The cost of moving cargo by trucks is set to go up by 15 per cent from Monday as transporters pass the VAT charge on to consumers.
The Kenya Transporters Association, a lobby for truckers, resolved last week to review rates upwards starting Monday to accommodate the implementation of VAT Act 2013 on petroleum products.
KTA chief executive officer David Abyiero said in a statement that the adjustments of rates by cargo transporters was inevitable and that they have been forced to raise their charges by 15 per cent.
“Fuel price is a major component of operational cost in transport business. Any increase in the cost of fuel such as the 16 per cent VAT on petroleum products has a significant effect on the operational costs which has to be transferred to the end consumer,” Mr Abyiero said.
The adjustment is expected to compound the woes of truckers on the Mombasa-Nairobi route where they already face stiff challenge from the standard gauge railway and an upgraded oil pipeline.
The close to 1,300 trucks that ply the Mombasa-Nairobi route charge between Sh80,000 to Sh100,000 to move 20ft container between the cities. Adjusting prices by 15 per cent implies new rates of between Sh92,000 and Sh115,000.
By comparison, the SGR trains have been hauling goods on a promotional tariff of Sh50,000 that runs up to December. At the same time, the transport ministry projects that a Kenya Pipeline Company line renovated recently at a cost of Sh48 billion has the potential of pushing some 700 trucks out of business.
Last week, Mr Abyiero maintained that the new VAT was a strain on the working capital as transporters are supposed to buy petroleum at the new rates and make a claim which takes an average of three to four months to refund.
He expressed fear over loss of business to neighbouring countries as the introduction of VAT makes the pricing by Kenyan transporters unfavourable to importers and exporters.
Mr Abyiero said road transport was supposed to complement the SGR freight services “but that transporters cannot adjust their prices upwards to accommodate the VAT and still remain competitive with highly subsidised SGR transport services.”
Shippers Council of East Africa CEO Gilbert Langat said cheaper fuel in Rwanda, Uganda and neighbouring Tanzania would lead to low consumption in Kenya. “Fuel is the driver of our economy and any increase in the cost brings issues. The challenge that we have at the moment is that the 16 per cent is loaded on the actual cost of transport.
“I am not sure whether we will achieve the Big Four, you already have seen the industry has been impacted by serious inefficiencies at the port, CFSs are laying off staff. Clearing agents are downsizing so the pillar of employment and manufacturing id under threat,” he said