Shipping & Logistics

New transport entity’s plan to reduce costs, end delays

trucks

Covid-19 has disrupted logistics, causing delays in movement of goods. FILE PHOTO | NMG

Summary

  • The formation of The Kenya Transport and Logistics Network (KTLN) is also seen a move by Kenya to hedge its status as regional trade hub, a position that is increasingly coming under threat in the wake of increased competition as neighbouring countries seek a bigger share of the industry’s revenues.
  • The KTLN is set to coordinate operations and management of Kenya Ports Authority (KPA), Kenya Railways Corporation (KRC) and Kenya Pipeline Company Limited (KPC).
  • Under the new arrangement, the three key agencies will also now fall under the state-owned Industrial and Commercial Development Corporation (ICDC)

The formation of a new logistics entity bringing together three major parastatals in the transport sector is expected to ease movement of goods from the Port of Mombasa and cut costs that have been increasing over the recent past.

The formation of The Kenya Transport and Logistics Network (KTLN) is also seen a move by Kenya to hedge its status as regional trade hub, a position that is increasingly coming under threat in the wake of increased competition as neighbouring countries seek a bigger share of the industry’s revenues.

The KTLN is set to coordinate operations and management of Kenya Ports Authority (KPA), Kenya Railways Corporation (KRC) and Kenya Pipeline Company Limited (KPC).

Under the new arrangement, the three key agencies will also now fall under the state-owned Industrial and Commercial Development Corporation (ICDC), headed by newly appointed Mr John Ngumi who received a three-year term that ends on May 2022 .

ICDC has been saddled with an immense role of overseeing rail, pipeline and port operations which in the past few years have invested heavily to streamline movement of goods along the Northern Corridor.

The formation of KTLN, whose key role is to oversee movement of cargo from Mombasa port to the hinterlands and East Africa export markets, comes amid rising concerns over conflicting directives that have been blamed on operational delays. This has seen importers, manufacturers and other port users protest in numerous occasions over levies paid to the separate entities. Traders have also cited the many players involved in processing cargo as the reason for delays in evacuation of cargo that cost them a tidy sum in storage and demurrage charges.

The logistics sector has also witnessed heightened competition in the recent past, with the Port of Dar es Salaam continuing to invest heavily in both infrastructure and offering relatively low rates to rob Port of Mombasa of its long term clients, especially Rwanda and DRC Congo.

Kenya now seeks to implement a number of reforms to ensure a more efficient sector in a bid to retain its status as a trade hub and gateway to the region.

“Going forward, the state agencies have 30 days to enter into a joint operations agreement where each entity will re-organise their structures, resources, operations and services towards establishment of a seamless and coordinated national transport and logistics network,” said President Uhuru Kenyatta when he announced the new changes.

Since the beginning of this year, there have been long delays on the corridor attributed to a number of trade barriers with Covid-19 also contributing to the rise.

Due to the series of inefficiencies along the corridor, truckers have increased transport costs with Kampala shippers forced to cough an extra Sh100,000. For Rwanda, shippers are paying an extra Sh140,000 while those in South Sudan and Bujumbura destinations are paying Sh240,000 and Sh200,000 more respectively.

President Kenyatta said the new structure creates a one-stop shop pricing arrangement thereby enabling KTLN to formulate friendly packages for customers.

The new reforms makes the four state agencies answerable to the national Treasury in line with the recommendations made by the Presidential Task Force on Parastatal Reforms. ICDC will act as a holding company to the three agencies.

The state also rescinded its earlier decision turning ICDC into the Kenya Development Bank to ensure a smooth transition for KPC, KRC and KPA.

Other measures that Kenya has instituted to ease movement of goods while seeking to keep costs down include encouraging traders to use Standard Gauge Railway and Inland Container Depots. Use of these facilities are also meant to reduce congestion and facilitate easier clearance of both domestic and transit goods.

KTLN is also expected to ensure smooth flow of cargo through the SGR and address perennial issues raised by stakeholders regarding pricing and ensure the newly developed Kisumu port and oil jetty serve their intended purpose.

In the President's order, which appointed John Ngumi to be the Chairperson of the ICDC and revoked appointment of Bernard Muteti Mungata, stated that the ICDC will develop a framework for the management, coordination and integration of public port, railway and pipeline services.

The State House spokesperson Kanze Dena said the network will leverage on the efficiencies and synergies of the four State agencies to achieve Kenya's strategic agenda of becoming a regional logistics hub.

The new framework Ms Dena noted, allows for the centralisation and coordination of operations without amending the existing laws or causing undue disruption to the legal structuring of the State entities.

"The new structure is expected to lead to the lowering of the cost of doing business in the country through the provision of the port, rail and pipeline infrastructure in a cost-effective and efficient manner, and within acceptable shared benchmark standards," she said.

The new structural organisation has also moved the four State agencies under the National Treasury in line with the recommendations of the Presidential Task Force on Parastatal Reforms.