How Kenya is missing out on billions in freight charges annually as the dream to revive Kenya National Shipping Line gathers moss and slowly turns into a mirage

A car carrier discharging imported motor vehicles at the Port of Mombasa.
  • Kenya is losing about Sh100 billion ($1billion) annually in freight charges for imported cargo.
  • The country does not have a national shipping carrier that would enable it to benefit from the charges levied on imported cargo.
  • Kenya National Shipping Line (KNSL) which was established in late 1988 has since been abolished and is now a shell.

Kenyans import about 130,000 second-hand vehicles every year and the minute the vehicles land at the port of Mombasa they have to part with billions of shillings in freight charges.

As the proud new car owners drive off their Japanese machines and the foreign vessels leave Kilindini harbor, the Kenyan economy watches empty handed with nothing significant to show apart from some meagre tax charges.

Kenya is losing about Sh100 billion ($1billion) annually in freight charges for imported cargo, which goes to foreign shipping lines docking at the Port of Mombasa.

In 2018, for instance the port received a record 1.3 million containers resulting in a freight payment of Sh78 billion ($780 million). Each of the standard containers is paid a minimum freight rate of $500 (Sh50,000).

On top of that, the port receives about 130,000 units of second-hand vehicles annually which attract freight charges of Sh10.4 billion ($104 million), all of which is repatriated back to foreign countries where the shipping lines ferrying them are registered.

The reason the Kenyan economy is not getting a share of this huge goldmile is simple; the country does not have a national shipping carrier that would enable it to benefit from the charges levied on imported cargo.

Car Importers Association of Kenya (CIAK) national chairman, Peter Otieno, believes a locally-owned national shipping carrier with a well-funded government programme will save Kenyan importers billions.

“If you buy a vehicle in Japan, you pay the company in Japan, both the cost of the vehicle and freight. It is the person in Japan who then goes to negotiate with the shipping line about the freight charges. The importer is not in the picture at that moment. Now if companies operating in Kenya can negotiate their rate here with the local shipping lines it means they will be saving, and the savings will be relayed to the consumer,” said Otieno, Business Daily reported.

The Kenya International Freight and Warehousing Association (Kifwa, Car Importers Association of Kenya (CIAK) and independent maritime and shipping sector players now want the country to set up a national shipping line which will be to shipping what Kenya Airways (KQ) is to the aviation industry.

Cargo importers want Cabotage law introduced to save the local shipping industry from paying billions to foreign firms.

Shipping and Logistics, Kifwa national chairman Roy Mwanthi says a national shipping carrier will be instrumental in reducing the cost of goods. It will also go along way in easing trade and reduce freight rates.

“There is need for Kenya to have its own national shipping carrier. It is prudent because we are advocating for shipper freight rates which will end up reducing the cost of imported goods and it will in time reduce the cost of doing business,” said Mr Mwanthi.

The sooner it is set up than the local shipping line will provide stiff competition to foreign vessels, summarily pushing them to lower their freight charges.

Andrew Mwangura, a maritime and shipping expert, says Kenya, East Africa and much of African countries stranding coastlines are sitting on goldmines and watching billions go down the drain.

“There are only some countries in West Africa that are trying to achieve this but they are also not at par with the world requirement. In East Africa, no country has even tried to act on this law,” said Mr Mwangura.

All the players in the industry are of the opinion that Kenya can be a transshipment hub and has everything at its disposal to pull it off.

“Because we have the Lamu port and Mombasa port has been dredged to accommodate big vessels, we need to promote the country as a transshipment hub to enable big vessels come in, discharge their cargo and then smaller vessels can take the cargo to its final destination,” said Mr Otieno.

The players are now calling the government to take the lead and set up Indian Ocean Services (IOS) that will be run by the Kenya National Shipping Line (KNSL) to ferry cargo to other East African countries like Tanzania, Djibouti, Comoros, and Reunion among other coastline countries.

KNSL was established in late 1988 by the Kenyan Government and operates from its head office in Mombasa. KNSL was a full member of the East African Conference until its abolition and now operates under a slot charter agreement with MSC.

Last year, President Uhuru Kenyatta witnessed the signing of an MoU between the Ministry of Transport and the Mediterranean Shipping Company for the revival of Kenya National Shipping Line. 

“By controlling its own terminal, KNSL will influence the efficiency of cargo operations reducing time and excessive operational costs,” Maritime and Shipping Principal Secretary Nancy Karigithu told Parliament in May this year.

However, the steam to have KNSL up and running has since died and the government continues to drag its feet.

Once fully operational KNSL has the potential to contribute over $3 billion into the country’s economy annually and similarly create an average of 3,000 job opportunities for youth in the first year, and thereafter progressively increase to 6,000 in five years, according to the government.

With no KNSL in sight however, Kenya will continue missing out on billions in freight charges annually as the dream to revive KNLS gathers moss and slowly turns into a mirage.


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