Business

Sh10.1bn SGR revenues revealed

Sh10.1bn SGR revenues revealed
  • Freight services, which started in January 2018, generated Sh8.4 billion in the year to June, internal performance data from Kenya Railways shows.
  • China Communications Construction Company, the operator, increased sales from the passenger service to Sh1.76 billion, up from Sh1.23 billion a year earlier.
  • The revenues were not enough to meet the operation costs, which are estimated at Sh1.5 billion a month or Sh18 billion a year.

The standard gauge railway (SGR) line raked in sales of Sh10.1billion in its second full year of operations, signalling that the mega project will take longer to break even.

Freight services, which started in January 2018, generated Sh8.4 billion in the year to June, internal performance data from Kenya Railways shows.

The data shows that China Communications Construction Company, the operator, increased sales from the passenger service to Sh1.76 billion, up from Sh1.23 billion a year earlier—reflecting a growth of 43 percent.

The revenues were not enough to meet the operation costs, which are estimated at Sh1.5 billion a month or Sh18 billion a year. Kenya Railways had budgeted to earn some Sh24 billion from the cargo service in the year to June, falling 65.56 percent below target.

The below target performance was attributed to reduced limited storage capacity at the Embakasi Inland Container Depot (ICDN), minimum use of the Nairobi Freight Terminal that handles cargo not stored in containers and cost tariff.

“There were several instances when the ICDN facility was congested, which impacted heavily on turnaround of resources and thus contributing to movement of low volumes. Closure of some lines also impacted on loading capacity of trains,” Kenya Railways wrote on the report.

The freight services formed the main economic justification for the $3.2 billion (Sh323.20 billion) that President Uhuru Kenyatta’s administration pumped into the project through loans largely procured from Exim Bank of China from May 2014.

Kenya Railways data shows the freight service moved 4,009,386 tonnes of cargo in the year to June against a target of 8,022,514 tonnes.

In the first full year operation to June last year, SGR made revenues of Sh2.4 billion, but this was based on a freight operations of six months.

Cargo charges on the SGR line from Mombasa to Nairobi were increased by up to 79 percent from January this year in a bid to raise more revenue to pay the Chinese operator.

But some importers said their transport costs shot up by nearly 50 percent when they used the rail due to extra fees, more time spent clearing goods at the Nairobi train depot and the need to send a truck to collect the goods from there.

The below target performance comes at a time when businesses based in Nairobi and upcountry are compelled to use the new railway line because the Mombasa port is contracted to supply it with a minimum amount of cargo.

Moving a 40-foot container to Nairobi by rail costs nearly Sh80,000 - roughly the same as a truck, says the Kenya Transporters Association.

But importers must also pay at least Sh25, 000 for a truck to collect the goods from the Nairobi depot, breaching the Sh100, 000 mark.

The cost of transporting a 20-foot container from Mombasa to Nairobi increased to Sh51,275 in January from Sh35,000, a 46.5 percent rise

Kenya Railways—which acts as the regulator of railway transport—has sought Cabinet approval to cut the freight charges to boost traffic.

Kenya requires additional cash from the railway business to ease the taxpayers’ burden of paying the Chinese SGR operator.

China Road and Bridge Corporation (CRBC) runs the SGR cargo and passenger business for an undisclosed management fee.

The Treasury also expects the SGR business to generate more revenue to help offset loans taken to build the multi-billion shilling railway line.

The Treasury will pay Sh61.2 billion in the year that started July, up from Sh30.9 billion it paid in the year ended June.

Kenya borrowed Sh324 billion for the project from the bank in May 2014, to be repaid in 15 years, with a grace period of five years.