Bleak future as fears over SGR freight business take over in Coast

President Uhuru Kenyatta flags off the first ever Standard Gauge Railway (SGR) line cargo train loaded with 99 containers at the port of Mombasa, May 30, 2017. [Photo by Gideon Maundu/Standard]

On Monday, the first Standard Gauge Railway (SGR) freight hurtled its way from Mombasa with hundreds of containers and in its midst stoking fears among freight business agents.

Mombasa Governor Hassan Joho says the SGR freight trains, the Naivasha dry port and Embakasi inland container depot (ICD) would affect the multi-billion shilling container freight station business in Mombasa.

He says the projects would lead to either relocation of logistics and transport business to Nairobi or Naivasha or a complete shutdown, leading to massive job losses at the port city.

Joho says the construction of the Naivasha dry port and expansion of Embakasi ICD was Jubilee regime’s plan to weaken Mombasa’s economy and status as the region’s logistics hub.

The national Government, however, says the aggressive infrastructure expansion is aimed at reducing logistics costs along the northern corridor and boosting value addition of Kenyan exports.

Logistics experts and economists continue to debate on economic effects of the mega projects, but concur that many logistics units in Mombasa, like the container freight stations, will be affected.

“The CFS business in Mombasa will be worst hit by these projects but they can re-invent themselves,” says Meshack Kipturgo, Siginon Group Managing Director.

He says the freight station operators in Mombasa will have to either diversify or the stations be turned into value addition or transshipment centres if they want to remain afloat.

Ideal place

“It is also true that most clearing services will find Nairobi an ideal place to set their shop because over 40 per cent of the cargo will be evacuated to Embakasi by the SGR,” says Kipturgo.

According to the SGR financing agreements seen by the Sunday Standard, the Kenya Ports Authority (KPA) is obligated to allocate 40 per cent of its total container throughput to the SGR.

The KPA now says the Embakasi ICD will act as a one-stop centre for the clearance of cargo destined for Rwanda, Uganda, Burundi and South Sudan.

Other logistics experts say establishing industrial parks upcountry will create an additional transport cost for Kenyan goods and make them non-competitive at the global market.

According to economist David Ndii, the shift of the logistics and port services from Mombasa to Nairobi and Naivasha will lead to a drop in the county’s revenue.

“It does not make sense when we move port services away from the port. It will ultimately increase the cost of trade,” says Dr Ndii, who is also an Opposition’s strategist.

“We made the same mistake with the establishment of Export Processing Zones (EPZ) in Nairobi and Thika and we were not able to compete with Bangladesh and India.”

He said disturbing a complex logistic system in Mombasa, which has worked for decades, will have adverse effects on the economy.

Other than the road haulage sector, clearing, forwarding and warehousing service providers in Mombasa also fear they may lose out in business or be forced to relocate to Nairobi.

Kenya Transport Association (KTA) statistics indicate that there are over 1,600 trucks operating along the northern corridor, which transport over 95 per cent of cargo passing through Mombasa.

Some road haulage firms, like the Bayusuf Transporters, have recently scaled down their investment, with some either selling off their trucks or investing in the real estate industry.

Mombasa-based Sanghani Transporters says it has decided to invest in the mining industry to generate cargo for its fleet in the light of the SGR project.

Logistical challenges

“We started the iron ore mining in Taita Taveta to create cargo for our transport section,” says RK Sanghani, the firm’s Managing Director.

On Monday, the first SGR freight train left Mombasa for the newly refurbished Embakasi inland container terminal in Nairobi with a total of 102 containers.

The container freight station concept was started in 2000 to address logistical challenges in Mombasa Port due to lack of enough space.

With the construction of the second container terminal and revitalising the use of its inland container deports, 21 container freight station operators in Mombasa fear they could be rendered irrelevant.

“We have done a study and identified many ways we can still remain afloat,” says Daniel Nzeki, the chief executive officer of Container Freight Station Association of Kenya.

He says some freight stations would become value addition centres but expressed confidence that with projected increase in cargo throughput at the port they will still be in business.

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