Monday, June 12, 2017

The SGR hasn't failed

The Madaraka Express, the passenger train service running on the new standard-gauge railway from Mombasa to Nairobi, is off to an auspicious start. Trains are overbooked and it is reported in the first week of its operation, over seven thousand passengers have been ferried between the coastal resort and the Capital. 

Of course, there are those who have little to cheer about when it comes to the Madaraka Express and the SGR that made it possible. These Kenyans are all up in arms over the cost of the railway and the rent-seeking that accompanied its construction and worry, justly, about the cost that it will impose on future generations as the debt is paid back to our Chinese sugar-daddy. But, and this is a good thing, macro- or micro-economic theory is meaningless of the railway and the trains that will use it remain the subject only of commentators with exoplanet-sized chips on their shoulders and massive axes to grind.

In rapid succession, two ideas have already percolated to the surface and given life in the pages of the Business Daily. Dr Bitange Ndemo reminds us that the most expensive part of the railway is actually the railtrack, for which the Government of Kenya has spent hundreds of billions of shillings to lay. The railtrack comes together with stations, switching gear, communications gear and, crucially for a Kenyan, the land on which the tracks are laid. Dr Ndemo proposes that Kenya Railways Corporation should be transformed into a regulator which shall oversee the operations of private-sector investors who shall run rolling stock on the SGR. To be simplistic: Kenya Railways can own the railtrack and a private investor can operate the Madaraka Express.

Carol Musyoka, the Nitpicker, picks up from where Dr Ndemo lets off. Ms Musyoka demonstrates that a railway is more than the tracks, rolling stock or stations that form the core assets of the railway, but also the amount of time that passengers and visitors to stations spend in stations. In the United Kingdom, services offered at the railway stations contribute significantly to the railway operator's bottom line. Anyone can see that the opportunities offered by the new railway are enormous and, regardless of the bitching that a minority of Kenyans are engaging in right now, there are Kenyans who will not hesitate to invest in goods and services connected with the SGR and the assets connected to it.

If Dr Ndemo's proposal is taken up seriously, there is no reason why the Kenya railways Corporation should be the only operator of trains on the SGR even if it doesn't become the railway's operator. More and more investors should be encouraged to invest in rolling stock, both locomotives and bogeys, so that they can operate trains on the SGR, ensuring that there is no downtime on the railtrack at any time. And if we look at the railtrack as an entire business ecosystem - never mind the predator-prey connotations inherent in that description - Ms Musyoka's proposal sees investors offering hundreds of thousands of services in and around the real estate owned by the railway that will contribute significantly to the bottom line of the railway's operator.

Notwithstanding the billions that may or may not have been stolen during the construction of the standard-gauge railway, the railway is now a reality and its fate is not going to be determined only by those who see the negative aspects of its constructions. Kenyans have demonstrated, time and again, that no opportunity will pass them by. when its benefits are as clear as those presented by the new railway. The knock-on effects of private investment in principal and ancillary activities connected with the new railway will, in the words of the Government's railway's boosters, be a game-changer.

Listen to the whingers if you must but don't live under the delusion that Kenyans will not invest in, around or along the new railway because they will. These Kenyans are the key to its ultimate success. I, for one, am very excited by its completion.

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