Kenyan efforts to influence the quality of port service and reduce cargo clearance costs. Presented By: John Omingo Kenya Maritime Authority

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

2. 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;

3. 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

4. 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’’

5. 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’’DWT

6. 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 1,000,000 99 99,000,000 8,415,000,000
4 LO/LO 1,000,000 32.5 32,500,000 2,762,500,000
5 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 5,421,900 460,861,500
10 Piracy Risk Surcharge 1,000,000 300 300,000,000 25,500,000,000
11 Empty Drop off charges 1,000,000 20 20,000,000 1,700,000,000
12 Peak Season Surcharge 1,000,000 100 100,000,000 8,500,000,000
13 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 5,000,000 425,000,000
16 Operation Surcharge Fee 1,000,000 250 250,000,000 21,250,000,000
17 Import Service Charge 1,000,000 50 50,000,000 4,250,000,000
18 Stripping 1,000,000 75 75,000,000 6,375,000,000
19 Bill of Lading Fee 91,240 60 5,474,400 465,324,000
Handing Over Fee 91,240 25 2,281,000 193,885,000
2,885,151,700 245,237,894,500

7. Government Agency Services – Delay Costs
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 0.4
Transport costs to Nairobi 2.4
Hidden costs (delays & document processing operations) 27.2
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)
Source:
KSC

8. 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

9. 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;

10. 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).

11. WHAT DID WE
DO IN 2013?

12. INTERVENTION 1
Regulatory Framework
• KMAAct 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
a) 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;

13. 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

14. Mombasa Port Community Charter
INTERVENTION 3

15. 11/9/2016 The Port Community 15
Port Community Charter
Inter-Agency Collaboration
Reform Programme Goals
1. High performing landlord port by 2016
2. 120,000Kms per Truck per Annum
3. 30% cargo off take by rail by June 2016
4. All port community systems in
KNESWS
5. 70% cargo throughput through the green
channel

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

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

18. Wednesday, November 9,
2016
18
Wednesday, November 9, 2016 18
Single Window Operations

19. 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.

20. WAY FORWARD
11/9/2016 20 The Port Community Charter

21. 3 Cooking Stones
Shipper
Empowerment
Competition
Enhancement
of oversight
capacity
WAY FORWARD

22. THANK YOU