While recognizing the Railway Bill’s potentially pivotal role in transforming the railway transport sector, we at SMC feel that there are certain key issues in the Bill that require reconsideration.
1. Lack of a clear Policy Direction on Private Sector Involvement.
The Updated Integrated National Transport Policy of 2024 has references to attracting private sector financing for transport infrastructure development and service provision but there has been no detailed analytical study by the Ministry of Transport into privatisation of rail. There seems to be no White Paper or clear Policy statement on which the Bill is premised. Privatization is a gradual process and systematic implementation is the need of the hour. In our view only an effective, well planned and well-addressed change in policy can improve the sector.
In contrast, South Africa’s National Rail White Paper started in 2014/15 with analysis and research, thereafter the drafting of a discussion paper and green paper and eight (8) years later the final white paper was approved by Cabinet. Is there an actual policy on which the overhaul of the current rail structure is based? It may also be useful to take lessons from countries like South Africa and Britain.
2. Criteria for a Railway Operating License
A rail operator essentially operates rollingstock on the railway. Section 76 of the Bill requires that an applicant for a railway operator license must have been in railway operation for a period of not less than 5 years. The Kenyan Railway Sector has been monopolistic in nature since inception. This section effectively excludes national players from the scope of being train operators. This requirement seems impractical, designed to lock out local entities interested in rail operations and should be adjusted to focus on physical infrastructure and relevant knowledge instead.
3. Access To Railway Line by Train Operators
Under the Bill, if a train operator wants to access Kenya’s national railway network, it will need to be allocated capacity by Kenya Railways. KRC currently controls the Kenyan railroad network and an argument can be made that it may discriminate against its competitors in passenger or freight transport to obtain a competitive advantage.
Discrimination may be practiced on the price that train operating companies must pay for access to the infrastructure but also in other dimensions. And, even without any actual discrimination, the mere possibility of discrimination may suffice to hamper market entry. It might be more ideal to have a complete separation of infrastructure and the transport companies so that KRC is simply the infrastructure provider as opposed to a player and access provider.
4. Insolvency of train operators
Railway infrastructure (even if put up by private companies) will likely become critical in the entire architecture of the Kenyan rail network. Railways are critical components of economic development and regional integration. It may be that private train operators may need protection from being wound up on a whim. We are guided by the UK Railways Act of 1993 which had express provisions on railway administration together with protections from winding up and liquidation without the sanction of the relevant Minister.
The Bill needs to address: what happens when the owner of a private railway goes bust? Is there a framework for KRC or another operator absorbing the infrastructure into the KRC railway infrastructure? Given that railway infrastructure is strategic infrastructure, should the Minister for Transport be notified before winding up petitions are instituted in respect of private railways?
Conclusion
While the Bill has many timely proposals, we at SMC feel that it is vital to address its shortcomings before it is made law.
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