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Shipping & Logistics

African countries to feel the heat as cost of marine transport rises

A Ship offloads fuel
A ship offloads fuel at the Kenya Ports Authority (KPA) yard in Mombasa in this photo taken on 13th September 2018. KPA will launch the construction of a free Port in Mombasa in the 3,000 acres of Dongo Kundu Land. PHOTO | KEVIN ODIT | NMG 

Developing countries will be hit hard by the rising sea high transport costs mainly due their export-import imbalance in the global trade.

The united Nation Conference on Trade and Development (UNCTAD) report said these countries will continue to suffer unless strategies that stimulate exports are put in place.

“Improved maritime connectivity should be at the core of any strategy that aims to stimulate exports and promote participation of national economies in the global production chains,” the report says.

“Such improvement could only contribute to the reduction of transport costs. Unequal and imbalanced countries’ participation in global supply chains and trade is reflected in the liner shipping connectivity of the different regions.”

The report, titled Reflecting on the past, exploring the future” is contained in the UN organisation’s ‘50 years of Review of Maritime Transport, 1968–2018’.

It has outlined how the maritime trade has been for the past 50 years and its projections in future.

Overall, the report says over the last 50 years, seaborne trade has seen a remarkable development.

Shipping carries the vast majority of international trade with its share ranging between 80 per cent and 90 per cent of trade.

“This predominance is particularly pronounced in developing countries where trade structures including the low volumes of intraregional trade leave limited space for land transport and air transport.

In Kenya, although the future of international trade looks bright, there has been increased transports costs in both sea and inland, with some blaming shipping agents for the escalating costs.

The Inter-Governmental Standing Committee on Shipping (ISCOS) in its statement to Shipping said that cargo through the Port of Mombasa has increased tremendously from 22,307,000 deadweight tonnage (DWT) in 2013 to 30,345,000 in 2017 an increase of 36 per cent.

“The cargo through the port of Dar es Salaam increased from 13,516,000 DWT in 2013 to 14,002,000 DWT in 2017 a small increase of 3.6 per cent,” said Iscos Secretary General Kassim Mpaata.

“Dar es Salaam port experienced a slight decrease in 2015 and 2016 which was attributed to changes in policy. However, cargo through Dar port has started picking up.”

Ugandan imports and exports by water transport go through Mombasa or Dar es Salaam. The Kampala volumes increased from 6,511,838DWT in 2016 to 7,384,928DWT in 2017, a 13.4 per cent rise. Analysts expect this trend to continue.

But despite increase in volumes of goods handled, Mr Mpaata said the challenge facing the shipping industry in the region has been “the issue of importing more than it exports”. This, he said has led to high costs for ocean and inland transport because one has to pay for return trip.

“For example, the Mombasa port in 2017 registered 554,600 TEUs full import containers while export full containers were 134,464TEUs, which was 19.5 per cent of 689,064 TEUs of full containers handled at the port. In 2017, a total of 406,799 TEUs were exported (repatriated) empt,” he said.

Due to oversupply of ships in the global shipping market, Mr Mpaata said the basic freight rates have been stable and in some sectors reducing. But other costs, especially destination charges, have been increasing.

“This trend increases the cost of doing business in the region. The big challenge is no longer freight rates but other charges imposed on cargo,” he added

The Kenya International Freight and Warehousing Association (KIFWA) national chairman William Ojonyo in an interview with Shipping said the sea freight costs have been increasing with time. He however said shipping companies have created a monopoly in hidden charges, hence making cargo freight costs to soar.

“Container detention charges are charged locally at a cost of $500 for a 20-foot equivalent unit (TEUs) and $1,000 for a 40-foot feet equivalent unit,” said Mr Ojonyo.

“For transit containers, shipping companies charge between $ 2,000 and $4,000 depending on the final destination of the goods.”

He said there is need for shipping companies and their agents to harmonise these charges, and make them public.

“The government needs to give more teeth to the Kenya Maritime Authority(KMA) which, with the help of its governing Act, can work out to reduce these continued increase of hidden charges by shipping companies,” he added.

The Car Importers Association of Kenya (CIAK) national chairman Peter Otieno said the sea transport is supposed to be the cheapest in the world but instead it is expensive.

“Most of the shipping lines are taking advantage of the developing countries because we don’t have enough cargo for export, so when they are bringing in cargo, they have to factor it the return cost, but they will not reveal that to the importer,” said Mr Otieno.

“When they are charging the freight, they have to factor in all this, but (they do) silently without the importers knowing it. It is high time that Africa countries looked for what to export,” said Mr Otieno. Gauge Railway(SGR).

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