Industry

Rising costs force shippers to give port a wide berth

Mombasa-port

Runaway freight costs through the port of Mombasa have started to scare away transit business as talks falter. Photo/FILE

Runaway freight costs through the port of Mombasa have started to scare away transit business, even as consultations aimed at arresting the migration have stalled because of partisan interests in the logistics industry.

Ship owners, sea liners, agents and transporters have failed to strike compromise one and a half years after the expiry of the deadline set by the industry regulator, the Kenya Maritime Authority (KMA).

According to Ugandan Business Community representative in Mombasa Patrick Kiyemba, some of its members have now opted to use the central corridor to Kampala which is 10 per cent cheaper despite being 600 kilometres longer than the Northern Corridor.

The Central Corridor is a road route from the Port of Dar es Salaam to Kampala through the Morogoro —Dodoma —Singida — Kahama —Biharamulo— Bukoba- Mutukula —Masaka route, a distance of about 1,800km.

The Northern Corridor starts in Mombasa through Nairobi, Eldoret, Malaba to Kampala.

The relocation of Ugandan and a section of Southern Sudanese importers to Dar port is also an indicator that rigorous marketing strategies being unveiled by the Tanzanian ports Authority (TPA) are yielding fruits.

“We have held so many boardroom meetings in the last two years and proposed to bodies some of the unnecessary costs that should be done away with or trimmed to make Mombasa port competitive,” said Mr Kiyemba.

He could not give the exact number of those who have relocated.

In 2009, the KMA and the Intergovernmental Standing Committee On Shipping (ISCOS) isolated costs that are charged at the port of Mombasa, but not levied in other ports saying that they should be done away with.

ISCOS is a permanent secretariat based in Mombasa and mandated to negotiate with shipping lines over maritime transport costs in the region

The charges that were due for elimination were the $60-65 delay order fee and terminal handling charges at $ 90 for a 20ft container and $135 for the 40ft container.

Others were the lift on or lift off charges, container handling charges ($25), the 10 per cent administration fee ($40 minimum), the $ 50 equipment management fee, handing over fee currently $25 per a document and the Container Freight Service charges.

Those earmarked for reduction were manifest correction charges at $30, bill of lading amendment charge which ranges between $30-50 and container demurrage charges.

“It costs between $1,400 and $1,700 to ship a 40-foot container from Dubai to Mombasa. The average transportation and clearing cost for the same container between Mombasa and Kampala is $3,800. A 20-foot container costs a trader $2, 250,” said Peter Otieno, a clearing and forwarding agent in Mombasa.

He said the exorbitant costs were borne by local importers who have now been forced to pass them on to consumers, pushing prices of certain goods up.

The elimination and reduction of those charges would have eased the burden on shippers who are currently shouldering other charges brought about by the piracy menace along the Somali Coast and chronic delays at the port of Mombasa.

Other experts, however, blame KMA and ISCOS for not coming up with a proper mechanism to interrogate all charges levied by each transport logistic service providers before proposing the reduction of those charged by carriers.

We could not get any official comment from both the KMA and ISCOS despite several calls, but a source said the plan had been shelved due to political interferences.

The experts say land based transport service costs should be looked at alongside ocean freight costs to unlock the gridlock.

“The discussions have hit a dead-end. This is due to the fact that KMA wanted to narrow down the issue to shipowners against land based transport logistic supply chain service providers. And as we said earlier it was bound to backfire because some of the charges have history like government taxes,” said Kenya Ship Agents Association executive officer Fredrick Wahutu.

As Mombasa continues to grapple with both delays and high costs, TPA has unveiled sound public relation strategies to stimulate awareness on the availability of the central corridor as a dynamic and alternative transit route other the traditional Mombasa port — which seem to be gaining ground.

“It seems that TPA’s marketing strategies have been initiated at the time Mombasa port is faced with myriad challenges including high cost of freight and other operational challenges that have led to increased dwell time and turnaround time at the port,” said  Wahutu.

Dwell time —the time that cargo remains in the port terminal storage area before clearance — has also dipped almost 50 per cent, from an average of 20 days in January, 2009 to between 10 and 13 days for transit and domestic goods respectively.

According Wahutu ships now waits for only four days at the outer anchorage compared to an average of 12.7 days in 2009, the turnaround time —the time needed to prepare a ship for a return trip — has also been reduced to 6.7 days from 18.9 days in January 2009.

Statistics show Dar es Salaam port has already edged out Mombasa in handling cargo destined for DRC Congo.