Kenya’s Standard Gauge Railway registers losses close to $100m in its first year of operations

The Standard Gauge Railway (SGR) made a Sh9.89 billion loss in its first year of operation, according to the latest figures from the Ministry of Transport.
SGR averaged a monthly loss of Sh750.7 million in the 2017/18 financial year largely as a result of low cargo business.

Kenya’s largest infrastructure project since independence registered losses close to Sh10 billion ($100m) in its first year of operations.

The Standard Gauge Railway (SGR) made a Sh9.89 billion loss in its first year of operation, according to the latest figures from the Ministry of Transport.

Documents tabled by Transport and Infrastructure Cabinet Secretary James Macharia before National Assembly’s Transport Committee yesterday revealed that SGR averaged a monthly loss of Sh750.7 million in the 2017/18 financial year largely as a result of low cargo business.

“Part of the reason we made the loss last year was that it was a bit difficult to convince people that the railway was good for their cargo businesses,” a local daily quoted Mr Macharia saying.

Despite rolling out a three-month-long promotional package offering half the cargo transportation fee to woo traders and shift cargo transport from roads to rail, traders still shunned SGR freight services.

“Also, we were in operation for only six months from June 2017 and we were only trying the waters.”

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During the period, the SGR freighters were to pay a flat fee of Sh35,000 ($350) inclusive of cargo handling costs and returning of empty containers for a 20-foot container and Sh40,000 ($400) for a 40-foot container from Mombasa to Embakasi Inland Container Depot (ICD).

The Government is however optimistic that SGR fortunes will turn around and projects that the Chinese-built railway will make a profit of Sh5.08 billion between now and June next year, averaging Sh424 million earnings per month.

The SGR expects to haul close to nine million tonnes of cargo compared to 990,488 tonnes carried in the last financial year.

Currently, there are eight cargo trains making daily trips from the Port of Mombasa and the Government aims to have 12 trains by the end of the year.

The transport CS said if the multi-billion infrastructure does not break even by the 2019/2020 financial year - when the loan repayment to the Chinese government is scheduled to begin - then the exchequer will have to pay from the newly established Railway Levy.

Kenya signed a Sh324 billion deal in May 2014 with China’s Exim Bank, comprised of Sh160.6 billion commercial loan and Sh163.4 billion concessional loan, to build the modern railway between Mombasa and Nairobi.

The loan, whose interest is 3.6 percentage points above the six-month average of London Inter-Bank Offered Rate (Libor) - which serves as an international benchmark - is to be repaid in 15 years.