As the country prepares to commission the Standard Gauge Railway (SGR) at the end of this month, it is important to understand that its economic benefits will be fully realized only if we put the necessary supporting infrastructure and policies in place.

This is especially true for the freight component of the business that the SGR is expected to handle. The ongoing expansion and modernization of the Inland Container Depot (ICD) at Embakasi is, therefore, critical.

The ongoing works, estimated to cost a total of Sh21 billion, and on which China Road and Bridge Construction (CRBC) is the Engineering, Procurement and Construction (EPC) contractor, will not only provide a solution for some of the capacity constraints facing the Port of Mombasa but will also improve the overall efficiency of cargo transport within the Northern Corridor and optimize the utilisation of the SGR.

With the expected improvement in capacity, cargo aggregation points like the port of Mombasa and the ICD will need to expand in tandem. This way, they can keep up with the heightened evacuation capacity of the new track, both for the containerized and bulk cargo. The numbers tell the story of a massive rise in transportation capacity that we must be prepared for.

Each freight train will, for instance, pack a haulage volume of 216 Twenty Foot Equivalent Unit or a trailing load of 40,000 tons, moving at 80km per hour. Annually, the SGR is designed to move a significant 22 million tonnes.

Ongoing works at the Embakasi Depot, which is financed by the Kenyan government and the China Exim Bank, comprises the railway and the container yards, under Phase I of the SGR which has a route length of 472km.

Work is continuing apace and we are confident that completion will be achieved by the end of May. Already, the 18 buildings required are 88 per cent complete. On the equipment front, the new gantry cranes are on site, with 85 per cent already assembled.

Overall, the works required to expand the ICD are 80 per cent done. Equally critical to the efficiency of the ICD and that of the SGR Corridor are the road links between the Embakasi-based facility and the country and Nairobi’s road networks.

A key component of the modernisation is the construction of two access roads linking the depot through the Southern (Road A-2.122 km) and Eastern (Road B-3.004 km) bypasses.

Currently, improvement of access into and out of the ICD through the Eastern bypass is 90 per cent complete. The same pace of progress has not been achieved on the Southern bypass due to challenges around relocations.

This link is critical due to the current congestion around the ICD and Embakasi area. It is instructive that with the expected upward spiral in cargo traffic from the current 30,000 TEUs to 450-500,000 TEUs in the next five years, the expanded ICD can only serve the country up to 2023. The challenge is on the government to acquire more land to upgrade overall cargo handling capacity.

The other challenge is freight economics. The huge investment in freight handling, storage and transport capacity will only make sense to Kenya and the region if it is fully utilised by importers and exporters.

Thus, we must get the time and economics right to incentivise the use of the SGR as opposed to the road option. Global best practice is that rail freight costs must be 30 per cent cheaper than the road option to attract freight.

Besides attractive pricing, discounts and promotional tariffs are the other tools that can be deployed, especially at the beginning, to drive uptake and achieve the modal shift from trucking to SGR. A number of policies could also be brought to bear.

These include setting weight bands of containers that must be conveyed through rail. We could also have a requirement that all transit cargo terminate at the ICD, with rail handling the first or last mile. Inter-modality of the SGR and the existing Meter Gauge Railway (MGR) at the ICD should be promoted.

The MGR, to its advantage, has extensive networks to private depots, industries and sidings to do the last mile. Due to this competitive advantage, transfer from one gauge to the other can be done at the ICDN.

There is also need to reduce cargo dwell time at the port, half of which global research shows, is attributable to Customs release processes. The Kenya Revenue Authority (KRA) should consider innovations like green channels and post clearance audits.

Volumes and early bird discounts are another form of incentive. For now, SGR capacity is limited to containerised cargo, yet a significant 30 per cent of port traffic is bulk freight.

The SGR’s capacity to convey bulk freight like clinker and grains must thus be developed to ensure optimal use of its capacity and achieve the target 40 per cent modal share of the freight market.

There is potential for bulk freight handling terminals around areas like Makadara, which accounts for 60 per cent of the country’s milling capacity and Athi River, with its concentration of cement plants.

With an inordinate 45 per cent of the cost of doing business in the region accounted for by freight logistics, the SGR will cut transit times from over 30 hours on the MGR to just eight hours, making East Africa competitive and sparking economic takeoff.

Source: Mediamax

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of TradeMark Africa.