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Manufacturers say SGR freight charges too high

In Summary

• Transporting a 20ft container by rail now costs between Sh74,165 and Sh76,714 up from Sh57,280.

• Moving a similar cargo by road costs an average Sh65,000.

The First Commercial Cargo train arrives at the Ultra-Modern Inland Container Depot, Nairobi.
The First Commercial Cargo train arrives at the Ultra-Modern Inland Container Depot, Nairobi.
Image: PSCU

Manufacturers now say the cost of transportation using the Standard Gauge Railway from Mombasa to Nairobi is prohibitive.

They said between January and todate, the freight charges for containers has gone up by between 33.9 and 39.3 per cent.

 

Through a government directive, all containerised cargo from Mombasa to Nairobi and vice versa must be moved using the SGR to and from the Nairobi inland container depot which acts as a holding ground

Under the new rates which came into place on January 1, transporting a 20ft container now costs between US$725 (Sh74,165) and US$750(Sh76,714) up from US$560(Sh57,280)the promotional rates which had been in place since the launch of the SGR cargo services on January 2, 2018.

Moving a similar cargo by road costs an average Sh65,000.

For a 40ft container, it costs importers between US$980(Sh100,240) and US$1,010(US$103,302) by rail compared to Sh85,000 on road.

“We want to be given a choice between road and rail. Currently importers have no choice, it is mandatory to bring cargo by rail,” said Mira Shah, Synresins Limited CEO.

She spoke in Nairobi yesterday during the launch of a manufacturing industry report by global firm-Syspro in collaboration with Strathmore University.

Speakers said  said the SGR related costs have piled pressure on businesses and industries and has forced them to incur further costs to move cargo from the ICD to its final destination.

 

According to the Kenya Long Distance Truck Drivers Association, it costs about Sh35,000 to move a container from Nairobi's Embakasi ICD to the industrial town of Thika.

“The SGR has reduced our business between Mombasa and Nairobi but it does not take the cargo to the door tep and the hinterland something we are capitalising on,” the association's chairman Nicholas Mbugua told the Star on phone.

This adds up to the existing external factors affecting industries in the country, with energy topping the list at 54 per cent in the cost of doing business.

According to the the report, political climate accounts for 50 per cent of effects on industries, taxes (43 per cent), cheap imports (40 per cent), exchange rates and raw materials (24 per cent).

Other are technical skills (17 per cent), climate conditions (13 per cent) labor wages (13 per cent) and visa requirements (one per cent).

Lack of a readily market in the wake of increased cheap imports mainly from China remains a challenge to most local manufacturers with the report indicating only about 46 per cent of the surveyed companies run full eight hours a day while 47 per cent run between six and eight hours.

“Fifty per cent of companies run three to five days a week thus may affect 24 hour economy envisioned,” said Strathmore's Ismail Ateya  the principal investigator in the survey.

Sixty two respondents reported that the manufacturing sector would face difficulties in competing with counterparts in other developed countries that have an advanced education and training system.

Industrialisation PS Betty Maina assured that the government would support manufacturers and investors, to help achieve the 15 per cent manufacturing sector-to-GDP target under the Big For Agenda.

“The government is addressing these issues while putting in place incentives to support growth of industries,” Maina said.

These include reduction of the import declaration fee (IDF) on intermediate goods and raw materials used by manufacturers from two per cent to 1.5 per cent, announced by Treasury CS Henry Rotich in the 2019/20 budget.

The CS also proposed an increase on IDF on finished goods from two per cent to 3.5 per cent to protect local players.

The manufacturing sector expanded by 4.2 per cent in 2018, compared to compared to a revised growth of 0.5 per cent in 2017, the Economic Survey 2018 shows, mainly on a vibrant agro-processing sub-sector.