Costs, competition drive truckers to innovate
Friday June 03 2022
Stiff competition from the standard gauge railway (SGR) coupled with the increasing cost of fuel, taxes and insurance premiums has forced Kenyan truckers to be innovative to remain afloat.
The government directed that all cargo delivered at the Mombasa port be exclusively railed inland to Nairobi via the SGR although this is being contested in court.
Some truck owners have converted their vehicles into specialised trucks to ferry out-of-gauge cargo that could not be hauled by the SGR while others have moved to neighbouring countries where there is still business.
Among businesses that have taken advantage of the heavy infrastructural developments in the region to transport out-of-gauge cargo such as oversize containers and reefers is Transtrailers, Simpet Global Logistics and Seven Stars, which have invested heavily in modern technologies for handling over-size cargo.
Simpet founder Peter Wachira says his company has also extended its coverage to Tanzania and Uganda.
“Simpet has ventured in the abnormal cargo or OOG (out of gauge) cargo operations and the company is investing in this sector due to ever growing demand in project cargo, infrastructure and construction field,” said Mr Wachira.
However, other truckers have had to cut their operations. Newton Wang’oo, chairman of the Kenya Transporters Association, says several of its members have closed down and others have reduced fleets.
“High truck operations cost and lack of business due to SGR has affected trucking business. A number of companies have closed,” said Wang’oo.
Awal Abdi of Awale Transporters says a majority of his 60 trucks have been grounded.
“I have to pay taxes, insurance premiums, service loans and when you add the operational expenses, it is very hard to stay afloat. I have seen a lot of trucks being auctioned because transporters now do not have business,” Abdi said.
While his firm charges about $800 for shipping cargo from Mombasa to Nairobi, Kenya Railways Corporation charges about $510 for a 20-foot container and $725 for a 40-foot type from Mombasa to the inland container depot in Naivasha.
He added, “As a trucker, I have been forced to reduce the number of my fleet while some I have leased which forced me to layoff some drivers and their assistants.”
Challenges posed by the SGR and operational costs make it harder for logistics firms to survive, especially those that own only a few vehicles forcing some logistics firms to resort to leasing to minimise costs.
In servicing a truck, fuel which has been on the rise, takes up nearly half of the expenses. There are also business licence fees, taxes and insurance premiums with a comprehensive insurance cover costs around 10 per cent of the value of the vehicle per year, with the cost increasing as the fleet ages
Despite a number court orders issued to stop the directive, the government has continued to implement it.
The ripple effect of the directive was that transporters had to reduced their fleets because the directive on SGR with high prices of fuel retailing at $1.24 per litre in Kenya, the highest in the past one decade and high cost of spare parts completely pushed them out of business.