State puts dodgy shippers on notice

Kenya: The Government has put unscrupulous shipping firms that curtail growth of maritime industry on notice. Transport Permanent Secretary Nduva Muli said the ministry is working with the Competition Authority of Kenya to weed out shipping firms that abuse their market dominance.

Mr Muli said the move would ensure anti-trust practices are eliminated in the maritime transport services. “The government will not tolerate any arbitrary actions, proliferation of charges or surcharges as well as any unfair or restrictive trading practices by maritime service providers or shipping lines as these actions result in high costs of doing business and unconducive trading environment,” he said.

He said unfair trade practices affect the competitiveness of Kenya’s exports in the international markets and contributes to low affordability of import commodities. “It is therefore imperative that we strengthen our regulatory space to ensure we bring sanity and order to the maritime sector to enhance socio-economic benefits for all Kenyans,” he said.

He was speaking during the launch of the 2014 Shippers Council of Eastern Africa (SCEA) Logistics Performance Survey in Nairobi yesterday. According to the report, Kenya ranks poorly in the logistics industry in the region, coming a distant fourth, behind East Africa’s best Rwanda, Uganda and Tanzania. Kenya particularly scored poorly on timely delivery of shipments and competence and quality of logistics services. Kenya, the region’s gateway, also fell short on transparency in conducting customs valuations, manner in which disputes are resolved and high incidences of corruption and rent-seeking.

Port charges

The report notes that in order to hedge their profits, shipping lines introduced a general increase in freight rates on the East China–East Africa route that averaged 45.4 per cent in 2012. This increase continued in 2013, albeit at a much slower rate as shipping lines imposed general rate increases of between $200 and $400 per 20 foot and 40 foot container for Dry cargo. The report shows that on average, it costs more for Rwanda, Burundi and the Democratic Republic of Congo to transport cargo by road from Mombasa than they would if they used Dar es Salam Port and route. Only Uganda and South Sudan would pay less for using Mombasa Port and not Dar es Salam.

The report also notes that transport costs per kilometre for a standard TEUs are an average of $1.24 using the Tanzania Railway and $2.66 using the Kenya Railways Corporation network.

In what explains the country’s waning business competitiveness, the report concludes that “Tanzanian shippers pay three times less freight charges for railway services than their Kenyan counterparts.”

Navigate traffic

The most striking differential in port charges between the ports of Dar-es-Salaam and Mombasa is the fixed wharfage charges of $70 for a 20 foot container and $105 for a 40 foot container at Mombasa, while Dar-es-Salaam levies its wharfage charges as a percentage of the value of the cargo – usually 1.6% for domestic cargo, 1.25 per cent transit imports and 1 per cent for domestic and transit exports. “Clearly this is a disadvantage for shippers who import through Dar-es-Salaam port as high value cargo will attract higher port charges.”

According to the report, trucks in East Africa can only cover between 5,000-7,500km per month. This compares unfavourably against against the international best practice of 12,000kms/Truck/Month. The Kenyan situation is blamed on several factors including the number of weighbridges that exist along the transport corridor, the average time spent by trucks at weighbridges, time spent to navigate traffic through major cities along the transport corridor, time spent at police and /or customs checkpoints and border crossing times.