KENYA: Higher Fees for Importers Avoiding the Standard Gauge Railway

The Kenyan parliament has recommended imposing a higher levy for importers who opt to transport their goods by road from Mombasa port to the capital, Nairobi, instead of using the country’s troubled standard gauge railway (SGR) that also services the route.

On 22 September 2020, the conclusions of a recent inquiry into the use of the SGR by the National Assembly Transport Committee proposed to parliament a 0.3% increase to the Railway Development Levy, which will take it up to 2.8% of the value of the goods transported by road. Importers currently pay only 2.5% of the value of the imported items in for the Levy.

Furthermore, those importers that do use the SGR should also receive a reduction in Railway Development Levy fees, according to the Committee, which recommended that importers pay a lower levy rate of 1.5% of the cost of goods. The Committee stated: “The Committee recommends that… importers who choose to haul their goods using the SGR can pay a preferential Railway Development Levy of 1.5% of the value of goods. Conversely, importers who choose to use road transport will attract an additional surcharge of 0.3% of the value of goods imported, up to a maximum of US$138 (KES14,900).”

The new levy rates are the latest in an increasingly acrimonious battle between the Kenyan government, which is trying to drive income to the SGR to service large debt repayments due on the project, and the country’s import, export and haulage sectors that want to continue using cheaper road transportation. In February 2019, the government’s joint technical committee on the Improvement of Efficiency and Cost Effectiveness of Transportation of Cargo Using SGR reported that it costs an average 133.5% more to transport cargo using the rail system than by road.

In June this year, Kenya Railways tried to boost SGR traffic by slashing freight charges for three months from US$600 to US$480 for a 20-foot container and from US$850 to US$680 for a 40-foot container. This followed a directive to shift to the SGR all cross-border transit cargo coming from Mombasa to the Inland Container Depot (ICD) facility in Naivasha near Nairobi for processing. This did not go down well with the haulage industry and bordering nations such as Uganda, that expressed displeasure at the directive and higher costs that it incurred. The Kenya government subsequently suspended the directive.