Mombasa benchmarks with successful hubs to grow transshipment volumes.

Subheading: Transshipment process in Malta takes less than 24 hours to approve, Colombo and Tangier takes less than 12 hours, whereas it takes 8-10 days in Mombasa.

The increased infrastructural development and cargo handling capacity is driving the Kenya Ports Authority (KPA) move to make transshipment business the next frontier of business growth. A joint task force by the KPA and Kenya Revenue Authority (KRA) initiated last year is leading a reform campaign geared towards removing all the bottlenecks that make shipping lines shy away from using the strategically located Mombasa port as a transshipment hub.

Captain William Ruto, the KPA’s Head of Marine Operations said that the task force has already created a working roadmap after collecting views from all the stakeholders involved in this trade and has recommended major transformation that once fully implemented, shipping lines will find it attractive to use Mombasa for transshipment.

The joint task force visited some of the best performing transshipment hubs each in Africa, Asia and Europe which have recorded significant growth in transshipment, to gather guiding lessons for Mombasa port initiative. The selected ports were Tangier in Morroco, Colombo in Sri Lanka and Malta port in Malta.

According to Captain Ruto, one of the major factors of success for 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 process, has now embraced. Transshipment process in Malta takes less than 24 hours to obtain all the necessary approvals from Customs and the port, Colombo and Tangier takes less than 12 hours, whereas at the port of Mombasa, it may take 8-10 days.

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

In all the ports visited, transshipment businesses have been simplified to allow faster clearance and approvals using Electronic Data Interchange (EDI). This compared with Mombasa port, where entries and processes are partly done manually thus not being user friendly with shipping lines.  The shipping lines in the three ports are only required to lodge manifest to customs for approval but in Kenya, there are 9 steps involved, which causes further delays and the ship earmarked for transshipping the cargo may depart without loading the cargo.

Delaying a ship is very costly and the daily average additional vessel operating costs incurred by shipping lines can range between U$ 20,000 – U$ 35,000 depending on vessel size, a demonstration of how crucial it is for the lines to save time in the shipping industry, according to Juma Tellah the Kenya Ship Agents Association (KSAA).

Also the ports visited have modern risk management systems that allows Customs to make advance risk profiling and targeting and the process of resolving cases of targeted cargo has also been simplified and takes minimal time.

“We have made good gains in enhancing our ICT platforms to accommodate business friendly processes having collected views from all the stakeholders involved in transshipment business,” Captain Ruto said.

Due to the simplified processes of handling the transshipment cargo, the three ports have recorded impressive growth of this business line. Colombo handled a total throughput of 4.3 million Twenty Foot Equivalent Units (TEUS) in 2013 with 2.5 million going as transshipment cargo. In the year that followed, the port’s total throughput increased to 4.9 million TEUS and transshipment volumes even grew more to stand at 3.7 million TEUS.

Malta recorded total throughput of 2.75 million TEUs in 2013 and transshipment volumes was 2.48 million TEUS. In 2014, it handled a total throughput of 2.9 million TEUs and transshipment cargo took 2.6 million TEUS. Tangier recorded a total throughput of 3.2 TEUS in 2014 with 3.0 constituting transshipment cargo.

This compares poorly with the Mombasa port. In 2013, the port handled 894,000 TEUs with transshipment cargo recording 16,269 TEUs. In 2014, the port handled 1,012,002 TEUs. During this year, the transshipment volume registered an impressive growth reaching 60,854, which Mr. Tellah attributes to KPA and his association’s marketing efforts.

Two of the critical issues that have been addressed as per the taskforce recommendations are the issues of transshipment bond and use of forwarders in lodging ship manifest, two features that were unique to Mombasa port, and which shipping lines highly contested.

Transshipment business passing through the Mombasa is governed by the East African Community Customs Management Act (EMCCMA) and Regulations. Since it is a requirement for all transshipment cargo to be entered in Appropriate Transshipment Entry, the shipping line or agent have been engaging the services of a forwarder at an extra fee.

Shipping lines will now lodge transshipment entries themselves as they do in other ports and they will be required to create only a nominal bond. The transshipment bond at one time stood at Sh 100,000 per container, according to Tellah. The bond was however reduced to Shs 1,000 per container.

Transshipment business is the best bet for the growth of Mombasa due to its strategic location compared to the other regional ports and the expansion undertaken in the recent years. Apart from Dar es salaam -Tanzania, Zanzibar and Tanga and the East Africa Islands of Madagascar, Comoros, and Mauritius, Mombasa port has a huge capacity to serve even a large market.

“The transshipment business gets huge boost from the port’s capacity to accommodate larger vessels, an advantage Mombasa has compared to Dar es salaam,” Captain Ruto observed.

The port completed, in 2013, dredging of the channel to accommodate huge vessels with a capacity of up to 6,000 TEUS, a feat Dar es salaam port has not yet achieved. Due to the economies of the scale, a shipping line can use a huge vessel to bring Dar and Mombasa bound cargo to the latter and smaller ships can be used to move the Dar port cargo.

Mombasa port is also better placed than Durban to handle transshipments due to the shorter distance from, China and Singapore, major world exporting country, then smaller vessels can be used to move cargo from the port of Mombasa to ports in Southern Coast of Africa.

Early this year, the second container terminal was handed over to the KPA creating an additional capacity of 500,000 TEUS with the first phase and the capacity expected to rise to 1.2 million TEUs when the second phase of construction is completed.

Mombasa port has also created an additional capacity outside the port where all the domestic cargo is handled through Container Freight Stations (CFSs).  The ICD Nairobi is also being upgraded and will create an annual capacity of 450,000 TEUS.

Other areas that Mombasa port has increased capacity include the construction of the 240 meters long berth 19 completed in 2013. The current container terminal quay is now 840 meters long up from the previous 600 meters. The port can therefore comfortably berth three ships with an average length of 250 meters. With an added stacking yard of 15 acres, the port created an additional annual capacity of 200,000 TEUs.

Another advantage of Mombasa is its capacity to attract major shipping lines. There are over 26 shipping lines using Mombasa of which 20 handle containers. In 2015, according to KPA statistics, Maersk, the biggest line in the world total volumes through the port of Mombasa stood at 394, 692 TEUs.

It was followed by PIL, which handled 174,169 TEUs while MSC and CMA/CGM handled 140,629 and 126,610 TEUs respectively. MSC and CMA/CGM are the second and the third biggest shipping lines in the world respectively.

Owing to the changing fortunes of Mombasa Port as a regional hub, with other ports in the region emerging to rival it out Mombasa, there is a strong case for promoting transshipment business.