A lifeline to the container freight stations in Mombasa? A shot in the arm to the business of hauling containers to Nairobi by road.
That is how observers in the maritime sector have responded to President William Ruto’s recent edict to dismantle the monopoly which the Standard Gauge Railway(SGR) has been enjoying over the business of transporting containers to the hinterland.
But should we expect booming business to immediately return to both the Mombasa-based container freight stations and to the business of trucking containers to the Embakasi inland container terminal in Nairobi by road?
The way I see it, it will all depend on how importers and shippers respond to incentive offered by presidential decision.
At the end of the day, it is the importer who decides to consign his goods to a container freight station, to the Embakasi inland container depot, to the Naivasha inland container terminal or to haul the goods by road to Nairobi.
The difference the presidential edict has introduced is that it has given the private sector and importers an alternative. In other words, the edict from the president is not alone enough to guarantee new business and volumes to the either the Mombasa-based container freight stations or to the road hauliers.
It seems to me that what will determine whether we will see any major diversion of traffic from the SGR will depend on competition and price. Until the announcement by the President, hauling goods to Nairobi by road was cheaper than using the SGR mainly because of the last mile factor.
When a truck transports your goods from Mombasa, it delivers it straight to your warehouse in Industrial Area without charging you for the last mile. In the case of the SGR, you have to pay a trucker to transport your goods to your depot from the Embakasi inland container terminal at an additional cost.
In the case of the Mombasa-based container freight stations, the only competitive advantage they have is that the operators can allow shippers to negotiate storage charges.
It makes it easier for importers who- for one reason or another- may want to store their goods in Mombasa for longer periods. If the SGR reduces its tariffs, these dry ports will still find it difficult to compete.
Put simply, the most important achievement of President Ruto’s edict is that it has introduced freedom. We must wait and see how the edict will impact on competition between the various players and the transport modes.
In the event the SGR responds by revising its tariff downwards significantly, then the road hauliers and Mombasa-based container freight stations may not see the boom in business they expect from the recent edict by the President. If anything, the SGR has several other advantages over its competitors.
First, safety-no theft of containers and no breakage of seals. Secondly, the cost of insurance is much lower when you use the SGR. Thirdly, the Embakasi container terminal has in recent years become very efficient.
We must not mix up our priorities. While the case for reviving business and stimulating the Mombasa economy cannot be gainsaid, the focus and priority of policy must remain broader.
For what Kenya needs today is an efficient maritime transport sector that can impact on the country’s regional and international competitiveness.
Policy should not be changed merely to address the narrow concerns of Mombasa-based container freight stations or Mombasa’s clearing and forwarding community. Indeed, under the blue economy strategy, the government has spelt out a fairly comprehensive and long-term strategy for stimulating business opportunities in the Mombasa region.
If you take a broad and longer- term view, the Naivasha container terminal is not necessarily in competition with the interests of Mombasa-based container freight stations. The roles are complementary.
We often forget what has kept Mombasa competitive over Dar es salaam and other ports is the level of investment we have maintained in building roads, rail and inland container depots that connect transport nodes within the Northern corridor.
The Northern corridor is the economic lifeblood of Mombasa. If you don’t build logistics hubs along the corridor that links Mombasa to the rest of region, you are headed nowhere in terms of regional competitiveness. The more money we spend in transport logistics infrastructure along the Northern corridor, the better for Kilindini.