Ruto port directive raises hope in Mombasa, but worry in Nairobi, Naivasha

Will President William Ruto’s directive to return all port operations transferred to Nairobi and Naivasha to Mombasa revive the coastal city’s economy?

According to a University of Nairobi’s School of Business study conducted after the implementation of the order requiring mandatory transfer of cargo through SGR to Nairobi, Mombasa County was losing Sh17.4 billion and 2,987 jobs equivalent yearly.

Closure of warehouses, container freight stations (CFS’) and transfer of clearing and forwarding services to Nairobi and Naivasha robbed the county billions of shillings and left thousands jobless.

Whereas the order is good news to coast businesses, it will hurt those set up at the Nairobi and Naivasha Inland Container Depots (ICDs).

SGR loan

The government, in 2019 enforced a directive that saw traders use the standard gauge railway (SGR) to help repay the Sh450 billion loan used to build it.

Those expecting good returns after the Tuesday order include property agents.

The introduction of the SGR freight train did not spare property owners, with the property market and commercial space in the city shrinking due to a bad economy.

Property consultants and real estate agents say there was a diminishing appetite for office spaces in the port city as many of the buildings remain vacant.

Working away from office

Mr Michael Mwangangi, founder of One Roof Agencies said he does not expect a quick return of business because majority of tenants have adapted to working away from the office.

He said unless Mombasa County reduces the cost of doing business to attract more people to work within the city centre, the situation will prevail for some time.

“The announcement by President Ruto is encouraging, but we do not expect that to happen overnight. Also, with the Covid-19 pandemic, the majority of workers, more so in the clearing and forwarding sector, adopted technology, thus they do not need a physical office to work,” said Mr Mwangangi.

A relief

Mombasa Governor Abdulswamad Nassir yesterday said the announcement was a relief, not only to the county government but also to the Coast people, who depend on the port for their survival.

“We are optimistic the move will grow Mombasa economy and it will also open businesses that have been closed for about five years now. As a county, my administration will create a one-stop portal to assist locals to register their businesses,” said Mr Nassir.

According to the Container Freight Station Association (CFSA), more than 4,000 workers have lost their jobs since the introduction of SGR and mandatory haulage of cargo from the port.

“We had to let go of more than half our workers as businesses struggled. All these job losses have happened here at the Mombasa port as a result of the reduction in trucked cargo volumes,” said CFSA Chief Executive Daniel Nzeki.

Facilitate East Africa trade

Dock Workers Union (DWU) Secretary-General Simon Sang urged the government to invest in the government land in the Malaba border town, to facilitate trade between East African countries.

He urged the Kenya Railways Corporation (KRC) to offer competitive transport rates to woo traders to use SGR and the metre gauge railway.

“We understand the advantage of the railway considering its safety and speed in evacuation of cargo but most traders would prefer using the road because of the last mile cost hence KRC should consider lowering their cost to become competitive in the market,” said Mr Sang.

Kenya Transporters Association (KTA) condemned the government's move to force traders to use SGR, saying it does not want to tell the public the hidden costs of using the SGR to ferry containers.

“It costs Sh80,000 including VAT to transport a 20-foot container to and from Nairobi using a truck but the SGR costs more than Sh90,000,” said KTA chairman Newton Wang'oo yesterday.

Moving a container

Transporters claim that moving a container to and from Nairobi using the SGR costs Sh50,000 but it does not consider that one has to pay Sh5,000 handling fee, Sh25,000 for ferrying the container from the SGR to a nearby CFS, and Sh10,000 empty container return charges.

Apart from Mombasa, a number of towns along the Mombasa-Nairobi highway who depended on trucks from survival such as Mariakani, Maungu, Voi, Mtito Andei, Masimba, Kibwezi, Mlolongo turned to ghost towns succumbing to economic malnutrition caused by SGR.

In the towns, deserted restaurants, empty parking lots, closed businesses, and unmotivated one or two workers is what one encounters, speaking to the lost glory of once vibrant centres along the highway largely sustained by the truckers.

The move also meant that the government was not collecting more than Sh675 million advance tax from about 15,000 trucks each year.

Reduced rent

Landlords were forced to reduce the rent to sustain and accommodate the tenants whose income continued to dwindle by the day.

According to Tysons Limited Property Manager Alfred Wambua, there is no business, no room for commercial space to thrive.

"Tenants moved out, others moved to more pocket-friendly buildings. Once the dry port was opened in Naivasha, most of the logistical, companies, businesses that occupied much of the commercial spaces in Mombasa shifted operations to Nairobi," said Mr Wambua in an earlier interview.

He added that the Covid-19 pandemic was like the last nail on the coffin that saw the businesses in the tourism hub county collapse.

"We have tried to lower rent, give waivers to tenants but this too has not been bearing much fruit. Mombasa lost it after the operationalisation of the standard gauge railway,” said Mr Wambua.

Train cargo uptake

Since the introduction of SGR freight trains in 2018, cargo uptake by train has increased from 4 per cent to 20 per cent in 2022 but what was touted to be a game changer in the logistics sector has turned out to be a double-edged sword.

Government efforts to improve efficiency at the Port of Mombasa and ease the government’s payment of the Sh362 billion loan to China for the construction of the 458-kilometre modern train infrastructure has driven up cargo operations by 27.5 tonnes.

The growth has been attributed to KRC's move to deal with bottlenecks at the evacuation hub at the port and in surpassing cargo delivery timeliness to designated pick-up points.

SGR operator, Afristar, moved 2,930,698 gross tonnes in 2018, 4,159,605 tonnes in 2019, 4,418,444 tonnes in 2020 and 5,419,508 tonnes in 2021, which was due to the introduction of two double-deck trains and direct haulage of cargo from ship to train.

Growth in cargo volumes

In an earlier interview, KRC Managing Director Philip Mainga said the growth in cargo volumes has been boosted by joint efforts in liaison with Kenya Ports Authority (KPA) and Kenya Revenue Authority (KRA), enabling smooth loading, delivery and clearance of cargo at destination deports in Nairobi and Naivasha.

“The recently inaugurated linkage line on SGR/MGR through Naivasha Inland Container Depot (ICD), enabling end-to-end rail cargo movement especially on transit goods from the Port of Mombasa to Jinja/Kampala and beyond destinations has gained momentum,” said Mr Mainga.

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