Building Integrated Markets within the East African Community by The World Bank

Author:The World Bank
Language: eng
Format: epub
Publisher: The World Bank

Map C.1 East African Railway System

Source: East African Railways Master Plan Study, Final Report, CPCS, January 2009.

Political Economy Issues

Political problems within the East African Community (EAC) resulted in the balkanization of the then East African Railways and Harbors (EARH), finally leading to the creation of national railways in 1978, following the collapse of the EAC. With respect to the railways, Kenya was left with the prime assets of EARH, such as the main workshops in Nairobi. The civil strife in Uganda and virtual collapse of Uganda Railways Corporation (URC) during the 1970s lost Kenya Railways Corporation (KRC) much of its longest distance and most profitable freight market; average freight haul distance fell by 25 percent. The weaknesses of KRC and URC management within a government-controlled environment became increasingly manifest. Tariffs could not be increased in line with inflation, and asset renewal fell accordingly. Political involvement in the appointment and tenure of senior management increased and salaries and benefits began to fall in real terms. Development partners attempted to assist with the commercialization of the management and operation of the two railways, but there was no strong commitment from the respective governments of the time. The rail business began a steady decade-long slide into insolvency as maintenance and investment lagged, revenues dropped, and the workforce continued to expand.

By 1992, the Kenyan government, responsible for most of this stretch of rail infrastructure, employed 22,000 workers to look after it, an estimated 15,000 more than necessary. In the 2004/05 fiscal year, the annual cargo tonnage slipped to 1.9 million tons, less than 20 percent of total east-west shipping. By June of 2004, KRC had accumulated US$277 million in debt, with annual losses running at about US$39 million. For average Kenyans and Ugandans, travel anywhere along the line was cheaper by taxi and took half the time. For the manufacturing sector, it was less costly to ship a 20-foot container from Chicago to the port of Mombasa than it was to transport that container via rail from Mombasa to Nairobi.

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