The burden of container deposit guarantees affected the cost of business for struggling clearing and forwarding firms that offer logistics to cargo owners. [File, Standard]
A number of clearing and forwarding firms and customs agents have closed shop or scaled down businesses, citing the high cost of doing business amid strict compliance issues enforced by government agencies.
However, a deal with a Swiss firm that takes up the burden of container deposit guarantees with shipping lines is seen as positive development for struggling clearing and forwarding firms that offer logistics to cargo owners.
Kenya International Freight and Warehousing Associated (Kifwa) recently signed a Memorandum of Understanding (MoU) with Viaservice, a subsidiary of Viatrans that takes responsibility for the container deposits that have been seen a hurdle to small scale businesses at the port.
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The question is: Will this deal signed at a Mombasa hotel lift the struggling freight forwarders and give then a chance to grow?
The deal is also hoped to address congestion at the port of Mombasa that has been blamed for high cost of doing business as clearing and forwarders firms will no longer need to spend days raising the container deposits. The more than 1000 corporate members welcomed the pact noting that it would take the small and medium upto four days organising the container cash deposits with shipping lines hence delaying cargo clearance logistics at the port.
Viaservice will now handle the container deposit, demurrage and damage while clearing agents and cargo owners use the money usually tied up in container guarantee to pay for port charges and other business costs.
The deposit for a 20-foot container for the domestic market is $500 (Sh64,230) and $1,000 (Sh128,461) for 40-foot container respectively.
Those in transit are charged between $1,000 (Sh128,461) and $5,000 (sh642,305) for a 20-foot and 40-foot container respectively. Last year, Mombasa port handled about two million containers.
The money is usually held by shipping lines until the container is returned in time and in good condition.
Addressing port congestion
Speaking during the Mou signing ceremony in Mombasa County, Kifwa National Chairman Fredrick Aloo said this logistics solution will address port congestion and reduce delays in cargo movement along the northern corridor. “This MOU is a game changer for our members. It is about removing trade barriers through embracing innovation to make Kenya’s logistics sector globally competitive,” he said.
He noted that the deal will free capital for small and medium enterprises and hence increase their volume of business while also ensuring faster movement of cargo through Mombasa and Lamu port.
“We are relieved that Viaservice will raise the container deposits on our behalf and we can use the money to grow our businesses,” said Musa Mbira, the Kifwa National Secretary,.
The money help up in container deposits can be used to pay port charges and there clearing agents can clear more containers at the port as the burden will be taken off their shoulders.
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Viaservice Regional Managing Director John Mathenge said the strategic partnership has come at a time when Kenya is positioning itself as a regional logistics hub, and the burden of container deposits has been a costly non-tariff barrier for importers, exporters and freight forwarders.
He noted that the innovative Viaservice Container Solution (VCS) offered a business-friendly and sustainable approach that addresses the container deposits challenge while protecting the interests of the container owners and users.
“We are proud to partner with Kifwa in delivering a scalable solution that empowers that empowers businesses and strengthens regional trade,” he said.
Expanding in Africa
Viaservice introduced its service in Tanzania in 2018 and now covers six shipping lines and 75 percent of clearing and forwarding agents.
In Kenya, the foreign firm landed in June last year and covers four shipping lines and about 35 percent of the freight forwarders.
It has so far signed pacts with Kenya Ships Agents Association (KSAA), Shippers Council of East Africa (SCEA) that represents cargo owners and Kifwa.
“We are happy to have received an endorsement from the Tanzania Revenue Authority,” said Mathenge who oversee the market in Kenya and Tanzania. After Tanzania and Kenya, Viaservice now seeks to expand to South Africa, Angola, Mozambique, Ethiopia, Morocco and parts of West Africa.
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