Mombasa port faces stiff competition as Dar extends demurrage period

The Port of Mombasa risks losing business to neighbouring Port of Dar es Salaam, after Tanzania moved to cushion traders from high demurrage costs importers have warned.

Tanzania Shipping Agencies Corporation (TASAC) has directed all shipping agents to extend demurrage free period for transit goods, effective June 10.

Demurrage is a charge payable to the owner of a chartered ship on failure to load or discharge the ship within the agreed time.

According to TASAC, the Covid-19 pandemic has affected cargo clearance and timely access to cargo and related documents, which has increased turnaround time to neighbouring countries.

Director General Emmanuel Ndomba has directed that importers of cargo destined for Rwanda, through the Tanzania-Rwanda border of Rusumo, be given 55 days to return empties from 30 days.

Importers of DR Congo bound cargo through Rusumo have 80 days to return empties from 55 days while those using Tunduma border have 65 days, an increase from 55 days.

Zambia cargo has 50 days from 40 days for containers to return. All East African Community states enjoy more days through Dar compared to Mombasa.

“Extended free period shall apply to containers which were issued with delivery order starting from March 15, 2020,” Ndomba says in the directive seen by the Star.

Shipping agents have also been directed to halt, with immediate effect, the use of storing order on receiving or returning empty containers in order to improve the availability of equipment and trucks.

They are also required to receive all containers which earlier could not be accepted by shipping agents due to restrictions imposed by the use of storing orders.

The latest developments now gives Dar an edge over Mombasa as importers have more time to return empties, reducing risks of hefty demurrage charges.

In Kenya, importers and clearing agents have 21 days for Kampala bound cargo and 28 days for South Sudan and DR Congo.

Local cargo has between nine and 14 days before empties are returned.

Importers are slapped with a minimum bill of $25 (Sh2,662) per container, per day, in case of delays.

“Some traders in South Sudan have told agents to use Dar es Salaam. If we don’t watch out, we will have a dormant port,” Kenya International Freight and Warehousing Association (Kifwa)national chairman Roy Mwanthi told the Star.

Though Kenya enjoys slightly lower logistic prices along the Northern Corridor, which runs from Mombasa to Uganda into the hinterland, traders could consider Dar es Salaam(Central Corridor).

This is based on the reduced demurrage exposure, which is a costly affair, especially with the current border delays.

Road freight costs from Mombasa to Kampala is at an average $3,275 (Sh348, 623 ), industry data shows, but prices vary depending on fuel prices, roads and clearing time at borders.

Shippers Council of Eastern Africa (SCEA) latest report quotes freight costs between Mombasa and Kigali at an average of $4,500 (Sh479,025) and Mombasa to Bujumbura at $6,000 (Sh638, 700).

Road transportation costs between Dar es Salaam and Kampala average $3,400 ( Sh361,930 ) while Dar es Salaam to Kigali is at $3,000 (Sh319,350).

“After the rehabilitation of the road between Dar es Salaam and Kigali, the freight rates reduced,” SCEA notes in its report.

Kifwa’s appeal for an extension of demurrage free period is yet to be granted.

Through the Kenya Ships Agents Association, clearing agents had requested shipping lines a free demurrage period to 21 days for domestic cargo, 45 days for Kampala and Northern Tanzania and 60 days for Juba, DR Congo, Bujumbura and Kigali.

This has however been turned down with chairman Kenya Ships Agents Association chairman Katy Aldrick saying it is not possible for all shipping lines to offer a blanket waiver.

The association further insists that request to extend free days does not address challenges brought about by Covid-19, saying instead, the government should ensure procedures in place to reduce the spread of Covid-19 do not impede supply chain systems.

“If we accept a slowdown in container turnaround time, we are accepting an inefficient logistical system which will ultimately only add to the cost of trade, doing business in Kenya and will not help the economy recover,” Aldrick said in a letter seen by the Star.

Kenya Maritime Authority (KMA) is expected to hold a consultative meeting today to look into the issue, which threatens to push up the cost of doing business through the Mombasa port.

Last month, Kenya Ports Authority extended free storage period for containers in view of the slow truck turn-around occasioned by the impact of the Covid-19.

The truck-turn-around time between Mombasa and Kampala has increased from four days to more than 10 days in the wake of Covid-19, with delays on border clearance being the biggest challenge.
Source: The Star

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