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Why Kenya needs a world-class port in Mombasa

Wolfgang Fengler's picture

Suppose all of Kenya’s borders suddenly close. Goods and people can no longer enter or exit the country through the port of Mombasa, Jomo Kenyatta International Airport or roadways. Quickly the lack of fuel brings economic activity—and daily life— to a stand-still. Tea and flowers rot in warehouses, and hotels shut their doors for lack of visitors.

Now imagine a situation where Kenya is trading with the whole world, producing world class products and enriching its citizens: consumers can enjoy cheaper products, and exporters exploit expanded opportunities. Given the choice, which scenario would you pick? 

A more open Kenya is indeed possible. According to the “Growth Commission”, there have been some 15 economies over the last 50 years which managed to grow at the rate of 7 percent a year for more than 15 years. In doing so they were able to move vast numbers of their citizens out of poverty. These countries have a few things in common, including that they embraced the world economy through trade. Openness to trade encouraged international firms to invest. Over time, local firms caught up and eventually became world leaders, such as Samsung.

 

But in order to trade goods, you need efficient ports (and airports). Today, Asia is home to the top nine ports in the world. The most active ports are Shanghai and Singapore, with an annual throughput of more than 30 million containers. Rotterdam is the only non-Asian port in the top ten, but far behind, with some 12 million containers. See figure.

 

Figure:  Shanghai and Singapore handle in a week what Mombasa achieves in a year

 

 

No one would have predicted such a scenario twenty years ago. Is there any reason why Africa could not follow suit and, twenty years from now, make it to the top ten? Mombasa would be a natural candidate but there’s a whole lot of catching up to do. Ironically, it is congested despite the small annual volume of 770,800 containers it handles. Kenya’s exports in comparison with global export trade are tiny and many of them, such as flowers and tourists, don’t even enter or leave by sea

 

Here are some startling statistics to illustrate the magnitude of the challenge. The volume of goods Mombasa achieves in a year, Shanghai and Singapore handle in about a week. To import a container from Singapore, your goods would spend 19 days on the sea (over 7,500 kilometers), but they would need 20 more days just to make it from Mombasa, by road, to Nairobi.  Bringing  a container from Tokyo to Mombasa would cost you less than bringing it from Mombasa to Kampala. 

 

Recently, a World Bank team visited the port of Mombasa and a number of companies there. Their stories reflect Kenya’s export challenges. Take AVA (Associated Vehicle Assembly), one of Kenya’s first car assembly plants. AVA could be a prime candidate for international investment to scale-up Kenya’s nascent automotive industry. The reality is bleakly different. High labor costs, expensive and unreliable energy, and delays at the port of Mombasa have constrained the growth of the company. AVA had to close down operations earlier this month for three weeks because components for Mitsubishis and Toyotas were delayed at the port for four full weeks. 

 

The case of AVA provides an important lesson for any growth strategy: While the world is becoming globally integrated, many products are becoming “vertically disintegrated”. Today, few products are being produced in just one place. Instead, subcomponents are manufactured to scale in different locations, and shipped assembled elsewhere. To be integrated in that dense web of trade relations— and to kick start its export engine— Kenya needs to be able to import and export goods in a fast and predictable way. Ports have a big role to play in the efficient flow of goods and their sub-components.

 

There are no easy solutions. Improving the performance of Mombasa port would require a concerted effort by a large number of players, beyond the Kenya Ports Authority. For example, enhanced management at the port will not bear fruit if off-take through the road and rail networks doesn’t improve as well. Unless antiquated Customs regulations on the disposal of assets are addressed, the port and the container freight stations will remain crowded, with abandoned containers that cannot be auctioned-off. 

 

Yet there are encouraging prospects for change. The dredging of the port is in its final stages and the construction of new terminals is in full swing. Larger ships will be able to dock, cutting shipment costs and Kenya may regain some of the transshipment business it has lost. A state-of -the-art integrated security system and new IT-based tracking being installed will enhance the performance and reputation of the port. 

 

These are steps in the right direction but the pace needs to pick up. Only with a world-class port can Mombasa become a world-class city, benefiting all of Kenya and East Africa. Not so long ago, Shanghai, Singapore and Dubai were poor, sleepy, low-performing coastal cities. Look where they are today.

 

Many thanks to the World Bank’s transport team for valuable advice, especially Bert Kruk.

Follow Wolfgang Fengler on Twitter: @wolfgangfengler

Comments

Submitted by Artur on
I’m a bit confused. What is the sense to compare Shanghai to Mombasa without comparing GDP, value of export etc… Do Kenya’s exporters really need bigger port? Is it the most important task for them? Best regards Artur

Submitted by Wolfgang on
Dear Arthur, countries need to trade to grow rich. There is no case of an inward-looking economy that has become rich in recent history. In order to trade you need good ports. China and many countries have shown that an export-led strategy with strong transport logistics can yield enormous benefits. In Kenya, the first challenge is that there are not many exporters to start with and one of the main reasons being that it is too painful to import the parts and components exporters (or any other industrial enterprise needs, see case of AVA). You may have a look at this Financial Times Video which illustrates these points: http://video.ft.com/v/1545221932001/Kenya-should-mind-the-trade-gap However, there are many other challenges in Kenya and other emerging economies. What would be your key priorities for Kenyan exporters? Wolfgang

Submitted by Christine on
How stupid do those people think we are ? A bigger port is only needed because Kenyan government receives so much money from chinese government and Sudan, so they can transport - their former stolen goods from Kenya and its citizens - off. Mombasa port is big enough if they would invest more money in it to keep it nicely, but Mombasa is to central, so many people would see when other countries transport and ship kenyas ivory and other treasures Kenya has to offer. Citizens never will see the income of the government ! Kenya citizens will never receive anything ! It is a crime what is happening right now in LAMU. The investors destroy landscapes, houses and sell even land ... for whom ? Did the government ever read anything about saving environment ??? It is hard to believe, that this former island will be destroyed so soon. The result will be a huge harbour for other countries and deluted water, no fish left etc etc. Wake up before it will be to late

Submitted by Brooke on
@Artur, As Mr. Fengler pointed out, efficiency gains are an important part of improving the port. But in the long-run the port will need to grow. Exporters need many things beyond a good port and connecting infrastructure but no one will invest in their growth if they can't be assured of easy access to international markets or to imported materials needed for manufacture. Inefficient and overburdened ports (air/sea/land) will stifle investment in high potential export industries. Currently, delays are so long at the port that tea exporters are struggling to find buyers because the buyers aren't confident the tea will leave the port while it is still fresh. This hurts not only the tea growers but also the entire economy. Tea exports are an important source of foreign exchange for the country, directly influencing the shilling exchange rate. The delays at the port are creating opportunities for Tanzania and tiny Djibouti to process imports/exports that would more naturally come through Mombasa. Recently Tanzania, Uganda, Rwanda, and S. Sudan signed an agreement for a new rail network that conspicuously avoids Kenya. Already, potential exporters are looking to countries other than Kenya to establish operations. The inefficient and over-capacity ports and transportation options are hurting investment in the country and the country's economic growth.

Submitted by Anonymous on
And this is what I see as the fallacy of the EAC federation. Why should other members of the block bi -pass Kenya in the said railway project? Why should Kenya alone be concerned about having a world class port in Mombasa? Instead of taking collective actions to harness the potentials of the EAC as a trading block, we still see a lot of individual country stand alone efforts which in a way are self competing. Connectivity of all EAC countries with a world class port and a good railway and road network will certainly improve trading among the member countries and make the block more relevant. Instead, we hear of other less pressing issues being fast tracked, including for example Monetary Union and Political Federation. Improving regional infrastructure should be priority number one for the EAC.

Submitted by njoro morio on
If Kenya is to be the economic powerhouse that it wants to be especially in the Eastern Africa region, then it must improve the port of Mombasa, improve Kisumu both gateways into Kenya. I agree with the writer, streamline the port, reduce the adverse effects of corruption and unprofessional conduct and lets make the import and export of goods and services as efficient and fast as possible. The thing I have always wondered with Kenya and African as a whole is, these solutions seem so obvious they should not even be pointed out or discussed, the port authority should be on the forefront of ensuring that its port is the most efficient therefore attracting companies from Rwanda and Congo and the greater the business, the more the money for everybody to share. SIMPLE LOGIC!

Submitted by Mukami on
Can Kenya wake up!!!, the leadership which is still stuck in the glory days of yesteryears need to move on. We need decision makers who are nimble, conscientious & able, otherwise we will be left behind & it's harder to catch up than to lead.

Submitted by mildred on
i think as we the landlocked countries of Uganda and others will benefit from this new port in the making because we badly need it. so i guess its needed

Submitted by Dominic on
In addition to the infrastructure development, the other critical piece of this puzzle is improving management systems to cut down the bureaucracy.

Submitted by Anonymous on
so why did the government prefer building Lamu port before actually, making the port of Mombasa bigger and efficient? KPA should not be privatized fully but be made efficient by revamping management,procurement and port procedures that meet international standards.

Submitted by Adam on
I was under the impression that one of the biggest challenges to the Mombasa port in the long run is its geographic limitations. Its relatively shallow depth, narrow channel, etc. While improvements in the governance, logistics and regulations could improve operations, such geologic challenges are permanent. Isn't this the reason for the work going on with the creation of a port north of Lamu (deep water, wide channel)? If Lamu is in the works, does it act as a complement to the Msa port, or does it largely replace it?

Submitted by Wolfgang on
Dear Adam, indeed, physical limitations can be important. However, with the current low volume of goods passing through Mombasa you could go a long way until you reach the physical limits. Germany's largest port of Hamburg has even more physical limitations as it is an "inland port". Still Hamburg's transacts almost 20 times more containers than Mombasa. Wolfgang

Submitted by Felicity Alice on
Originally it was stated that Lamu Port was necessary since Mombasa could not be extended beyond its current capacity - the current dredging at Mombasa seems to counter this and so it is now unclear whether the government perceive Lamu to be a replacement or a compliment. There are also some suspect details floating around about Lamu, which also requires extensive dredging (in a UNESCO World Biosphere Site no less...) in order to accommodate the vessels. The government of Kenya has been particularly quiet in releasing details on the Lamu Port project and currently do not even have the guaranteed funds to complete (though it has begun already). The need to extend trade is clear however the methods are not. More work needs to be done on improve internal infrastructure and equity issues before a port in either location will be able to make much difference.

Submitted by Athman Mohamed on
some of the work we do at the organization i work with has established that up to 40 percent of the delays for transit goods are occassioned at the port of mombasa. Delays lead to high costs of doing business, which are passed on to the end consumer with ridiculous result of upto 45% of any goods in the landlocked countried being attributed to transport costs (and related delays). Improvement at the port are therefore necessary, especially with the projections that the port traffic will quadruple in about ten years. We have a problem. But gegoraphical constraints and other related factors have led people to term mombasa as a 'landlocked' port... You just have to visit and see the trucks parked outside the port creating congestion and its plain to see why. Measures as the introduction of the container freight stations to move goods out of the port faster have merely resulted in transferring the problem from one point to another; CFSs are not regulated, the tariff structure is 'random' and costly and worse, the CFS profit model is based on charges on how long the goods stay in their premises! Improvement of equipment can only increase a capped amount of optimal productivity, harmonization of soft issues like cooperation between revenue authorities, port authority and OGAs is something that can be done... a new container terminal is being planned... And all these will alleviate the problem a little bit. Hence the thinking on a new port at Lamu to overcome limitations currently faced at Mombasa. Here's my BUT... in my opinion, its a bit unfair to compare Mombasa say to Singapore... singapore is handling mostly transshipments, not inland transit... Its an island. While I agree Mombasa's throughput could improve, we need to compare apples to apples I think :)

Submitted by Wolfgang on
Dear Athman, many thanks for your deep insights. I like your term of Mombasa being a "landlocked port". In terms of comparisons with Singapore, let me add two thoughts: 1. Mombasa has lost a lot of its transshipment business over the last years. It needs to be earned and it should try to remain it. 2. There are other global ports which have a smaller transshipment share than Singapore - such as Shanghai and Hong Kong - where the comparisons with Mombasa are almost as extreme as with Singapore. Wolfgang

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