Port effectiveness is crucial if local industries are to enjoy any growth

It is quite telling that presently, the port of Mombasa is losing a chunk of Rwanda’s business to Dar es Salaam. Granted, one reason for this is the short distance from Tanzania’s port into Rwanda but the second and most important reason is the improved efficiency of Dar’s port that has seen businesses move their goods faster and with significantly less administrative hassle.

The correlation between functioning ports and local economic advancement is undisputed – both regionally and globally. Ports act as key entryways for international trade and are, therefore, very vital for the movement of goods, services and people between continents, spurring the integration of local and national economies into the global sphere.

In this regard, it is also easy to see why ports and industries are linked. For many countries, ports were developed to support local economic activities during the early stages of industrialisation.

But due to technological advances and the expansion of markets and trading activities across the world, the need for ports to equally advance in order to support these demands has become greater.

Kenya, for instance, has an ambitious target to grow its manufacturing sector to 15 per cent of GDP by 2022, which translates to a 36 per cent year-on-year sector growth rate. 

In order to do this, we need to grow our export markets and at the same time ensure that the local industries are operating at full capacity thereby enabling them to produce quality goods to meet the local demand.

Local industries

Ports are therefore an indispensable catalyst for the movement of goods for export to regional and international markets, and for bringing in key inputs and raw materials needed in order for local industries to produce. Presently, we are looking to diversify our export markets since over 70 per cent of our total exports are destined for only 12 countries globally.

Our share of exports in the global market is also quite low, at 0.03 per cent of total global trade. In order to grow at the intended 33 per cent, we need to boost our local productivity and competitiveness because our current growth rate as a sector is only 0.2 per cent.

There are indeed many reasons that can be attributed to this performance, but a recurrent one is the logistical and operational challenges experienced at the port that compound the numerous challenges faced by the sector both in terms of cost and productivity.

In May, the Government reinvigorated its war on counterfeits and illicit trade, which is a welcome and much-needed intervention for the sector to grow. Doing so required that the screening and inspection activities at all entry points into the country, including the port, were bolstered.

However, we now find ourselves in a situation where a well-intended policy is hampered by operational challenges.

Raw materials

Inputs and raw materials needed for production, that originally took two to three days to be cleared, now require up to 14 days. There are many reasons for this, including a disconnect between agencies mandated to clear the goods, which translates to lengthened and duplicated procedures, and cumbersome administration processes.

In the meantime, the quality of storage for these inputs is not guaranteed. The facilities are not equipped to store many of these inputs and are overwhelmed as the days go by.

Ultimately, the storage and demurrage costs are very high, sometimes even surpassing the value of the inputs and raw materials being shipped in. What this does is to compromises the productivity of local industries – their ability to produce for both local and international markets – and, therefore, their ability to be competitive.

A key measurable indicator in a well-functioning port is tracking the Container Dwell Time especially in cases of limited storage capacity.

Container Dwell Time refers to the length of time a container stays at the port terminal. The longer it stays, the lower the potential utilisation of the port and the higher the costs.

There are countries that have perfected this and use it to increase port functionality and consequently, their local economies. Singapore, China and South Korea have some of the most flourishing port industries and, unsurprisingly, are synonymous with industrialisation.

Reducing congestion as well as operational and logistical delays will undoubtedly have a significant impact on the cost of doing business for industry, stimulating growth and productivity, and ultimately increasing our competitiveness in the region.

This is the only way we can sustain the Mombasa port as the entryway of choice for investors across the globe.

Mr Gudka is chairman, Kenya Association of Manufacturers; [email protected]