New SGR cargo policy hits hard transporters, coast residents
With a number of businesses in Mombasa shutting down, there is no question that 2019 was a bad year for the port city’s economy.
The introduction of a new cargo clearance policy on August 3, requiring all cargo destined for Nairobi and beyond to be evacuated through the Standard Gauge Railway and cleared at the Inland Container Depot (ICD) in Nairobi, appeared to have spelt doom to businesses in the coastal city.
But even before the Kenya Revenue Authority (KRA) and Kenya Ports Authority (KPA) made the announcement that officially came into effect on August 7, players in the sector complained that the government had started enforcing the policy silently.
The Kenya Transporters Association (KTA) said its members were among the first casualties of the directive to evacuate all cargo from the Port of Mombasa by train, which translated to 107 trucks being locked out of the road daily.
“One train transports about 107 containers… this means 107 trucks will automatically be pushed off the road and in that same day 107 drivers will be left without income... this also means that the fuel levy will not be collected and this is a loss of revenue for the government,” said KTA chief operations officer Mercy Ireri.
Just a day after the directive was implemented, the official said, 749 drivers were rendered jobless. But loss of business and jobs is the tip of the iceberg since most transport companies employ many other people in various roles.
“Don’t just look at the 11 people who will be rendered jobless in just one company. Imagine these 10 people, times the number of companies in the country and the families they support… we are staring at a crisis,” Ireri told People Daily.
According to the KTA chief, 70 per cent of 1,000 containers that used to leave the Port of Mombasa daily before the “SGR disruption” were destined for various points within the country and only 30 per cent were for transit.
Kenya Groupage Cargo Handling Association (KGCHA) chairman Solomon Muema, said by making it mandatory that all cargo be cleared at the ICD, means additional costs which are passed on to the consumer.
“It is not all about moving goods from point A to point B… SGR can only make economic sense if we make Nairobi’s ICD a place of storing already cleared consignments for delivery as opposed to clearing at the ICD,” said Muema, adding that the cost of moving one by 40-foot container from Mombasa to Nairobi and back for the empty container by truck is Sh85, 000 on average, plus VAT.
On the other hand transportation of containers through SGR to Nairobi is $450 (Sh45,000) but after clearance at the ICD there is an additional cost of last-mile charges which on average is Sh25,000 to Sh35, 000.
That brings the total charges to about Sh80,000 yet the consignee has to return the empty container to Mombasa either by truck with additional charges of Sh25,000 to Sh30,000 or take it back to ICD and use SGR which costs an additional Sh15,000.
“This means the cost of using SGR to ferry loaded containers and returning empties to Mombasa is an average of Sh125,000 which is way above the fixed cost of Sh85,000 levied by trucks,” says Muema.
The chair reckons that in addition to the Sh125,000, there is the re-marshalling and storage charges of Sh11,000 per 20-foot container and Sh16,500 for 40-foot containers, which kick in after the four days free time are over at the ICD.
Shippers Council of East Africa CEO Gilbert Lang’at is of a similar view, saying ferrying cargo via SGR is far more expensive than using trucks.
A recent study revealed that Mombasa county’s contribution to the National Gross Domestic Product (GDP) had declined by Sh126 billion in two years as the SGR impact continues to devour the city’s economy.
A University of Nairobi (UoN) study titled “Assessment Report on Socio-Economic Impact of Operationalisation of the Standard Gauge Railway on the Port City of Mombasa” was commissioned by the Mombasa county government “to evaluate the possible impacts of SGR on the various socioeconomic activities in Mombasa and the possible implications on the county revenues”.
The survey was conducted from August 27, 2018 to September14, 2018 in Mombasa county, targeting 500 respondents who included 40 trucking firms, 230 roadside businesses and 230 drivers and loaders, according to technical leader of the research, Kennedy Ogollah of UoN.
It revealed that Mombasa’s contribution to the GDP was Sh332 billion in 2016, a figure which declined to Sh206 billion in 2018.
The study projected various direct losses including huge job losses and mass relocation of residents away from Mombasa.
It says over 8,000 people had lost their jobs due to redundancies.
According to Ogollah, the survey projected an income loss of Sh33.3 billion per annum for Mombasa county.
Operations of logistic companies such as Compact Freight Systems Limited have been immensely affected, resulting in massive job losses that continue to impact negatively on the economy of Mombasa.
“Since SGR started operating there was a shakeup in our company and they started firing people.
Colleague after colleague were being shown the door and finally my turn came and three months ago I was also fired,” said Jenny Mutuku, who worked in the company’s Human Resource department.
Today, parts of Mombasa are dotted with vacant office spaces and stalls in high-rise buildings overlooking the panoramic view of the Indian Ocean.
However, all is not lost for Mombasa. According to the UON study, there is hope for the regions economy with the establishment of Special Economic Zones at Dongo Kundu.