Mombasa port offers sweeteners as fear of violence drives business south, to Dar and Tanga
Apprehension over the likelihood of violence in Kenya’s March 4 general elections has produced an unexpected windfall for Ugandan traders; for the first time ever, the Kenya Port Authority (KPA) is offering incentives to stop them switching to the Tanzania ports of Tanga and Dar es Salaam.
Traders have for decades complained of poor service from KPA which runs Mombasa port on the Indian Ocean and is Uganda’s main international gateway and handles 90% of all its exports and imports by sea.
The traders have complained of perennial network failures, delays in cargo handling, cumbersome procedures that involve many agencies, arbitrary charges, and theft of cargo at Mombasa port. Outside the port, the traders have complained of poor road infrastructure along the Nakuru – Eldoret – Bungoma stretch to Uganda, endless weigh bridges, and road blocks.
Nothing has been done to change the situation but KPA Managing Director Gichiri Ndua said this time, his organisation is ready to handle all grievances to ensure that Uganda remains its predominant transit destination. Ndua has promised to automate KPA systems, construct a second container terminal, expand Lamu port to serve the new transport corridor to South Sudan and Ethiopia, and acquire modern equipment such as forklifts, pilot boats, and terminal trucks. Critically, the port authority promised to install 450 CCTV cameras, integrate the security system and listen more to Ugandan traders concerns.
Ndua announced the incentives on Jan. 16 at a stakeholder’s workshop he hosted in Kampala. At the meeting, Kassim Omar, the Chairperson of Clearing and Forwarding Associations of Uganda said that the Mombasa Port is prone to theft of cargo and has limited rail services for only 5% of the total cargo shift capacity. He said KPA does not involve stakeholders in decision making processes. Another trader, Sam Watasa said some of KPA processes were unrealistic.
“It is not practical that we are expected to complete all port processes within the seven days. Any delays result in higher charges after the short free time that was unilaterally reduced from 21 to seven days.”
He said the new KPA tariff of US $155.12 up from $135 per 20 feet container was implemented without room for adjustment on the port users’ side. Such persistent complaints show that it is not clear yet if the traders will bite the bait offered by KPA.
Stiff competition was evident when a few days after the KPA stakeholder’s workshop, on Jan. 25, a delegation of Ugandan ministers for trade, finance and transport flew to Dar es Salaam and signed a protocol that would see more Ugandan export and import traffic transit through the Dar port. The Tanzanian government had earlier offered Tanga Port to handle Uganda’s exports and imports through the Central Corridor. Lawrence Bategeka, an economic expert at the Economic Policy Research Centre, Makerere University says the new competition between KPA and Tanzania is likely to benefit Ugandan traders.
“Uganda‘s move to use Dar es Salaam as an alternative route is a threat to Kenya,” Bategeka noted.
Under the MOU with Tanzania, Uganda is to provide two locomotives and 200 wagons to facilitate cargo transportation from Dar es Salaam port to Mutukula border point between Tanzania and Uganda.
Early this month, the Tanzania Ports Authority (TPA) announced that it is immediately starting to compensate traders that lose any cargo at the Dar es Salaam Port.
The Mombasa or Northern Corridor Route as it is officially called is popular among Ugandan traders because it is shorter at about 1200 km to Kampala. The Dar es Salaam route or Southern Corridor is about 1800kms long.
About 90% of Uganda’s imports and exports transit through Mombasa, about 5% goes through the Central Corridor and, about 5% through Entebbe International airport. Only 1% of Uganda goods transit through the Dar port. But that could change, depending on whether Kenya can avert post-election violence and its disruption of Uganda business.
KPA is anxious to hold on to Uganda’s business because it has increased the port’s competitiveness. Uganda contributes 78 % of transit traffic at Mombasa port. Between 2011 -2012, traffic volume grew by 70% from 12.9 million tonnes to 21.919 million tones. Container traffic also rose from 2004 million tonnes to 438, 597 million tonnes, and transit traffic was up from 2,891 million tonnes to 6,625 million tonnes.
Frank Sebbowa, executive director Uganda Investment Authority told The Independent that Kenyan investors have finally realised that Uganda is the gateway to all its neighbours.
“Kenyans are shrewd businessmen but unlucky, they are blessed by the sea but the sea has no consumers,” Sebbowa said.
According to Sebbowa, Kenya’s interest in Uganda can be seen in the entry of its companies, supermarkets, fuel companies, and financial institutions like banks.
Sebbowa said at a time when Africa is becoming an investment hub for Europe and some Asian economies that have reached their peak, Kenya also appears to have peaked and investors in search of virgin markets are looking beyond it.
“One can invest anywhere within the East African community,” Sebbowa says.
Kenya Commercial Bank (Uganda) Managing Director Albert Odongo says Kenya is not yet saturated and the influx of Kenya brands onto the Ugandan market can be traced to the strong trade flows between the two.
“Uganda is more than Uganda. It is a natural route. You can go to South Sudan through North Kenya but the road network is poor.”
Although the shift in tone by KPA has been sparked by its attempts of traders to prepare for any eventualities from the March Kenyan polls, observers say the Uganda government needs to do more.
Heading into the elections, all indicators are that if there is violence, Uganda is likely to be hit hard as it is already experiencing pre-Kenya election jitters. When the Bank of Uganda announced in January that the shilling was being battered by the dollar, pundits attributed it to a slowdown in dollar capital inflows.
Bategeka said the Uganda shilling is suffering due to decreasing capital inflows and the low dollar supply. Exports to South Sudan, which is Uganda’s biggest regional market, have slowed by 20% and donors have cut aid.
Stephen Kaboyo, the managing director for Alpha Capital Partners, also in a statement on Jan. 28, gave the current account deficit in Uganda, a regional hue encompassing Kenya and Tanzania. Kaboyo attributed the malaise to weak export earnings in the region due to a slowdown in the export markets of Europe and US.
The good news out of Uganda is the rate of inflation which in January 2013 declined to 4.9% from 5.3% recorded in December. But observers will recall that in 2007 when Kenya went to the polls, Uganda’s inflation was just 4.9% but on a monthly basis, it shot to 7.8% in February 2008 because of the violence.
Over the same period, Ugandans endured sky-rocketing prices of essential commodities including sugar, and petroleum products. The price of petrol shot to an unprecedented Shs 10,000 per litre at the cheapest stations from an average of Shs 2000 before the violence as Ugandan destined cargo was vandalised. Transport fares and the cost of food items including refined cooking oil went up dramatically.
At the time the Ugandan economy was being battered, the government promised to construct a 150 million litre fuel depot to avert shortages in future. The project should have seen four fuel reserves built in Nakasongola, Gulu, Kasese and Mbale. The government also pledged to inject Shs 45 billion to refill national fuel reserve depots in Jinja that could last for at least a month.
Nothing has been done. The Minister of State for Energy, Simon D’ujanga, told The Independent recently that the reserves will be refilled `soon’ but could not be drawn to name a timeline or confirm whether money has been disbursed for the job. Last year in May, Hared Oil Ltd, a private company, won the tender to rehabilitate and refill the Jinja reserves but the Shs 45 billion needed from the government has not been released. The venture requires about Shs 80 billion and Hared was expected to top-up the balance. Uganda consumes 45 million litres of petrol, 60 million litres of diesel, 7 million litres of kerosene and 12 million litres of Jet A-1 fuel monthly. The private fuel companies collectively have a storage capacity of 50 million litres of diesel, petrol and kerosene which can run the economy for half a month. The Jinja reserves have capacity of 30 million litres- 20 million litres of diesel and 10 million litres of petrol.
At hell’s gate
The government has been aware of the risk involved in the Kenyan election and has occasionally made the right noises but taken no action. In August 2012, Minister of State for Industry and Technology, Shinyabulo Mutende, told a risk-assessment seminar the government would establish a Uganda Maritime Authority to address the question of an alternative route. Nothing has been done. But the traders, who are the most at risk, are also not taking up adequate safeguards, according to KACITA chairman Everest Kayondo.
“We encouraged traders to insure their cargo in the wake of the forthcoming Kenya polls but we cannot force them to insure, use the alternative route, or stock up,” he said, “The preacher tells followers about heaven and hell. Do you think hell is empty? No.”
One of the leaders of the Kampala City Traders Association (KACITA), JJemba Mulondo, who is in charge of Security, is convinced that “there is a high possibility that chaos may erupt in Kenya”.
“The people who caused the post-election violence in 2007 are still in power or vying for power,” he told The Independent
Kenya firms too are not taking chances. They have taken up political risk and terrorism insurance covers by 50 % since 2012 but Naik Suryakiran, APA insurance CEO says some Uganda companies could be waiting to insure at the last minute.
“People should be ready with their political risk insurance. If not, they should import a few days before and after elections” because Naik says, “transporters may park their trucks.”