Nairobi faces logistics nightmare as inland depot cargo expands

Logistics experts have warned that should cargo continue being transferred to the Nairobi Inland Container Depot (ICD) at the current rate, it will cause serious congestion problems at the capital city.

Already, routes within the ICD are experiencing heavy traffic, with the Kenya Ports Authority (KPA) leasing remarshaling yards where goods that have stayed at the facility for more than 21 days — when they start attracting customs warehouse rent — are being transferred.

The Standard Gauge Railway (SGR) freight trains are railing 800 Twenty Foot Equivalent Units (TEUS) to the ICD daily, which in a year translates to 288,000 TEUs.

With the export cargo estimated at 55,000 TEUs plus empty containers, this means the ICD will be operating at over 80 per cent of its installed annual capacity of 450,000 TEUS, presenting a logistics nightmare.

Under normal circumstances, ports are required to operate at 70 per cent of their installed capacity to give room for acceptable levels of congestion in case of a crisis. According to a study carried out by Maritime Business and Economic Consultants (MBEC) in May 2017 to determine whether Mombasa port would need services of Container Freight Stations (CFS) in the wake of an operational SGR, a port should utilise 70 percent of its capacity at any time. Anything beyond that is considered congestion, which results to inefficiency.

“For a container yard, it is commonly understood that a port operating at a slot utilisation levels below 70 percent of its theoretical capacity will normally operate without experiencing congestion,” says the study, whose lead researcher was Gichiri Ndua, an economist and former KPA managing director.

Industry players now argue the problem that was faced in Mombasa before establishment of CFSs and later construction of phase one of the Dongo Kundu bypass and expansion of Port Reitz road to dual carriage, is being transferred to Nairobi with serious logistical challenges.

Reduced congestion

The Port Reitz road and Dongo Kundu bypass projects have significantly reduced congestion within the port area and allowed smooth movement of trucks in and out of the facility.

Before the SGR started operations, over 800 trucks left the CFSs loading 1,200 TEUs daily.

Under the Mombasa Port Area Development (MPARD), the projects were funded by Japanese International Cooperation Agency (JICA), African Development Bank (AfDB) and Trade Mark East Africa. “What we have witnessed in the recent past is that congestion has been shifted from Mombasa to Nairobi where getting a few acres of land to set up a yard is a problem,” said Daniel Nzeki, CFS Association of Kenya executive officer.

At the same time, removing CFSs from the logistics chain as is the case currently, where all domestic cargo is being transferred to the ICD, will reduce the extended Mombasa port capacity by over 700,000 TEUs, a move that is likely to choke the port and reduce efficiency.

In 2016, six CFSs were sourcing their business directly from importers, meaning that containers were being transferred to the facilities immediately after being offloaded from the vessel.

On average, 72 percent of containers received at the port then were owner-nominated with 28 percent being nominated by KPA, according to the MBEC report.

“Based on the projected growth of container traffic, which has recorded an average of 10 percent per year, the utilization of the port as at 2020 would be 98 percent and more than 100 percent should CFSs be removed from the equation,” the report noted.

This assumption is based on the fact that cargo dwell time which is calculated from the time cargo lands at the port and the time it exits, remains reasonable.

The port had before SGR recorded a fairly good dwell time of less than six days, which was attributed to the use of CFSs.

Capacity utilisation

Capacity of CFSs in Mombasa stands at slightly over 38,000 TEUs and at any time have an average of 21,000 TEU translating to 58 percent of the capacity utilisation. The capacity at the port at 70 percent utilisation is 22,500 TEUs and the port on average holds 16,000 TEUs.

“CFSs on average hold more containers than the port at any given time. If all the containers were dumped at the port, one would not even get a place to step in at the terminal. However, in the next few years as cargo throughput increases and SGR becomes more efficient, the two modes will slowly co-exist and share cargo at a ratio of 40:60 on rail and roads respectively,” notes the report.

CFSs were established in 2007 to address congestion at the Mombasa port. The facilities involve massive capital investment with an operating license costing Sh2.1 million while the operator is expected to place a bond to cover duties for the goods at the facility, “as the commissioner may determine”, according to KRA rules. This bond may run to more than Sh500 million.

The facilities, located within 10 kilometre radius of the port, should occupy an area of not less than six acres, have well paved surface and cargo handling equipment, with the CFS Association of Kenya putting the total investment for each facility at about Sh2 billion.

According to KRA, there should be a building of not less than 3,000 square feet suitable for use as a customs warehouse; surveillance cameras accessible to the KRA office and a suitable facility to accommodate mobile cargo scanning equipment.

Transporters, according to Kenya Transporters Association (KTA) chairman Newton Wang’oo, have also grounded most their trucks for lack of business. “This has seriously affected all the other traders doing business with transporters,” Mr Wang'oo said.