The envisaged Standard Gauge Railway that will link the Tanzanian port of Dar es Salaam and Kigali is a game changer, the state minister for transport has said.
“It is big in so many ways,” Jean de Dieu Uwihanganye told The New Times on Thursday.
President Paul Kagame and his Tanzanian counterpart, John Pombe Magufuli, on Sunday, sealed a deal that will see the two countries undertake joint construction of a Standard Gauge Railway (SGR) from Isaka in northwestern Tanzania to Kigali.
The development was announced during Kagame’s working visit to Dar-es-Salaam.
Rwanda’s business community is excited about the development, with Deus Kayitakirwa, the Director of Advocacy at Private Sector Federation (PSF), saying that the railway line will “ease the challenges associated with the country’s landlocked status”.
Both the government and business leaders say the Dar-Kigali SGR will significantly reduce the cost of transport between Kigali and the Tanzanian port and subsequently bring down the prices of imported products.
According to President Magufuli, the two parties want construction works to start “immediately” because feasibility studies and designs are complete.
The two leaders went ahead to instruct their Infrastructure ministers to meet within two weeks to plan the implementation of the project.
Minister Uwihanganye said negotiations between the two parties are already in advanced stages.
“This is a project to which we attach great importance. Once it is in place, it (SGR) will be a game changer. And that is why we are doing everything possible to have it in place as soon as possible,” Uwihanganye said.
Asked about the likely impact of the proposed railway line, Uwihanganye simply said, “it’s one big deal that Rwanda has firmly set its eyes on.”
“It is big in so many ways; in terms of the budget of the project, impact on cost of imports and exports to and from Rwanda and Made-in-Rwanda (products) competitiveness on the global market, to say the least.”
High transport costs in East Africa have often been cited as a serious challenge to Rwanda’s ability to compete effectively with its neighbours.
Importers say it costs the country, on average, $4,990, to import a 20ft container while the sub-Saharan average is $2,504, which significantly affects Rwanda’s competitiveness in terms of cross-border trade.
Uwihanganye says the cost of transporting a container between Kigali and Dar-es-Salaam currently stands at a staggering $3912.
PSF’s Kayitakirwa said it will cut transport costs by over $1500 a container.
“The SGR will significantly increase volumes and reduce retail prices for imported products,” Kayitakirwa told The New Times.
Asked to compare the central corridor (Dar-Kigali) and the northern corridor (Mombasa-Kampala-Kigali), Kayitakirwa said: “the northern corridor is longer (1661km) with two border posts to cross, while the central corridor crosses one border post (Rusumo) and covers 1495km.”
According to the National Institute of Statistics of Rwanda, Tanzania’s port of Dar es Salaam holds over 60 per cent of Rwanda’s external trade volumes, while Kenya’s seaport of Mombasa accounts for 40 per cent.
Theodore Murenzi, a truck driver and member of Rwanda cargo transporters, said that about 200 to 250 trucks cross Rwanda-Tanzania border daily.
“Dar-es-Salaam port has become even more popular with Rwandan businesses and transporters following the significant reduction of non-tariff barriers on central corridor,” he said.
Issa Mugarura, another transporter, said the proposed Rwanda-Tanzania railway line will come as a huge boost to the transportation of goods and improve traffic along the central corridor.
Besides the transport cost element, the Dar-Kigali SGR will also cut the number of days it takes for cargo or people on the corridor to reach their destination.
It is expected that a passenger train will take a day or less to reach Kigali from Dar, and vice versa, while a cargo train will take a maximum of three days.
Currently, it takes a minimum of four days for trucks to move from Dar to Kigali, while buses use three days between the two cities.
“We are excited with this development,” he said.
Uwihanganye reiterated the government’s commitment to realise standard gauge railways both on central and northern corridors “because both lines are equally important.”
He added: “For now, we are focusing on Isaka-Kigali SGR because both presidents have expressed willingness to expedite the process; the study has been conducted and we are now looking at different funding mechanisms.”
“But that doesn’t mean that we are foregoing the northern corridor SGR project. We understand Kenya has advanced from their side and Uganda is doing the same, and so we are waiting to play our part. Negotiations are ongoing for that line too,” Uwihanganye added.
Uwihanganye said the Isaka-Kigali railway project will cost about $2.5 billion.
Rwanda is already working on railway terminals on the outskirts of the capital Kigali, with the passenger terminal in Ndera in Gasabo District, while cargo terminal will be located at Masaka in Kicukiro District.
PSF’s Kayitakirwa said once the Isaka- Kigali SGR project is complete, the business community anticipates a sharp decline in the cost of goods and services in Rwanda.
“Of course the import costs will reduce,” he said. “And the final consumer will benefit.”
About 40 per cent of the cost of imported products is directly linked to transport and logistics, largely due to the distance between Rwanda and East Africa’s seaports.
“We expect this 40 per cent to go down significantly and this will result in reduced prices,” added Kayitakirwa.
But, he said, the proposed standard gauge railway will come with far greater benefits to the economy.
In many developed countries, including China, transportation accounts between 6 per cent and 12 per cent of the GDP, he said. “At the microeconomic level transportation is linked to producer, consumer and production costs.”
“With the standard gauge railway it is expected that transportation within the rail system will account between 10 per cent to 15 per cent of total household expenditure, and around 4 per cent of the costs of each unit of output in manufacturing,” he said.
However, it is imperative to understand that this figure varies greatly according to subsectors, he added. “The added value and employment effects of the standard gauge railway will extend beyond employment. It includes added value generated by that activity, there are many salient indirect benefits.”