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Shipping & Logistics

CFS operators fault directive on use of railway to transport cargo

Kenya Railways
A Kenya Railways cargo train. FILE PHOTO | NMG 

Investors who have pumped in more than Sh20 billion to establish Container Freight Stations (CFS) at the Port of Mombasa have raised the red flag over loss of business following government directive that imported cargo be ferried by the standard gauge railway (SGR).

Through the Container Freight Station Association, the investors said the government order is benefiting international shipping companies at the expense of local CFS firms.

The association said the provision of customs services at various CFSs has helped to spread out the delivery of the services.

“Closure of CFSs and subsequent withdrawal of customs services will mean that all port users desirable of customs services must come to the Port. This will abet congestion and further slowdown movement and clearance of containers. Indeed this might impact negatively on the gains so far made through CFS’s,” the association said in a study report on the Impact of Port Expansion and Standard Gauge Rail on the CFS business in Mombasa.

The CFSs are licensed by Kenya Revenue Authority (KRA) and are required to meet stringent requirements that include having an area of more than 2.5 hectares, located within 10km from the port, have access to a rail siding, generate no less than Sh100 million in customs revenue and have adequate office facilities and equipment for CFS operations. There are about 14 licensed CFSs at the Port of Mombasa.

The association said the government move to promote the services of the SGR to users of the port at the expense of other road haulers goes against provisions of the Competition Authority Kenya.

“Promoting SGR over other carriers would be anti-competitive. This provision would also give Kenya Railways Corporation (KRC) undue advantage over other carriers which would be in breach of section 8(2) (e) of the Competition Act,” states the report, compiled by Maritime Business & Economic Consultants Limited.

The report shows that the government has imposed an obligation to load cargo on the SGR whilst on the other hand, the Rift Valley Railway (RVR) will be compensated if it can prove that the SGR caused it to lose profits.

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