International Finance

Kenyan traders reluctant to use SGR, fearful of losses

Kenyan traders SGR
Kenyan authorities issue directive that all cargo imports will be transported from Mombasa to Nairobi via the Standard Gauge Railway

Kenya Revenue Authority and Kenya Ports Authority have issued a directive that all imported cargo will be transported from Mombasa to Nairobi via the Standard Gauge Railway (SGR). According to the authorities, the move will improve cargo logistics at Mombasa port and the Nairobi Inland Container Depot (ICD).

However, Kenyan traders fear they will incur losses if they are to use the SGR.

Congestion at Mombasa port has troubled authorities and businesses alike for many years. Things have been so problematic that Ugandan importers threatened to take their business to the port of Dar Es Salaam in protest.

Recent developments aimed at reducing congestion at the port should be highly welcomed by importers. However, that is not the case. Even though the time taken to transport cargo from Mombasa to Nairobi will improve, importers fear they will have to bear additional costs as well. Therefore, Kenyan traders are skeptical about the use of SGR.

To move a 20-foot container from Mombasa to Nairobi, it costs Sh50, 000. However, the costs associated with the handling and storage of cargo at the port pushes the amount to Sh142, 000. At the same time, transporting the same cargo by road costs only Sh65, 000. The new directive also comes as bad news for hundreds of truckers operating across the region. It could lead to huge losses or worse, completely put them out of business. Other businesses along the busy Nairobi-Mombasa highway such as restaurants and lodgings are also likely to suffer.

Due to the logistical challenges faced by Kenya at Mombasa port, Kenya’s maritime trade connectivity has worsened to a five-year low. The United Nations Trade and Development Agency’s liner shipping connectivity index (LSCI) for 2019 ranked Kenya at 16.98 points.

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