Kenya Railways will buy trucks to complete container journey from standard gauge railway (SGR) depots to their final destinations in a bid to lock in customers and stop them from switching back to road transportation.
Kenya railways management told the National Assembly Public Investment committee they are working to sign partnerships with key customers to guarantee cargo while purchasing trucks to facilitate last mile connectivity.
The viability of the loss-making line has come under threat on competition from road transport following President William Ruto cancellation of state protections that guaranteed SGR import cargo.
The former regime of President Uhuru Kenyatta had issued a directive that forced almost all cargo destined for Nairobi and beyond to be evacuated through the SGR. President Ruto has since reversed this
“In terms of strategy, the corporation is undertaking the following, purchasing trucks to facilitate last mile connectivity and strategic partnership to secure and guarantee volumes with key customers,” Kenya Railways Corporation MD Philip Mainga said in written responses to the PIC committee chaired by Pokot South MP Hon. David Pkosing.
The National Assembly committee probed the Kenya Railways management on several audit queries including revelations by the auditor general that the corporation’s was running on negative working capital, as it’s liabilities exceeded it’s current asset value.
Kenya’s most expensive infrastructure project, the Standard gauge Railway has made a cumulative loss of Kes33.3 billion over the last five years on high operations costs, cargo discounts.
It costs up to kes1.8 billion a month or Kes22.5 billion annually to operate Kenyan’s Kes360 billion SGR according to the Kenya Railways management.
Kenya Railways made Kes1.5 billion a month in 2022 bringing total income of Kes18.6 billion but discounts eat away Kes1.1 billion each year.
The railways has defied government projections that it will break even within three year as high costs and discounts have kept the SGR in loss making position.
Management however says they have narrowed losses from Kes9.8 billion in 2018 to Kes4.8 billion last year increasing freight business.
The railway company says completion of the railway destined for Uganda, linking with a renovated meter gauge railway and takeover of full operations will improve the railway line’s viability in the long run.
Kenya railways in 2017 contracted AfriStar, a subsidiary of China Road and Bridge Corporation (CRBC), to manage SGR operations and maintenance but has been slowly taking over part of the operations to cut down on costs.
“This position is expected to improve with full take over f the SGR. We equally appreciate the increased competition and liberalization of the transport sector posses a great challenge to the sustainability of our freight operations,” Kenya Railways said.