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Shipping & Logistics

Traders flag hurdles threatening viability of Naivasha depot

standard gauge railway
The standard gauge railway between Nairobi to Naivasha’s Inland Container Depot. FILE PHOTO | NMG 

The launch of the Naivasha inland container depot was meant to be part of a grand plan to ease movement of cargo and enable the country to sustain and strengthen its stature as a regional trade hub.

However this objective may not be attained if certain measures are not swiftly instituted, according to stakeholders in the logistics sector who have warned that the viability of the ICD at its current state is questionable.

The Stakeholders say a way should be found to remove the bottlenecks that are bound to strangle smooth movement of goods from Mombasa to the Naivasha Inland Container Depot (ICD), and to other EAC destinations.

The viability queries surrounding the Naivasha depot have been heightened by the fact that the facility still remains largely idle since it was launch. A visit to the facility last week by Shipping & Logistics revealed that there were minimal activities at the Sh6.9 billion depot launched last year by President Uhuru Kenyatta.

At the time of the launch on December 17, the President was irked by media reports that the railway line was going to “nowhere”.

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“There is nothing much that has happened since the launch. The offices remain unoccupied and we don’t know when full services will resume,” said a worker at the site.

The ICD, located a few kilometres from SGR’s Maai-Mahiu terminus, is intended to handle freight cargo destined for Uganda, Rwanda, South Sudan and the Democratic Republic of Congo via the Mombasa port.

The cargo is expected to be ferried to Western Kenya and the neighbouring countries by road, but the State has plans to revamp the old metre gauge railway (MGR) line and link it to the SGR track in Naivasha.

One of the challenges the SGR experienced when it started moving containers to the Nairobi ICD in January 2018 was the last mile transport and returning of containers to Mombasa.

Even before containers start being railed to Naivasha, there are already concerns that the cost of transport of a container from Mombasa to Naivasha by SGR is likely to be prohibitive with importers calling on Kenya Railways to make the cost competitive to attract more clients and benefit from envisaged gains of fast transport of goods.

Mr Stephen Thuo, Nakuru County Kenya Chamber of Commerce and Industry (KCCI) chairman, said they had projected that the cost of transporting a 20-foot container from Mombasa to Naivasha would be Sh45,000 more than when the same container is dropped in Nairobi then transported by road to Naivasha.

“I have talked to several importers and they have expressed misgivings, terming the freight cost economically unviable. They complain about prohibitive freight charges that are being proposed from Mombasa to Naivasha and the charges should be relooked into,” he said.

Yesterday, the Kenya Railways managing director Phillip Mainga could not be reached to confirm the schedule for the introduction of the freight services or the costs as he did not answer our calls.

Mr Thuo said importers were weighing options including buying land near the depot and putting up godowns to minimise costs. Some traders, he added preferred ferrying cargo by road to avoid the freight charges and other logistical costs.

In order to ensure seamless transfer of goods from Mombasa to Naivasha, some stakeholders have proposed that clearance should be done in Mombasa after which the containers would be moved to Naivasha for distribution to various destinations.

“If there is any inspections on the goods this should be done in Mombasa. The problem is that when we talk nobody listens to us yet we are the experts,” said Mr Otieno, managing director PetroSA Contractors and Agencies.

Mr Otieno said there are facilities in the Container Freight Stations (CFSs) in Mombasa with idle capacity since most of the cargo is now being transported to Nairobi via SGR.

“The moment we introduce new storage yards in Naivasha as has happened at the Nairobi ICD, we will invite inefficiencies and delays in onward movement of goods,” added Mr Otieno, who is also the chairman Car Importers Association of Kenya (CIAK).

To shore up business around the Naivasha ICD, the government is expected to mobilise financial resources in addition to involvement of the private sector to fast-track development of industries within the Naivasha Special Economic Zones (SEZ).

fiscal incentives

Other supporting infrastructure for the SEZ that are in the pipeline include development of an interchange between the SGR and the Metre Gauge Railways (MGR), trans-shipment facilities around Maai Mahiu road and rail links to the Suswa-Longonot line.

The SEZ scheme will offer both general and specific incentives which will include, fiscal incentives, 10 percent corporate tax for first 10 years, 15 percent corporate tax for subsequent years, duty and VAT exemption, plus 100 per cent of the investment allowance on cost of building and machineries.

At the same time, players in the sector want speedy conclusion of the controversy surrounding establishment of storage facilities at the Nairobi ICD, saying the stalemate was continuing to cost importers millions of shillings in charges.

Former Kenya International Freight and Warehousing Association (Kifwa) chairman William Ojonyo said as counter accusations on the process of licensing the facilities continued, meaningful engagement with the lead agencies to focus on efficiency was being derailed.

“Stakeholders must step in to stop the fight for control of the lucrative business of storage areas in Nairobi by engaging lead agencies on how to improve service delivery rather than allow business men to control trade in storage of goods,” said Mr Ojonyo, who is also Keynote Logistics managing director.

“Going forward, we will insist on clearance of cargo within the four days stipulated time with each party taking responsibility for any delay be it public or private,” he said.

“The SGR has its benefits in its movement of goods with ease and speed but these gains are being eroded as blame game continues.”

Importers, he noted, have been short changed, and left at the mercy of third-party business people who created obstacles on reforms aimed at reducing delays and inefficiencies to benefit importers.

“All goods shipped into the country should be handled in customs controlled areas at KPA and ICDs,” Mr Ojonyo said.

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