that according to the degree of dilapidation and rot for the local rail service, tangible developments will only be visible from 2010 and beyond.
Last year, RVR announced its commitment to invest $17.5 million in the rehabilitation of the railway network and other works this year, and the turn around plans were expected to be felt by August this year.
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