Critical success factors for SGR

As anticipated, the standard gauge railway (SGR) is going through “market entry” rigours that any new business has to undergo.

We have seen SGR adjust its operations, systems and tariffs to penetrate a logistics arena that has been a virtual monopoly of road transportation.

Transport dynamics are essentially market driven, with the client (cargo owner and passenger) having a major input on choices.

The SGR business can be segmented into three logical phases— the Nairobi destination, Western Kenya, and transit into Uganda— defined by the project completion times.

There is also a classification into cargo and passengers which are either from or to Mombasa. In the case of cargo it is imports, exports or local transfers.

Each one of these areas has unique opportunities and challenges requiring different approaches to maximise business value. And from what we read, SGR appears to be working on the right solutions to penetrate the market.

The cargo owners are interested in the least total freight cost, and the shortest cargo turnaround time. The passengers are keen on both the fare cost and trip convenience.

As and when SGR enters Uganda, it will open up cargo transit opportunities with Rwanda, Eastern DRC and South Sudan.

Rail transport economics are favoured by the longest possible distances as these substantially reduce unit operating costs while multiplying revenues.

For this reason, transit business should always remain the ultimate prize for SGR with the government of Uganda being a highly valued partner.

The main pushback and competition for SGR will remain road transporters and clearing/forwarding agents.

Road transport offers convenient and possibly cheaper, door-to-door service.

For this reason, it should be accepted that there is a captive fraction of long haul transport that will always remain on the road.

However, SGR should aim at converting transporters and clearing agents into value adding partnerships especially in utilisation of ICDs (Inland Container Depots).

It is the ICD import/exports consignee model that presents the biggest potential for early SGR success.

The test for SGR is to make ICDs work flawlessly by substantially improving cargo and truck turnaround times by eliminating documentation and operational delays.

Cargo clearance and forwarding paperwork will need to be effectively transferred from Mombasa to Nairobi and Naivasha, by integrating the Kenya Ports Authority, the Kenya Revenue Authority and SGR systems into efficient real time systems that work 24/7.

Times from ship to loaded trucks at ICDs should reduce and approximate global benchmarks.

The planned capacity expansion of Nairobi ICD and improvement of highway truck access and egress should usher in efficient operations, without aggravating the already congested Nairobi traffic. Improvements on security can improve ICD productivity to 24 hours round the clock operations.

To encourage the exporters from Western Kenya and Uganda to use the ICDs, especially at Naivasha, it is important to make available back-load cargo for return journeys to avoid empty return journeys.

It is such partnership and liaison with cargo importers, exporters and transporters that will improve overall truck roundtrip economics, while improving ICD and SGR usage

The passenger’s story is a more straightforward one.

Apart from the train fare, the passenger is very sensitive to the “first mile” and “last mile” convenience, time and cost.

Convenient passenger transfers and shuttles to and from Syokimau (Nairobi) and Miritini (Mombasa) stations are a must if SGR wishes to maximise passenger train usage.

SGR are apparently planning to enhance the passenger shuttle between Miritini and the Island. I will here make a very wild suggestion for Nairobi.

Convert the Railway Golf Club area into a first-class passenger terminal for shuttles to Syokimau SGR station and also to JKIA.

Should the SGR electrify? This is a decision that should be made jointly with the Ugandan government. Otherwise, transportation all over the world is going electric.

It is possible for SGR to make a quick and profitable market entry by focusing on meeting cargo owners and passenger expectations and creating win-win partnerships with road transporters and clearing agents.