SGR yet to break even with Sh91bn revenue, 10m passengers in six years

Since its launch, it has been run by Africa Star Railway Operation Company. Kenya Railways is the regulator.

The project, which was conceived during President Mwai Kibaki’s tenure, was to build a railway connecting the port of Mombasa to Kisumu and extend it to Uganda.

When Kenya secured a $3.2 billion loan from China to build the 485 km railway from Mombasa to Nairobi, the idea was to have a “highly profitable” transport corridor.

Years on, the railway has still not reached Kisumu and the money generated is still not enough.

A 2014 parliamentary report by the Departmental Committee on Transport shows the Ministry of Transport justified the SGR construction by claiming that the railway would carry 22 million tonnes of cargo a year.

Read: The good, bad and ugly of standard gauge railway service

It has only transported 26 million tonnes since 2017.

Between July 2022 and June 2023, some 6.29 million tonnes of cargo were transported, according to Kenya Railways – the highest the SGR has done in one year.

This is despite more than 33 million tonnes of goods being handled at Mombasa port in 2022 alone.

The revenue from the cargo business has hit Sh80.47 billion.

Kenya Railways MD, Philip Mainga, defends the construction costs saying SGR has had an impact on Kenya’s economy.

“The macro effect of the SGR, which has a life span of 150 years, far outweighs the direct cost of construction over time,” Mr Mainga told the Sunday Nation. 

China Road and Bridge Corporation was involved in the first phase of the project from Mombasa to Nairobi while China Communication Construction Company won the contract for Nairobi-Naivasha line.

Despite its revenues rising every year, the railway remains a strain on the taxpayer as the government has to look for money to pay the debt.

There is also criticism of the cost of the project and the final product compared to international standards.

Read: Taxpayers to foot SGR bill following President Ruto's port order

Ethiopia, which also built a railwayline financed by the Chinese, spent $3.4 billion – which was $200 million more than the Kenyan railway. The Ethiopian line is 250 kilometres longer than the Kenyan SGR. It is a double track and electrified.

The government defended the cost, claiming the terrain the line would pass through required many bridges and tunnels, as well as money that would go towards land compensation.

Mr Mainga says there are plans to have the railway electrified, with availability of stable power supply being a key factor in determining the time for such a plan.

“Construction and installation of facilities to support electric traction will be done once the cargo volume reaches the threshold for electric traction,” the Kenya Railways boss says. 

The passenger side of the business has been lauded as it reduced the amount spent on the road from almost ten hours to around six hours.

Kenya Railways says the service has so far has run 10,109 passenger trains transporting over 10 million passengers since 2017.

Revenue from the passenger business has reached Sh11 billion, putting the entire amount generated by the cargo and passenger services at Sh91.55 billion.

Phase 2A of the railway, which runs from Nairobi to Suswa, was completed in 2019 at an extra cost of $1.2 billion. It has ferried 203,351 passengers to date.

Mr Mainga says business to the Naivasha Inland Container Depot (ICD) has seen an increase in volumes of cargo despite President William Ruto’s ordering that cargo clearance be reverted to Mombasa.

“In spite of the directive, the freight service registered an increase in the volumes of cargo moved, from 1,982 twenty-foot equivalent units (TEU) in 2021/2022 year to 3,511 TEUs in 2022/2023,” he says.

The Kenya Railways boss says the Naivasha ICD handles containerised goods and transits conventional cargo, including steel and wheat.

Read: China seeks to set record straight on SGR, global trade as row rages

But the SGR is still facing opposition from those who feel it has destroyed their businesses and livelihoods.

Long-distance truck drivers interviewed say the SGR brought nothing but pain.

Kenya Long Distance Truck Drivers and Allied Workers Union Chairman, Roman Waema, says the railway led to closure of many businesses and job losses.

“Businesses that heavily relied on transit goods trucks such as hotels, accommodation, spare parts sellers and mechanic workshops collapsed. Some have never reopened after the SGR started operating,” Mr Waema says.

He attributes the closure mainly to the Uhuru Kenyatta government directive of moving customs clearance to the ICDs in Nairobi and Naivasha but adds that even after the reversal of the order by President Ruto, damage had already been done.

“The damage was calamitous. It was irreversible for many businesses. It will take a long time to recover,” he adds.

For some Kenyans, the SGR has been a success as it eased travel and transport of goods Nairobi and Mombasa.

Mr Abinel Mwangi, a security and life safety technician, says the railway has made him conveniently move fast between the two cities.

He, however, believes Kenya did not get value for its money, arguing that such a huge investment should have yielded much better results.

“For the amount the country spent, we should have had a railway that went all the way to Kisumu and Malaba. It is like a lot of money was spent for an incomplete project,” he says.

While Mr Mwangi sees the movement of cargo via the SGR as a good way to decongest the coastal city and reduce traffic on the highway, Mr Waema says the SGR has had no benefit for him and the many others whose businesses were affected.

“Before the SGR, a truck driver could make four to five trips between Nairobi and Mombasa in a week. This has been reduced to one trip,” he says.

He adds that the situation affected those who transport cargo to other countries, saying while a driver would make seven trips to Kampala every month, that had reduced to two.

[email protected]