Kenya banks on second terminal to consolidate regional gateway role

Saturday November 17 2012

A container ship berths at the port of Mombasa Picture: AFP

Kenya, faced with strong competition from Tanzania and keen to entrench its role as the trade hub in East Africa, will in the next two weeks commission the construction of a second container terminal at the port of Mombasa.

The $327 million terminal is expected to increase Mombasa’s container handling capacity from the current 771,000 to 1.2 million containers, and help reduce the clogging that has forced some port users to move to Dar es Salaam.

On December 5, President Mwai Kibaki is expected to commission the construction of the second terminal at the port, whose container handling capacity is currently overstretched — largely because of a sharp rise in imports into Kenya and the region. The port also serves Uganda, Rwanda, DR Congo, Burundi and South Sudan.

Expanding Mombasa’s capacity is one strategic issue at the heart of the East African Community’s regional interest. Kenya’s ultimate aim is to secure a geostrategic position as the key access to the Indian Ocean to serve the economic zone straddling the Nile Basin countries –– a position Tanzania too is keen to achieve.

The second container terminal is the latest in a string of mega projects Kenya is pushing to consolidate its standing as the hub of economic activity in the region. Kenya is building another port in Lamu as part of the Lamu Port-South Sudan-Ethiopia Transport Corridor, known by the acronym Lapsset.

At the moment, Kenya only has one transport and economic corridor, the Northern Corridor, running from the port of Mombasa to Malaba on the border with Uganda and onwards to Central Africa. A second corridor is critical as it seeks to access Ethiopia and South Sudan through the north and east of the country from the new port of Lamu.


In a report issued last year, the World Bank demonstrated how delays at the Mombasa port — due to capacity constraints — multiple police roadblocks and inefficient border crossing points, translated into significantly high costs of doing business in Uganda, Rwanda and the Democratic Republic of Congo. The World Bank estimated that it takes

20 days for a cargo container to get from Mombasa to Nairobi. The same journey takes 22 days to Kampala and 24 days to Kigali.

A study by CPCS Transcom published in June and sponsored by USAid established that road transport costs and indirect costs of port delays account for between 35 and 42 per cent of the cost of importation of transit cargo through Kenya by road.

Uganda is the biggest regional customer for the port of Mombasa, accounting for 80 per cent of cargo. Tanzania, DR Congo and Rwanda account for five per cent each and Sudan 3.5 per cent. According to the Kenya Ports Authority (KPA), which manages the facility, the second terminal should be able to serve the port until 2030, when the 1.2 million container capacity will be exceeded.

“We expect the number to go up to 830,000 containers by the end of this year, from last year’s 771,000, and we project that by 2030, the port of Mombasa will be receiving close to two million containers in a year,” said an executive at KPA. But the authority expects that, by that time, the Lamu port will have been completed and will be able to handle the extra cargo.

Work on the second terminal started in June this year, with dredging (deepening) of the harbour to accommodate bigger ships having been completed in April. It will be 900 metres long and will have three berths — numbers 20, 21 and 22 — for offloading the ships. Currently, there are 19 berths that are about 800 metres long.

The longer second terminal should be able to handle larger vessels, which most shipping companies prefer because of their capacity to carry more containers. The port will now able to receive 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.

The commissioning of the second terminal comes less than a month after a World Bank survey, the 2012 Worldwide Logistics Performance Index, showed that Dar had overtaken Mombasa to become the region’s best ranked port.

Recent data from the Kenya Ports Authority shows that Mombasa handles 20 per cent less cargo — 552,000 tonnes — destined for northern Tanzania and the inland countries of Rwanda, Uganda, Burundi and the DR Congo.

The port of Dar es Salaam has increased its market share in East Africa, handling 16 per cent more containerised cargo last year, thanks to road improvement, eating into Mombasa’s share.

(Read: Tanzania scoops top position as best route for transit goods)

According to Lawrence Mangarunyi, division manager of the Siginon Global Logistics Group, the port of Dar es Salaam is the preferred route because there is little congestion due to lower volumes and because the clearance period is shorter as the documentation both at the port and by the Tanzanian Revenue Authority takes a shorter time.

“Vessels discharge first since Dar is not normally a direct port of call and the exports are significantly lower than Mombasa; the port receives fewer ships and is able to share traffic with Tanga and Zanzibar ports,” said Mr Mangarunyi.

However, he says that the main obstacle hindering the smooth flow of cargo from the port of Mombasa is the non-tariff barriers along the roads of the Northern Corridor in the form of weighbridges and roadblocks At least 95 per cent of the cargo leaves the port by road and only 5 per cent is transported by the railway.

While Mombasa port received 771,000 containers last year, Dar es Salaam port received 475,000 containers.

The Burundian president of the Federation of East African Freight Forwarders Associations, Mathew Basimana, has written to KPA and the Kenyan government to expedite the construction of the Voi to Taveta/Holili road to the border with Tanzania so they can start using the Mombasa port for importing oil.

“If completed, the road will be less expensive and shorter for Burundi as opposed to using the longer Northern Corridor,” said Mr Masemo.

However, the commissioning of the new terminal is not good news for private cargo handlers known as container freight stations (CFSs), which could be phased out. The CFSs are privately contracted by KPA for clearing local cargo at the port to help decongest the port and operate under Customs control and other governmental agencies.

“With the completion of the second terminal, the port will be able to handle its own cargo and the CFSs will be left with no business,” said one analyst. Currently, there are up to seven CFSs contracted by KPA.

Jim Siro, divisional manager of the Kencont CFS, said that once the second terminal is completed, CFSs engaged in container handling, empty container handling and transshipment of cargo will lose out, especially those that don’t adapt to the new cargo flows and supply chain structure. However the new terminal will also create opportunities for the CFSs, including free zone activity, oil production related logistics and transshipment of cargo.

“The current cargo handling model is based on inefficiency, and the new model will be based on efficiency, and this change will come fast and will catch many CFSs unawares,” said Mr Siro, adding that the new terminal, will bring in new international competitors, with higher standards and more financial muscle, so only the most efficient and capable CFSs will survive.

(Read: Execs sought to head online cargo system)