Love it, Hate it SGR is a Game Changer

Love it, Hate it SGR is a Game Changer

Love it, Hate it SGR is a Game Changer

By Sitati Wasilwa

The Nairobi SGR Terminus.
Image: Courtesy

Enter “Madaraka Express” and exit the “Lunatic Express”. The official commencement of the operations of the newly constructed standard gauge railway line (SGR) presents a new frontier for the growth and development of Kenya’s economy not so much in the short-term but in the medium-term and long-term. This is in view of the calculated economic projections which indicate that the SGR will expand the country’s economy by 2 to 2.5%.

The SGR is one of the flagship projects documented in the country’s development blueprint, Vision 2030. Its construction, therefore, is a function of the political aspect of continuity of government clearly highlighted under the Medium-Term Plans that are subsets of the Vision 2030. The bragging rights in terms of the conceptualization of this grand project and the subsequent implementation of the project design have been overtaken by cheap political talk and banter.

For starters, it is strongly believed that the SGR is the foremost flagship infrastructural project of the Jubilee administration. This is a misguided notion. The complete lack of information as well as the aspect of information asymmetry on the origins of the SGR in the country is largely responsible for the aforementioned misguided notion.

The construction of the SGR in Kenya is well highlighted in a policy document known as the East African Railway Master Plan whose main objective is to significantly improve railway transport in the East African region by constructing the SGR marking a shift from the use of the metre gauge railway track that was laid by the colonialists.

Preceding the formalization and harmonization of the East African Railway Master Plan, a Memorandum of Understanding (MoU) for the construction of the SGR was signed between the governments of Kenya and Uganda in October 2009 hence the genesis of the project.

Completion of the first phase of the SGR hasn’t been as smooth as envisaged in view of the criticisms and controversies that have coated the region’s largest infrastructure project. The Kshs.327 billion, that is the cost of the first phase of the project, is believed to have been inflated by the robber barons and the masterminds of corruption. Indeed, nothing could be further from the truth but other considerations should be taken into account and this would be explained later in the article.

Critical transport infrastructure is fundamentally important for the economic growth and development and the subsequent structural transformation of any economy. The SGR should be evaluated on the basis of the multiplier effect that it will generate in the country’s economy. Primarily, the SGR is expected to increase the efficiency of the movement of people and goods between Nairobi and Mombasa. It is out of the increased efficiency that the positive spill-over effects will spur economic growth and development.

Fast forward, the efficiency of the SGR will be majorly assessed on the shortened period of time that it will take to transport cargo and people between the country’s capital and the coastal city. This should be evaluated in comparison with the transportation of people and cargo using the metre gauge railway line and road.

Passenger trains using the metre gauge railway line take approximately 24 hours to move between Mombasa and Nairobi. The travel time for buses shuttling between the two cities is approximately 8 hours. On the other hand, the travel time of the SGR passenger trains is between 4 to 5 hours. Furthermore, it is expected that 22 million of cargo will be transported on a yearly basis in the longer-term which is almost 15 times the volume of cargo transported on the metre gauge railway line that is approximately 1.5 million tonnes per year.

Cost Concerns

A number of cost comparisons have been made in relation to the first phase of Kenya’s SGR and other countries like neighboring Ethiopia and Morocco. Much focus, however, has been on the cost of construction of the SGR in Kenya and the electrified railway system in Ethiopia which was launched last year.

From the outset, the electrified SGR line linking Ethiopia and Djibouti is 750km long and its total cost of construction was $3.4 billion, approximately Kshs.340 billion. For Kenya, Kshs.327 billion has been used to construct the SGR for a total length of 609km. Calculating the cost per km for the two countries is a vague way of ascertaining the costs for the two countries in absolute and relative terms. The variance and disparity of the costs of constructing the railway lines in the two states is a function of a number of factors, that is, a number of factors led to the railway line in Kenya to be more costly than the one constructed in Ethiopia.

Firstly, Kenya’s SGR involved the construction of massive bridges compared to Ethiopia’s electrified SGR. Secondly, Kenya’s first phase of the SGR is set to have a total of 33 railway stations compared to Ethiopia’s 18. Thirdly, the construction of Kenya’s SGR involved massive compensation of land owners compared to Ethiopia. There are two scenarios that play out in view of the land compensation in the two nations. One is that in Ethiopia the government is high-handed and any objection to the land compensation deal offered is met by the full force of the law. On the other hand, with a more open democratic space and institutions, the Kenyan government at least gives an ear to the victims which would mean that the tabled land compensation deal could go up in the latter.

The second scenario is that a significant amount of the land compensation deal in Kenya was not devoid of corruption which may not have been the case with Ethiopia. The fourth factor is that Kenya purchased more locomotives than Ethiopia. Moreover, the electrification of Ethiopia’s SGR has been made possible by the availability of electricity from the Great Ethiopian Renaissance Dam which has a capacity of 6,450MW. For Kenya, the available electricity can hardly sustain an electric rail system but going into the future, the full implementation of the Least Cost Power Development Plan that will generate 5,000MW will enable the electrification of the SGR at a cost of approximately Kshs.40 billion.

Some Kenyans called for the rehabilitation and upgrading of the metre gauge railway line as an alternative to constructing the SGR but its whole-scale rehabilitation would only lead to the transportation of 5.5million tonnes of cargo per year hence largely inefficient.

Creative Destruction

There is no doubt that the SGR is going to lead to loss of jobs with respect to the passenger service buses and the cargo-hauling road trailers. But on the flipside, the SGR will bring about more efficient and cost-effective transportation of people and goods with a large-scale multiplier effect. This multiplier effect will be in terms of creation of employment opportunities, the construction of roads linking with the SGR, development of the technical/vocational skills among others.

Creative destruction is a technological and economic phenomenon that disadvantages one segment of the economy while creating more economic opportunities in the medium-term and more specifically in the long-term. The SGR is creative destruction at play with some individuals bound to suffer but with a larger number expected to benefit in the long-term.

 

The SGR is a key infrastructural project that offers a new trajectory for the growth and development of the country’s economy. Proper management of the project is paramount if at all the returns on investment are to be realized.

The writer is an Economist and Consultant on Public Policy at Savic Consultants’ Centre for Economic & Public Policy Analysis (CEPPA).

3 Comments

Leave a Reply

Your email address will not be published. Required fields are marked *