Traders Shift From Northern Corridor To Rail On High Fuel Costs

Increasing the cost of fuel in Kenya after enactment of the Finance Act 2023 will increase transport cost along the Northern Corridor by more than 30 percent, with some traders already opting to use rail to ferry cargo from the Port of Mombasa to the hinterland.

The Shippers Council of Eastern Africa (SCEA) has already shown more interest in using railway to cut cost of transportation as rail charges remain unchanged since the standard gauge railway freight train was introduced five years ago.

Recent data by the Kenya Ports Authority shows a shift to use of railway to the Naivasha Inland Container Depot (ICD) for both containerised and conventional cargo for the last three months despite Kenya announcing return of port services to Mombasa.

In March last year, long distance transporters increased transportation charges by five percent and the announcement to increase charges further will make the corridor one of the most expensive routes in the region.

According to latest traffic cargo report, Naivasha ICD recorded a sharp increase in usage by conventional cargo compared to containerised, with grain and fertiliser boosting throughput – an indication of a shift resulting from high cost of transporting cargo using trucks.

The report shows in March, the Naivasha ICD recorded 1,670 tonnes of conventional cargo which included wheat, maize and fertiliser.

The subsequent month registered a sharp increase of throughput to reach 3,662 tonnes of cargo while in May cargo handled increased to 4,530 tonnes.

Total Grain Bulk Handlers (GBHL) isthe main company using the facility. Its throughput in twenty feet equivalent units (teus) also indicated an improvement this year, increasing from 358 teus in March to 446 in April and 444 in May.

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Since March, the facility received 116 (teus) containers of imports compared to 54 in February, April (118) and May 178 teus.

Despite promotional tariffs by the Kenya Railways Corporation (KRC), few traders are using railway to return empty containers to Mombasa. Numbers have been declining since January where it registered 173 containers before this reduced sharply to 34 in February and 13 containers in May.

KTDA deal

Throughput of the number of containers received at the Naivasha ICD for export remained average after the recent deal between the Kenya Tea Development Authority (KTDA) and KRC to export tea and other farm inputs for tea farmers.

SCEA chief executive Gilbert Lagat said shippers choose mode of transport depending on time and cost.

“Traders will only choose mode of transport be either road or rail depending on if it is cheaper and if it is timely to deliver cargo,” he said.

The recently inaugurated linkage line from the SGR to the meter gauge rail through the Naivasha ICD, enabling end-to-end rail cargo movement especially on transit goods from the Port of Mombasa to Jinja/Kampala and beyond, has gained momentum according to data.

Already some traders through Bill of Lading have nominated Nairobi and Naivasha ICDs as their clearance and picking of cargo to be ferried by SGR from the Port of Mombasa.

Last week, Kenyan long-distance transporters warned of an increment of transport charges starting July, after parliament voted to Kenya’s idea to use rail was aimed at reducing time and cost of ferrying cargo from Mombasa port destined for Malaba where cargo is to be loaded at the port and transported via the SGR before being transhipped onto the MGR line at the Naivasha ICD.