New regulations to let local firms share in Sh304b shipping profits

The Chief Executive Officer of Resolution Insurance Peter Nduati (left) is congratulated by the Kenya Maritime Authority (KMA) Commercial Shipping director John Omingo (right) after the unvailing of Resolution Marine Cargo Insurance. (Photo: Gideon Maundu/Standard)

The national government plans to enact regulations to allow local firms to venture into the multi-million-shilling shipping business.

The Kenya Maritime Authority (KMA) said local importers spend Sh304 billion in freight and destination costs annually and that the Government was keen to facilitate local investors to venture into the business.

"We are in discussions on how to spur local investment in merchant shipping," said John Omingo, KMA's commercial shipping manager.

Under regulations that govern the right to operate sea transport services, only domestically owned or registered ships are allowed to ply local cargo routes.

But KMA is proposing more continental rights.

"This will mean that foreign container carriers will drop cargo at one big port, say Mombasa, and African-registered ships will transport the goods within African ports," said Mr Omingo.

He said similar arrangements exist in Europe, India and the US.

The regulations came after the Government effected the marine cargo insurance law, compelling importers to buy insurance from local underwriters.

Prior to the marine insurance law, most shippers bought cargo insurance from foreign firms under the Cost, Insurance and Freight (CIF) arrangements.

Omingo was addressing over 300 ship agents, clearing and forwarding agents and importers at the launch of the Resolution Marine Insurance portal at Whitesands Hotel.

Resolution Insurance Group Chief Executive Peter Nduati said the law would raise marine cargo insurance premiums by Kenyan underwriters to Sh20 billion.

He said the portal would be linked to the central data system where Kenya Revenue Authority, KMA, insurers and importers will be able to track the movement of cargo.

"This will reduce or even eliminate cargo diversion, theft or even loss, which denies the Government revenue. It will also deal with the challenge of false claims," said Nduati.

It is estimated that local importers spend Sh30 billion in marine insurance, which they buy from international firms. Last year, marine insurance by local underwriter firms stood at Sh2.9 billion.

KMA however said marine insurance was a small share of the multi-million-shilling shipping business.

According to Omingo, Kenya spends billions of shillings in freight costs on foreign shipping lines and ships agents.

Shipping experts say Kenya should strive to retain the colossal amounts of money paid to foreign firms.