The Kenya Ports Authority (KPA) is upbeat about the growth of its trans-shipment segment after the taxman scrapped security bond and allowed shipping lines to lodge their own entries.
The Kenya Revenue Authority (KRA) has from last week scrapped security bond on transshipment containers.
The changes are part of the wider campaign by port users to ensure that at least 70 per cent of cargo are pre-cleared by the time of arrival at Mombasa, a move aimed at avoiding demurrage charges.
“The removal of the security bond and related paperwork is a major milestone.”
Kenya Ports Authority (KPA) spokesperson Bernard Osero told the Business Daily. “It will play a key role in attracting customers. We now have ample capacity to handle the cargo.”
Transshipment involves large vessels docking at the port and redistributing their cargo to smaller ships that serve regional ports.
The bond, initially collected at the rate of Sh100,000 per vessel — before it was revised to Sh1,000 per container following months of intense lobbying among shipping agents — is meant to ensure that such goods are not diverted into the local market duty-free.
While the KRA initially argued that it only collects the minimal sum to boost customs compliance, logistics sector maintains that together with the time-consuming paperwork, the bond has played a key role in driving large ships away from Kenya’s coast.
“For a customer, any cost which ties to money is an expense. You also have to remember that we are talking in terms of large volumes. If I am handling about 1,000 containers, then a small fee can become a lot of money,” said Mr Osero.
Kenya moved to up its transshipment potential two years ago when it dredged Mombasa port and embarked on its expansion. Port users have, for instance, been pushing for exclusive use of Mombasa’s second container terminal for transshipment business.
Experts have also said that the second seaport being built in Lamu will only make economic sense if Kenya revs up its transshipment traffic. The KPA data shows that transshipment traffic dropped by 9.5 per cent in the six months to June, putting a stop to its history of a steady growth.
According to the data, transshipment cargo dropped to 260,444 tonnes in the six months of 2016 compared to 287,952 tonnes in the similar period of 2015.
“This (elimination of security bond and paperwork) is a big incentive that can attract shipping lines that avoided Mombasa Port for trans-shipment purposes”, said Mr Juma Tellah, chief executive officer of the Kenya Ships Agent Association.
The taxman agrees. Last week, the KRA commissioner general John Njiraini said removal of transshipment bond was one step in the agency’s quest “to continuously make Mombasa port more attractive and reduce the cost of doing business for investors.”
The KPA sees transshipment as a new growth area as administrative barriers fall.
Economies of scale
“Shipping lines are looking for space. It is not in their interest to go to every port.” Mr Osero said.
“If you can have facilities to accommodate one big ship, the vessels will capitalise on economies of scale and send one big ship to our port. They don’t have to send the same ship again to Dar. This saves costs.”
The agency said its dream of becoming a transshipment hub of Africa will become a reality.
“This is what makes trans-shipment a big business for ports, for instance, Singapore. You become a hub and turn other ports into feeder ports. It’s like the same system with airline hubs.”
KPA is projecting an overall growth 6.4 per cent in the segment.
“We can hit 551, 152 tonnes if we grow by our projection. These were projections made before the bond was scrapped so we expect to do even better”.