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

Contextual Background 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)

MSA Port Throughput (DWT): 2003 – 2013 Rate of increase for the period: 11.2% (2014 – 24,875)

Private Service Providers - Costs MARITIME 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 1,269,000,000 107,865,000,000 2 DO fees (BLs) 91,240 60 5,474,400 465,324,000 3 THC 99 99,000,000 8,415,000,000 4 LO/LO 32.5 32,500,000 2,762,500,000 5 ISPS 6 6,000,000 510,000,000 Container Cleaning Charges 20 20,000,000 1,700,000,000 7 10% Administration Fee 40 40,000,000 3,400,000,000 8 Equip Management Fee/ITS 50 50,000,000 4,250,000,000 9 Out of Service Charge 36,146 150 5,421,900 460,861,500 10 Piracy Risk Surcharge 300 300,000,000 25,500,000,000 11 Empty Drop off charges 12 Peak Season Surcharge 100 100,000,000 8,500,000,000 13 Bunker Adjustment Factor 450 450,000,000 38,250,000,000 14 Emergency Bunker Surcharge 15 Seal Surcharge 5,000,000 425,000,000 16 Operation Surcharge Fee 250 250,000,000 21,250,000,000 17 Import Service Charge 18 Stripping 75 75,000,000 6,375,000,000 19 Bill of Lading Fee Handing Over Fee 25 2,281,000 193,885,000 2,885,151,700 245,237,894,500

Government Agency Services – Delay Costs Delays as a proportion of the total import costs Logistics =18%, while the FOB accounts for about 55%: Delays 27% of the total import cost (2013) Element Prop (%) Tot cost of importing 100.0 FOB 55.2 Logistic + taxes 17.6 Sea Freight & Insurance 3.1 Port-charges + VAT 0.7 Shipping line charges at Mombasa 0.3 Certificate of conformity 0.4 IDF and goods VAT 10.6 Clearing and forwarding Transport costs to Nairobi 2.4 Hidden costs (delays & document processing operations) 27.2 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

By exporting on FOB and importing on CIF terms 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).

KENYAS TRANSPORTSECTOR WHAT DID WE DO IN 2013? KENYAS TRANSPORTSECTOR

INTERVENTION 1 Regulatory 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 of Professional ethics; Efficient, effective and economic use of resources; Responsive, prompt, effective, impartial and equitable provision; Involvement of the people in the process of policy making; Accountability for administrative acts; Transparency and provision of timely and accurate information;

INTERVENTION 2 Development of Service Delivery Standards 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);

INTERVENTION 3 Mombasa Port Community Charter

Port Community Charter Inter-Agency Collaboration Port Community Charter Reform Programme Goals High performing landlord port by 2016 120,000Kms per Truck per Annum 30% cargo off take by rail by June 2016 All port community systems in KNESWS 70% cargo throughput through the green channel 12/3/2018 The Port Community

Development of the National Single Window Platform Inefficient processes Development of the National Single Window Platform Port Health KTB KPA Other related government agencies KRA KEBS Many government regulatory agencies Inspection Agents Numerous lodgments Importer/Buyer Freight Forwarder /Shipping Many Duplicated data elements Carriers Exporter/Seller Bank Terminal Insurance Company Warehouse 16

Expected Business Solution KPA KWATOS KRA SIMBA Clearing Agent Ship Agent Bank KTB Importer KNSWS Port Health Exporter KEBS 17

Single Window Operations Monday, December 03, 2018 Monday, December 03, 2018 18

INTERVENTION 4 Enhance 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.

WAY FORWARD 12/3/2018 The Port Community Charter

Enhancement of oversight capacity WAY FORWARD 3 Cooking Stones Competition Shipper Empowerment Enhancement of oversight capacity

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