SGR staff gagged over Sh1 billion monthly hefty pay deal

Atanas Maina, Kenya Railways Managing Director has defended the make-up of the contract that condemned Kenyans to pay the Chinese firm a staggering Sh1billion a month to operate SGR. [File, Standard]

A Chinese firm running the Standard Gauge Railway has tried to bind its local employees to a code of secrecy, even as the Kenya Railways defended the Sh1 billion monthly expenses.

China Road and Bridge Corporation (CRBC), which has been rocked by racism claims, last month asked local staff to sign secrecy agreements to prevents them from taking pictures and posting them on social media or sharing them with other media outlets.

“One should not post negative articles or writings or videos or photos on social media or Facebook or YouTube and etc involving SGR operations,” a copy of the secrecy agreement seen by The Standard reads in part.

This comes at a time when the CRBC has been rocked by claims of open discrimination of local staff.

Kenya Railways has come out to explain the make-up of the contract that condemned Kenyans to pay the Chinese firm Sh1 billion a month to operate the new railway.

Yesterday, the Kenya Railways board took charge of the ongoing investigations into racism claims that have rocked the Chinese firm behind the walls of the Standard Gauge Railway (SGR), on a day it emerged that Kenyan staff working at the facility had been asked to sign secrecy agreements. Staff in Mombasa received the letters of the secrecy agreements last week.

Defending the pay

Kenya Railways Managing Director Atanas Maina said fuel and staff costs were some of the biggest expenses in running the train, besides the maintenance as well as utility costs, among them water, electricity and toilet paper.

“To come up with the fees, we calculated all the costs per item that were required from fuel and lubes to small amenities such as serviettes and toilet paper,” Maina said.

He said the other costs included security, spare parts and day-to-day operations. For instance, to run a fully loaded train needs eight litres of diesel for every kilometer for 1,000 tonnes of cargo. To do the 472 kilometer distance between Mombasa and Nairobi, one locomotive, he says, would consume about 9,000 litres of fuel coming and another 4,000 litres of fuel going, which he says would bring the fuel bill per train to about Sh900,0000 per day. Running the seven trains would therefore cost Sh6.3 million per day.

Staff remains the biggest cost component of the operation. “So far we have 870 Chinese and 1,624 Kenyan staff working for the operator. Of these, 110 are Chinese locomotive drivers while we have 94 assistants already being trained and 120 who have been interviewed and enlisted for training starting next week, after which they will become assistant drivers and eventually graduate to full drivers,” Maina said.

“The increase in numbers has been necessitated by our plan to do more trains than initially anticipated,” he said.

Operation contract

Policemen working at the railway are also paid an allowance besides the salary paid by the taxpayer.

If all the other costs are incurred, Maina said, CRBC would only be left with a margin of between 3 per cent and 5 per cent of the Sh1 billion bill per month to keep as profit.

Maina said to deal with the killing of wildlife in the corridor, the Government was building a second electric fence to give the line another buffer zone and prevent breach. The railway currently has a wire mesh fence, which has seen at least five buffaloes and two lions killed.

But it is the operation contract that continues to attract scrutiny after insiders said their advice was ignored.

Insiders have questioned the circumstances under which Kenya Railways was forced to sign the contract that they say was skewed in favour of the Chinese.

At Sh1 billion a month, Kenya is paying more than Sh30 million everyday to the Chinese operator to drive and maintain the train.

For the first six months, the firm was given a total Sh6.2 billion in two installments. The first installment of Sh3.4 billion was paid at the contract execution date, while the second of Sh2.8 billion was due at the end of the first six months.

On top of this, the Government also gave an initial Sh3.5 billion interest-free advance to CRBC before they started their operations.

This amount was for mobilisation, procurement of initial operation and maintenance spares and material as well as cash flow support.

“The money was used to buy spare parts and support the startup, given that we did not have the transition phase but moved straight to operations,” Maina said. This amount is to be recovered from the operator within eight years. 

Maina said the contract was divided into three components - the transition phase, which needed upfront interventions by the operator to start operations.

The second phase was the startup, which commenced on June 1, to December 31 last year, while the third was the steady state phase, which would last the five year period of the contract.

Different costs

The costing of the steady state phase is divided into two sections. The first one is the fixed cost calculated on the basis of delivery of a minimum of two pairs of passenger trains and two pairs of freight trains – one for general freight and the other passenger for containers, daily with the tonnage lifted to exceed 1.5 million tonnes.

The second one is the variable cost for performance over and above the fixed cost. These costs include the freight tonne per kilometer, the container per kilometer, the ordinary passenger train and the special train.

To break even, the Government is counting on a cargo boost from the clinker business to Athi River. Clinker is a major raw material in the production of cement and most of the cement manufacturers are based in Athi River.

“The clinker business will be a bonus boost to the railway and we expect to transport about 4 million tonnes a year via the railway,” Transport Cabinet Secretary James Macharia said in an interview.

Mr Macharia said the Government was also working with the private sector to get access to the bulk grain transport business that was expected to guarantee the SGR another 5 million tonnes a year.

Macharia said the country had been adding one more train every month and by the end of the year would be expected to have 12 that would be plying the Mombasa-Nairobi route. With an increased frequency, the Government is hoping to have broken even by the end of 2020.

The contract was also passed on the major costs of repairs to Kenya Railways. CRBC was only allowed to absorb a maximum of Sh5 million in costs per year. The corporation is to refund the operator any amount in excess of Sh5 miilion in any calendar year.

CRBC was also to secure a commercial general liability insurance of at least Sh2 billion, while Kenya Railways was to take the biggest part of the insurance.

Kenya Railways was to obtain an insurance against all risks on the property, machinery as well as breakdown. This was to be no less than Sh150 billion ($1.5 billion).