The Kenya Railways Corporation (KRC) splashed Sh17.08 billion to acquire wagons and vans from China last year as it sought to arrest a slide in freight revenue on delays in cargo transportation due to inadequate capacity.
The KRC was forced to make the biggest investment in a single year since the launch of the standard gauge railway (SGR) freight and passenger services in the financial year 2017-18 to address the loss of cargo business due to the occasional lack of wagons.
Trade data from the Kenya National Bureau of Statistics shows orders of “railway or tramway goods vans and wagons (which are) not self-propelled” from China surged more than 2,000 times to Sh17.079 billion from Sh762.67 million in 2023 and Sh2.43 million in 2022.
The acquisition of new wagons followed increased complaints from traders about rising storage charges and demurrages resulting from lengthy delays in moving goods to the inland container depots (ICDs) in Nairobi from the Mombasa port.
That prompted some of the importers to resort to road transport, according to the Kenya Association of Manufacturers (KAM), the lobby representing traders who ship in the biggest volume of goods, largely raw or semi-processed industrial material and machinery.
“Delays due to unavailability or inadequate wagons for loading containerised cargo in readiness for railage from the Mombasa port to the Inland Container Depots in Nairobi and Naivasha is costly to businesses,” KAM wrote in the Manufacturing Priority Agenda 2024.
“Delays can also emanate from unavailability of wagons due to slowed repair works of damaged wagons by KRC engineers or delayed procurement of new and additional wagons needed to increase the number of containers that each train can pull from the Mombasa port to ICD.”
Kenya Ports Authority usually allows importers and exporters a free cargo storage period of up to four days, beyond which it charges demurrage charges of between $30 (about Sh3,900) and $60 (Sh7,800) per container depending on the size.
The storage fees apply for cargo that remains uncollected between the 5th and 21st day after arrival at the port.
It was not clear how many wagons the KRC acquired last year, as Managing Director Philip Mainga was yet to respond to our enquiries via text sent to him on May 20 and did not pick follow-up calls.
The KRC had, however, targeted to acquire 300 wagons for SGR services and 200 for meter gauge railway (MGR) services in the current strategic plan 2022-27.
“Availability of wagons for both MGR and SGR will be maintained at above 85 percent and 95 percent, respectively, to increase capacity for freight haulage by acquiring and overhauling SGR and MGR wagons,” the firm wrote in the plan.
Tobias Alando, Chief Executive at KAM, said on Tuesday delays emanating from a lack of wagons had been addressed after “Kenya Railways invested in new wagons”.
“Generally, there’s improvement in movement of cargo from the Mombasa port to ICD except early this year when there was a slight congestion at the port and that was attributed to delay in removing the containers and transferring them to the ship,” he told the Business Daily.
“Any delay hurts business. This is because there is already a relationship with the buyer that ‘my cargo will be shipped on this day and arrive on this day’. So any slight delay impacts on that relationship we have with our buyers abroad, especially for textile products, tea and coffee.”
Provisional data in the KNBS Economic Survey 2025 shows the volume of cargo railed via SGR last year dropped for the first time since full-year freight services started.
Slightly more than 6.531 million metric tonnes of cargo were hauled on SGR last year, a marginal drop of 0.03 percent from 6.533 million tonnes in 2023. Revenue from freight services also fell 4.84 percent to Sh13.97 billion in 2024, the first contraction since 19.62 percent to Sh10.46 billion during the pandemic year of 2020.
Increased expenditure on railway wagons helped grow total imports from China last year by 25.52 percent to Sh576.19 billion, the fastest year-on-year pace since 29.02 percent to Sh320.82 billion in 2015 when construction works on SGR started.
Freight services were the main economic justification for the $3.75 billion (Sh487.5 billion under the prevailing exchange rate of Sh130 per dollar ) the former administration of Uhuru Kenyatta pumped into the first phase of the project.
More than 90 percent of the project costs were in the form of loans contracted from the Exim Bank of China from May 2014.
The SGR line has struggled to hit targeted cargo volumes with importers balking at the tariffs to transport goods from the Port of Mombasa to the ICD in Nairobi and Suswa for consignment largely destined for western Kenya and neighbouring countries such as Uganda and Rwanda.
Delays in loading containers onto the SGR and resultant demurrage charges have prompted importers of goods destined beyond Nairobi to prefer road transport to SGR.
“Most transporters of cargo that is destined for upcountry prefer to use the Through Bill of Lading (TBL) to avert cargo demurrage costs while using the Standard Gauge Rail (SGR) as the TBL is a better option where rail transport is available and connecting the seaport to the mainland,” KAM says.
“This is because in the TBL import mode, the shipping line takes responsibility to transport cargo to the destination, while in the Merchant Haulage Product (MHP) or the Non-TBL mode, the responsibility of the shipping line ends upon discharge of the container at the port.”
