Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Kenya forcing importers to use costly new Chinese railway, businessmen say

EconomyDec 03, 2019 02:21AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

By Duncan Miriri

MOMBASA, Kenya (Reuters) - Kenya's new Chinese-built railway should have been a boon for business. The $3.3 billion line sliced hours off the journey from the port city of Mombasa to the capital, Nairobi.

But some importers said their transport costs shot up by nearly 50% when they used the rail due to extra fees, more time spent clearing goods at the congested Nairobi train depot and the need to send a truck to collect the goods from there.

These importers used to truck their goods in from the coast. But port authorities now say businesses based in Nairobi and upcountry must use the new line because the Mombasa port is contracted to supply it with a minimum amount of cargo.

"KPA has an obligation to feed the railway ... we were the guarantors of the rail," said Daniel Manduku, head of the state-run Kenya Ports Authority.

The railway's problems are a cautionary tale, both for developing nations loading themselves with Chinese debt, and for China as it seeks to expand global trade links and project soft power through its massive Belt and Road initiative.

"The vast majority of its (China's) overseas spending has no detectable effect on economic growth," said Bradley Sparks, executive director of AidData, a research facility that tracks development finance at William and Mary university in Virginia.

China has sought to allay fears that its infrastructure projects overload some countries with debt.

Last year, it agreed to restructure more than $12 billion in repayments owed by Ethiopia, whose Chinese-funded railway is also struggling.

Now some Kenyan politicians are asking whether their railway was worth the cost.

Hundreds of people - residents, business owners and local leaders - hold weekly demonstrations in Mombasa against the mandatory movement of cargo by rail.

"This is a revolution," lawmaker Mohammed Ali said earlier this month as demonstrators carried a mock coffin branded "RIP China Colonisation" in blood-red letters.

BUSINESSES UNDER PRESSURE

The contract between China's Exim Bank, the Kenya Ports Authority (KPA) and Kenya Railways requires KPA to provide 1 million tonnes of cargo to the railway per year, rising to 6 million by 2024.

KPA says rail cargo is expected to hit 5 million tonnes this year, after more than 4 million last year.

Mombasa is projected to handle 34 million tonnes of cargo this year; most does not go by rail. Cargo destined for Mombasa, or countries other than Kenya, can still go by road.

But Kenyan importers in and around Nairobi say they have been forced to use the line since October last year. The port confirmed the policy in August, but rescinded the order in October after protests. Businesses say little has changed and they are still required to use the more expensive railway.

Port authorities are diverting shipments to the new railway, said a Nairobi-based customs clearance agent. "You are made to pay for it whether you like it or not."

Moving a 40-foot container to Nairobi by rail costs 80,000 shillings ($800) - roughly the same as a truck, said Mercy Ireri, chief operations officer for the Kenya Transporters Association.

But importers must also pay at least 25,000 shillings for a truck to collect the goods from the Nairobi depot and 15,000 shillings in depot fees, said three businessmen who asked not to be named.

LOAN REPAYMENTS

Manduku, also a board member of Kenya Railways, said the higher charges are necessary to meet loan repayments.

Kenya owes Exim Bank of China 660 billion shillings for the railway and other projects, about a tenth of its total national debt. The bank did not immediately respond to a request for comment.

Kenya Railways did not respond to requests for comment. The China Road and Bridge Corporation, which built the railway and now runs it through its Kenya subsidiary Africa Star Operations, said it did not set policy on cargo.

The exact terms of the agreement are not public.

The new line opened in 2017. Running alongside a dilapidated track British colonialists built a century ago, it cut the Nairobi-Mombasa journey to four hours from 12 for passengers and to eight hours from 24 for cargo.

China supported the directive requiring importers to use the railway, said Wu Peng, Beijing's ambassador in Nairobi.

"That is a responsible and smart move by the Kenyan government," Wu told Reuters.

After the directive was lifted, the embassy said the line "has revolutionized cargo and passenger movement".

Parliament summoned the transport minister to answer questions about the cargo policy in November but he did not appear. Esther Koimett, principal secretary at the department of transport, told Reuters the government was no longer making importers use rail.

But Daniel Nzeki, chairman of the Container Freight Stations Association of Kenya, and Ireri of the Kenya Transporters Association, said port security in Mombasa was still preventing trucks from picking up some cargo.

"It is a circus," Nzeki said.

Kenya forcing importers to use costly new Chinese railway, businessmen say
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email