As the two East African countries heighten competition against each other in providing transshipment logistics for the region’s landlocked countries, how the one-year-old Kenya Kwanza government employs its diplomatic tact to navigate a costly non-tariff barrier erected by Tanzania to deny Mombasa Port transit business will put Kenya in the spotlight.
Although the two countries can be applauded for tackling a significant number of Non-Tariff Barriers (NTBs) between them since President Samia Suluhu came to power – more than any previous administration – Tanzania has scored poorly on a single – sinister – NTB; the country has consistently failed to create a geofence on a 15-kilometre stretch of road past the Taveta-Holili One-Stop Border Post that would allow Kenya to use the new Voi-Taveta-Singida-Kobero link road to serve Burundi, Rwanda and some parts of Tanzania instead of the longer Central Corridor Road that connects them to the port of Dar es Salaam.
For a road section to be considered geofenced, it is supposed to have inspection points and cargo passing through it can be tracked electronically for taxation and avoidance of dumping of goods in a country. Geofencing also guards against cargo theft or loss while in transit.
The East African region has embraced this concept for a number of years now. The Northern Corridor route from Mombasa Port to Malaba and onward to Uganda, Rwanda and Burundi has been fully geofenced and the movement of cargo is monitored through a Regional Electronic Cargo Tracking System (ECTS) system operated by the Kenya Revenue Authority (KRA). Any slight movement of the goods outside the geofence sends a red alert for immediate action.
The absence of geofencing on that section of the Voi-Taveta-Singida-Kobero road has worked against Rwanda and Burundi, in particular, as they now use the much longer route to import through the port of Dar es Salaam.
To use the Taveta route, which was tarmacked in 2018, importers are forced to use the traditional bonds system that has been abandoned by the region, a tedious manual process that causes costly delays that surpass any benefit that would accrue from using the shortened distance.
Bilateral trade between Kenya and Tanzania was expected to get a major boost when the road was constructed and a One Stop Border Post (OSBP) at Taveta and Holili, hosting government agencies on either side of the border, was opened.
In Kenya, the new road deviates from the Northern Corridor at Voi town, making it the most important link between Tanzania, Rwanda and Burundi, especially for imports and exports. It was estimated that the OSBP would reduce transit time at the two border posts by 30 per cent.
“It’s a demonstration of the trust between the two countries and that the One People, One Destiny dream is slowly being realised through various East Africa Community initiatives,” Tanzania Authorities put it during the OSBP launch.
The Kenyan section of the Holili-Taveta-Mwatate Road is 135 km long. The section between Voi and Mwatate was not under the project since it was in good condition.
Up to 2003, at least 60 per cent of the cargo destined for Rwanda and Burundi passed through Mombasa and the Northern Corridor before traders began to shun the Kenyan facilities citing congestion at the port and insecurity and corruption on the roads, which Kenya comprehensively addressed in 2007 when it introduced Container Freight Stations (CFSs) that gave the port breathing space to tackle its perennial congestion problem by expanding port facilities.
According to Justus Nyarandi, the Executive Secretary of the Northern Corridor Transit Transport Coordination Authority (NCTTCA) headquartered in Mombasa, there is a great need to agree to geofence the Taveta Road section, which would allow the use of the single customs facility that allows some goods to be cleared and taxed at the points of entry.
Up to 2003, at least 60 per cent of the cargo destined for Rwanda and Burundi passed through Mombasa and the Northern Corridor.
NCTTCA has already presented this geofencing case to the East African Community Council of Ministers and is now roping in the Commissioners of Customs to compel Tanzania to geofence so that transporters can use Regional Electronic Cargo Tracking Seals (RECTS) instead of the tedious bond application and cancellation processes.
The NCTTCA’s annual Northern Corridor Transport Observatory Report for 2022 indicates that the port of Mombasa handled only 977 tonnes of cargo destined for Burundi, constituting 0.1 per cent of the transit market, and 181,286 tonnes of cargo for Rwanda, representing 4.2 per cent of the market. At over 75 per cent and 12 per cent for Uganda and South Sudan, respectively, these two countries are the biggest transit markets for Mombasa Port.
“The volume of the Burundi cargo passing through the port of Mombasa is too low. If the geofencing is implemented, the volume would go up to 30–40 per cent,” Nyarandi said, adding that by using the port of Mombasa, Rwanda and Burundi would cut the transit distance by between 300 and 400 kilometres, translating to a significant drop in the cost of fuel and reducing the cost of transport, the crossing of two border points notwithstanding.
The new route was expected to open up fresh competition between Kenya and Tanzania, especially for transit cargo. For over a decade now, the two countries have strived to outsmart each other to become the preferred hub for the East African regional transit market. Rwanda and Burundi prefer to use Dar es Salaam Port while South Sudan prefers Mombasa Port.
Due to the emerging strength of the port of Dar es Salaam in recent years, the Kenyan government has initiated a number of reforms to cement its position as the gateway to East and Central Africa. For instance, it has now increased the free storage days before the return of empty containers to the shipping lines from 9 to 15 days.
The Intergovernmental Steering Committee on Ease of Doing Business through the Port Reforms Working Group High-Level Consultative Forum recently made a raft of recommendations that, once fully implemented, will make the Northern Corridor more competitive.
The conveners of the forum were led by the Head of State, President William Ruto, the Council of Governors Chairperson Ann Waiguru, the Cabinet Secretary in charge of the Ministry of Investments, Trade and Industry Moses Kuria, Roads and Transport Cabinet Secretary Kipchumba Murkomen, and Salim Mvurya, Cabinet Secretary in charge of Mining, Blue Economy, and Maritime Affairs.
In a report released in July 2023, the forum tasked all the Partner Government Agencies (PGA) involved in cargo clearance and the private sector to embrace round-the-clock work including weekends to ensure faster clearance of goods and improve cargo dwell time and ship turnaround.
The county governments through which the corridor traverses were asked to stop levying cess or any fees on transit trucks to facilitate international trade and improve the competitiveness of the Northern Corridor.
The report noted that there is a need to review and harmonise the charges levied by various shipping lines and to regulate the arbitrary charges introduced by other cargo interveners that have made Mombasa Port more expensive by up to US$500 per container, the report noted.
“Shipping lines operating in Mombasa Port grant 9 days free period for the return of the empty containers for local imports, 30 days for Uganda, and 15 days for Democratic Republic of Congo (DRC) and South Sudan cargo. The ports of Dar es Salaam, Durban, and Egypt grant more days. This makes the port of Mombasa non-competitive and discourages customers from using the facility since they incur demurrage charges due to the shorter free period by shipping lines taking into account the transit distance for DRC and South Sudan,” the report said.
Dar es Salaam Port does not charge shippers Terminal Handling Charges and Lift-on/Lift-off (LoLo) while Mombasa Port charges US$99 and US$148 for a 20ft and a 40ft container, respectively, for the former, and US$30 and US$40 for a 20ft and a 40ft container, respectively, for the latter.
Other unique charges levied by the shipping lines in Mombasa Port include Container Cleaning Charges, Container Management Fees, Logistics Management Fees and Equipment Management Fees.
KRA was also asked to acquire additional drive-through scanners. This will minimise scanning delays and result in efficient cargo offtake at the port of Mombasa, with the task force recommending fast-tracking of the Customs Agents and Freight Forwarders’ Bill that has been developed by the Federation of East African Freight Forwarders Associations (FEAFFA) to professionalise the sector.
Compared to Mombasa Port, Dar es Salaam Port is rapidly closing existing infrastructural gaps and it has gone up in World Bank rankings. Kenya now ranks below both the port of Dar Salaam and Port Berbera in Somaliland.
Of a total of 348 ports surveyed in 2022, the World Bank’s annual Container Port Performance Index (CPPI) ranked Mombasa – the largest port in East Africa – at position 326; Dar es Salaam, its main regional competitor, was ranked at 312.
This compares poorly with the 2021 CPPI report that ranked the port of Mombasa at 296 and Dar es Salaam Port at 316. In the 2022 CPPI report, Kenya also compares poorly with both Djibouti Port and Port Berbera – the two biggest competitors for Lamu Port – which were ranked at 26 and 144, respectively.
Dar Port ranking has been boosted by new infrastructure projects; Tanzania Ports Authority (TPA) projects currently at different stages of implementation include the expansion and modernisation of the Indian Ocean ports of Dar es Salaam, Tanga and Mtwara, as well as the lake ports of Mwanza and Kigoma.
Dar es Salaam port is rapidly closing existing infrastructural gaps and it has gone up in World Bank rankings.
Other projects in the pipeline include the establishment of Kwala Dry Port, the construction of a Standard Gauge Railway, paving trunk roads and overhauling the operations of the Tanzania-Zambia Railways Authority (Tazara).
The expansion and modernisation of the port under the Dar es Salaam Maritime Gateway Project (DMGP) includes strengthening and deepening of berths 1 to 7 and the Roll-on/Roll-off terminal (berth 0) at Gerezani Creek; dredging of the entrance channel, turning circle and harbour basin; strengthening and deepening berths 8–11. The Roll-on/Roll-off (Ro-Ro) terminal, which has a capacity of 600,000 vehicles annually, has already been completed. Last year, the new 320-meter berth broke both its own handling capacity record and those of all other Eastern and Southern African ports – except South Africa – by accommodating the cargo ship MOL Tranquil Ace to discharge 3,743 cars.
Dar es Salaam Port is contributing US$357 million to the DMGP, a World Bank project financed through an International Development Association Scale-up Facility credit. The project, which was initiated in 2017 and will be finalised 2024, will support the financing of crucial investments in the Port of Dar es Salaam with the aim of improving its effectiveness and efficiency for the benefit of public and private stakeholders.
The DMGP will increase Dar es Salaam Port’s capacity from the current 15 million metric tonnes annually to 28 million tonnes.
For the port of Mombasa to remain competitive, maritime experts propose that the government cede its development to the private sector. It took about ten years to construct three berths at Lamu Port with Kenya government funding, a luxury the port of Mombasa may not enjoy owing to the growth in cargo volumes, which almost surpassed 34 million metric tonnes of total throughput last year. Studies show that the port will surpass its maximum capacity by 2028.
Privatising the port would require political goodwill. Efforts to have the port operations privatised have always faced resistance from the region’s politicians and the giant Dock Workers Union (DWU) that has successfully prosecuted the matter in the courts. Privatisation has been wrongly perceived as a strategy to cut down the workforce.
With the lack of capacity at the state-run KPA, Dubai Port World (DP World) has already expressed interest in managing Lamu Port. It has also expressed interest in running other Kenyan ports. Located in Dubai, DP World UAE is at the heart of DP World. It is home to the flagship Jebel Ali Port, the premier maritime commercial gateway and hub to a region of more than 3.5 billion people. It has a huge portfolio managing many ports globally, including in Africa.
For the port of Mombasa to remain competitive, maritime experts propose that the government cede its development to the private sector.
This year, President William Ruto’s administration said Kenya will lease the operations and management of five critical ports through an ambitious KSh1.4 trillion public-private partnership (PPP) aimed at revitalising the country’s maritime industry.
Efforts to increase the port infrastructure at the port of Mombasa have in the past maintained a good pace, however. KPA has completed the construction of Phase 2 of the Second Container Terminal (CT2) and brought on board an additional capacity of 450,000 twenty-foot equivalent units (TEUs). The new facility increased the Mombasa port capacity to 2.1 million TEUs. It acquired modern cargo handling equipment this year, which has enhanced its capacity to go into the transshipment business should the KRA reduce the customs procedures that have caused shipping lines to shy away from using Kenya’s ports.
KPA recently commissioned the Kipevu Oil Terminal (KOT) which will have four berths capable of handling the import and export of five different hydrocarbon products including crude oil, heavy fuel oil, LPG and three types of white oil products. The KSh40 billion KOT facility will enable Kenya to double its capacity to handle transit products related to energy and petroleum.
The construction of the Standard Gauge Railway connecting Mombasa Port to Naivasha has already been completed. Kenya has also constructed the Inland Container Depot in Naivasha that is serving its Uganda, Rwanda, Burundi, South Sudan and the Democratic Republic of Congo (DRC) transit markets. It has also rehabilitated the MGR line to Malaba, where an ICD is to be constructed.
Last year, the KRA launched the Integrated Customs Management System (iCMS) which has reduced the paperwork cargo clearance period from 24 hours to under 10 minutes. The system was also integrated into the National Open Electrical Single Window System, which is operated by KenTrade, and has fully automated the cargo clearance processes.
As Mombasa Port moves towards maximum utilisation, there is a great need to also focus on Lamu as an alternative port and how it can be connected to the existing corridors by seeking private partnerships. The enthusiasm with which the government has rolled out infrastructure development at Mombasa Port should be replicated in Lamu Port.
Tanzanian has proposed to construct the biggest port in the region at Bagamoyo. President Samia Suluhu last year hinted that she would revive the construction of the Bagamoyo port project that was initiated by the former Tanzanian head of state Jakaya Kikwete, who is now an advisor to the current president. The project was blocked by the late President John Magufuli when he took power. If it intends to remain the regional transshipment hub, Kenya needs to keep its own eyes wide open, considering that other competing ports – Djibouti and Berbera – are rapidly expanding.