Maximising the single window system in Kenya’s trade economy

NAIROBI, KENYA: International trade has grown rapidly in recent years, thanks to the progressive reduction of tariffs and quotas through successive rounds of multilateral trade liberalisation.

More trade means more goods crossing borders and having to comply with Customs formalities. The only major challenges and that need to be agreed on at the multilateral levels are the subsidies, tariff peaks and escalation, standards and entry conditions which continue to hurt exports to developed countries.

 Businesses suffer both direct border-related costs, such as expenses related to supplying information and documents to the relevant authority, and indirect costs, such as those arising from procedural delays, lost business opportunities and lack of predictability in the regulations. Surveys aimed at calculating these costs suggest that they may range from 2 per cent to 15 per cent of the value of traded goods in developed countries and upto 30 – 42 per cent in production costs in Developing Countries such as Kenya.

Inefficient border procedures cost governments in terms of lost revenue, smuggling and difficulties in implementing trade policy, for instance because of failure in determining the origin of products or in collecting accurate statistics. In Kenya we estimate that upto 25 per cent revenue is “lost” due to delay in collecting the same on time.

With  increasing  integration  of  economies  around  the  world,  facilitating  the  smooth  flow  of trade  becomes a pressing requirement for governments and businesses. Efficient information systems and procedures can significantly reduce the time taken to move goods, reduce costs and improve business. In Kenya, Trade facilitation is carried out by over a number of institutions. The roles of the trade facilitating agencies range from revenue collection, provision of services for cargo movement and ensuring that goods conform to the set standards and health regulations, efficiency  and  enhance  the  overall  economic  performance  of  a  country .

The overall objective of the Kenya National Electronic Single Window System Project also known as Kenya TradeNet System is to facilitate International trade in Kenya by reducing delays and lowering costs associated with clearance of goods at the Kenyan borders, while maintaining the requisite controls and collection of levies, fees, duties and taxes, where applicable, on imports or exports.

Despite  recent  reforms,  trade  related  procedures  in  Kenya  still  remain  lengthy,  cumbersome and costly; an aspect which has negatively impacted on the competitiveness of Kenyan goods in the region. The rationale for implementing the Single Window System results from the following weaknesses inherent in the current system:

Besides having upto 27 agencies, duplications have become the order of for example between Kenya Bureau of Standards (KEBS) and National Transport Safety Authority (NTSA) on vehicle inspections, Pharmacy & Poisons Board and Nursing Council of Kenya, National Biosafety Authority and Radiation Protection Board. Again the motivation does seem to be elsewhere – revenue generation.

Essentially, everyone stands to gain from making the process of trade easier. Governments gain because efficient border procedures make them able to process more goods and improve control of fraud, thus increasing government revenue. Businesses gain because if they can deliver goods more quickly to their customers they are more competitive. And consumers gain because they are not paying the costs of lengthy border delays. If a truck waits at the border for a week, ultimately the customer is paying for its being off the road and unproductive during that time.

The benefits of Single Window clearance of cross border cargo to trade economy like Kenya are numerous. World Bank rate economies that have adopted Single Window System for transparent, efficient and faster cargo clearance better than those without. World Bank’s 2014 Logistics Performance Index (LPI) ranking places Kenya at number 74 while our key competitors Egypt and South Africa placed at 62 and 34 respectively.

With a Single Window compliant economy, Kenya is set to reap from increased competitiveness and reduced costs of doing business which is good for consumers who shoulders the burden of shipments delays in form of demurrage charges incurred by importers.

Based on the present volume of goods imported and transited through Kenya, it is estimated that  the  streamlined  procedures  will  result  in  yearly  savings  to  the  Kenyan  economy  ranging between  US$  150  million  (or  about  Ksh.10.5  billion  and  US$  250  million  (or  about  Ksh  17.5 billion) annually during the first 3 years. This will increase to between US$ 300 million (Ksh. 21 billion) and US$ 450million (Ksh.31.5 billion) annually in subsequent years.

It must also be emphasized that Single Window Systems is relevant to implementation of 8 of the 13 articles of the Trade Facilitation Agreement commonly known as the Bali Agreement

 However for the gains already realized to be sustainable, Kenya must give priority to a number of key success factors key of which is the legal framework for the Kenya TradeNet System.

It is observable that all of the government trade facilitation agencies  envisioned as stakeholders in  the  Kenya TradeNet System  are  all  currently  anchored  within  the  Kenyan  laws  with  clear  mandates  and objectives. Participation of these agencies in implementing the Kenya TradeNet System will involve some of them ceding their mandates to the operating entity of the Kenya TradeNet System. 

 The other crucial success factor is the E – Readiness of Stakeholders. While  stakeholders  in  the  private  and  public  sectors  have  invested  in  ICT  (both infrastructure  and  hardware),  some  government  departments  are  still  lagging  behind  in  this aspect, with many of them still relying  upon manual process.  The Kenya TradeNet System  will be anchored upon a  strong  ICT  base  and  the  lack  of  sufficient  infrastructure  is  likely  to  hamper  progress  in  its implementation. Also worth focusing on is the adequate funding for this complex and cross cutting project.

 Even as Kenya repositions itself for gains from embracing the Single Window System, caution must be made that Single Window on its own will not deliver on the envisaged desire that the industry seeks to ascertain. The desired outcome will in our view depend on other fledging measures. These include Systems stability and the harmonious co-existence between Kenya Revenue Authority and Kenya Trade Network Agency (KenTrade), Timely delivery of the Port Charter and strict adherence of Kenya Ports Authority (KPA) and KPA to their service delivery.

KPA and KRA must also review their business processes by eliminating rigid and outdated rules, procedures  and non-tariff barriers, embracing modern technology such as forensic audit, post audit, better risk management by employing know your customer to prevent leakage of revenue but at the same time provide customer friendly environment

The government must also eliminate the duplication of work by Kenya Bureau of Standards (KEBS), Kenya Plant Health Inspectorate Services (KEPHIS), Nursing Council, Kenya Medical Laboratory Technicians and Technologists and Poisons Board among other System users.

 Single Window Success in Kenya will also come as a result of Government strict enforcement of the 24/7 economy through legislation that will allow the Port operations to be round the clock, Shippers fulfilling their obligations including paying duties, availing documents on time, making accurate declaration, improving their systems (Logistics Audit), employing best practices amongst others and lastly, the Government undertaking necessary measures to implement WTO – Trade Facilitation agreement.

The author is the CEO of Shippers Council for Eastern Africa and Chair of Mombasa Port Charter. He also represents Shippers interest at KenTrade Board. This is a revised speech he delivered in Nairobi during the stakeholders’ breakfast meeting on maximizing Single Window System in Kenya.