Kenya’s status as the region’s logistics hub has again come under threat after Tanzania signed a deal with China to set up the bloc’s largest port and expand Dar es Salaam’s main airport.

The $11 billion Bagomoyo port will be bigger than the Dar es Salaam and Mombasa ports, tilting the scales of regional trade in favour of Tanzania.

Bagamoyo will have the capacity to handle 20 million containers a year, compared with Mombasa’s installed capacity of 600,000 and Dar es Salaam’s 500,000.

The country has also secured $164.3 million from the Netherlands for the expansion of the Julius Nyerere International Airport in Dar es Salaam to ease pressing capacity constraints.

READ: Tanzania secures $164m for new airport terminal

Tanzania also plans to construct a railway line linking its coast to the landlocked countries of Uganda, DR Congo, Rwanda and Burundi, which have hitherto used Mombasa-Malaba as the main transport corridor.

READ: Dar to spend $330m on rail upgrade

Meanwhile, Kenya’s efforts to upgrade facilities at the Jomo Kenyatta International Airport, expand the Mombasa port as well as construct the Lamu port, continue to lag behind schedule. Last month, the government cancelled a tender for the construction of a Ksh1 billion ($12 million) temporary terminal at JKIA.

The Kenya Airports Authority is yet to kick off the construction of the planned Ksh55 billion ($647 million) airport facility amid continuing procurement controversy.

The status of Mombasa as EAC’s hub has fluctuated wildly over the past few years, with delays in clearance of goods and glaring capacity challenges continuing to hurt regional trade through additional costs.

READ: Congestion at Mombasa port slows down trade in EAC bloc

Geofrey Nkusi, a leading general merchandise importer and distributor in Kigali, knows this too well. He says he abandoned Mombasa three years ago and now ships his products through Dar es Salaam. He finds the route convenient, as there is only one border post at Rusumo.

“It takes me three days to deliver goods to Kigali through Tanzania. Mombasa port takes me seven days,” he says.

The World Bank estimates that inefficiency at the Mombasa port adds about 50-80 per cent to the time required to move imports to landlocked countries.

For low-value bulk commodities, which constitute the highest proportion of cargo entering Mombasa, port costs account for over 15 per cent of the delivered market value.

The World Bank estimates that it takes 20 days for a container cargo to get from Mombasa to Nairobi (This includes the time taken to clear the cargo and the road trip.); 22 days to Kampala and 24 days to Kigali. As a result, road transport costs and indirect costs of port delays account for 35 and 42 per cent of the cost of importation of transit cargo through Kenya by road.

Economists, business executives and trade experts say with the ongoing mega infrastructure projects, the region can expect a major shift in the flow of trade, with Tanzania set to have four ports — Bagamoyo, Dar es Salaam, Tanga and Mtwara — by 2017, when Kenya will have only two — Mombasa and Lamu.

READ: Infrastructure spending to rise sharply as region’s business grows

Government officials in Uganda are said to favour the use of the southern route through Tanzania to end uncertainties Uganda faces while transporting goods from Kenya’s Mombasa port into the country.

As a result, Uganda is keen to see quicker construction of Tanga-Musoma railway line.

The existing ports, business players said, are poorly equipped and operate at low levels of efficiency. Few are capable of handling the largest of the current generation of ships, and are generally unprepared for the dramatic changes in trade and shipping patterns globally.

As such, they are lagging behind other regions even in the wake of a rise in containerised traffic.

“Lack of investment in infrastructure developments like the railways frustrates trade,” said Polycarp Igathe, chairman of the Kenya Association of Manufacturers.

“Mombasa port is perhaps the only one where 95 per cent of cargo is evacuated by road. This is totally unsustainable,” he added.

Kenya has also signed a deal with China for build a standard gauge railway between Mombasa and Malaba. But nothing much has been seen on this front.

Construction of the Bagamoyo Port is expected to begin later this year, with completion set for 2017.

Geoffrey Tindimwebwa, managing director at Unifreight Cargo Handling Ltd in Uganda, said the proposed Bagamoyo port offers a shorter route to the sea, while cutting costs.

“Goods are supposed to be cleared within 48 hours once they reach Mombasa port, but ships are forced to stay in the outer anchorage for 14 days before docking,” he said.

“The monopoly on the routes we use also encourages the placing of non-tariff barriers like roadblocks. Creating an alternative port to handle the cargo would lead to a reduction in the roadblocks, bribes and clearance time would be shorter too,” he said.

“These projects should be a wake-up call for Kenya to get its act together and improve investments and efficiency at the port,” said Christine Munywe, an official at the Shippers Council of East Africa.

Freight companies said Burundi and Rwanda were likely to divert most of their business to Tanzania. Rwanda had already begun doing so.

“More than 70 per cent of the cargo that previously went through Mombasa is now moving through Dar es Salaam. Kenya is likely to lose Rwanda and Burundi,” said Meshack Kipturgo, chief executive officer at Siginon Freight.

“It takes up to five days from the time a ship arrives to the time the trucks leave the port. This should come down to two days.”

Rwanda importers said extra costs charged at Mombasa port eat up their capital, advising port authorities to bear some of the fees as an incentive to attract more shippers.

“The delays eat up almost $1,500 on each trip. It costs about $5,000 to transport a container from Mombasa to Kigali and the delays result in importers losing $1,500 on each trip,” said Theodore Murenzi, secretary general of the Rwanda Transporters Association.

Kenya Ports Authority officials said the Bagamoyo port would be complementary to Mombasa port because the latter is operating beyond capacity.

Last year, the port handled 903,000 twenty-foot equivalent unit (teu) while Dar handled 580,000 teu. Mombasa port’s current capacity is 600,000 teu.

Meanwhile, KPA has progressed in the construction of the 1.2 million capacity second container terminal in Mombasa.

“The reclamation work on 100 acres from the Indian Ocean is almost over. Although the first phase was to stretch to 2016, contractors say it could be done by March 2015,” said KPA in a statement last week, adding the capacity is expected to hit a million teu this year.

Mombasa’s second terminal should be able to handle larger vessels, with a capacity of up to 6,000 containers. Previously, the port could only receive a ship carrying a maximum of 2,400 containers.

Data from KPA shows that Mombasa handled 20 per cent less cargo last year — 552,000 tonnes — destined for northern Tanzania and the inland countries of Rwanda, Uganda, Burundi and the DR Congo, a factor that industry players said was temporary.

“Some importers from the hinterland countries of Uganda, Burundi and Rwanda took the decision to use the Dar es Salaam port over fears that the general election in Kenya could be chaotic and disrupt the flow of goods as happened after the 2007 elections,” said Ms Munywe of the EA Shippers Council.

The stretched capacity of the Mombasa port is forcing it to turn down trans-shipment business, thus limiting Mombasa’s potential role as a regional hub.

According to Hannington Namara, CEO of the Rwanda Private Sector Federation, both ports are strategic for the country.

The overall cost of moving a tonne of freight along East Africa’s key trade routes is in the order of $200-$300, estimates the World Bank, and takes between 200 and 600 hours. The extensive dwell-times in ports and in Customs clearance accounts for about 80 per cent of the time.

Shortening those delays could greatly reduce the time needed to move imports from ports to landlocked capitals.

Reducing delays at ports alone could shave between $70 and $100 from the cost of moving a tonne of imports.

By Peterson Thiong’o, Scola Kamau, Dicta Asiimwe and Kabona Esiara