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Shipping & Logistics

How Kenya is shipping out billions yearly in imported cargo levies

A ship arrives at the port of Mombasa. FILE
A ship arrives at the port of Mombasa. FILE PHOTO | NMG 

Kenya is losing about Sh100 billion yearly in freight charges for imported cargo, which is paid to foreign shipping lines docking at the Port of Mombasa.

Last year, the port made a cargo record of 1.3 million containers leading to a freight payment of Sh78 billion. Each of the standard containers is paid a minimum freight rate of $500 (Sh50,000).

Also every year, the port receives about 130,000 units of second-hand vehicles which attract freight charges of Sh10.4 billion, all of which is repatriated back to foreign countries where the shipping lines ferrying them are registered.

The reason Kenyan is not getting a share of this huge amount of cash is simple; the country does not have a national shipping carrier that would enable it to benefit from the charges levied on imported cargo.

Experts say such a local carrier will be to shipping what Kenya Airways (KQ) is to the aviation industry.

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To address this situation, cargo importers and other players are calling on the Kenyan government to introduce the Cabotage law to save them from paying billions to foreign firms.

‘Cabotage laws apply to merchant ships in most countries that have a coastline, to protect the domestic shipping industry from foreign competition, preserve domestically-owned shipping infrastructure for national security purposes, and ensure safety in congested territorial waters.

The Kenya International Freight and Warehousing Association (Kifwa, Car Importers Association of Kenya (CIAK) and independent maritime and shipping sector players say Kenya lags behind in applying the laws that the developed nations enacted years ago.

Speaking to Shipping and Logistics, Kifwa national chairman Roy Mwanthi said a national shipping carrier will be instrumental in reducing the cost of goods.

“There is need for Kenya to have its own national shipping carrier. It is prudent because we are advocating for shipper freight rates which will end up reducing the cost of imported goods and it will in time reduce the cost of doing business,” said Mr Mwanthi.

“If the government can operate a shipping carrier the same way they operate Kenya Airways (KQ), then that would be good.”

He said a national shipping line will get support from Kenyan importers because it will ease their trade and reduce freight rates.

“It (national shipping line) should be a parastatal run independently so that it can marshal all cargo coming to Kenya. It must have several vessels to fulfil the demand of the importers,” said Mr Mwanthi.

The shipping line, he noted will provide stiff competition for foreign vessels, pushing them to lower their freight charges.

“If there is competition by a national career, they (foreign vessels) would bring the rates down,” said Mr Mwanthi, adding that Kenya ought to urgently find a way to ensure that the huge money being repatriated abroad is retained within the country.

Andrew Mwangura, a maritime and shipping expert, said most countries in Africa have not enacted the law despite them having all the required resources to do so.

“There are only some countries in West Africa that are trying to achieve this but they are also not at par with the world requirement. In East Africa, no country has even tried to act on this law,” said Mr Mwangura.

He said developed countries such as USA and Japan only allow their shipping lines to trade in their waters for the benefit of their economies.

“From the first port of call to the third port of call in their territories, these developed nations make sure that it is only their shipping lines that trade and not foreign owned lines. The law on this is clear but our countries have neglected it,” said Mr Mwangura.

CIAK national chairman Peter Otieno said a locally-owned national shipping carrier with a well-funded government programme will save Kenyan importers billions.

“We import into the country about 130,000 second-hand vehicles every year with each vehicle carrying on it a freight charge of Sh80,000 on average. However, the figure might not be the correct because of factors such as the make and model of the vehicles and their engine capacity,” said Mr Otieno.

He said Kenya should be promoted as a transshipment hub.

“Because we have the Lamu port and Mombasa port has been dredged to accommodate big vessels, we need to promote the country as a transshipment hub to enable big vessels come in, discharge their cargo and then smaller vessels can take the cargo to its final destination,” said Mr Otieno.

He called for the formation of Indian Ocean Services (IOS) that will be run by the Kenya National Shipping Line (KNSL) to ferry cargo to other East African countries like Tanzania, Djibouti, Comoros, and Reunion among other coastline countries.

“These are countries are bordering the Indian Ocean but we can serve them through the Port of Mombasa,” said Mr Otieno.

The CIAK boss also called for the launch of two additional Kenyan shipping vessels to import the vehicles into the country.

“There are almost two motor vehicles vessels calling at the Port of Mombasa on weekly basis from Japan. These vessels bring vehicles for Kenyan and East African consumption,” he said.

“If we can have two vessels for motor carriers, one leaves Mombasa and another one leaves Japan and they cross each other as they move, importers will be happy to deal with them here because they will have powers to negotiate the freight charges.”

That means, he added, the freight Kenyan importers pay to foreign shipping lines will go directly to local banks and the KNSL, boosting the country’s economy.

“If you buy a vehicle in Japan, you pay the company in Japan, both the cost of the vehicle and freight. It is the person in Japan who then goes to negotiate with the shipping line about the freight charges. The importer is not in the picture at that moment. Now if companies operating in Kenya can negotiate their rate here with the local shipping lines it means they will be saving, and the savings will be relayed to the consumer,” he added.

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