OK, Kung Fu Built The SGR. But This Seems A Bit Much

[MOON Ki]

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Kenya:







China:

[Globalcitizen12]

When is the cargo trains starting. May be after we bay off 3 billions dollars will change the uniform to kitenges and train colour. Everything is outsourced in this project. We are a sovereign nation

[RVtitem]

This SGR is chinese property and part of extensive chinaman one road one belt.

[RV Pundit]

Who cares - SGR is fully booked until October - now that is something. The chinese will ran the train for 5yrs. They can do whatever they want - as long as the trains run on time. The savings from cargo alone - will save this country 25B - in my calculation. That mean this rail line will pay for itself in less than 10yrs.

[veritas]

More like TNA ... even has the fluro green tinge on the bird/stewardess arm ...



...also Jubilee ? logo on the beret.



wonder how they'll protect the track ...

[Globalcitizen12]

Save 25 billion where did you pull that figure from?

[RV Pundit]

I calculated the projected total containers per annum * 50k to Nairobi- which is half the price a container get charged from MSA to Nairobi - I didn't even care about the profit they may make per annum - which they will use to re-pay this loan.

1) SGR to cut cargo fees to 50K per container - http://www.businessdailyafrica.com/economy/SGR-freight-unit-cuts-cargo-fees-to-Sh50-000/3946234-3948808-bv2ikw/index.html
2) Expected to carry 400,000 containers annually - or probably more considering the double stack wagons we got can carry 4,000 containers daily  http://www.the-star.co.ke/news/2017/07/28/sgr-county-service-starts-august-1-as-demand-soars_c1605625

Save 25 billion where did you pull that figure from?

[MOON Ki]

I calculated the projected total containers per annum * 50k to Nairobi- which is half the price a container get charged from MSA to Nairobi - I didn't even care about the profit they may make per annum - which they will use to re-pay this loan.

The article you link to states that the average road cost is Sh. 80K, so it is more than half.     Anyways ... we are now in a position to settle an old argument.   In the past, you, citing bogus government figures, have repeatedly written things lik:   

Why do you care about the technical details? Gov has promised 8shs (8 cents) per tonne per km instead of the current 20shs that RVR and trucks charge. Gov owns SGR including the trains. The chosen operator I believe has to stick with gov prices. Which are 2.5 times less than what is charged now...and so if anyone want to move cargo at those prices....the economy is the winner..and gov is more than happy....and even happier if it get moved quickly.

http://www.nipate.org/index.php?topic=3211.msg22511#quickreply

and

In the meantime the economy will benefit first from 120B savings (2.5 times less the transport cost), save time, less strain on nairobi-mombasa road, more cargo passing kenya because it cheaper and quicker than TZ, more juice generally for the economy given transport has multiplier effect.

http://www.nipate.org/index.php?topic=3211.msg22511#quickreply

And I repeatedly disputed that:

The [1.5% GDP growth] figure has been repeated endlessly by GoK types, and, on that basis, repeated endlessly by numerous others.   (Right up there with the one about how the SGR will reduce costs by 2.5 times.)  But good luck into trying to find any basis for how GoK has arrived at it!

http://www.nipate.org/index.php?topic=3401.msg24750#quickreply

I hope we can now agree that the 2.5 factor was a bogus one.
 
You now add that:

2) Expected to carry 400,000 containers annually - or probably more considering the double stack wagons we got can carry 4,000 containers daily  http://www.the-star.co.ke/news/2017/07/28/sgr-county-service-starts-august-1-as-demand-soars_c1605625

A couple of things:

First, how much cargo goes on the railway will be determined by the rates charged; it is not solely a matter of the railway's capacity.   The first article you link to above states that the current rates are "introductory rates"; the rates will go up, in line with the recommendations of GoK's consultants, as I explained here: http://www.nipate.org/index.php?topic=3211.msg22511#quickreply

Second, you have forgotten the little matter of the cost of running the railway.   Your calculations are like those of the guy who thinks of selling a mandazi for Sh. 10 and, without taking into account his costs, simply multiplies the number of mandazis by 10 and considers that to be the money he has made.   

Third, you have several times written about how much will be saved and how this means that the railway line will pay for itself.     That seems to be rather funny reasoning: whatever is "saved" is not necessarily money  that goes to the government, to be used to pay for the rail.    At a first level, "savings" go to the people transporting goods, and some of them might just use it for .... booze and malayas?   

We have now dealt with the "1.5% GDP growth" and "factor of 2.5".   As before, let's return when the projected rosy future arrives and cargo starts to move.

[RV Pundit]

Whatever less they charge is economy cost savings with lot of multiplier let's not talk about time.Obviously they would still make enough to repay this loan and maybe even turn profit.This ought to have done ages ago...

[MOON Ki]

Whatever less they charge is economy cost savings with lot of multiplier let's not talk about time.Obviously they would still make enough to repay this loan and maybe even turn profit.

Who is "they", and on what basis is it "obvious"?    GoK has never actually released any concrete figures to show that economic viability of the SGR with respect to the loan repayment.   What they have done so far:

- "1.5% GDP growth per year, during and after SGR construction" was waved around until the figures came in for the first year (and thereafter).   GoK types then quickly dropped that line or delegated it to RV Pundit.

- "factor of 2.5 in cost" was waved around for much longer---until last year.    We now have some real figures, so nobody is talking about it.  Not even RV Pundit is sticking to that one, despite his cheery predictions of Sh 125B saved on that basis.

GoK always waves around figures for the future as though that future and its reality will never actually arrive.  It is now waving around figures like 400K that are quite different from what their own consultants projected.      And, as usual, nobody will say where that figures actually comes from.   Anyways .... as I stated above, let's revisit it at the right time.   

Still, I think there might be something in regard to "time", as in being able to move goods much faster.   There  is some potential there.    But even then there is another interesting factor: corruption. 

- One of the things that GoK's consultants observed was that the "time taken" with trucks was not entirely "road time"; a fair bit was time spent at weighbridges (mostly automated).  For example, that trucks might arrive at such places early in the afternoon but then hang back until late night, when they could give "something small" to not be charged appropriately.  (Even at a fairly crude level, it's easy to find a mismatch: Mombasa-Nairobi distance and average speed on the road.)

- The second point has to do with getting traffic off the roads and onto the rails.   On the face of it, even the "introductory rates"---and they are "introductory"---of Sh 50K vs Sh. 80K ought to make it a no-brainer.     But not quite.   According to GoK's consultants, most of the bribers were paying to overload, by (if I recall correctly) factors of up to 4.   Excluding the fact that there will be bribery in SGR operations, do we really expect that people will pay  for a factor of 1.6 (80:50) when, for a small additional "fee", they would get a "reduction" of 2 or 3 or even 4 times?

Again, let's revisit it at the right time.   Say, after one year (or even half a year) of operations.

[Globalcitizen12]

MoonKi are you a prosecutor? man you can prosecute a debate. You are right any contrarian views on the need of SGR was treated with contempt. I never cared so much for facts about SGR  because I concluded that the railway will be built and will never be viable. I remember Kirori ngugi clearly doing his home work and trying to raise questions. The answer to his questions was "leli tutajenga" I think that what Engineer Kamau who told off CORD brigade when they were questioning the project..

I need to optimistic and believe that we are going to succeed this time around and repay $3.2 billion easily and that the next phase will just adding a crown to the jewel. I hope it works out for the sake of the nation
It looks like the current elite have agreed that we need infrastructure development at all costs. We needed infrastructure and infrastructure we got. Now we should see the magic bullet that people were talking about of how infrastructure construction projects can create a boom.. so far we have not seen the 1.5% growth and I remember pundit claiming how Jubilee would hit it 10% target once SGR is done

.. may be the multiplier is being eaten by the fact everything other than some land buying and labor was outsourced.. Could the model that worked for America in the 1930 and 45s could have worked because the projects consumed American steel, cement, used American labor and funded by Americans loans?

Now let us build Lapset and see .. Economists live for the long run.. Someone said in the long run we are dead.. may be we have to be dead for this success to be apparent

I am think I should wear my red tshirt and start cheering this government for another 5 years. it will wonders to my self esteem and ego

[MOON Ki]

It is a cost of infrastructure development at all costs. We needed infrastructure and infrastructure we go. Now we should see the magic bullet that people were talking about of how infrastructure construction projects can create a boom.. so far we have not seen the 1.5 billion.. may be the multiplier is being eaten by the fact everything other than some land buying and labor was outsourced.. Could the model that worked for America in the 1930 and 45s could have worked because the projects consumed American steel, cement, used American labor and funded by Americans loans?

Now let us build Lapset and see .. Economists live for the long run.. Some said in the long run we are dead.. may be we have to dead for this success to be apparent

I think we need better infrastructure.   Badly.    And I'm all for it.   But I am yet to be persuaded that building things like the SGR  is the way to go about it.  Consider this:

- The World Bank was willing to support the much cheaper project of refurbishing the the current "narrow gauge" line.  We said, "no, thank you; w want brand new shit".

- The Japanese consultant on the EAC's "Master Plan" had this to say: (a) when your spanking new line is ready, the maximum speeds will be lower than what we have on most of our refurbished "narrow gauge" lines that are much older than yours, (b) even with your current lines you could get better speeds just by improving the signalling, and (c) you folks need to move away from "must have new" and work on improving your maintenance culture.

One may take whatever view one wishes on all that, but here's what I think should not be dismissed:  GoK has never, ever given any serious presentation on the economic viability of the SGR.    What has been dished out has been vague and baseless hand-waving.  Snake-oil pouring as if to replenish Lake Nakuru. 1.5% of this, 2.5 of that, savings here, whatever there. The current "introductory rates" for cargo and "promotional rates" for passengers ... what is the economic basis?***

Money to be made on the SGR?   Definitely.  Some of it has already been made; the rest will be in the "something small".    How any of that will help with loan repayments is not clear.   Not that Kung Fu cares: insurance on the loans had to be paid before Day 1 of start-of-construction.   

LAPSSET?   Good idea .... because people are really keen to do exactly what in places like South Sudan?  The port stuff will go ahead because the Japanese are really keen on it---and, by the way, those folks do a lot for Kenya and spend a lot of their money here without bringing in so many of their people and so much or their material, or getting people to jerk off over their national colours.   Some of the intra-Kenya road stuff too will go ahead, because the World Bank and the likes have already made the commitments.    Kenyans making money there?  Yes, but nothing to do with actual construction of anything.

__________________
*** I believe that for the latter, H. E. President Uhuru did a Moi-thing and just declared that "it shall now be this", but still just "promotional".  I also note the consultant's recommendation that the rates start low to lure in the suckers.  And ....

[Globalcitizen12]

What does Japan get by financing this projects? Is it interest to pay pensions back home? I remember my friend telling how his dad used to train the Chinese and Japanese on working in olkaria. They would be earning 4 times his pay. On weekends they would go on outing to naivasha while this guy could barely afford to take his kids out..on my way out if Kenya in the 1990s Iwas in the embassy with a Chinese girl at 22 she had worked in olkaria for several years and saved enough to relocate to Kansas to study business. She was an engineer already earning consultant salary in Kenya. When I told I never had a paid job she pitied me.

[Globalcitizen12]

On maintenance culture I am told all the roads kibaki built in kiambu are now being ploughed back go all weather..they have not been maintained..in 2005 all those roads were the rave of kiambu. I drove around and they were good ..no one put money aside to repair the roads