TECHNICAL EFFICIENCY OF RAILWAY TRANSPORT SYSTEM IN KENYA: A CASE OF THE STANDARD GAUGE RAILWAY TRANSPORT SYSTEM
Abstract
Purpose of the Study: The study's purpose was to investigate the level of technical efficiency of Kenya's standard gauge railway goods transport system from Fiscal Year 2018/19 to Fiscal Year 2023/2024.
Problem of Statement: According to Kenya Railways' Strategic Plan 2023-2027, the Corporation has been unable to maximize the value of its assets while also meeting increasing market demand. This is a clear indication that the SGR freight transport system must be efficient to meet the growing market's high demand.
Methodology: To achieve the study's objectives, a non-experimental research design was used. Stochastic Frontier Analysis was used to estimate the gauge's technical efficiency levels. The Stochastic Frontier Analysis results were then subjected to regression analysis using the Tobit model to identify the factors influencing the technical efficiency of Kenya's standard gauge railway transport system.
Results: The study found that the average technical efficiency levels for the Net Tonne Kilometre model were 0.94 (94%), while the revenue model was 0.873 (87.3%). The technical efficiency levels for the Net Tonne Kilometre model showed that the railway system is extremely effective at managing goods transportation, with only minor inefficiencies limiting its potential. However, the slightly lower average technical efficiency levels for the revenue model highlight a problem in translating operational success into financial performance. The inclusion of macroeconomic variables such as inflation and exchange rates in the models revealed more nuanced effects, with inflation having a negative impact on efficiency and exchange rates having a mildly positive effect.
Conclusion and Policy Recommendations: The study concluded that, while Standard Gauge Railway freight services have high technical efficiency in freight handling (94%), there is a significant gap in financial performance, with revenue efficiency of 87%. To address this, disconnect, policymakers were encouraged to adopt improved pricing strategies, cost management, and adaptability to macroeconomic factors, which are critical for maximizing the SGR's transformative role in Kenya's socioeconomic development and regional integration goals.
Keywords: Technical Efficiency, Railway Transport System, Standard Gauge Railway Transport System, Stochastic Frontier Analysis
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