The transshipment business, which involves the handling of cargo for other ports, is now an area of keen focus for many ports the world over. However, administrative bottlenecks created by the Kenya Revenue Authority (KRA) have stymied Kenya’s transshipment business even as the Mombasa and Lamu ports face increasing competition from the other regional ports that are modernizing their operations even as new ones emerge.

But the tide is set to change if the new Managing Director of Kenya Ports Authority (KPA) Captain William Ruto makes real his promise to confront the issues that have made it difficult for the port to tap into an emerging business line that has led to the growth of other successful ports.

Ruto has indicated that he will impress upon the KRA to simplify their procedures by adopting industry standards practiced elsewhere—such as at the Tangier Med port in Morocco, where 85 per cent of the cargo handled is for other ports, translating to 7.17 million Twenty-Foot Equivalent Units (TEUs).

In an ideal situation, according to the new MD, the KRA is only supposed to approve the ship manifests once the shipping lines lodges them online, which in not the case in Kenya where the KPA is required to physically handle the transshipment containers that are landed at the ports. According to global standards, however, shipping lines, are only required to give notification of the ships that will carry the transshipment containers from the ports to the final destination. Simplified procedures have seen ports such as Singapore and Salalah in Oman handle over 90 per cent of their cargo as transshipment.

The port of Mombasa handled 1.43 million TEUs in 2021 compared with 1.35 million TEUs handled in the same period in 2020, representing an increase of 75,986 TEUs or 5.6 per cent. However, the KPA’s transshipment traffic was at an abysmal level, recording only 220,489 TEUs in 2021, a slight increase compared to the 175,827 TEUs recorded in 2020.

Lamu Port has the potential to become the biggest competitor to Salalah Port in Oman and the Port of Durban in South Africa in the transshipment business. Mombasa is also better placed than Durban to handle transshipments from Europe, China, and Singapore, all major world exporting countries; smaller vessels can be used to move cargo from the port of Mombasa to others on the Southern African coast.

Lamu Port could attract transshipment cargo for Tanzania, Mombasa, Somalia, and the Indian Oceans Islands of Comoros, Madagascar, Seychelles, and South Africa.

Although the KPA has striven to market Mombasa as a transshipment hub, reforms to tap into the business have been painstakingly slow even though the increased infrastructure at the port of Mombasa—dredging of the channel, rehabilitation of the berths, and the construction of the second container terminal—has increased the potential of the Mombasa port to handle more transshipment cargo.

Over seven years ago, a joint task force of the KPA and the KRA created a working template to increase the transshipment volume after collecting views from all the stakeholders involved in this trade and recommended a major transformation that, once fully implemented, would have seen more shipping lines find Mombasa port attractive for transshipment cargo.

In 2015, the joint task force visited three ports in Europe, Asia, and Africa that were close to Mombasa in size—and which have recorded significant growth in transshipment—to gather guiding lessons for the Mombasa port transshipment initiative. The selected ports were Tangier Med in MorrocoMorocco, Colombo in Sri Lanka, and Malta’s Freeport.

According to the team’s report, one of the major factors for the success of these ports is the manner in which they have simplified the processing of transshipment cargo, a vital lesson that Kenya, which has been associated with lengthy processes, could embrace. When the team visited the three ports iIn 2015, the transshipment process in Malta took less than 24 hours to approve, Colombo and Tangier Med both took less than 12 hours, whereas at the port of Mombasa it took 8 to 10 days.

“The shipping business is a complex affair that rides on predictable trends,” said Captain Ruto, a member of the delegation.

In all the ports visited, the transshipment business has been simplified through the use of Electronic Data Interchange (EDI) for faster clearance and approvals. Shipping lines in the three ports are only required to lodge manifests with customs for approval whereas in Kenya nine steps are involved, causing delays, with the ships earmarked to deliver cargo departing without loading the containers.

“The shipping business is a complex affair that rides on predictable trends.”

Delaying a ship is very costly and the daily average additional vessel operating costs incurred by shipping lines can range between US$20,000 and US$35,000 depending on vessel size, a demonstration of how crucial it is for lines to save time in the shipping industry.

Kenya has made significant strides following the fact-finding mission to the three ports. Vessel processing at Mombasa port went paperless when the Single Maritime Window System went live in June 2021, allowing shipping lines to lodge documents online and thus significantly improving clearing and turnaround times.

KenTrade, which runs the online cargo clearing system, worked with the Kenya Maritime Authority (KMA) to implement the system that facilitates ship clearance procedures by providing a single online portal for the sharing of information on the arrival, stay and departure of ships between the shipping lines/agents and the approving government agencies involved.

Since 8 April 2019, it is a mandatory requirement for national governments to introduce electronic information exchange between ships and ports. The objective is to make cross-border trade simpler and the logistics chain more efficient for the over 10 billion tons of goods that are traded by sea annually across the globe.

The requirement is part of a package of amendments in the revised Annex to the International Maritime Organization’s Convention on Facilitation of International Maritime Traffic (FAL Convention) adopted in 2016. It is intended to reduce or eliminate the manual, decentralized, duplicated, and unnecessarily lengthy processes in the maritime sector, which are affecting ships’ turnaround times and increasing costs at the port of Mombasa.

The FAL Convention recommends the use of the “single window” concept whereby the agencies and authorities involved exchange data via a single point of contact.

Another advantage of Mombasa as a transshipment hub is its capacity to attract major shipping lines. There are over 20 shipping lines currently using the port at Mombasa, the majority of which handle containers.

But what should concern Kenya most is the growing competition that is coming with the development of other regional ports and the emergencemergencee of new ones. Tanzania is inching closer to realizing several plans and strategies that have been initiated over the years to enhance its potential as a maritime country.

There are over 20 shipping lines currently using the port at Mombasa, the majority of which handle containers.

The country has direct access to the Indian Ocean, with a long coastline of about 1,424km at the centre of the east coast of Africa. It has the potential to become the least-cost trade and logistics facilitation hub of the Great Lakes region.

There is the planned expansion and modernization of Dar es Salaam port under the Dar es Salaam Maritime Gateway Project (DMGP). The DMGP will increase Dar es Salaam port’s capacity from the current 15 million metric tonnes annually to 28 million tonnes.

The improvement of maritime hard infrastructure has gone hand in hand with the overhauling of the soft infrastructure. The Tanzanian government has already introduced electronic systems that have made cargo processing and clearing easier. These systems include the electronic single window, which has reduced paperwork and has also removed the need to physically visit multiple government agencies and regulatory bodies to lodge documents as all this can be done digitally through the Tanzania Customs Integrated System (Tancis).

In May 2016, global port mega-operator DP World agreed to develop Berbera Port in Somaliland and manage the facility for 30 years, a move that is set to make it the most modern port in the Horn of Africa. Ethiopia has acquired a 19 per cent stake in the project, the other partners being DP World, with a 51 per cent share, and Somaliland with a 30 per cent share. The total investment of the two-phased project will reach US$442 million. DP World will also create an economic free zone in the surrounding area, targeting a range of companies in sectors from logistics to manufacturing, and a road-based economic corridor connecting Berbera with Ethiopia.

Port Berbera is now the closest sea route to landlocked Ethiopia, a journey of 11 hours by road. It has opened the route needed for growth in the import and export of livestock and agricultural produce.

Djibouti has undertaken significant developments in all its ports. The Djibouti International Free Trade Zone (DIFTZ) was officially inaugurated in July 2018. The initial phase, a 240-hectare zone, is the result of a US$370 million investment and consists of three functional blocks located close to all of Djibouti’s major ports.

The project has also created major business opportunities for Djibouti and East Africa as the region’s export manufacturing and processing capacity is expanded in key sectors such as food, automotive parts, textiles and packaging.

The Djibouti ports of Doraleh Multipurpose, Ghoubet and Tadjourah have all been completed in recent years. Doraleh Port is particularly strategically located, connecting Asia, Africa, and Europe. It can handle two and six million tonnes of cargo a year at its bulk terminal and breakbulk terminal, respectively.

Port Berbera is now the closest sea route to landlocked Ethiopia, a journey of 11 hours by road.

Another key milestone for the Djibouti ports is the standard gauge railway (SGR). A 750-kilometer SGR line connecting Addis Ababa with the ports in Djibouti has been constructed, cutting a three-day journey down to 12 hours.

Djibouti has also received global attention due to its strategic location. Virtually, all of the sea trade between Asia and Europe passes through the Red Sea on its way to or from the Suez Canal. As a result, Gulf and Middle Eastern powers, China, the United States, and France have developed great interest in this route and the country today hosts 5 military bases.

Having made significant gains in automating cargo clearing procedures and also expanded the port of Mombasa by constructing a second container terminal and a new port in Lamu, there is great need for the KRA to work with the other industry players to simplify transhipment cargo procedures. The capacity of Lamu Port—which is ideal for transhipment cargo owing to its deeper channel that can receive bigger vessels—has been under-utilised. In spite of its strategic location as a transshipment hub, the port has received less than 20 vessels since the three berths were commissioned in May 2021.

The proposal in section 76 of Kenya’s Finance Bill 2023 to amend the Employment Act 2007 so that employers will compulsorily deduct 3% from workers’ salaries and send that, plus a further 3% contributed by the employer, to the National Housing Development Fund has met with widespread consternation.

The levy is expected to raise around £460 million a year for the National Housing Corporation that administers the fund. Following legal action, earlier proposals for a housing levy under the previous regime had been made voluntary and set at a lower rate of 1.5%. Now, the 3% levy will begin with civil servants before being extended to other parts of the formal and non-formal sectors.

The money will be used both to support developers and building contractors to build 200,000 affordable units and to subsidise mortgages for low- and middle-income households who would be offered an interest rate of 7%, half the market rate. By some calculations, affected employees’ net monthly salaries will be cut by about 52% when all statutory deductions including tax, the National Health Insurance Fund and the National Social Security Fund, as well as this new deduction, are taken into account.

Trade unions have spoken out against the levy, arguing that a variation in employment law cannot be imposed without consultations. The Kenya Constitution of 2010, Article 118, says that Parliament must facilitate public participation in its legislative work.

According to the 2022 Kenya Economic Survey, there were 2,907,300 employed in the formal sector and an annual rate of affordable home construction by the national government of around 500 units a year. It is not clear under the Constitution that the national government has this responsibility, as opposed to the devolved government at county level.

Kenya’s skewed land ownership

Whilst there is manifestly a need to address Kenya’s dire shortage of affordable homes, it is important to diagnose fully the reasons for this. Land shortages and the high costs of building materials are important causes as Steve Biko Wafula has argued. Kenya’s skewed land ownership is attributable to long-term land grabbing, going back to the colonial period. Importantly, one constitutional provision designed to address this – which calls for the development of  minimum and maximum land ceiling laws – has been studiously ignored, especially the setting of a maximum holding. The housing levy will not address this problem: it cannot increase the supply of land for housing.

The levy is designed to encourage developers to enter the affordable housing market by offering them lower land and construction costs and providing tax exemptions, as well as guaranteeing contracts with the government. However, Wafula has also pointed out that the administration of the housing fund is not clear because it relies ‘on a complex system of collection, allocation, and disbursement of funds that could be prone to errors, delays, and fraud’.

Moreover, Kenyans have seen funds such as the National Housing Development Fund used as a revenue kitty. The 2005 Ndung’u report on Illegal and Irregular Allocation of Public Land detailed how state corporations were in effect forced into buying grabbed land, as ‘captive buyers of land from politically connected allottees’. The primary state corporation targeted to purchase land was the Kenyan workers’ pension scheme, the National Social Security Fund (NSSF). It spent Ksh30 billion (£175 million) between 1990 and 1995 on the purchase of illegally acquired property.

At a time when the government is desperate to increase its resources through raising taxes, Kenyans are also understandably suspicious that some of this money, at least, will end up in general government coffers rather than in the fund for which it is statutorily earmarked – other than that which ends up in party or private pockets, of course.

Household incomes

Whilst some prospective home-owners may be lured by the offer of lower interest rates and longer repayment plans, the proposed fund is also being seen as an unwelcome compulsory saving scheme. Funding can be drawn down after seven years or at retirement whichever is the sooner. But with standards of living being severely squeezed by inflation and with longstanding constraints on wages, as well as existing deductions which yield little benefit, many households will struggle to take a further cut to their take home pay.

Indeed, government workers were not paid their salaries earlier this year due to cash flow problems caused by the country’s mounting debt. It is ironic then that the proposal is in effect asking Kenyans formally to agree to defer a portion of their wages. Furthermore, because contributions are payable from income that has already been taxed and are taxed again when the funds are drawn down, workers are exposed to double taxation.

Workers are being asked to stake their long-term security on the success of a housing fund about which many have unanswered questions. If the promised housing materialises, how can we be sure that it will not be developers and landlords who benefit rather than the intended beneficiaries? There are real prospects that the housing units will be taken up by landlords and that Kenyan workers – having already accepted lower wages because of the housing levy deduction – could still find they have to pay high rents to access housing. What guarantees will there be that the housing will not be financialised in such a way as to put the notion of housing – as shelter and personal security – at grave risk?

Building on Serap Saritas Oran’s work on the financialisation of pensions in Turkey which theorises pensions from a political economy perspective and argues that pensions are fundamental to working class standards of living, we can see how the housing levy proposal similarly financialises a right to housing. Housing is a critical factor in social reproduction, that is, in how life is maintained and labour power reproduced. Turning housing from what Oran calls ‘a social right’ into an individualised personal investment, the levy creates opportunities for speculation and extraction. In this schema, there is a real risk that some who should be the beneficiaries of affordable housing will find that because of interest rates or the accrual of high rent arrears, they in fact become debtors.

Progressive taxes

We recognise that providing affordable housing is an important goal but we believe other, much fairer ways of raising much needed revenue for housing should be considered.

Might the time have come to have a well-informed national conversation about Land Value Taxation? Given Kenya’s worsening gini coefficient which demonstrates how skewed the country’s wealth is, why should workers bear the brunt of the government’s house building programme?

Land Value Taxation is a progressive tax which ensures that the tax burden is instead borne by landowners who can well afford it. Because land ownership generally correlates with wealth and income, it is much fairer to require those already advantaged to fund the needs of those who do not yet have homes.

Land Value Capture should also be considered. This taxation can be used for example if a road is built or other infrastructure such as a park is improved, causing a rise in the value of neighbouring properties. The principle is that these property owners should share some of their unearned gain with the public.

Elsewhere in the world, funds raised in this way have been used to build lower-cost housing. In addition, the money raised could also be used to fund ongoing operational costs such as maintenance of local roads, schools, and parks. Wouldn’t that be a fair and – given the infrastructure boom of recent years which has bestowed windfall gains on many property owners – very effective way to tackle the shortfall in affordable housing?

A raid on wages

Speaking on Kenya’s NTV news channel  Mercy Nabwire, Kenya Medical Pharmacy and Dentistry Practitioners Union National Treasurer, recently described the proposed housing levy as ‘a raid on workers’ wages.’ The economy is in bad shape and public services are threadbare, but the case for asking workers to bear the cost of righting this – especially when their incomes are squeezed and their standard of living plummeting – has not been made. Still less the case for compelling them to surrender their already precarious wages for some nebulous future promise.

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This article was first published by ROAPE.

Gone are the days when Melania Trump traveled to Africa in tropical colonial clothes, showing the complete lack of interest of the United States, led by her husband, in the continent. Since then, official American policy has changed significantly.

Africa is, once again, a continent disputed by the great powers. This dispute results from the new race for raw materials and markets, the search for influence in the world chess, namely African votes in the United Nations, and also the presentation of a social laboratory to show the world which recipe for prosperity works best. : the developmental authoritarian Asian or the liberal western.

All of this, in the context of the new competitive dispute with China, led the United States to once again focus its attention on Africa and place it at the forefront of its foreign policy priorities.

In recent months, American initiatives related to Africa and the trips of high dignitaries have been constant. Vice President Kamala Harris, Secretary of the Treasury Janet Yellen, First Lady Jill Biden, to mention just the most important recent trips (Harris, March 2023; Yellen, January 2023; Biden , February 2023). Only Joe Biden’s tour is missing to culminate this high-level political-diplomatic offensive.

However, the impression that remains from these trips is that, apart from beautiful speeches, splendid photographic opportunities and some circumstantial financial support, they add nothing to the resolution of African problems and, above all, they do not diminish the supposed Chinese influence, nor do they oppose it.

The problem is in the model adopted by the Americans. It is a model that is not very interactive and does not address African structural problems. Essentially, US leaders distribute smiles and marketing, warn of the Chinese danger, announce small foreign aid and refer the big questions to the International Monetary Fund (IMF), talking with greater or lesser intensity about good governance. Janet Yellen’s visit to Zambia was emblematic of this failure. When Hichilema was elected, he became a sort of poster boy for American good intentions.

However, what is certain is that Zambia has a serious foreign debt problem and has defaulted, finding itself in an endless labyrinth between China and the IMF, which ends up greatly harming the population. It is not enough to say that China is to blame and order the IMF to move forward, which in turn makes everything depend on agreements with China, which is waiting for the country to agree with the other creditors, getting into a tailspin – prolonged pong.

This kind of attitude will only lead to the US being criticized for talking but doing nothing.

The truth is that China’s entry into Africa from the 2000s onwards was not due to any historical relationship, practically irrelevant, but to a void, a void left by the West. Now, it is this void that persists, despite the new rhetoric and the countless initiatives, trips and forums held in the American capital or in Europe.

Africa does not need economists with their Harvard and MIT textbooks, which apply recipes from developed market economies unable to serve African populations and leading to their impoverishment. The manual to be applied must be the previous one, that of the very creation and structuring of economies and markets. Bringing consultants, economists, managers and people of intentions ashore doesn’t help – it only complicates things.

Obviously, to be successful, the North American perspective has to be different, resembling what was done in Europe after the Second World War (1939-1945). In other words, launching their money helicopters over Africa, while creating domestic markets on the continent.

Very simply put, the US will only compete with the Chinese in Africa if it replaces them, if it spends money. Arriving in Africa empty-handed or with promises of future private investment, which may or may not materialize, is no use.

Strictly speaking, if they really want to help Africa, the Americans should start by swapping the Chinese debt, that is, lending financial funds to African governments at lower interest rates and higher maturities, so that governments pay China. In this way it would certainly be possible to introduce competition into the African debt market and remove the monopoly from China.

In the same vein is the financial support for structural projects on the continent, from the massification of electricity and basic sanitation to digitization.

It is clear that the American people may disagree with this option and politicians may not want to embrace it, but the only realistic path is this and not another — this is how the US has gained influence in the past.

Furthermore, in addition to real capital, Africa needs specialists: not economists or consultants, which are in abundance, but professionals in essential areas, such as doctors, nurses, engineers, IT professionals, teachers, etc.

It is necessary to recover the initial spirit of the Peace Corps, idealized by President Kennedy, and massively send to Africa “men and women from the United States qualified for service abroad and available to serve, if necessary under difficult conditions, to help people in areas that help countries meet their needs” (Peace Corps Goals).

Finally, good governance should not focus on the constitutional apparatus, but on something simpler and more fundamental: public administration.

What is essential is to prepare public administrations in African countries to function efficiently and effectively, even if governments do not meet their objectives. Shifting the focus of good governance from the executive to the administration is a structuring element of any functioning society, overcoming disagreements and fears of political interference.

It is evident that only an investment of this type – in capital, in human resources and in qualified training – can allow the United States to leave a real mark of progress in Africa, following a counterpoint strategy to that of China. Otherwise, good intentions will be just that: good intentions without results.