Mandatory SGR use causes unease among importers

Saturday March 11 2017

Part of Kenya’s standard gauge railway. Transporters argue that giving SGR special preference in the cargo business will push them out of the market. FILE PHOTO | NMG

Plans by the Kenya Revenue Authority to have at least 40 per cent of cargo arriving at the port of Mombasa transported to Nairobi on the standard gauge railway for clearance at the inland container depot are causing anxiety among transporters and importers.

KRA Commissioner for Customs and Border Control Julius Musyoki said using the SGR is a part of the agency’s strategy to ensure Mombasa remains the route of choice for traders in the Northern Corridor, as well as northern Tanzania,  DR Congo and Ethiopia.

“The SGR railway line is designed to carry 22 million tonnes of cargo annually, equivalent to 40 per cent of Mombasa ports throughout,” Mr Musyoki told The EastAfrican.

Recognising that volumes of imports and exports at ICD will grow exponentially, KRA developed the strategy to enhance efficiency in clearance time and provide effective controls on imports, exports and transit traffic, he added.

While KRA is yet to formally issue a directive on the matter, importers and transporters say it would be illegal for the government to dictate how to conduct their business.

“The government would be opening itself up to legal battles if it forced importers to transport their cargo by rail,” said Gilbert Lang’at, the Shippers Council of Eastern Africa chief executive.


He added that while the SGR had the potential to bring down transportation costs by as much as 35 per cent, the company that has been awarded the contract to operate the SGR has not given importers its operations strategy, particularly on key issues regarding the last mile, pricing, reliability and efficiency.

“If the SGR operator comes up with the right strategy, it is possible for it to attract even 50 per cent business without government support,” Mr Lang’at added.

Transporters argue that giving SGR special preference in the cargo business will push them out of the market.

“Cargo transportation should be based on what the importer wants, not what the government wants. That is why SGR should not be given special preference,” said Wanja Kiragu, the operations director at East Africa Online Transport Agency.

She added that the government should restrict itself to building infrastructure to enable the private sector to flourish, but should not itself be an active player in the transportation business.

To ensure that the SGR, which has been constructed at a cost of $3 billion in loan financing, does not lie idle come June, KRA is revamping and upgrading its systems at the ICD to ensure faster clearance of cargo transported from Mombasa.

The Kenya Ports Authority  is also expanding the depot in Nairobi to increase its capacity.

Currently, the depot has a throughput of 180,000 20-foot equivalent units (teu) per annum, but is being expanded to increase this to 450,000 teu.

The decision to grant SGR special cargo transportation rights is also causing jitters at Rift Valley Railways, the operatorS of the metre gauge Kenya-Uganda railway.

Australian construction firm John Holland, a subsidiary of China Communications Construction Company (CCCC), has been contracted to operate the SGR and is expected to commence operations in June.

Currently, about 97 per cent of the cargo arriving at the port of Mombasa is transported by truck, with the other three per cent being handled by RVR. The cargo is 33 per cent bulk liquid, 30 per cent containerised cargo, and at 28 per cent dry bulk.

It is estimated there are 15,000 trucks in the region, with 8,000 trucks leaving the port every week.