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Shipping & Logistics

Queries as directive to ferry all cargo through SGR takes effect

Inland Container Depot
A cargo train at the Inland Container Depot in Embakasi, Nairobi. FILE PHOTO | NMG 

The recent government directive to have all cargo from Mombasa cleared in Nairobi effective Wednesday will impact negatively on shippers and consumers even as consumers are likely to absorb the additional costs.

The new directive, which in essence means that all cargo from the port will have to be transported by the Standard Gauge Railway (SGR), brings to question issues of efficiency in handling an expected increase in volumes.

The directive, which requires all cargo passing through the Port of Mombasa to be cleared at the ICD in Nairobi, will stretch the capacity of the facility and lead to delays in clearance both at the port and in Nairobi, according to shippers.

The directive has also caused confusion as it is not clear whether cargo on transit will be part of the consignment required to be cleared at the ICD.

“This directive will create congestion at the ICD and this means that shippers will have to incur extra charges for the delays,” says Gilbert Langat, chief executive officer of the shippers’ council.

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Mr Langat said some cargo will also be held up in Mombasa as they wait for the consignment at the ICD to be released to create room for more imports.

Shippers normally have four days to collect their cargo from the ICD after it has been delivered and cleared.

The latest move by the State, which is seen as a measure to shore up revenue for struggling SGR, is a departure from the norm where all cargo on transit and conventional consignments such as clinker, grain and oil are ferried by road.

“There is a lot of ambiguity with the directive because it says all cargo and we are not certain if this includes conventional ones and those on transit,” said the CEO.

The Kenya Ports Authority (KPA) and Kenya Revenue Authority (KRA) issued a directive to shippers that all imported cargo that is not declared or removed from the Port of Mombasa or Inland Container Depot within 21 days from the date of discharge of the vessel, will be transferred to designated customs controlled areas awaiting disposal.

The Kenya Association of Manufacturers (KAM) said counting of 21 days should start once the cargo has arrived at the ICD.

“This should be reconsidered for unremoved cargo due to factors such as delays in granting waiver and other processes beyond the importer's control. Counting of the 21 days should commence upon arrival of cargo at the ICD,” says KAM.

The players in the industry want the government to allow shippers to use either road or SGR.

Shippers, he noted, are not opposed to the move and that they will support it if the process will be efficient.

“Our concerns are hinged on efficiency, whether they can be efficient in handling cargo and ensure minimum delay,” Mr Langat said.

It has also emerged that KPA and KRA did not consult stakeholders before coming up with this new directive, a move that is likely to attract a legal battle between the government and industry players.

The additional costs that are likely to be occasioned by delays will add to the already expensive railway transport following the adjustment of the freight charges early this year.

The costs were increased by 79 percent compared with the promotional rates that had been in place since the advent of SGR cargo business.

The cost of transporting cargo by road currently ranges between Sh85,000 and 95,000 for a 40-foot container compared with the new charges of SGR that will now be Sh100,000 for the same quantity.

Manufacturers have protested over the increase in rates pointing out that it will make the cost of doing business more expensive in the country.

There have been complaints of delays at the ICD that became a headache to logistics firms offering last mile connection.

Whereas it took about five hours for a cargo from the Port of Mombasa, which is over 350 kilometres away, to get to the ICD, it could take more than 24 hours for a consignment to be cleared at the Nairobi-based depot.

The move saw trucks that would have done an average of two trips to deliver cargos within Nairobi in a day, reduced to just one, subjecting the transport firms to immense losses on missed opportunity.

The situation has so far improved at the facility but it is feared the increased cargo will reserve the positive trend.

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