Kasingye in his presentation noted that Uganda is in an era of global competitiveness and the cost of doing business must be globally competitive. Investors should be in position to manufacture from Uganda and export their products to other countries at the lowest possible costs.
The Cost of the SGR
Uganda is investing in a Class 1 Electric Standard Gauge Railway expected to cost $2.4 billion for a 273km stretch without locomotives. The question being asked by many is why the SGR would cost much more that it did in Kenya which cost $3.4 billion for a 472km stretch, Ethiopian-Djibouti line, which cost $3.4 Billion for 656km.
Uganda unlike Ethiopia to which the cost of the Standard Gauge Railway is being compared, is investing in a Class 1 fully automated SGR while Ethiopia invested in Class 2 semi-automated SGR. Among other things, Uganda will benefit from the Class 1 trailing load capacity of 4000/5000 tonnes while the Class 2 SGR only offers a 3500/4000 trailing load capacity. The class 1 SGR also offers a reduced risk of accidents because of no level crossings unlike the Ethiopian SGR whose tracks cross several roads posing a danger to other road users.
The major difference between the SGR in Uganda and that in Kenya is the Kenya SGR runs on diesel while the Uganda SGR will be Electric. However, both have several bridges. In Kenya, the Tsavo bridge and the Mombasa super bridge as well as the bridges that will be constructed over several water bodies in Uganda are costs incurred for the good of the environment
Why we urgently need the rails?
Looking back, the 1896 Kenya-Uganda railway line improved the economic power of towns through which it passed. Previously small towns became major trading centres. The speed of the mode made it easy for towns to have a sizeable population of workers since people moved easily from one town to another. This boosted trade and led to economic growth.
In Kenya, the lives of people living around the stations has improved because of the increased trade opportunities. The value of land around the stations has also gone up exponentially and has improved the value per household. The cost of travelling has also reduced significantly. The tiring journey that once took the rising to the setting of the sun before you reach your destination is now 3 hours less and cheaper.
Railways promote economic growth while cutting greenhouse gas emissions. They are a clean and compact way to move millions of passengers and goods across countries and continents. The Standard Gauge Railway in Uganda is expected to take on 95% cargo and 5% passengers. This will reduce the impact of the current load on the roads and pollution of the environment as well as increase competitiveness through faster delivery of freight and the cost effective transportation of cargo.
Road transport accounts for over 95% of freight movement in Uganda and the 5% of freight is transported by the dilapidated and inefficient metre gauge railway. This has led to very high transport costs reason for which Uganda has become uncompetitive
In the global competitiveness report of 2016, Uganda is ranked at 115 and Kenya at 99 out of 140 countries. The loss in transport costs in Uganda are currently estimated at $1.2 billion per annum. The cost of transportation of commodities is one of the reasons the seemingly cheap items in downtown Kampala cost a lot more than they should. It is also one of the reasons Uganda’s mineral wealth remains untapped. This therefore calls for an immediate intervention in Railway transport in order to boost the economic growth of the country and region as a whole and attract investors. Undoubtedly, transport is the lifeline of a nation.
The mineral sector
Uganda is a mineral rich country with over 27 minerals of economic potential. Big deposits of iron ore exist in the South Western and South Eastern parts of the country estimated at about 260 million tonnes worth approximately $19 billion (68 trillion shillings) at current prices. If exploited commercially, this resource alongside other minerals like Tin and Wolfram could be a significant foreign exchange earner for the country. However, the current cost of transportation in Uganda, estimated at US$ 0.21 per tonne km compared to the world average of US$ 0.03 per tonne km is a serious bottleneck.
Taking an example of Australia, majority of coal is from Queensland and New South Wales. Due to the coal freight task, rail is the most efficient and cost-effective option for delivering coal from the mine to port. Australia’s main coal haulage is on the Central Queensland Coal Network and the Hunter Valley Coal Railways. Rails have an unmatched ability to undertake rapid expansion. This doubled the trade in the decade to 2013-14, which was made possible by the ability to expand rail capacity along the existing corridors
The Oil and Gas sector
Given that Uganda expects first oil by 2021, the SGR is a timely element towards the success of the pipeline. Transportation of cargo will take a shorter time and cost less on rails compared to any other form of transport. The 42 months SGR if started will equally hasten the flow of oil through the East African crude oil pipeline. The Standard Gauge Railway (SGR) will be Uganda’s fastest and cheapest link to the world.
For this reason, people agreeing on the need for a railway but delaying the construction of the Standard Gauge Railway on the basis of cost should learn from mistakes of our neighbours. Sometimes it is better to invest more and spend less on costs of maintenance.
An old car is usually cheaper than a brand new car. However, the costs of maintenance will in the long run cover up for the cost invested.