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Shipping & Logistics

Ambitious plan to reduce cargo transport costs

Kenya Railways
Kenya Railways will increase number of freight trains to transport cargo from Mombasa Port to the Inland Container Deport (ICD) in Nairobi. FILE PHOTO | NMG 

A joint technical committee appointed to look into ways of reducing the cost of transporting cargo from Mombasa to the Inland Container Depot (ICD) in Nairobi has come up with far-reaching recommendations that will see reduction of rates while some charges will be struck off the Kenya Ports Authority (KPA) tariff.

Since the Standard Gauge Railway (SGR) freight service was launched in January 2017, the cost of haulage has escalated, even surpassing haulage of goods by road.

The report, seen by Shipping and Logistics, is compiled by key government and private agencies that operate at the port, and expected to be presented to Head of Public Service Joseph Kinyua and Interior Cabinet Secretary Fred Matiang’i for implementation.

The Shippers Council of Eastern Africa (SCEA) and Kenya Private Sector Alliance (Kepsa) played key role in compiling the report.

The report points out that there are 27 cargo interveners operating at the port, making procedures so bureaucratic that processes that could ordinarily take a few hours end up taking several days, resulting to delays and huge costs to importers.

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Recent introduction of stringent measures to curb proliferation of counterfeit and sub-standard goods have seen cargo overstay at the port, incurring billions in storage charges.

These costs, which are paid by importers, are passed on to end users, raising the cost of goods and services, resulting to high inflation rates and escalating cost of living.

Some agencies blamed for inefficiencies and delays will also be kicked out of the port as the government moves to improve movement of goods at the facility.

Only KPA, Kenya Revenue Authority (KRA), Kenya Bureau of Standards (KEBS) and Kenya Railways (KR) will remain at the facility, with all the other procedures being done outside the port, according to the report.

Yesterday, a senior KPA official who declined to be named discussing a report that is yet to be implemented, cited bureaucracy by cargo interveners, adding that they are the result of frequent congestion at the East Africa’s largest cargo entry and the Nairobi ICD.

“The delays in clearance of goods are not as a result of inefficiency by KPA or key agencies but the other procedures that must be completed before goods are released. But if they operate outside the port, cost of handling goods will go down by up to 50 percent because storage charges will reduce,” the official said.

It is envisaged that matters to do with public health, anti-counterfeit, pest control and a host of other services will be done in Container Freight Stations (CFSs), which are customs-controlled areas after goods are released under the Customs seal.

“For efficient management of the port activities, only critical agencies will operate at the port with all the other procedures being done out of the facility,” says the report.

According to the committee, for smooth running of the rail service, the only processes required at the port are cargo movement from vessel to the rail side, cargo loading, train marshalling, cargo quality inspection and customs clearance.

The high cost of transporting goods via the SGR freight trains came into focus, with the committee noting that ferrying a 20-foot container to Nairobi costs a whooping $1420 (Sh142,000) while a 40 feet container costs $2130 (Sh213,000), double the cost of transporting the goods by road.

The challenge has been in the last mile transportation of containers. It costs $500 (Sh50,000) to ferry the container, and since the train does not deliver to the doorstep, the importer has to hire transport to their yards, which means additional costs. Returning the containers to the shipping line designated yards is also an added cost.

The average transportation cost by road is $650 (Sh65,000) for containers up to a maximum of 15 tonnes and $850 (Sh85,000) for 20ft containers above 15 tonnes and all 40ft containers.

The road transport remains the preferred mode by importers since truckers arrange for transport to the doorstep and entice importers with free storage of goods in their yards awaiting collection.

Transporting containers by rail attracts a host of charges including marshaling and remarshalling at KPA and the ICD; storage charges and shunting (moving from a container from the port to a CFS) and last mile costs. The committee proposed that some charges should be removed, so that the cost of transporting goods via SGR is lower.

“If the cost of empty return by rail, shipping line margins and KPA shunting of empties to empty container depots are removed, the cost will be US$ 780 (Sh78,000) and US$1,095 (Sh109,500) for the 20ft 40ft container respectively,” says the report.

According to the Shippers Council of Eastern Africa, some private operators are also to blame for the delays and huge costs to businesses.

Gilbert Lang’at, SCEA executive officer, said the high cost of importing goods is largely due to inefficiencies at the port, caused by government and private institutions.

“We did the report with the understanding that each agency must take responsibility. At times you find that it is the agents who have failed to lodge documents at the right time or the driver of a loaded truck fails to show up resulting to clogging up of the system. We are actually paying for the inefficiency and not genuine charges,” he said.

Mr Lang’at said there are proposals that goods would be released under seal so that the cargo would be safe even as other procedures were being completed.

The report says there is duplication of roles in cargo processing from Mombasa port where goods are offloaded from the vessel, transportation to the Nairobi ICD and release of cargo at the exits to the doorsteps of the cargo owners.

“The cost of doing business and efficiency at the port is dependent on the actions by government agencies, shipping lines and cargo owners, and the time each of the players take to executive their actions is crucial. Duplication of roles results to increased processing time and cost of doing business,” the report says.

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