The expense of the SGR and related implications

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This article first appeared in my weekly column with the Business Daily on November 29, 2015.

It is now well known that the Standard Gauge Railway (SGR) is being developed under the leadership of the Kenyan government and will connect Mombasa to Malaba (with a branch line to Kisumu) onward to Kampala, Kigali (with a branch line to Kasese) and Juba (with a branch line to Pakwach). What is also well known is that Ethiopia is developing Ethiopia Rail (ER) which will link Addis Ababa to Djibouti. The importance of the SGR to Kenya is, yes, the potential dividend that will arise from bolstering infrastructure in the country; indeed the government expects the project to reduce freight costs from $0.20 per tn/km to $0.08 per tn/km. But importance also lies in the fact that the SGR is expensive. Indeed, last week Treasury made the point that the SGR has caused an upwards revision of the fiscal deficit from the initial 7.4% of GDP to 12.2%.

(source: http://i2.wp.com/nairobiwire.com/wp-content/uploads/2015/05/sgr2.jpg?resize=1121%2C682)

So is the approach towards the construction of the SGR the most cost effective possible? A comparison with the ER would be useful. As early as 2013, experts raised questions about the costing of Kenya’s SGR; Kenya is being charged $6.6 million per kilometer compared to $4.9 million per kilometre for Ethiopia’s ER. This is particularly a concern because, as experts have pointed out, there are no major rivers or lakes or big hills to justify the high cost of the SGR. In addition, parts of the ER will be a double track, not a single track as the SGR will be in its entirety. The SGR freight will have an average speed of 80KPH while the ER will go up to 120KPH; experts state that it is doubtful those speeds will be reached by the SGR because it is a single track and stoppages will be needed to allow other trains to pass. The SGR passenger train will have an average speed of 120 KPH while the ER will have an average speed of 160 KPH with future provision for 225KPH. Questions also arise because Kenya is spending more to buy its trains and rolling stock than Ethiopia. Why?

Ethiopia has also been smarter with regards to reaping human development dividends from rail construction, specifically the Light Rail Transit System (LRT). Ethiopia has been using the development of the LRT to build domestic technical capacity. Reports indicate that foreign contractors conduct training for local staff at the Institute of Technology in Addis Ababa University. Further, the Ethiopian government is sending promising undergraduates to Russia, India and China to continue their education. Indeed, the Ethiopian government is doing all it can to ensure that the all other rail network projects including ER will be carried out by Ethiopian enterprises. Are there such plans and activities going on with regards to Kenya’s SGR?

(source: http://www.hgomezgroup.com/wp-content/uploads/2015/02/techtransfer_620.jpg)

The basic sense one gets when comparing Kenya and Ethiopia is that the latter has been able to get a better deal overall and is leveraging all experience to build domestic capacity and reduce future dependence on external contractors for rail construction. Kenya on the other hand has agreed to a plan that appears to not be the most cost effective and there have been no plans announced indicating intentions by the Kenyan government to use SGR construction to build domestic capacity. I have long argued that if Kenya does not leverage all infrastructure development projects to build domestic technical capacity, Kenya will be relegated to eternal dependence on others to do the basics of building infrastructure of the country. The prudence of such a strategy is questionable. Kenya is in a position to learn from Ethiopia; pressure ought to be applied to ensure such learning happens.

Anzetse Were is a development economist; email: anzetsew@gmail.com

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5 thoughts on “The expense of the SGR and related implications

    SD Maundu said:
    November 30, 2015 at 8:50 am

    There is something peculiar about the Kenyan SGR too. Why isn’t being used as the foundation for a true rail network? The SGR will follow the same line from Mombasa to Malaba, but are all goods destined for Malaba or Kisumu alone? What about goods produced outside the SGR route? The cost of getting them by road to a point where they can get onto the SGR will be high compared to the cost of building a spur to these points and then using the spurs as the basis for local Light Rails. I wonder if the SGR will be the foundation for a true Greater Eastern Africa rail network, making it possible to travel to all the capitals in the IGAD.

    Moses Khamadi said:
    November 30, 2015 at 9:10 am

    Baffling how decisions are made

    Ian Cox said:
    November 30, 2015 at 9:21 am

    Reblogged this on Ian Cox.

    Dennis Dome said:
    December 7, 2015 at 6:45 am

    Technical capacity building is such a big issue especially with the shifty application of the practice, while other major projects e.g LAPSSET have a very detailed plan on improving local technical capabilities, there shouldn’t be a reason as to why the same isn’t happening in this case.

    RollingWave said:
    June 6, 2017 at 4:10 am

    Now that it’s first phase is done some aspects to consider on the cost.
    1. there’s a higher concentration of station and more locomotives are used in general, which is obviously part of the cost.

    2. Although there isn’t technically very extreme terrains , a large part of the line that runs through the national parks are intentionally built to be high rise and land bridges for conservation considerations. while these aren’t quiet as expensive as doing it over water, it is still pretty expensive.

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