With the launching of the Standard Gauge Railway (SGR) almost two years now, we’ve witnessed growth in various sectors. Not only has SGR created job opportunities for thousands of Kenyan citizens, but also moving heavy cargo from the port to designated depots is quicker compared to road transport.

Despite SGR Kenya having transformed the scene in various ways, it is no doubt one of the costliest projects in Kenyan history.  and even all over Africa. Far from that, transporting good using SGR is proving to be expensive to importers.

The costs have hiked with time. And if you look at the numbers,  it is now cheaper to use road transport. Unfortunately, according to a government directive, Containers can only be transported from Mombasa and Nairobi using the SGR route.

Hiking SGR Kenya Charges

With the hiking costs of transporting cargo with SGR, manufacturers have expressed their discontent with the recent prices. It’s costly to transport goods between Mombasa and Nairobi. With deep regret, manufacturers have noted that the freight charges have skyrocketed since the start of the year. The cost has gone from 33.9 to 39.3 per cent.

New rates became applicable on January 1st. 

In line with the new charges, expect to pay approximately Ksh. 74,165 and 76, 714.  That’s the cost of transporting a 20 ft container.

The cost of transporting a 40ft container ranges from Ksh. 100,240 and KSh. 103,302. 
Before the fees were hiked, citizens would pay Ksh 57,280 to transport containers. Since the launch of the SGR cargo service, the latter has been the promotional rates for customers.
Ironically, the SGR cargo service was launched to enhance transport of large containers, cut down the transport cost, decongest our roads. Ironically, moving cargo by road costs cheaper now than using SGR cargo services. You part with Ksh.65,000 for a 20ft container. Supposing you are transporting a 40ft container on the road, expect to pay roughly Ksh. 85,000.
Manufacturers would love to have road transport as an option. The implications of these are yet to be reviewed in detail. But under the current circumstances, importers have no choice but to use the railway system to transport the cargo.

Lamenting manufacturers 

Of course, manufacturers can’t deny the convenience SGR has brought with it. SGR Kenya has improved the transportation of containers from Mombasa to Nairobi. Still, producers have to incur the cost of moving the cargo to other further destinations, which comes with an extra cost.

With the SGR rising costs, pressure is mounting on businesses and industries since companies have to incur additional costs when moving cargo from the ICD depot to designated places.

Long truck drivers report that moving a container from the ICD at Embakasi, Nairobi to Thika industrial town costs approximately Ksh. 35,000.

On top of these rising transport costs, manufacturers have to bear with external challenges affecting production costs.

Here is how various external factors affect the product cost:

  • Energy (54 percent).
  • Political climate (50 per cent).
  • Taxes (43 per cent).
  • Cheap imports (40 per cent).
  • Exchange rates and raw materials (24 per cent).
  • Technical skills (17 per cent).
  • Climate conditions (13 per cent).
  • labour wages (13 per cent).
  • Visa requirements (1 per cent).

Final Word 

Although the manufacturer’s hands are tied, the government may need to find a way to make SGR cargo service affordable. Our economy depends on the growth of the multi-facet industries, and by crippling transportation, production costs will hike. The result: some businesses may find it hard to stay in the game. Eventually, that will manifest itself as increased unemployment and retarded growth of the economy.

 

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