State bows to pressure, lifts order on SGR cargo transport

Friday, October 4th, 2019 00:00 |

 By Eric Wainaina and Mutiga Murimi 

The government may be forced to seek alternative ways of raising money to service its hefty Chinese loan after it suspended a directive requiring all cargo leaving Mombasa port to be transported through the Standard Gauge Railway (SGR).

The government had hoped to raise enough revenue from movement of goods from Mombasa to Nairobi to repay the Sh324 billion loan and make the modern railway viable, but protests by players in the port business and pressure from local leaders have forced it to rescind the move.

While the directive to transport all goods through SGR, which was issued by the Kenya Ports Authority (KPA) in March this year has remained in force, leading to protests from shippers and transporters, Transport Cabinet secretary James Macharia yesterday claimed the order had been lifted.

Macharia, who spoke yesterday at Harambee House, Nairobi, after he and Interior counterpart Fred Matiang’i met Mombasa leaders, led by Governor Hassan Joho, said the directive was quashed because it was issued unilaterally by KPA managing director Daniel Manduku and the Kenya Revenue Authority (KRA).

Remains suspended

“…because the directive had been issued by KRA and the MD of KPA without consultation, within two days (after it was issued) we directed that it be reversed and it remains suspended,” Macharia told a press conference that followed a closed-door meeting with Coast leaders. 

The meeting was sanctioned  by President Uhuru Kenyatta following requests from Mombasa leaders, who in the past few days, have been joining protesters fighting the SGR directive as well as raising the matter in Parliament.

KRA and KPA have been moving containers to the Inland Container Depot (ICD) in Nairobi through the railway, attracting street protests from stakeholders in the cargo and logistics business. 

Yesterday’s announcement comes in the wake of threats to boycott Mashujaa Day celebrations scheduled for the refurbished Mama Ngina Waterfront in Mombasa on October 20. 

On Monday, civil society groups led cargo and logistics business players in street demonstrations where they threatened to boycott the national event if the government will not have heeded their calls to stop forcing shippers to clear their cargo in Nairobi. 

The directive had starved road transporters, clearing and forwarding firms and Container Freight Stations (CFS) business and in effect strangled Mombasa’s economy and rendered thousands jobless. 

But while Macharia maintained the suspension remains in place, Coast leaders asked the government to ensure orders issued in Nairobi are implemented on the ground.

“We are grateful for the reassurance that the earlier pronouncement that made it compulsory for the movement of cargo through SGR has actually been lifted (but) what we ask them (Cabinet) to do for us, is to ensure whatever is announced here in Nairobi, is executed on the ground,” Joho said.

Mvita MP Abdulswamad Nassir, who was in the delegation, said the government policy was rescinded only on paper while the reality on the ground was different.

Last month, acting Treasury Cabinet secretary Ukur Yattani said there was no going back on government’s plan to move cargo by SGR, noting that the use of SGR for cargo evacuation was the only way to ensure the country remains competitive in the transport sector.

“In the past, there have been some issues of utilisation of SGR in movement of cargo but we say there is no choice. For us to remain competitive in the region and beyond, we must modernise our rail transport to make sure our cargo handling is up to date and we decongest the port,” Yattani said in Mombasa.

Yesterday, Joho, who spoke on behalf of Coast leaders, said while they are “defiantly in support of the SGR”, proper transition is paramount and mitigation measures must be put in place to ensure traders and Coast residents benefit. 

Investors at Container Freight Station have been complaining that investments worth over Sh60 billion risk going down the drain if the government’s directive to transfer all imported cargo to ICD through the SGR continues.

Kenya Transporters Association argued that the SGR move will make more than 15,000 people, who were working as drivers, and 15,000 turn-boys jobless. 

 “One train transports about 107 containers…this means 107 trucks are automatically off the road and at the same time in just one day, 107 drivers are out of job without income... this will also mean that the fuel levy will not be collected and this is a loss of revenue to the government,” said KTA chief operations officer Mercy Ireri.

The  Kenya Groupage Cargo Handling Association chairman Solomon Muema, said the directive was misplaced given the “current congestion at the ICD”, adding that insisting that cargo be cleared in Nairobi will translate to additional costs which will be passed on to the consumer.

But while yesterday’s move by the government may come as a relief for the traders, it  may send the government back to the drawing board on how it will raise money from the project to repay the Sh324 billion it borrowed from China’s Exim Bank to facilitate the SGR construction.

In August, CS Macharia said government will settle the first installment of the loan in January next year and expressed hope that the country will pay back the loan from revenue generated from SGR services. 

“Kenyans should not be worried about this loan. The SGR will be able to pay it back by itself. In one day, we are doing about 10 trains, this means that we are breaking even,” he said, and urged Kenyans to take advantage of the SGR infrastructure and stop complaining that it is “taking away their businesses”.

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