New system to bring down cost of trade through Mombasa port

The Spetes Lady oil tanker with 105 cubic meters of oil from Saudi Arabia docks at Mombasa Port. [Omondi Onyango, Standard]

The cost of doing business through the port of Mombasa is set to reduce following the introduction of Viaservice Container Solution (VCS) to replace the punitive container deposits.

Traders said the VCS would free up capital tied in the deposits, ending financial constraints for importers using the Northern Corridor that links Mombasa and the East Africa region.

Shippers Council of Eastern Africa acting Chief Executive Agayo Ogambi said the deposits also disadvantaged small and medium-scale firms in the import and export trade.

"Container deposit is one the perennial problems identified in the SCEA's Logistics Performance Index affecting importers, and the implementation of VCS will provide a big relief," he said.

VCS would enhance cargo logistics efficiency, thereby reducing the cost of business along the corridor connecting the Port of Mombasa and the hinterland, he added.

A Swiss-based firm, Viaservice Ltd, will issue a guarantee on behalf of registered freight forwarders and traders for shipping lines to waive the container cash deposit.

A director of the company, Morgan Lepinoy, said they will offer an alternative to container deposits, freeing up working capital that remains tied up in deposits.

He said this will encourage SMEs that have shunned import and export business because of the high cost of container deposits to engage in overseas trade.

"Under the deposit era, some of our customers deal with one or two shipments a month, involving 20-100 containers per year," Mr Lepinoy said.

"With our solution, these same clients are now handling that much cargo monthly, and some even more. This transformation has led to a fairer and more competitive environment in the market,".

Deployed in Tanzania in 2020, VCS has improved cash flow for shippers, clearing and forwarding agents, and shipping lines and enhanced container turnaround efficiency.

Container deposits vary between $$500 (Sh65,500) to $2,000 (Sh262,000) per twenty-foot equivalent unit (TEU), which is the standard measurement of containers.

The deposit amount depends on the geographical location, market demand, type, and size of the containers. Importers complain that the deposits lock their capital.

"These deposits impose a huge financial burden on clearing agents by idling resources resulting in cash flow problems, translating to a high cost of doing business in the region," Ogambi said.

It is estimated that container deposits account for Sh210 billion annually in East Africa, contributing to the corridor's poor ranking in cost of doing business.

These extra costs are passed on to consumers. However, importers said the VCS would be a big reprieve for the logistics industry.

Federation of East African Freight Forwarders Associations acting Executive Director Elias Baluku said the VCS would lower the overall cost of doing business.

"Use of technology to manage the VCS cycle has reduced human intervention, thus saving time while increasing transparency and accountability of transport logistics services," Mr Baluku said.