SGR Railway will pay for itself


The idea for the Standard Gauge Railway is for railway to pay for itself. The cargo they need to do that is about 28Million tonnes and so far we are importing 26M tonnes via Mombasa port or more than 1 million containers per annum so this will pay for itself. I have no doubt that this will pay for itself. In 2009 Mombasa had 600,000 containers passing through the port now that has doubled to 1.1Million.

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If we move 20M tonnes per annum (say 70%) of that cargo though SGR at the current rate Kshs 20 per tonne per km in distance of 500kms, then total revenue for the rail operator will be Kshs 200Billion but because the rail operator will be charging 2.5 times less at Kshs 8per tonne, it will be able to rake about 80Billion revenues. When you remove the running cost (fuel +labour + others), then this rail can make 50B profit on cargo alone to be used to repay the loan. Throw in passenger traffic and it could be a little more.

In the meantime the economy will benefit first from the KSHs 120 Billion savings (2.5 times less the transport cost), save time, less strain on Nairobi – Mombasa road, less maintenance cost of our roads, more cargo passing Kenya because it cheaper and quicker than Tanzania, more juice generally for the economy given transport has multiplier effect.

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There is no DOUBT that Mombasa-Nairobi SGR will be profitable. What is doubtfully is the NBO-Malaba especially with Uganda and Sudan playing games. The cargo will have drop by another 60-70% because most of the cargo is destined for Nairobi. Nairobi is the engine of our economy. Even the rickety current rail line is now moving 1.5-2Million tonnes of cargo every year. The government should go slow on Nairobi-Malaba and try to renovate the current line — and stick it up Museveni for screwing us up on the pipeline. It may be worthwhile to renovate and build new lines to 47 counties than trying to help Museveni move his cargo.

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There are about 5,600 trucks weighed at the Athi River (Mlolongo) weighbridge daily; 2,507 in Mariakani; 2,655 in Gilgil; 965 in Webuye and 432 in Busia. The reason why those in Athi River doubles those in Mariakani is most likely due to Industrial Area, EABL, milk supplies to Ukambani, Coast etc. With this data, it is obvious Nairobi-Mombasa SGR route make business sense. Nairobi-Malaba is doubtful. Seem cargo drops by 50%. We may need go slow on that and try work on metro in Nairobi for passengers.

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New rail operator according to government sources will transport cargo at 8shs per tonne per kilometer compared to current 20shs per tonne per km. I don’t think trucks will be able to compete at those prices. They will move inland to transport cargo to areas without the rail. Pick cargo in Nairobi and transport it to Nyeri etc.

We are talking a Standard Gauge Railway project, which alter the logistics game completely. SGR is designed to transport 22M tonnes in few years. I think it will start transport more than that when it get launched next year. Already Mombasa port (now forth busiest port in Africa) is moving 26M tonnes of cargo and once the railway start operating, the trucks will have to go to Nairobi or elsewhere to find business

1) SGR -CRBC (China) running for initial 5years will deliver cargo in 1 day to Nairobi -@80Km/h speed.
2) SGR – will charge 2.5 times less than what is charged currently

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Nairobi-Mombasa line is self-evidently profitable. The cargo will be dumped in the huge inland/dry port being built in Nairobi’s Embakasi at a cost of 20B and that is where trucks will find business to do.

Government owns SGR including the trains. The chosen operator has to stick with government prices. Which is 2.5 times less than what is charged now and so if anyone want to move cargo at those prices, the economy is the winner and government is more than happy and even happier if it get moved quickly.


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