Category Archives: Kenya Railways

Funding the SGR

Excerpts from the Public Investments Committee special report on the procurement and financing of the construction of Standard Gauge Railway (SGR) from Mombasa to Nairobi (phase I) (April 2014)

  • The Ministry of Finance on 4th January 2010 wrote to the Government of China requesting for a concessional loan for the construction of a new Standard Gauge Railway at a cost of USD 2.5 Billion. The funding of the project is not a grant to Kenya but rather a loan that the people of Kenya are going to pay.
  • In the Budget Statement for Fiscal Year 2013/14 delivered on 13th June, 2013 the Cabinet Secretary for the National Treasury proposed an amendment to the Customs and Excise Act, Cap 472, Laws of Kenya, so as to introduce a Railway Development Levy of 1.5 % of the customs value of all imported goods. The loan will cost USD 3.23 Billion from EXIM Bank of China comprised of a concessional loan of USD 1.6 billion and a commercial loan of USD 1.63 billion. The concessional loan is for 20 years and has a grace period of 7 years and an interest rate of 2% per annum while the commercial loan is for 10 years and grace period of 5 years and insurance cover of 6.93% of the commercial loan and interest of six months LIBOR + 360 basis point. The loan has a grant element of 35%. The insurance component is always available for any commercial loan. For China, the insurance cover has to be done by a Chinese firm, SinoSure. The insurance cover is to take care of nonpayment.
  • The major financial implications of the project will be Kshs. 349.44 billion relating to: – EPC contract for USD 3.8 billion covering USD 2.657 billion for civil works, and USD 1.146 billion for facilities, locomotives and rolling stock; Kshs. 8.04 billion for compulsory acquisition of 2,253 hectares of land for the railway corridor; Kshs. 10.6 billion for Embakasi Inland Container Depot (ICD) expansion programme, facility development and container handling equipment; Kshs. 1 billion for land acquisition for the Embakasi inland depot; and Kshs. 3 billion for project supervision.
  • The Government of Kenya has met all the requirements of the EXIM Bank of China which include; an Assurance that the Government will guarantee minimum freight demand for the SGR through execution of take or pay agreement between KRC and the Kenya Ports Authority and confirmation that Railway Development Fund will be used to repay the loan. EXIM Bank of China is currently going through its internal credit approval process following which it will submit to GoK, through the National Treasury the Financing Agreements. The financing agreement has not yet been signed (at the time of the report).
  • There is no financing agreement yet signed between the Government of Kenya and EXIM Bank in China. There is no sovereign guarantee by the Government of Kenya on the commercial and concessional loan from the Government of China (at the time of the report).
  • The National Treasury has undertaken a debt sustainability analysis and to ensure that the SGR loan does not compromise the debt policy parameters spelt out in the debt sustainability strategy paper and is sustainable.
  • In the unlikely event that the revenues from railway operations are inadequate, the proceeds from the Railway Development Fund will be used to repay the loan.

$1 = ~Kshs 103

First Class: Kenya Railways vs SGR

This is the first class cabin of the lunatic express, the 120-year-old Kenya Railways line (operated by Rift Valley Railways – RVR), that the Standard Gauge Railway (SGR) is meant to improve on. The cabins are about 40 years old; they are mostly used by tourists or adventurous travelers and families taking scenic journeys to and from the Coast or Rift Valley.
It was disappointing to see pictures from Kenya Railways of what #SGR “first class” will be – it looks like a third class with swivels seats – this after a $3.2 billion mega-project?. Yes, the trains will move faster, but apparently, they won’t go too fast because this is Kenya where they may encounter people or wildlife on the tracks. 

By looking at this chart of train cabin seats in China, KR is a correct, but the first class of China and the new SGR is not the same as the first class on the old (RVR)/Kenya Railways. China has first, second, and business class (which has lie flat seats) like an aircraft – but no economy class.

What we know as the first class of the old Kenya railways, qualifies as a luxurious “sleeper coach” in China which offers privacy and comfort. SGR Journeys will be faster, perhaps 5 hours from Nairobi to Mombasa compared to the current train service by RVR which takes 15-20 hours. The  train is also used by hundreds of residents who live in small towns along the railway and who will appreciate the improved new cabins.

But will Kenya Railways offer some new sleeper cabins to improve on the old railway service? The Kenya Economic Survey 2016 shows there has been a continuous decline in rail passenger indicators of journey, passenger-km and revenue. The major reason is prioritizing on the freight, which is more profitable than passengers’ services hence the available locomotives are prioritized to freight.

Nairobi-Mombasa Highway Transforms

For a long time, motorists on the road trip to Mombasa had endless savannah and semi arid brush-land as their only view, with few sizeable towns and centres along the highway. Many travelers would drive the long stretch between Nairobi-Mtito Andei or even up to Voi, before deigning to stop for refreshments and use of sanitation facilities at what were mostly only petrol station joints. Many of the Colonial era taverns and Inns along the Highway had fallen either into disrepair or closed completely. And a night in Voi meant accessing the adjacent Tsavo East National Park to stay in Voi Safari Lodge.

Not anymore. Recent events have led to a great change in the landscape along the Highway. Sure the great vast ranches of Konza are still largely intact but urban development has become a major feature of the highway with numerous new centres expanding and what were once junction centres now turning into overnight stop points or places of bustling with 24-hour economic activity. A number of factors have contributed to these developments and are manifested in some of the features observed.

Konza City: Previously tiny centres such as Kyumvi (Chumvi) or the Machakos turnoff have now become major truck stops. Investors have established vehicle sales centres nearby and the price of land is sky rocketing going by rough quotations one receives. Further along is Malili centre which sprung up once news of the plan publicized by the grand coalition government about a new Technological (ICT) city to be built at Konza, that was meant to take away pressure of land and space from Nairobi. The city was touted as a Kenya’s Silicon Valley and out of nowhere, Malili town sprung up right next to the borders of the proposed, but yet to be built, Techno-City.

Standard Gauge Railway (SGR):  This is Kenya’s single largest investment in infrastructure. As is widely known, the project replaces the old Uganda Railway (also known as the Lunatic Line) from Mombasa to Uganda. The first phase starts from Mombasa to Nairobi with advanced plans to extend it first to Naivasha and then to Kisumu and Malaba. When the SGR is done, the railway will need return cargo i.e from Western Kenya or Nairobi to Mombasa to be viable, and to get more trucks off the road.

Whatever the merits or demerits of this project is not for debate here but what must be stated are the numerous economic activities and developments that have been brought about by this project.

As the SGR is constructed, groups of the thousands of workers involved must be watered, fed, housed, clothed, transported, treated and entertained along the route. This direct and multiplier effect of the project is an indication of heavy spending. Elevated sections of the railway are a sight to behold especially for one who has not travelled the route for a long time. Major site stations chosen include Makindu, a town whose most distinct feature is the Sikh Temple. A Skygo motor cycle assembly factory is one of the new investments set up by a local born and bred entrepreneur, while new entertainment joints such as Shushan Place and Oasis  have emerged. emali

At Emali, Nakumatt, Kenya’s largest Supermarket chain by sales volume, products variety and retail outlets has deigned it fit to set up shop. The petrol station eateries of Mtito Andei which marks the half way stop between Nairobi and Mombasa have changed tremendously. Weary travellers alighting from luxury coaches can now relax in massage chairs. Voi town has also enjoyed a boom in construction of residential and commercial real estate that as previously unimaginable. These are all visible signs that there is money along the highway.

Oil Pipeline: Kenya is replacing its over 40-year-old Mombasa to Nairobi oil pipeline. This project has also attracted huge groups of workers contributing to the activity along the highways in camps and sections nearby.

Concrete Poles Not to be forgotten as a major activity is the replacement of old wooden electricity poles by the Kenya Power & Lighting Company with heavier concrete ones.Poles

Devolution: It is indeed true that devolution has  brought major developments and investments in the towns along the highway. The County Governments have spent on setting up their structures and attempting to deliver services to their people; the heavy spending has indeed yielded change, and this has attracted new players even in the tourist sector at Tsavo. One such establishment is the Zomeni Lion Hill Lodge in Voi, 6 km outside town along the road to the Tsavo East National Park Gate which is run by the knowledgeable father and son duo of Basil and Agam. The lodge features 8 rooms and 4 tented rooms with delightful views of the vast Tsavo park. It is secured from wild animals by electric fence, and is one of the new joints that offer real variety to local and international tourists. There are two air strips ay Voi, one by KWS in the park

Lion Hill Conclusion: This article is not intended as a feel good piece but an appreciation of tremendous changes that have taken place along the highway. The writer has not spent time in many of the centres and towns to appreciate other factors such as the availability or lack of water, sanitation, waste management or security among others let alone whether much of this development is affordable, planned or sustainable.

But for long time travelers, it may be worth it skipping that flight to Mombasa and instead taking a day long drive and appreciate the changes that have taken place along the highway. Although the Mariakani Weighbridge headache is ever-present, newer routes into Mombasa or the South Coast are opening up. Both County and National Government are endeavoring to create alternatives through Kaloleni to the North Coast and Samburu to the South Coast.

Today’s children will never know what the old highway looked like before, e.g why Man Eaters was named so, or appreciate that the drive down to the Coast used to be about five hours only (it now takes about 10 hours to drive between Nairobi and Mombasa)  or why is the lane going towards Mombasa is smoother than the uneven lane climbing towards Nairobi. But who else to tell the story than their parents when caught for speeding between Mtito-Andei and Voi by the NTSA?

 guest post 

Passenger Train to Mombasa in 2015

What if the sales person, at a company you want to buy from, tells you not to buy their  products and you still  go ahead to, because of nostalgia and history?

Train front

The legendary iron snake

What if, despite being routinely behind schedule, the staff go out of their way to ensure that you’re comfortable? What if despite being inconvenienced by half a day, you still consider it worthwhile? And after all this, and understanding all the circumstances they are in, would you still recommend the service to your friends?
That’s the situation with the passenger train between Nairobi and Mombasa. Many people used to take the Kenya Railways train to Mombasa and for school trips elsewhere. But not many do these days, and many more are not aware that the passenger train still runs to and from Mombasa.

It’s been eight years since this last review and there are some major differences

  • There used to be two trains per days, now there is one train, that makes numerous stops
  • The train runs to Mombasa three times a week (M, W, F), and the same to Nairobi on alternate days (T, R, S)
  • The meals are done by Pride Inn hotel group
  • The train is usually late
Train late lunch

Late lunch at Kenya Railways

The train was meant to leave at 7 p.m., and get to Mombasa at 10 a.m. the following day. But we got called at 10 a.m. the day of the trip to be told that the night train was late, and to come in at 10 p.m.

This we did, and there was still no train at the station, just the night managers who said this does happen a lot. There were other passengers waiting, and it was clear that they would take the train no matter what time it came, as it was their only transport from Nairobi to whatever town they were heading on the route. The station master said that when the train came, it would take more than an hour to clean and ‘fill the water’ before the return journey.

We left a phone number with the station master and went back home and kept calling every half hour back to check if the train had come. It did come in at about 3 a.m. and we went back to the station. At about 4 a.m. the train pulled up from the yards, and after showing our receipts, we were issued with boarding cards for the first class cabins. A first class ticket is   Kshs 4,505 ($45) for adults and 2,795 ($28)  for children for full board travel which is dinner, breakfast and beddings for the cabin for each person.

Train cabin beds

1st class cabin with upper and lower beds made

Dinner was served at 5 a.m., and shortly afterwards, the train departed Nairobi for what turned out to be an interesting, and very long day trip. When we got back to the rooms, the beds had been made up by the train staff and we went to slept for a few hours, till the bell rang again to announce breakfast was served. This was at about 10 a.m. and it was back to the dining car that seats about 40, in tables of 4.

The train made many stops in places such as Konza, Sultan Hamud, Makindu, and Ulu, and it got to Mtito Andei which is the mid-point of the journey at about 2 P.M. At these small town stations, passengers in the third class cabins would get on or off the train with their luggage.

That should have been it for meals, but at about 5 p.m. the crew again to summoned first class passengers for an unexpected late lunch meal. After that, it was back to either watching the afternoon views or taking another sleep break in the cabins

The delayed train afforded some unusual daytime views not seen on past trips. Two particular new sights were views of the SGR, the new China-built standard gauge railway which for many kilometers, runs parallel to the old railway. Also after Mtito Andei, and once the train was passing the Tsavo Park, there were also sighting of wildlife including several giraffe and elephant herds in the evening.

Train speed

Speeding through Tsavo

The train is able to attain a decent  speed of almost 60 kilometers per hour when the railway is straight and there are no slopes to navigate or stops to make.

But cargo is clearly the priority for the Rift Valley Railways consortium who run the railway (it is said that 99% of their revenue is from cargo, with just 1% from the passenger trains) – and on at least three occasions, our passenger train had to stop for 10-30 minutes at a station, to wait for a heavy cargo train to pass on the way to Nairobi. The trains had wagons go goods or fuel for Uganda, or wagons for the Magadi soda ash factory.

The train eventually got to Mombasa at  1 a.m., having left Nairobi at 5 a.m. the day before. Mombasa station seems to have lost or leased some space in its front yard to a private developer and there’s now a lorry sales lot  where cars used to park.

Some other advice;

  • Carry extra snack foods, and soft or hard drinks of choice.
  • Carry wipes, toilet paper, bug spray.
  • Have reading material and fully charged devices