Kenya’s Railway Expansion: A Strategic Move for Regional Trade
Kenya is taking significant steps to expand its Standard Gauge Railway (SGR) network, aiming to connect the country to Malaba and beyond. This initiative is part of a broader plan to enhance regional trade and economic integration across East Africa. The railway levy, which is charged on imported goods, is being used as a key funding source for these ambitious projects.
Funding Sources and Challenges
The Kenya Railway Development Levy (RDL) plays a crucial role in financing the SGR expansion. Currently, this levy generates approximately Sh50 billion annually, based on a two percent charge on the value of imported goods. For the 2023-24 financial year, the government collected about Sh31.7 billion under the old 1.5 percent rate. However, with the rate increasing to two percent effective December 27, 2024, the total annual collection is expected to rise significantly.
Despite this increase, the government has ruled out any plans to further raise the levy. Instead, it is exploring other financing models and partnerships to support the project. One such model involves concessioning SGR freight operations and supporting neighboring countries in setting up logistics hubs in Kenya. Private sector partnerships are also being considered for the development of supportive infrastructure and cargo handling facilities around key locations like the Naivasha Inland Container Depot and economic zones along the railway line.
Project Details and Regional Implications
The SGR extension includes Phase 2B, which covers the route from Naivasha to Kisumu, and Phase 2C, extending from Kisumu to Malaba. These phases are estimated to cost $5 billion (Sh645.8 billion). The project will involve compensation for individuals affected by the railway’s construction, which will pass through several counties including Narok, Bomet, Nyamira, Kisumu, and Busia.
Feasibility and Environmental and Social Impact studies have already been completed. Kenya is working closely with Uganda and South Sudan to develop the East Africa Rail Corridor. During a recent ministerial meeting in Nairobi, attended by officials from Uganda and South Sudan, Kenya emphasized its commitment to kick-starting the project as Uganda is already making progress.
Economic Benefits and Infrastructure Needs
The extension of the rail to Malaba and into the hinterland is expected to boost trade along the Northern Corridor, which runs from the Port of Mombasa into Uganda, South Sudan, the Democratic Republic of Congo, Burundi, and Rwanda. Neighboring countries are planning to establish Special Economic Zones (SEZs) and logistic hubs, including warehouses for handling their respective cargoes.
With the continued rise in cargo volumes at the Port of Mombasa, proper infrastructure is essential to ensure seamless movement. Last month, SGR freight achieved its highest-ever monthly cargo haul since the service began operations in 2017, reaching 640,000 metric tonnes. This haul is equivalent to removing 23,000 trucks from Kenya’s highways, significantly easing road congestion and highlighting the railway’s growing role in freight transport.
Enhancing Efficiency and Sustainability
Moving cargo via rail has helped reduce pressure on roads, road accidents, and the carbon footprint. Each country is expected to deliver its rail infrastructure for connection at borders. During the Nairobi meeting, officials from Uganda and South Sudan noted that the infrastructure will not only make the region competitive but also lower the cost of doing business.
Kenya Railways has been actively increasing its wagon capacity. In the 2024-2025 financial year, it procured 500 new wagons, including 300 for the SGR and 200 for the Metre Gauge Railway. Each SGR freight train has an average capacity of 4,000 tonnes and can carry 108 TEUs (containers). However, there have been delays when cargo volumes increase at the Port of Mombasa.