Saturday, November 04, 2006

Kenya Railways deal; the winners, losers

The govts of Kenya & Uganda finallyput pen to paper to allow a consortium led by Sheltam a south African company to run the Msa.- Kampala rail network for 25yrs. This is a deal with potential for serious consequences on various sectors of the economy.

Road Transport
It will be cheaper, faster and safer to move containers from msa to kampala and upcountry via rail than road. companies like excel logistics, express kenya (nse listed) etc will suffer serious decline in revenues. Unless they reengineer their business model these companies may collapse in 24 months.

Movement of good to and from msa will be faster and cheaper. lead times are likely be cut by as much as 200%. Kenya will more competitive... a ball for investors.

Matatu sector
If Rift Valley railways establishes efficient rail passenger transport from mtaas like githurai, eastlands, kibera to town. then matatu's in those areas are in for declien especialy at peak times. Investors will be forced to pull out or improve the services. a + for consumers.

Govt divestiture program
If sucessful, the concessioning will serve as a model for other struggling public sector enterprises. we are likely to see more and bold moves like KPA privatisation, KAA etc..... a plus for the economy

Road maintenance
Fewer overloaded trucks on our roads means longer lifefor roads and less accidents

i think its up up up from here


Blogger mwasjd said...

Nice post on the railways deal, but I think it's just too nice to take in. You haven't touched on negatives.

Consider if they muck up on the deal, maybe by not raising enough capital or unable to turn around the company, then all your positives are out of the window.

I thought that the overloaded trucks usually carry building materials i.e. stones + sand which I don't think will be railway transported.

Despite the pessimism, I think that overall, the deal is good for the country, if they get it right like KQ.

6:19 AM  
Blogger gathinga said...

mwasj@agreed on if they fuck up the deal.. but i dont they have that luxury. this govt's reputation is pegged on economic reform. hey're likely to give anything to see this succced.

if you watch the trucks on msa very few are carrying building materials as oposed to containers.. besides, cement can be tranported on rail.

8:35 AM  
Anonymous Anonymous said...

Road transport companies will NOT collapse in 24 months since the railway line is in bad shape and just repairs will take 24 months or longer. In the meantime, the delays will continue.

If Sheltam doesn't muck it up (at least not my money!) then the long-term benefits will flow.

Manufacturing will benefit but the lead times may be cut by 50% not 200%. A reduction of 100% = ZERO. 200% is time travel...

Matatus - No serious competition for now. They can go to corners where Railway can't. Furthermore, not for another 5 years before NEW tracks can be laid to new destination. Priority should be given to Sudan.

Divestiture is GOOD. Already proven by KQ & KCB.

4:08 AM  
Anonymous Anonymous said...

I think its good.KR is on the floor it can only go up from here.
Road Transport will still be here.

It will co-exist with the rail

2:55 PM  
Blogger gathinga said...

coldt@ am with you on the lead times. its a big thing to cut lead times by 50%. you're thus creating a competitive local manufacturing sector.

1:10 PM  

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