How to make logistics work for the economy

A cargo ship before off-loading containers at Lamu Port. 26th September 2022. [Omondi Onyango, Standard]

Maritime transport is critical to the global economy. It is the backbone of international trade, accounting for around 80 per cent of worldwide trade.

It has also led to the growth of major cities and towns. The Ports of Mombasa and Dar-es-Salaam, which are vital to the Northern Corridor and Central Corridor, respectively, in East Africa are two such cities.

Malaba and Busia towns in Kenya and Uganda are further examples of beneficiary towns that owe their growth and economic activities to the Port of Mombasa.

Kenya has made massive infrastructural investments at the Port of Mombasa to serve land-locked and rapidly growing neighbors.

 The investments include inland container development and expansion, and the Standard Railway Gauge ostensibly constructed to enhance cargo transport from Mombasa to Nairobi and to the neighboring countries.

The Port of Mombasa has enjoyed five-year annual port throughput growth of 3.3 per cent, increasing from 30 million tons in 2017 to 34.5 million tons in 2021.

Additionally, the Port containerized cargo traffic through the port has increased tremendously from 1,189, 957 teus in 2017 to 1,430,000 teus in 2021. A 4.8 per cent increase. Despite this, the Port’s performance, though favorable against African ports, lags behind in global rankings.

The World Bank’s Container Port Performance Index (CPPI) 2021 ranks the Port of Mombasa at position 293 and Dar-es-Salaam at position 370.

The low raking is linked to delays, congestion, and mismanagement of the facilities. Despite this, credit is due to the port management for reduced average cargo dwell time, improved container-ship turnaround time, which reduced from highs of 4.9 days in 2009 to 3.0 days in 2021.

The increase in the free period at the ICDN Nairobi from four days to five days was also supportive to the industry players who paid over Sh2.4 billion for storage in 2021 down from Sh3.6 billion in 2020.

Logistics costs remain high in Kenya, estimated between 30 per cent to 42 per cent of the value of the goods, against global best practice of 8 per cent.

According to the Shippers Council of Eastern Africa Logistics Performance Survey 2021, transport costs stand at $1.8 per km per container against best practices of $1 per Km per container.

The recent increase in fuel costs announced on 14th September 2022, which has seen a rise in road transport costs from Mombasa to Nairobi from an average of Sh80,000 to Sh100 for a 20ft container.

The directive by the President during his inauguration to reinstate port clearance back to Mombasa is welcome especially by the cargo owners who will henceforth have the freedom to choose the mode of transport.  

The pronouncement was seen as a masterstroke and lifesaving social economic intervention, breathing life to the coastal region on one hand and a fear of possible collapse of the rail freight and the ICDs in Nairobi and Naivasha on the other hand.

That Mombasa and the coastal region consume approximately 7 per cent of the port throughput - over 93 per cent is consumed in Nairobi and the rest of the country and region means that the previous arrangement meant fewer activities in Mombasa.  

Shippers applaud Kenya Ports Authority for the steps it has taken toward implementing the directive.

Importers now have the choice to state in their documentation the place of clearance and mode of transport for their goods and the Kenya Railways now must go out to competitively reach out to shippers for their services.

For the directive to confer the intended benefits, further interventions are required to ensure the efficiency of the Port of Mombasa is improved.

This entails appropriate deployment of resources including financial, human and equipment to reduce congestion, increase efficiency and enhance productivity. On the road front, the Mombasa road to Nairobi definitely requires dualling.

To augment and support the directive, the government working with the private sector must endeavor to develop a multimodal transport policy that will in effect ensure competitive, reliable, and safe maritime, road, rail, and lake transport.

The target for the county government would be to ensure that at least 15 per cent of the port throughput is consumed in Mombasa and its environs.

The writer is the Chief Executive Officer of the Shippers Council of Eastern Africa.