The Private Sector Call for Reduction of Freight Rates to ICD Naivasha

Through a report from a study commissioned by The Kenya Private Sector Alliance (KEPSA) in partnership with Shippers Council of East Africa (SCEA), the Private Sector has called for a review of Kenya Railways freight rates to the Inland Container Depots to make them competitive. The report proposes the reduction of rates from the current USD 600 to USD300 for 20ft container, from USD 800 to USD 400 for 40ft container of up to 20.9 tonnes, and from USD 910 to USD 500 for 40ft container above 21 tonnes.

The multiagency study was initiated to independently assess the situation of Naivasha Inland Container Depot (ICD) and how different Departments and Agencies can make the facility ideal for clearance of cargo. This was occasioned by an outcry by Private Sector on issues with operational efficiency and cost-effectiveness of the facility.

Naivasha Inland Container Depot

The study sought to; appreciate possible benefits to transit partner member countries and exporters; compare the total freight costs for the rail freight, from Mombasa to Naivasha and the EAC Partner States, with road freight costs considering all shipping, last-mile and related costs; undertake a situational analysis of Naivasha ICD to advice on infrastructural gaps, and review supportive regulatory and policy environment for efficient operations.

With the launch of the facility in 2019, the ICD was expected to reduce transport costs, guarantee minimum non-tariff barriers (NTBs), facilitate fast and predictable cargo evacuation from origin to destination, and contribute towards the reduction of greenhouse gas emissions generated from the transport sector, amongst others. 

The three days exercise, however, revealed that despite the infrastructural developments and economic advantages presented by the facility, some operational and efficiency concerns needed to be addressed. The team learnt that there were cases of lack of access cards and the process of application. Customers using the facility are required to travel to Mombasa for application, which is time-consuming and increases the cost of doing business.

Although Kenya Railways Corporation (KRC) had committed two (2) dedicated trains to haul cargo from Mombasa to Naivasha, the delivery of freight was experiencing delays. Due to these delays, only a few shipping lines have supported the transfer of freight to Naivasha ICD. The report, currently on final validation stages, proposes that Kenya Ports Authority (KPA) and KRC considers implementation of First in First out (FIFO) framework to ensure timely delivery of cargo to Naivasha ICD from Mombasa.

Regarding incentives, KPA is implementing a 30 days free period for cargo clearance at the Naivasha ICD. Shipping lines, on the other hand, give up to 28 days. Further, Kenya Revenue Authority (KRA) charges customs warehouse rent for any cargo that delays beyond the 21 days as provided by the East African Community Customs Management Act (EACCMA ACT,2012). The variance, the report says, creates inconsistency on incentives making it almost impractical for cargo owners to benefit.

To enhance the operational efficiency of the facility, the report recommends full installation of support infrastructure and systems. Specifically, the report calls for addition of control gates for smooth movement to trucks; fast-tracking system configuration as well as weighbridge activation; construction of verification area to support processing of local cargo; completion of re-marshalling yard to the required standards; construction of a medical facility and establishment of COVID-19 isolation facility; and infrastructure to handle perishable goods.

Further, the report wants KPA to develop and implement Standard Operating Procedures (SOPs) for the smooth running of the facility and other ICDs in the country.

To enhance visibility, the report adds that a joint marketing team involving private sector be constituted. In the future, the report opines that the facility is commercialised and run by the private sector on completion when Public-Private Partnership (PPP) processes have been initiated and completed.

The report concludes that there is need to boost collaboration and coordination of Naivasha ICD public and private stakeholders for addressing operational challenges.