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Shipping & Logistics

Transporters’ plan to reclaim Kenya’s imports hub status

Mohammed Ahmed Abdulle
Young male CEO of the year, Mohammed Ahmed Abdulle of Dakawou Transport at the 2019 Top 100 Gala Dinner at the Safari Park Hotel on the night of December 5, 2019. PHOTO | DIANA NGILA 

Players in the transport and logistics industry are fighting to reclaim Kenya’s position as the preferred route for importation of goods destined for landlocked countries in the East Africa Community.

Over the last 13 years, countries such as Uganda, Rwanda and Burundi have been increasingly using the Tanzania route particularly for their importation of fuel products.

"Rwanda and Burundi transport all their petrol products through Tanzania," says Mohammed Ahmed Abdulle, CEO of Dakawou Transport Ltd, one of the leading transporters of fuel in Kenya, and who doubles up as Secretary-General of the East Africa Petroleum Transporters Association.

According to the association, which was formally established in 2018, the Democratic Republic of Congo transports 60 percent and Uganda 40 percent of their petroleum products through Tanzania, a trend that policy makers in Kenya can reverse by eliminating both tariff and non-tariff barriers.

One of the non-tariff barriers that have made Kenya unattractive to transporters of petroleum products is the requirement that their cargo must be weighed at every weigh-bridge between the point of entry in Mombasa and the point of exit at the Kenya-Uganda border points.

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According to Mr Abdulle, once fuel products are weighed at the Port of Mombasa, the containers are secured with a Kenya Revenue Authority seal, which cannot be tampered with unless the fuel is being offloaded. Because of the nature of the product, it is not possible for it to be evenly distributed on all axles as required by law especially when the trucks are being weighed and this creates room for delays or demands for bribes. As a result, this increases the cost of transporting fuel products across the country either because trucks have to queue for days at weigh-bridges or the drivers are compelled to bribe weigh-bridge officials so as to clear the trucks to proceed with their journey to border points in western Kenya.

Only last week, the Kenya Revenue Authority announced that it had fired all its staff members in the cargo tracking department on grounds that there were attempts to interfere with the integrity of the tracking system, in effect creating potential room for goods meant for export to be dumped in Kenya without paying the necessary taxes.

Streamlining the operations of the tax authority, through such drastic action as weeding out rogue officers will go a long way in ensuring that Kenya eliminates non-tariff barriers while also increasing the ease of doing business for transporters.

According to Mr Abdulle, the association with 30 active members who control over 3,000 trucks are willing to comply with government rules and regulations if that is what it will take to ease the flow of export goods through Kenya.

"Compliance is cheaper than non-compliance," says Mr Abdulle, whose firm controls 175 trucks in the industry where the biggest player has 600 trucks.

This is the message that the association has been selling both to its members and potential members in the hope that it will encourage all players in the transport sector to embrace best practices that will make Kenya attractive once again as the route to East Africa's hinterlands.

The association is pushing for Kenya to regain its position, which it lost due to a variety of factors, including security lapses like those witnessed during the 2007-2008 post-election violence. This left countries like Uganda jittery as such chaos interfered with the flow of fuel products.

Although Kenya remains the cheapest and most viable route for goods destined to Uganda, security remains a challenge that needs to be comprehensively addressed to restore transporters confidence. The second intervention would be for both government agencies as well as transporters to improve efficiencies especially by leveraging on technology. The third intervention, according to the association, would be for the Kenya Pipeline Company to further reduce the tariffs its charges to transport fuel products using its infrastructure.

"The aim is to bring back business to the northern corridor," says Mr Abdulle, whose company was among the winners of the Top 100 SME survey conducted by the Business Daily in partnership with KPMG. Mr Abdulle, a second generation chief executive in the family-owned business was the youngest CEO in the survey. Only companies with an annual turnover of between Sh50 million and Sh1 billion are featured in the survey.

According to the survey, 60 percent of the SMEs support East Africa integration to a large extent. Another 30 percent said they support integration to a small extent while only 10 percent said they do not support at all. Many of those that support integration have an eye on engaging in cross-border business, meaning that they if they can get government support in reducing both tariff and non-tariff barriers, this would boost their regional footprints.

Interestingly, 48 percent of the respondents said that cross-border taxes remain their biggest hindrance. However, for all the SMEs, lack of talent in various countries remain the biggest challenge with protectionism by some countries being ranked third.

For the East Africa Petroleum Transporters Association, therefore, addressing these challenges is the best boost that they need to increase their presence in the region besides making Kenya more competitive.

"Demand (for goods) in Kenya grows by about 10 percent annually, hence the need for regional growth," says Mr Abdulle who sees a future in doing business westwards as well as northwards with countries like Ethiopia.

This will also give Kenya the opportunity to use its infrastructure, such as the fuel pipeline and the Standard Gauge Railway to serve customer needs across East Africa.

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