Has the SGR benefited anyone?
|A wind power project: Increases power supply
and lower cost of electricity
The Project’s financial costs and pricing of the service come at the tail end of the
study. For instance, at conception, a piped water project is justified on the
strength of the economic, health, nutrition, and welfare benefits.
These activities are assigned monetary values which are compared to the financial cost of building the project. If these benefits exceed the construction costs then, the project is developed.
That process is called the Cost-Benefit analysis. CBA is the evaluation of all potential
benefits of a project compared to its costs. The costs here include the
opportunity cost of the resources invested in a foregone project.
If the benefits exceed the costs, then the project is good
to go. It is worth noting that the benefits are not only direct gains from the project per se. Public projects are mainly enablers that improve productivity in other sectors. Among the benefits of
a piped water project in a rural area, for example, is improved hygiene, improved nutrition,
improved health, and poverty reduction as the people are expected to use the
water to irrigate kitchen gardens whose surplus they sell.
|Phonebooth: Anyone remember queuing to make a call?
Travelers from Northern Kenya could take days to travel to
Nairobi, now it is just a seven-hour journey.
Long-time users of Thika road in Nairobi can attest to the
difference the superhighway has made in their lives and the value of their
Infrastructure levels the playing field for economic
actors-yes even that passenger in a PSV. That is why they are enablers, things
that exist to improve the efficiency and profitability of other economic
players. Although they are business activities, they do not necessarily exist
to make a profit but to enable others to make profits.
The first benefit of an infrastructure project is, therefore,
leveling the playing field for other players. Rural electrification enables the
rural folk to industrialize, an all-weather road links farmers to the markets,
cutting their losses.
On this score alone, investment in infrastructure
projects- Rails, roads, power generation stations, etc. improve our lives whether they make a profit or not. Economists call the valuation of loss and
benefits of a project Cost-Benefit analysis. It calculates and sums up all
potential benefits of a project against financial costs. They also test the potential
losses without the project. If the benefits exceed the losses, then the project
Among the economic benefits are savings in time spent
performing a given economic activity such as drawing water or traveling on bad
roads. These are assigned a monetary value depending on the per capita income
of the project area. Time has a higher value in urban areas than in rural areas
but keeps rising as the areas develop.
To illustrate, we use the Standard Gauge Railway in Kenya.
Its services are paid for but have yet to return a financial profit. For this reason, many commentators dismiss
it as a white elephant.
However, was financial profit the primary goal of investing in it? Does the project engender economic benefits way beyond the financial costs? The passenger train travels between Mombasa and Nairobi in five hours. Official data shows that between January and June this year, it ferried 765,000 passengers, an average of 127,500 passengers a month or 4250 passengers a day. Each passenger saves 5 hours on the trip. Therefore, a single journey adds 5
|A Double stack train: Saves $1.7 million per trip
For all passengers, this adds to 21,250 man-hours that can be used productively. A year has 8760
hours. If we divide 21,250 hours by 8,760 we get 2 years and 4 months of man-hours saved in a single day. Extended to a month, the train saves the country
77 man-years of travel time that is used productively.
Experts value an hour
of travel savings at shs1,461 ($14.61) per hour per passenger. By shaving 5
hours off the journey to Mombasa from Nairobi, the SGR saves each passenger the
equivalent of Kshs 7305 ($73.5). The 4250 passengers shipped to and from
Mombasa save the equivalent of Kshs31 million ($310,000) a day!
The freight train travels between Mombasa and Nairobi in
eight hours, down from 15 to 24 hours by train and 24 to 96 hours by truck. By
truck, there is ship-to-shore at the Port in Mombasa. By train, it is ship-to-train
and on to the Nairobi ICD.
A double-stack train
carries 216 TEUs, meaning 216 businessmen- manufacturers and traders are saved
88 hours apiece. That is a total of 19008 hours of travel time saved by a
single train. A single train saves the country’s business community a total of
2 years and two months of travel time. The ten trains that ply the route per
day save the country the equivalent of 20 years and 11 months in a single day!
Experts value the time savings to an importer by train in
Africa at $0.02 per Kilometer/ ton. A Twenty-foot Equivalent Unit carries 21.6
tons. Traveling a distance of 500 KM creates savings amounting to Kshs 821,600
($8,216) per TEU. Now, multiply that 216 times and we get ksh177 million ($1.77
million) in the equivalent value of time savings in a single day!
Extended to a year,
the SGR generates time savings worth US$114 million. These savings also
translate into further savings in terms of; bank overdrafts, storage costs, and,
ordering lead-time for the business community.
Other users, especially motorists and their passengers along
the same road also gain. The trains remove 177 heavy vehicles on the Northern
Corridor. That eases traffic on the roads and raises cruising speeds, thus saving
on travel time, fuel wastage, and frequent repairs owing to bad roads. This should
be added to the benefits of the SGR to say nothing of the costs of repairing
Please note we have just been calculating the benefits
accruing to others. Not the direct benefits such as employment, skilling, and