Hope remains for Kenya's major terminal

Political tension has increased congestion at the port of Mombasa, but all is not lost, writes Benedict Young

The recent political unrest that engulfed Kenya following its disputed presidential election on the 27 December brought East Africa’s reliance on the port of Mombasa into sharp focus. It is not only Kenya’s main port, but also a crucial entry point for cargo destined for neighbouring Uganda, Rwanda, Burundi, eastern Congo and southern Sudan.

Increasing demand in Kenya itself has also put the port under mounting pressure over the years, with the county’s population growing from under 12m in 1970 to nearly 37m in 2007.

Within days of the recent election, the port became crippled by congestion, and by 6 January there was a backlog of over 18,000 containers occupying an area with an official capacity of 14,300. Around 4,500 of these are transit containers for the other countries.

The civil unrest created not only a shortage of labour for port operations and customs clearance, but also made truckers reluctant to provide trucks, because of their high susceptibility to attack.

By 10 January, there were signs that the congestion was slowly beginning to ease. Berthing delays – which had peaked at four days, with the number of waiting vessels in double figures – came down to three days, with eight containerships waiting.

However, only a day later – as Cargo Systems Africa goes to press – local news sources report that the conciliation talks between the two political parties have broken down, leading to renewed fears of civil unrest, which could affect port operations.

Despite the continued nervousness among truckers, cargo is moving out of the port and David Mackay, Inchcape Shipping’s Mombasa-based regional MD, is hopeful that movements will increase in the coming week. Armed police have been deployed to escort regular convoys of cargo destined for the hinterland.

Productivity at the container terminal is averaging 12 moves per hour, with an average of seven to eight moves an hour for container vessels working at the conventional berths. Average waiting time for the container terminal has worsened and is estimated to be five to six days, while at the conventional berths it is two days.

This compares with berthing delays of a day or less in December, although congestion also hit the port in October and November, causing berthing delays of two, three and four days.

"Customs is now open, cargo is being cleared and trucks are moving. So we expect the gridlock situation to be slowly alleviated in the next 10 days if there’s no more political unrest," says Mackay.

In a bid to accelerate cargo clearance, Kenya Port Authority (KPA) has decided that the port will stop all transhipment by 15 January. With several lines relying on Mombasa for their transhipment operations, this move will certainly cause them additional difficulties.

"We are trying to persuade the port authority to accept transhipment because that is going to create a huge headache for the lines," says Mackay. "Basically, they’ll have to stop acceptance if we don’t find another alternative or we can’t persuade KPA to accept transhipment."

Alternative ports in the region are extremely limited, and the most obvious candidate, Dar es Salem, is suffering from severe congestion problems of its own, with recent berthing delays of six days.

Mitsui Line is even considering transhipping at the Tanzanian port of Tanga as a short-term solution, but Mombasa’s transhipment ban may remain in force for up to two months before the current backlog can be properly resolved.

Although the current congestion was sparked by Kenya’s recent political upheaval, it is symptomatic of a more entrenched problem facing the port. Last year, the government cancelled plans to privatise the container terminal in Mombasa, which had been under consideration for several decades. In recent years, the KPA has invested US$72m in upgrading the container facilities, including four new panamax ship-to-shore gantry cranes, two new RTG cranes, six 40-tonne reachstackers and one heavy FLT. However, many observers argue that private sector involvement is required in order to overcome systemic corruption and bring the port up to world-class standards.

Container volumes through Mombasa are growing at a dramatic rate that far outstrips the growth of the East African economy. Mackay says: "More and more traditional cargo is now being containerised, such as rice, sugar, steel and fertiliser, so a lot of the cargo that used to come in by conventional ships is now containerised. So the actual increase in container throughput has been far more dramatic than the economic growth of 6-7%.

"In fact the port says its throughput – and I don’t know if this includes transhipment – has increased in the last year by 30%, although I suspect that the throughput growth is more like 19-20%. But there is a dramatic difference between 19% and 7% growth, and a big chunk of that is the ongoing transfer of conventional cargo to containers."

This phenomenon is partly due to the overall global shortage of conventional vessels. Many of the old style vessels that used to regularly ply into Mombasa five or six years ago are either too old or have been scrapped. The growth in China and India has exacerbated this major lack of vessels, meaning that those that are available are very expensive.

Another aspect to this problem is that the port tariff does not favour conventional vessels. "Very crudely, if you stuff 20 tonnes of rice in a container, the terminal handling charge is around $80, whereas discharging 20 tonnes of rice costs $8 per tonne on the conventional side, plus additional handling charges, which actually takes it to $12 per tonne," explains Mackay. "The port needs to encourage more general cargo ships, as there’s too much pressure on the container vessels."

The KPA’s solution to this pressure is a second container terminal, which will have 900 metres of quayline, 40ha of yard space and the capacity to handle 1m teu per year. In November, the Japanese Bank for International Cooperation agreed to lend the Kenyan government Ksh16bn ($230m) towards the $318m required to build the new terminal and associated road infrastructure.

Framed under the Special Terms for Economic Partnership, the loan agreement will see Japanese companies play a major role in the terminal’s construction, while the loan itself carries a very low interest rate of 0.2% per annum.

The new terminal is scheduled for completion by 2014, and container throughput at Mombasa is expected to reach 1m teu by the following year.

"I’ve studied the plans in some detail and I know that the port studied three proposals," says Mackay. "The Japanese proposal, which will be built on reclaimed land, looks very viable. The problem is that it’s going to take five years. Before they get started, they have to do a huge dredging project and that contract hasn’t been signed yet."

The dredging contract was due to be signed in September last year with a view to starting in February, but the KPA and the dredging companies failed to agree terms amid allegations of corruption, meaning that the project now looks set for further damaging delays.

Once the dredging contract is signed, it is likely to take several months for the dredging companies to mobilise, and the project itself will take around 22 months, meaning it will take until the middle of 2010 to complete.

There is every indication that East Africa’s reliance on Mombasa will continue, and that there will be increasing pressure from Uganda, Rwanda, Burundi, the DRC and Sudan to press ahead with the infrastructure developments required in order to handle ships efficiently.

The cost of doing business remains a very sensitive issue, and a number of carriers imposed vessel delay surcharges in November that have not yet been withdrawn.

With ship operators typically facing costs of $25,000 per day, the surcharges are likely to remain in force until there is compelling evidence that berthing delays are at a minimum level.

Mackay remains bullish about Mombasa’s future, despite the recent problems in Kenya. "Africa is arriving and is no longer the ’Dark Continent’ and can no longer be ignored by the rest of the world. Africa’s renaissance is underway. I think that is very easily achievable, provided the infrastructure is in place to cope with it. Just like India and China, infrastructure is the key issue," he says. cs