John OmingoKenya Maritime Authority

Port Transit (ship and cargo ) Costs – Kenyan efforts to influence the quality of port service and reduce cargo clearance costs

PORT TRANSIT COSTS

Contextual Background• Kenyan Port Service Structure – Introduction;• Costs from Private Service Providers;• Delay Costs arising from Government Agencies;• Cost arising from the nature of international sales contracts;• Intervention measures – Kenyan Experience;• Way Forward;

Kenyan Port Service Status

Service Port - Mombasa Second Container Terminal – Concession Lamu Port (LAPSSET) – 32 Berths Kenya Maritime Authority – Oversight on Quality, Availability and Cost of

maritime transport services in the country

Container Trafic (TEU): 2004 - 2013

Rate of increase for the period: 13.2 %: (2014 – 1,012,200 TEUs)

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

438,597 436,671 479,355

585,367 615,733 618,816 695,600

770,804

903,463 894,000

‘’TEU

’’

MSA Port Throughput (DWT): 2003 – 2013

Rate of increase for the period: 11.2% (2014 – 24,875)

-

5,000

10,000

15,000

20,000

25,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

11,930 12,920 13,280

14,418 15,961 16,414

19,061 18,934 19,952

21,928 22,307

‘’000

’’DW

T

Private Service Providers - CostsMARITIME TRANSPORTATION COSTS ON CONTAINER TRAFFIC (2014)

EXCHANGE RATE 1USD=KSH.85  Charge item Units Rate US Dollars Kenya Shillings

1 Freight (TEU) 1,000,000 1,269 1,269,000,000 107,865,000,0002 DO fees (BLs) 91,240 60 5,474,400 465,324,0003 THC 1,000,000 99 99,000,000 8,415,000,0004 LO/LO 1,000,000 32.5 32,500,000 2,762,500,0005 ISPS 1,000,000 6 6,000,000 510,000,000

6 Container Cleaning Charges 1,000,000 20 20,000,000 1,700,000,000

7 10% Administration Fee 1,000,000 40 40,000,000 3,400,000,000

8 Equip Management Fee/ITS 1,000,000 50 50,000,000 4,250,000,000

9 Out of Service Charge 36,146 150 5,421,900 460,861,50010 Piracy Risk Surcharge 1,000,000 300 300,000,000 25,500,000,00011 Empty Drop off charges 1,000,000 20 20,000,000 1,700,000,00012 Peak Season Surcharge 1,000,000 100 100,000,000 8,500,000,00013 Bunker Adjustment Factor 1,000,000 450 450,000,000 38,250,000,000

14 Emergency Bunker Surcharge 1,000,000 100 100,000,000 8,500,000,000

15 Seal Surcharge 1,000,000 5 5,000,000 425,000,00016 Operation Surcharge Fee 1,000,000 250 250,000,000 21,250,000,00017 Import Service Charge 1,000,000 50 50,000,000 4,250,000,00018 Stripping 1,000,000 75 75,000,000 6,375,000,00019 Bill of Lading Fee 91,240 60 5,474,400 465,324,000

Handing Over Fee 91,240 25 2,281,000 193,885,0002,885,151,700 245,237,894,500

Government Agency Services – Delay Costs

Element Prop (%)Tot cost of importing 100.0

FOB 55.2Logistic + taxes 17.6Sea Freight & Insurance 3.1Port-charges + VAT 0.7

Shipping line charges at Mombasa 0.3Certificate of conformity 0.4IDF and goods VAT 10.6Clearing and forwarding 0.4Transport costs to Nairobi 2.4Hidden costs (delays & document processing operations) 27.2

Delays as a proportion of the total import costsLogistics =18%, while the FOB accounts for about 55%: Delays 27% of the total import cost

(2013)

Source: KSC

Government Agency Services – Delay Costs

Delays as a proportion of total logistics costs -account for about 60% (2013)

Logistic & taxes Prop (%)

Total Logistic costs + taxes+ delays 100

Sea Freight & Insurance 6.8

Total Taxes 24.6

Shipping line charges at Mombasa 1.1

Clearing and forwarding 0.6

Tot port charges 1.4

Certificate of conformity 0.8

Transport costs to Nairobi 4.4

Total indirect payments 0.2

Hidden costs (delays & document processing operations)

59.8

Delays and unofficial facilitation (corruption) 60 Source: KSC

Costs associated with the nature of International sales contracts (Incoterms)

By exporting on FOB and importing on CIF terms

You loose the right to nominate or negotiate terms of carriage or insurance for shipment of goods;

You reduce income from sale of goods;You incur expenses that could be managed by

direct involvement in arranging shipments;Consequently the price of products traded

become less competitive;Negative impact on local transportation and

insurance industries;

Key Challenges (2013)• Low service quality• Inefficiency and high costs - procedures that attract

penalties• Proliferation of charges• Lack of competition• Lack of clear standards on performance• Insignificant involvement in sea transportation• Weak structures for oversight on quality and cost of

services• Disjointed approach to cargo clearance (Silo mentality).

WHAT DID WE DO IN 2013?

KENYAS TRANSPORT

SECTOR

INTERVENTION 1Regulatory Framework

• KMA Act and Merchant Shipping Act

Oversight on service delivery in regard to availability, quality, standards of service, cost and efficiency of production and distribution – public and private agencies

• Merchant Shipping (Maritime Service Providers) Regulations;Annex IV: Service Level Agreements – KPIs

• The constitution (Article 232) Public agencies - high standards ofa) Professional ethics; b) Efficient, effective and economic use of resources;c) Responsive, prompt, effective, impartial and equitable provision; Involvement

of the people in the process of policy making; d) Accountability for administrative acts;e) Transparency and provision of timely and accurate information;

INTERVENTION 2

The process• Pre-define the business process;

• State the requirements for the process;

• Establish a quantitative/qualitative measurement of the results – KPIs in order to compare actual performance with set goals;

• Address shortfalls in service delivery in the key services – associated cost implication to the responsible parties (Accountability Structure);

• Develop framework for monitoring performance – investigation of variances and weaknesses in the processes (Port Community Charter);

Development of Service Delivery Standards

Mombasa Port Community CharterINTERVENTION 3

05/03/2023 The Port Community 15

Port Community Charter

Inter-Agency Collaboration

Reform Programme Goals1. High performing landlord port by 20162. 120,000Kms per Truck per Annum3. 30% cargo off take by rail by June 20164. All port community systems in KNESWS 5. 70% cargo throughput through the green

channel

1616

Development of the National Single Window Platform

TerminalWarehouse

Carriers

KRA

KTB KPA Port Health Other related government agencies

Importer/Buyer

Exporter/Seller

Freight Forwarder/Shipping

BankInsurance Company

Inspection AgentsMany government regulatory agencies

Numerous lodgments

Many Duplicated data elements

KEBS

Inefficient processes

1717

Expected Business Solution

Clearing Agent

Port Health

KRA SIMBA

KNSWS KTB

Bank

Exporter

Importer

Ship Agent

KPA KWATOS

KEBS

Wednesday, May 3, 2023 18Wednesday, May 3, 2023 18

Single Window Operations

INTERVENTION 4Enhance Regulatory Framework to ensure fair play and efficiency: • Intervene in cases where the cost of delays not caused by the

Importer/Exporter are nonetheless charged to them (Use on the national Single Window).

• Have the ability to exact penalties on those service providers who are culpable of inefficiency.

• Ability to intervene in finding the balance between tariff and the value for money e.g in the case of the CAK being able to arbitrate between operator and customer in the case of termination charges.

05/03/2023 The Port Community Charter 20

WAY FORWARD

3 Cooking Stones

Competition

Enhancement of oversight

capacity

WAY FORWARD

THANK YOU