Fierce competition from the Standard Gauge Railway (SGR), combined with rising costs for fuel, taxes and insurance premiums, has forced Kenyan truckers to innovate to stay afloat.
The government ordered all cargo delivered at the Port of Mombasa to be shipped inland to Nairobi exclusively via the SGR, although this is being challenged in court.
Some truck owners converted their vehicles into special trucks to haul oversize cargo that could not be transported by the SGR, while others have relocated to neighboring countries where stores still exist.
Companies that have taken advantage of the strong infrastructural developments in the region to move oversized cargo such as oversized containers and reefer containers include Transtrailers, Simpet Global Logistics and Seven Stars, which have invested heavily in modern technology for handling oversized cargo .
Simpet founder Peter Wachira says his company has also expanded its coverage to Tanzania and Uganda.
“Simpet has ventured into the special cargo or OOG (out of gauge) cargo space and the company is investing in this sector due to ever-growing demand in the project cargo, infrastructure and construction sectors,” said Mr. Wachira.
Other truckers, however, had to shut down their operations. Newton Wang’oo, chairman of the Kenya Transporters Association, says several of its members have closed and others have reduced their fleets.
“High truck operating costs and lack of business due to SGR have impacted the truck business. A number of companies have closed,” Wang’oo said.
Awal Abdi of Awale Transporters says the majority of his 60 trucks were grounded.
“I have taxes to pay, insurance premiums, service loans, and when you add in operating expenses, it’s very hard to stay afloat. I’ve seen many trucks being auctioned off because transport companies are out of business now,” Abdi said.
While his company charges about $800 to move cargo from Mombasa to Nairobi, Kenya Railways Corporation charges about $510 for a 20ft container and $725 for a 40ft container from Mombasa to the inland container depot in Naivasha.
He added, “As a trucker, I’ve been forced to downsize my fleet while hiring some, which has forced me to lay off some drivers and their assistants.”
The challenges posed by SGR and operating costs make it difficult for logistics companies to survive, especially those that own few vehicles, forcing some logistics companies to resort to leasing to minimize costs.
When servicing a truck, fuel, which is on the rise, accounts for almost half of the cost. Added to this are trade license fees, taxes and insurance premiums, with fully comprehensive insurance costing around 10 percent of the vehicle’s value per year, with the costs increasing as the fleet ages
Despite a series of court orders issued to stop the directive, the government has continued to implement it.
The directive’s knock-on effect was that transport companies had to reduce their fleets because the SGR directive, with high fuel retail prices of USD 1.24 per liter in Kenya, the highest in the last decade, and high spare parts costs had completely phased them out Business.