By ANTHONY KITIMO

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Kenyan long-distance transporters have said transport costs will increase starting July 1, after parliament voted to double value added tax (VAT) on petroleum products to 16 percent on June 21.

With the uncertainty in the transport sector in the coming days, some transporters have announced plans to downsize staff to reduce the cost of operations to remain in business.

Transporters say increasing costs and non-tariff barriers on the Northern Corridor will increase the cost of doing business and, if not checked, it will benefit the Central Corridor, where the Tanzanian government is working to cut transport costs and improve infrastructure.

Read: Dar port topples Mombasa with $357m upgrade

The Northern Corridor stretches 1,700 km from Mombasa port through Kenya, Uganda, Rwanda, Burundi and the eastern Democratic Republic of Congo. The 1,300-km Central Corridor runs from Dar es Salaam port through inland Tanzania to Rwanda, Burundi, Uganda and eastern DRC.

With the passing of the Finance Bill 2023, the current cost of transporting goods will increase from the current minimum of $2.35 per kilometre for transit goods and $2.25 for local cargo.

High costs, increasing road tolls, multiple border charges, and bad road conditions have already been identified as factors that cause cost escalations for transporters on the Northern Corridor, which Dar is taking advantage to have a slice of Mombasa’s cargo throughput share.

Kenya has already raised fears that if key logistics stakeholders fail to work on key performance indicators, mainly under the Mombasa Port Charter, Mombasa could lose out to neighbouring ports.

Read: Dar reaps as Mombasa cargo volumes dip

Advance tax riddle

The Kenya Long Distance Truck Drivers Union (KLDTDU) and Kenya Transporters Association (KTA) have warned traders to expect new transport charges once the Finance Bill is enacted.

KTA chairman Newton Wang’oo said with the increment of the VAT, doubling of advance tax on prime movers and trailers and the introduction of other statutory charges like National Health Insurance Fund, the cost of running the transport sector will definitely go up.

“We have no option but to hike transport charges once fuel prices go up, and this will definitely affect the cost of moving cargo on the Northern Corridor. With the increment of advance tax for commercial vehicles, this will further make the cost go up,” said Mr Wang’oo.

The Bill proposes to double this levy from January 2024, where vans, pick-ups, trucks, prime movers, trailers and lorries will pay $30 per tonne of load capacity per year or $360 p.a, whichever is higher.

The proposal, however, exempted advance tax for tractors or trailers used for agricultural purposes.

KLDTDU chair Roman Waema said new taxes introduced by Kenya has affected truck owners and they are reinventing means to stay in business.

Read: How Kenya tax plan will impact EAC trade

“We have reports that a number of permanent employed drivers have received communication of change of working terms to contract beginning next month. Most of the truck owners are uncertain about the future in the sector,” said Mr Waema.

Barely hours after the National Assembly approved the contentious proposal in the Finance Bill, 2023, Buzeki Group of companies, a major business conglomerate, announced change of business plan.

Among those to be affected is Buzeki Logistics, which provides transport services for loose, containerised and abnormal cargo contractual services. The group’s flagship is bulk cargo handling, in Kenya and the larger East and Central Africa.

Buzeki Logistics proposes to downsize by eliminating some staff positions. Buzeki said that henceforth all old trucks in his fleet would stop operating.

“Due to the rise in VAT on fuel from 8 per cent to 16 per cent, we are now officially downsizing with immediate effect. All old trucks, including those with Euro 3 and below, will be sent to the scrap yard,” said the firm’s founder and chairman, Kiprop Bundotich alias Buzeki.