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September 24, 2018

JEANNE ONGIYO: SGR is a wealth of opportunities

SGR opportunities
SGR opportunities

I doubt there is any Kenyan, schoolchildren included, who has not come across the acronym SGR. The media has written extensively about it and pundits have given varied opinions, some in support and others against.

I think the question in many Kenyans’ minds is whether the standard gauge railway was necessary in the first place. A project of this nature, with all its promise, will have its downsides.

The SGR is, arguably, Kenya’s most consequential infrastructure project since Independence. Because of this, it costs a lot of money, most of which (about 90 per cent) is a loan from China's Exim Bank. It is without a doubt a huge sacrifice, one which must, in due course, pay back many times over.

The macroeconomic benefits generated by the SGR have been the source of many a conversation. Many have been wondering if the project is value for money and if the timing of construction was appropriate.

The SGR will lower the cost of doing business both for government and the private sector. When complete, it will further decongest the Port of Mombasa and make movement of people and cargo faster and cheaper. For example, it will cost about Sh50,000 to transport a container through the SGR cargo trains compared to Sh90,000 by road from Mombasa to Nairobi.

This alone will attract more foreign direct investment than was possible only a few years ago and will have a direct bearing on one of the Big Four pillars, industrialisation. More jobs will be created and we are likely to witness increased growth across all sectors.

The SGR will connect more than half of Kenya’s 47 counties, linking agricultural and fishing communities to the market and opening up trade and tourism opportunities.

Macroeconomic benefits aside, there are many trickle down effects of the SGR that many, especially critics, choose not to talk about. Even before completion, the SGR has been acutely keen on local content, ensuring that locals, particularly in areas traversed by the project, benefit from it.

Land and property owners have been compensated fully in phase 1, injecting lots of cash into rural neighbourhoods. Those who invested their money well have not only overcome extreme poverty but have created jobs. Overall, the compensation arrangement has not been perfect, especially considering the delays in phase 2A, but its significance cannot be downplayed.

Since the start of phase 1, the SGR has directly employed thousands to work in various capacities—from menial to skilled jobs. These employees are supporting families, paying taxes and breathing life into the local and national economy. There are also many indirect jobs created through suppliers and other third-party contracts.

For the ongoing construction of the 120km Nairobi–Naivasha SGR line (Phase 2A), China Communications Construction Company (CCCC) has already employed 26,000 personnel spread across the seven branch offices and the head office.

Directly related to job creation is the construction of the proposed mega industrial park that will be established near the Mai Mahiu Freight Exchange Centre. The dry port will be critical in capturing and aggregating freight to and from Naivasha, and later Nakuru, Eldoret, Bungoma and eventually Uganda. Similar dry ports are planned for Voi and Mariakani, along the SGR corridor.

The Mai Mahiu Freight Exchange Centre will greatly boost the freight traffic from the SGR corridor’s expansive hinterland to the port city of Mombasa. It will also nullify a challenge that critics have often levelled against the entire SGR enterprise and its long-term viability – the alleged lack of outbound freight traffic in the near term.

Equally critical to the socioeconomic potential of the Nairobi-Naivasha line is the proposed Special Economic Zone (SEZ) at Naivasha. Conceptualised to promote industrialisation through the establishment of factories in a specific area under a set of incentives buttressed in law to serve the export market, the SEZs are expected to be a major draw for investors.

Once complete the SGR is expected to turn Naivasha into a magnet for SEZ investors and their tenants. It goes without saying that the Mai Mahiu Freight Exchange Centre and the Naivasha SEZ are also likely to be major employers, during construction and when they finally start operations.

There is little doubt that the SGR is creating impact through local content as construction progresses. And in the long term, the SGR will have a significant impact on the economy as more businesses abandon road transport and embrace the SGR. The government, however, will have to enact the necessary laws for this to happen as 95 per cent of all the cargo is still currently being moved by road.

The writer is the Press and PR Executive, China Communications Construction Company (CCCC)

 

 

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