New piracy levy to push up the cost of imported goods

India and China, could take up to 75 per cent of South Africa’s 65 million tonnes of thermal coal exports in 2010 as demand shifts from Europe to Asia, putting many more ships in the gun sights of Somali pirates, analysts said.

“Shipping lines have introduced a piracy surcharge to cover the risk of attacks in addition to other charges such as war risk surcharge, voyage time surcharge to compensate for the longer route being taken to evade pirates,” said Mr. Langat.

To reduce attack exposure, ships have raised bunker heights to make it difficult for pirates to get on board, travel in convoys or even use armed escort that only increases operation costs.

A number of shipping companies involved in the coal freight business have admitted facing high insurance costs or taking longer routes that also came at a higher cost.

Piracy risk cover on a voyage from South Africa to India adds $30,000 to the basic insurance cost, according to some estimates.

Navigation through longer routes adds between $40,000 and $50,000 to ordinary shipping costs.

Mr J. Peter Pham, an African security adviser to US and European governments and private companies, says that dry bulk ships that carry commodities such as coal, iron ore and grains, are more vulnerable to pirate attacks partly due to their slow speed and older age.

“When they are fully loaded with their cargo they tend to have a low freeboard (the distance between a ship’s railings and the water) and are easier to attack even in motion,” he told Reuters in a recent interview. “If you are moving more coal in these types of carriers, it is fairly reasonable to say you are probably going to get more attacks on them.”

In terms of voyage time ship vessels are opting for the longer route through West Africa and the port of Good Hope in South Africa that lengthens the shipping time by up to a month.

For instance the Fresh Produce Exporters Association of Kenya (FPEAK) has lamented at the increased length and cost of delivering fresh produce to key markets in Europe.

“The cost of transporting avocado, mangoes, pineapples or vegetables to Europe has risen by at least $2500 (Sh187,500) per container mainly driven by increased shipping and insurance due to rampant piracy,” said Stephen Mbithi, the FPEAK chief executive.

Longer shipping time is forcing exporters to use more advanced vessels with controlled environment containers to ship their produce instead of traditional refrigerated containers.

Shippers say that the controlled environment containers which prolong the shelf life of the fresh produce cost $4,800 compared to $1,200 for the normal refrigerated containers.

This has affected fresh produce such as avocadoes and tea which are largely shipped by sea due to their bulky nature and in the process leading to loss of income by small scale farmers who are the main producers of these produce.

For tea traders, irregular shipping schedules to the main Pakistan market because of the piracy has hurt their business in that at the peak of the global financial downturn, most shipping lines lowered the frequency of voyages along the route to cut down on loses.