Find out the following analysis done by a 3rd year economic student from Nairobi University about the Standard Gauge Railway and it’s importance to the Kenyan workforce:
At the aggregate level, efficient rail transport will reduce costs in many economic sectors, while inefficient transportation increases these costs. The Standard Gauge Railway carries an important social and environmental load, which cannot be neglected if Kenya is to attain Vision 2030. Assessing the economic importance of the new railroad requires a category of the types of impacts it conveys. These involve core (the physical characteristics of transportation), operational and geographical dimensions. The SGR will be able to meet the following dimensions
Core. The most fundamental impacts of transportation relate to the physical capacity to convey passengers and goods and the associated costs to support this mobility. This involves the setting of routes enabling new or existing interactions between economic entities.
Operational. Improvement in the time performance, notably in terms of reliability, as well as reduced loss or damage. This implies a better utilization level of existing transportation assets benefiting its users as passengers and freight are conveyed more rapidly and with few delays if any.
Geographical. Access to a wider market base where economies of scale in production, distribution and consumption can be improved. Increases in productivity from the access to a larger and more diverse base of inputs (raw materials, parts, energy or labour) and broader markets for diverse outputs (intermediate and finished goods). Another important geographical impact concerns the influence of transport on the location of activities.
Mobility is one of the most fundamental and important characteristics of economic activity as it satisfies the basic need of going from one location to the other, a need shared by passengers, freight and information. This is a thing that the standard gauge railway promises to the Kenyan economy. All economies and regions do not share the same level of mobility as most are in a different stage in their mobility transition towards motorized forms of transport. Economies that possess greater mobility are often those with better opportunities to develop than those with scarce mobility. Reduced mobility impedes development while greater mobility is a catalyst for development. Mobility is thus a reliable indicator of development. Providing this mobility is an industry that offers services to its customers, employs people and disburses wages, invests capital, generates income and provides taxation revenue.
The economic importance of the standard gauge railway in Kenya can also be looked at in the industry from a macroeconomic and microeconomic perspective:
At the macroeconomic level (the importance of rail transport for a whole economy), standard gauge railway and the mobility it confers are linked to a level of output, employment and income within the national economy. In many developed countries like China, transportation accounts between 6% and 12% of the GDP. China intends to teach Kenya how to do this by helping in the development of the standard gauge railway. At the microeconomic level (the importance of transportation for specific parts of the economy) transportation is linked to producer, consumer and production costs. The importance of specific transport activities and infrastructure can thus be assessed for each sector of the economy. With the building of the standard gauge railway it is expected that transportation within the rail system will account on average between 10 percent to 15 percent of total household expenditure. While it accounts around 4% of the costs of each unit of output in manufacturing, however, it is imperative to understand that this figure varies greatly according to sub sectors. The added value and employment effects of the Standard gauge railway will extend beyond employment. It includes added value generated by that activity; indirect effects are salient. For instance, the China Road & Bridge Corporation while constructing the railroad will purchase a part of their inputs (fuel, supplies, maintenance) from local suppliers. The production of these inputs generates additional value-added and employment in the local economy. The suppliers in turn purchase goods and services from other local firms. There are further rounds of local re-spending which generate additional value-added and employment. Similarly, households that receive income from employment in transport activities spend some of their income on local goods and services. These purchases result in additional local jobs and added value. Some of the household income from these additional jobs is in turn spent on local goods and services, thereby creating further jobs and income for local households. As a result of these successive rounds of re-spending in the framework of local purchases, the overall impact on the economy exceeds the initial round of output, income and employment generated by passenger and freight transport activities. Thus, from a general standpoint the economic impacts of the Standard gauge railway will be immense and greatly change the direction of the country.
As a graduate and future icon in Kenya’s workforce, those are opportunities worth conversion into a fruitful career in building Kenya into a financial powerhouse.
By VarCity Correspondent