23 July 2014

Kenya: New Railway Project Could Break Even After 20 Years

Photo: Capital FM
The Standard Gauge Railway line (file photo).

THE Kenya Railways Corporation will have to wait for at least 20 years before accruing any profits from the operations of the standard gauge railway if it is completed by 2023 as planned, a public forum was told yesterday.

KRC engineer, Solomon Ouna said a railway line requires huge cargo movement in order to start giving returns but since entrepreneurs have lost confidence in using the existing railway for transportation of cargo it will take time to convince them on the benefits of the SGR.

"A properly designed and con- structed SGR will reduce the cost of doing business immensely. But changing the perception of the business community on modern rail transport benefits will not be easy because of poor management of the existing railway in the past," he said. Cargo transport is cited as the most profitable in rail business since its done in bulk and its returns are used to offset losses in human trans- port.

According to KRC, Kenya has a rail network of 2,200 kilometers but only 1,080 kilometers from Mombasa to Malaba is currently in use accounting for only one per cent of transport contribution to the economy with the balance coming from roads.

"A well operated railway has capacity to haul five million tonnes per year," he said during the rail transport policy forum hosted by the Institute of Economic Affairs in Nairobi. The railway operator, Rift Valley Railways, blamed the government for contributing less funds for the management of the railway line. The director of external affairs, Cosma Gatere said that they charge more in cargo transport in order to avoid cost overrun, thus consumers prefer the long haul trucks.

"We took a concession for a railway that had been abandoned for over 25 years and we had to rebuild most parts of it. Cargo transport will reduce significantly if the government agrees to share with us the risk managing railway," he said. He said they pooled $25 million (Sh2.19 billion) in 2012 from lenders, investors and internal funds in a bid to invest in rolling stock, technology and upgrading of infrastructure adding that they have utilised $10 billion (Sh877.9 million) so far.

"We are also signing up private partnerships with interested oil marketers in order to revive the dead tank wagons. The fleet now has 40 oil wagons and we hope to get to 400 in two years," he said adding that they have already signed a deal with Vivo Energy while Hass and Total have shown interest.

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