5 January 2016

Kenya: High-Speed Rail Will Be an Economic Boost to Kenya

With the laying of rail tracks set to be complete by December, the completion of the Standard Gauge Railway is going to be one of the big stories this year. The modern railway is expected to open to first commercial traffic in June 2017.

Transport CS James Macharia is already sounding optimistic, lauding the progress made so far and noting that big impact on the economy will be recorded this year even as the tracks are laid on the 500-kilometre railway.

"The laying of the tracks in itself will have a huge impact on the GDP even before completion of the project," said Mr Macharia, adding: "local businesses are expected to contribute up to 40 per cent of all supplies whilst more than 50,000 Kenyans will be employed either directly or indirectly by the project."

The Sh400 billion infrastructure investment links the Port of Mombasa to Kenya's capital Nairobi. Plans are underway to extend it to the landlocked Uganda, Rwanda and South Sudan. Once complete, it is expected to cut the cost of transport in the region and stimulate industrial growth.

The plan to construct the SGR began in 2009 through a memorandum of understanding between Kenya and Uganda to connect Kampala to the coastal port city of Mombasa.

However, it took a regional approach in 2013 when Kenya, Uganda and Rwanda signed a tripartite deal committing to fast track the construction of the railway to their respective capital cities. Later, South Sudan joined.

The Kenya Railways Commission project manager in charge of the SGR Eng Maxwell Mengich told Smart Company that 65 per cent of the civil works are complete.

"We are way ahead of schedule," said Eng Mengich, adding that "the government has been so committed to have this project completed on time."

About 90 per cent of the modern railway is financed by the Exim Bank of China with Kenya raising the balance. The government spent an extra Sh45.6 billion on the SGR in the year to June 2015 to accelerate its construction. The budget set aside for the project was Sh77.4 billion.

As a result, the railway took an extra 0.8 per cent in GDP spending, but it is expected to contribute 2 per cent to the country's wealth annually, starting this year.

In May last year, President Uhuru Kenyatta announced that Phase II of the project will start in 2016 and will see the railway extended by 120 kilometres to Naivasha from Nairobi. The rail will link a special industrial zone that would be build in the Rift Valley to Nairobi and Mombasa.

"There must be no laxity in terms of delivering what is one of our most transformational projects," the President said.

The SGR has some iconic structures; the Nairobi-Naivasha link will cost about Sh143.5 billion, with a 5.3-kilometre tunnel, the second longest in Africa. South Africa's 13.4-kilometre Hex-River rail tunnel is the longest.

Engineers from China Road and Bridge Corporation, the contractors of the modern railway, are expected to spend about 18 months drilling through the Great Rift Valley escarpment to construct the tunnel.

The SGR is expected to have a huge impact on the devolved units' development plans especially where it will pass through with Mombasa, Nairobi and Naivasha tipped to be the big beneficiaries.

FIVE NEW STATIONS

For instance, the Mombasa-Nairobi stretch will include marshalling yards, 33 crossing stations and sidings about 124kms long.

Business opportunities are expected to rise along the line as traders target a surge in railway travellers.

Five new stations at Mariakani, Voi, Mtito Andei, Sultan Hamud and Athi River will likely stimulate the growth of these business centres.

These stations will be served by locomotive workshops. There will be a constant need to supply the workshops with electricity, water, signalling, communications and ICT systems. Small and medium enterprises with the ability to meet the needs will be awarded the lucrative tenders.

Experts say that the successful completion of the SGR will be a defining moment for the Jubilee government.

The SGR is considered a game changer in transport, reducing time spent on travelling, with cargo train speed of up to 120kms/hr and passenger trains at 180km/hr.

It will for instance take a traveller just four hours from Mombasa to Nairobi by rail. Despite the reduced travel time, the cost of cargo shipment is expected to be cut from $0.20 to $0.08 per tonne per kilometre due to the use of block trains which offer economies of scale compared to narrow gauge and road transport.

Commodity prices are expected to contract by early 2017 as the cost of transport, which is a main factor in commodity pricing, will have gone down significantly.

SEAMLESS OPERATIONS

Eng Mengich said that the Kenya Railways master plan is a brilliant plan, "it allows for a network of seamless operation of trains, which are compatible."

The plan provides for another SGR as part of the Lamu Port South Sudan Ethiopia Transport corridor from Lamu to Addis Ababa through Moyale and to Juba via Lokichogio.

Many Kenyan and regional importers and exporters have already factored in the SGR into their 2018 logistics plans and are watching the pace at which the project is being implemented.

A 2012 presentation by the then Transport PS Nduva Muli to the World Bank shows that rehabilitating the existing railway networks would pose major capacity constraints.

The maximum amount of traffic that the rehabilitated railway line could accommodate was 5.5 million tonnes per year, far below the 14.4 million tonnes of freight forecasted per year in the region by 2030.

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