Kenya MPs against forced use of SGR to ferry goods
Monday November 16 2020
Kenyan lawmakers have recommended the removal of the compulsory requirement for the use of the Standard Gauge Railway (SGR) to transport cargo.
This gives importers the freedom to choose their own means of transport, but spells doom to the commercial viability of the multi-billion-dollar project.
The Parliamentary Departmental Committee on Transport, Public Works and Housing said importers should be given the freedom to choose how to transport their goods without restrictions from any government agency.
The committee chaired by Pokot South MP David Pkosing said the government should look for other alternative ways of raising funds to repay the SGR loan, including utilisation of Kenya Railway assets where income accrued from idle land and assets should be channelled to the Railway Development Fund.
The government was also advised to consider adjustments to the Railway Development Levy (RDL) as an incentive to use the SGR such as importers paying a preferential RDL of 1.5 percent of the value of their goods. Conversely, importers who choose to use road transport will attract an additional surcharge of 0.3 percent of the value of goods imported, up to a maximum of $138.
According to the committee, the rate of the surcharge can be subjected to a review by the relevant stakeholders.
The recommendations which will be subjected to a House vote this week also provide that the government allows private investors to extend the railway line from Naivasha to their respective yards at their own cost to address the existing challenge of last-mile connectivity.
“For the SGR to remain the choice for shippers, it is important to ensure that efficiency, predictability and costs remain the focus of service delivery. The government should allow the multimodal transport concept to thrive while providing enabling environment for competitive yet efficient services,” the committee said in its report titled Inquiry into the use of the SGR.
The committee also noted that forced railage is against the International Maritime Laws and Word Trade Organisation Treaties.
Kenya has been pushing for compulsory freight from Mombasa to Naivasha via the SGR to make it economically viable, a move that has put the country on a collision course with some of its regional peers and truck drivers.
In June, the presidents of Kenya, Uganda, Rwanda and South Sudan agreed through a virtual meeting that all goods imported through Kenya and headed for neighbouring landlocked countries be transported by rail from Mombasa to the Naivasha inland container deport. However, Uganda backed out of the deal arguing that the use of the SGR should be optional.
Kenya completed the initial phase of the 487km SGR line from Mombasa to Nairobi at a cost of $3.8 billion with 90 percent of the funding being a loan from the Chinese Exim Bank in May 2014, with a grace period of five years and repayment period of 15 years. It also secured a further $1.5 billion loan from the same bank to extend the railway to Naivasha.
However, the Madaraka Express is not generating enough revenues to cover its operational costs and repay the loans, whose repayment started in the 2019/2020 fiscal year.