The standard gauge railway (SGR) recorded Sh3.2 billion in operating profit during the fiscal year 2025/26, the first time in nine years since it was launched in 2017.
The SGR’s economic turnaround, , comes after its operational viability had been questioned following a string of losses despite high operational costs.
The strong performance, driven by continued growth in cargo volume and the interventions put in place by the government, occurred as Kenya Railways Corporation (KRC) Managing Director Philip Mainga revealed that the government agency had taken over the full operations of SGR.
The growth was also recorded in passenger services, with both the SGR and the meter gauge railway (MGR) recording growth in the period under review. MGR passengers specifically recorded the stronger year-on-year increase.
According to KRC’s annual report and financial statements for the year under review before Parliament, SGR remained the corporation’s strongest-performing freight segment during the 2025/26 period, recording 8.2 million tonnes of freight, the highest freight volume since it started operations nine years ago.
Other than the growth in cargo volume, SGR’s strong performance was driven by improved operational reliability, enhanced cargo evacuation at the port of Mombasa, improved asset turnaround times and strengthened customer engagement and service delivery.
“The sustained growth demonstrates the increasing role of SGR in facilitating the movement of cargo along the Mombasa-Nairobi corridor and supporting the corporation’s contribution to national logistics and trade facilitation both locally and regionally,” the KRC annual report says.
The Mombasa-Nairobi SGR project cost the taxpayers Sh327 billion, with the Nairobi-Naivasha extension line costing another Sh150 billion.
The financing of the two SGR lines was largely in loans from the Chinese government.
The performance represents the highest SGR freight volume recorded over the four years, an increase of 1.11 million tonnes compared to the 7.04 million tonnes recorded in the 2024/25 financial year, 6.4 million tonnes in 2023/24 and 6.3 million tonnes recorded in the 2022/23 financial year.
The annual report shows that SGR generated Sh21.8 billion, accounting for 84 percent of the corporation’s operating revenue.
The total operating expenditure on the other hand, increased marginally from Sh18.33 billion in the 2024/25 period to Sh18.52 billion during the 2025/26 period, an increase of Sh191.9 million, while remaining Sh1.58 billion below the approved budget.
Mr Mainga noted that “the overall freight achievement is a reflection of KRC management actions and the interventions to drive freight movement and growth in the state agency.”
“The combined trend of SGR and MGR indicates increasing utilisation of the railway system, highlighting a divergence between the two networks,” said Mr Mainga.
The annual report indicates that while SGR is driving sustained freight growth, MGR’s strongest recent performance is in passenger services.
The annual report also shows that the key strategic interventions that drove the strong SGR freight performance during the period under review include increased average daily freight train operations from 7.96 trains in 2023/24 and 8.27 trains in 2024/25 to 9.67 train pairs in 2025/26.
This enhanced network capacity and freight throughput, supported by the full takeover of SGR services.
There was also strengthened freight handling capacity through the deployment of additional cargo handling equipment, including three reach stackers at the port of Mombasa, improving cargo evacuation and operational efficiency.
Optimised rolling stock, leading to wagon utilisation of 70 percent and improved fleet productivity, also contributed.
Strengthened operational coordination through improved planning and coordination, leading to better train scheduling, reduced turnaround times, and enhanced service reliability, was another key driver.
The SGR has been operated under a shared partnership transitioning towards full local ownership, run by KRC and the Chinese firm Africa Star Railway Operation Company (Afristar).
Afristar, a subsidiary of China Road and Bridge Corporation (CRBC), was originally awarded a 10-year contract in 2017 to operate and maintain the railway.
However, the Kenyan government negotiated a gradual phase-out to cut operational costs and localise management.
Until recently, KRC was handling 98 percent of all operational functions, which include managing day-to-day services such as passenger ticketing (Madaraka Express), security, fuelling, track maintenance, and rolling stock management.
On the other hand, Afristar has been handling the final 2.0 percent of critical technical operations, which include high-level signalling systems, dispatch coordination, freight management and specific yard operations at the Port Reitz and Nairobi termini.
A report by the Parliamentary Budget Office (PBO) on the budget options for the 2021/22 financial year and the medium term showed that the cost of running the SGR far outweighed the revenues generated in its fourth year of operation.
This is despite the SGR contributing greatly by hauling cargo and passengers between Mombasa and Nairobi.
The government had projected May 2019 as the year for the project to break even.
For instance, between January and May 2020, the cost of operating the SGR was Sh7.5 billion compared to the Sh5 billion that was realised in revenue.
The cost of running the SGR was the highest in 2019, hitting Sh17.9 billion against the Sh13.5 billion in revenues generated for the year. In 2018 and 2017, the cost of operating the SGR far outweighed the revenue streams.
In 2018, Sh14 billion was the amount incurred to run the project against the Sh5.5 billion that was generated.
Between June and December 2017, Sh7.5 billion was incurred in operational costs against Sh1 billion in revenue as questions emerged whether the project was economically viable for the country or was a bad investment.
Not even the increase in cargo volumes to 4.159 million tonnes in 2019 made the difference, with PBO optimistic, noting that rail transport “remains the best alternative for cargo haulage and long-distance passenger travel.”
The construction and expansion of the broader Western SGR network, the Naivasha- Kisumu- Malaba corridor, remain driven by agreements with China Communications Construction Company (CCCC) and CRBC.
