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Business at port still sluggish as players push for clear directives

Cargo being offloaded from a ship at Mombasa Port. [Omondi Onyango, Standard]

Business is gradually picking up at the Port of Mombasa, nine days after President William Ruto ordered State agencies to return all services to the coastal city.

Tuesday, importers said they could nominate storage facilities and the mode of transport for their cargo, marking the end of the monopoly enjoyed by the Standard Gauge Railway (SGR).

Private storage facilities in Mombasa also reported improved business as more Nairobi- based importers abandoned the SGR for road transport.

But independent logistics experts warned that the benefits of the President’s directive for Mombasa will be short-lived because it was premised on the inefficiency of the last mile in the SGR system.

Gilbert Langat, chief executive of the Shippers Council of East Africa (SCEA), said SGR still provides a secure mode of transport for importers, but the challenge was the last mile that makes it costly.

SCEA is the umbrella body for importers in the region. Mr Langat said between 60 and 67 per cent of the domestic cargo that passes through the Port of Mombasa is destined for Nairobi.

“Yes, merchant haulage is now being allowed. Business is picking slowly, but I think once the excitement is over and Kenya Railways deals with the issue of last mile importers will prefer SGR,” he said.

In the merchant haulage agreement, importers appoint a trucking firm to transport the cargo. Before President Ruto’s directive, goods destined for Nairobi were moved on a through bill of lading (TBL).

TBL is a contract signed between an importer and shipping line also known as a carrier. The agreement stipulates that the carrier was in charge of the cargo from the point of origin to the final destination. 

This means that if a TBL indicates an importer is based in Nairobi, the carrier was tasked to make sure cargo reaches the capital city. KPA exploited this provision to force Nairobi-based importers to use SGR.

Meanwhile, Mombasa Governor Abdulswamad Nassir admitted there has been progress on the President’s directive, but urged the Kenya Ports Authority (KPA) to address red tape at the port.

Full implementation

“There needs to be a concerted effort by the Kenya Ports Authority to limit excess bureaucracy that is hampering business people from working. We will continue consulting regularly as we look forward to full implementation for the benefit of our people,” said the Governor after a meeting with port stakeholders.

Kenya International Freight and Warehousing Association (Kifwa) said Nairobi-based firms with branches in Mombasa incurred an extra cost of transporting cargo back after it was hauled through SGR to the capital city.

Kifwa Chairman Roy Mwanthi said there was a need for the government to issue a notice cancelling the earlier one that forced the use of SGR. “It was sad that carriers or their agents enjoyed import volume rebate from Kenya Railway as if they were cargo owners,” he said.

He also asked KPA to issue a notice explaining how cargo is nominated to the Container Freight Stations (CFSs) to ensure the implementation of the presidential order is smooth.

“We are waiting for a notice from KPA to explain how the directive is implemented. The notice should give clarity on the nomination of cargo,” he said.

A clearing and forwarding agent said they were expecting the government to issue a notice to allow importers to choose CFSs and the mode of transport.

“The contentious issue has been the restriction by the government for cargo owners to choose the CFSs where they should clear their goods and the mode of transporting them. We want the government to allow the cargo owners the right to choose whether they want to transport cargo by road or SGR. There should be a complete link between road and rail transport,” said Salim Mbarak.

He said the move will lower the cost of transport, which will benefit the consumers. He said for efficiency, clearing and verification of cargo should be done outside the port.

“CFSs are there to stay. They facilitate trade and ease operations. To avoid congestion at the port, clearing and verification of cargo should be done outside the port,” he said.

CFS Association Chief Executive Daniel Nzeki said two of the 22 CFSs based in Mombasa had closed down after the government’s directive to have cargo hauled by SGR to Nairobi and Naivasha where it was being cleared.

“We hope that business will return to Mombasa where 5,000 workers directly employed by CFSs have since lost their jobs. CFSs are currently operating at between 20 and 30 per cent capacity,” he said.

Robert Mulela of Simba Logistics, which operates a fleet of trucks, said the President’s order was yet to be felt in Mombasa.

“We are yet to see the trickle-down effect yet on the President’s order. Business is still as usual. We hope the effect will be felt in the next two to three months. We are waiting for communication from KPA and shipping lines,” he said.

Delayed effects

A KPA official who talked on condition of anonymity said the inauguration day directive was being complied with, but effects will be felt later.

Kenya Ships Agents Association Chief Executive Juma Tellah said KPA and the Kenya Revenue Authority (KRA) are expected to give more direction.

“Shipping lines are waiting for the official communication from KPA and KRA. Their business is to transport cargo to and from the port,” he said.

Mr Langat said importers from neighbouring countries like Uganda and South Sudan still preferred the SGR because of cargo security and convenience. Kenya allocated the two countries land in Naivasha to set up depots for their cargo.

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