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EA traders spoilt for choice as infrastructure upgrade boosts supply chain
It used to be the most efficient way, to ship Zambian copper through Mombasa. When a better supply chain option emerged through the TAZARA railway, the volumes were diverted to Dar es Salaam.
During the period up to the 1970s, truckloads of copper ingots would line up in Mombasa port to deliver their cargo. A dedicated area – the “G” section – at the port would store Zambian copper awaiting export.
In those years, the port “hinterland” covered reached as far as Zambia. That was then. Today, not a single kilogramme of Zambian copper is exported through Mombasa. Most of it goes through Dar es Salaam port. What happened?
In those past years, it was generally accepted that Mombasa port’s absolute hinterland was geographically determined and static, covering Kenya, Uganda, Rwanda, Burundi and Eastern DRC.
It has since been proved that hinterland can be influenced and changed by technology – such as the Single Window customs clearance, removal of non-tariff barriers and enhancement of physical infrastructure such as roads, rail and even port efficiency.
The speed of change was slow in the past, but with the current ambitious investment in infrastructure by all regional governments, how will the network of refurbished roads, new road network, new standard gauge railway network and new ports influence supply chains?
Kenya has unveiled an ambitious road construction plan – the building of an additional 10,000km of tarmacked roads in five years. Compare that to 14,000km in 50 years since independence.
Two SGR corridors, Mombasa-Nairobi-Malaba and Lamu-Isiolo to Ethiopia and South Sudan, when completed, will open up new opportunities for Mombasa port. The proposed SGR master plan provides for a linkage of the Northern Corridor with a line between Garissa and Nairobi.
Shifting hinterland situations make a very strong free market point. Increasingly, importers and exporters don’t choose ports just because they are the nearest to their business locations. Instead, businesses select supply chains, not ports.
The most efficient supply chain has the biggest possibility of being picked, regardless of the port used. When a middle income Nairobian imports a car from Japan, one’s main concern is how to get the car in Nairobi at the lowest cost and shortest time possible, regardless of the port used.
Efficiency of any supply chain is mainly measured in terms of cost and speed. An inefficient supply chain gets relegated or bypassed.
It used to be the most efficient way, to ship Zambian copper through Mombasa. When a better supply chain option emerged through the TAZARA railway, the volumes were diverted to Dar es Salaam.
The Dar es Salaam-Zambian copper supply chain option became more efficient than Mombasa. There are many examples that can be given and from every port, hinterland have been shifting.
Kenyan sea ports – Mombasa and Lamu – are set to benefit from the proposed SGR and highway to run from Addis Ababa. Part of southern Ethiopian cargo should now find Kenyan ports a preferred supply chain compared to Djibouti and the new Berbera corridor.
The Mombasa and Lamu port hinterland is bound to get a boost of the extension. Port competition between Mombasa and Lamu will be expected, especially for Kenyan and South Sudan cargo. Both ports will rely on improved infrastructure.
With the interlink connecting Nairobi to Garissa, Lappset will be able to feed into the Northern Corridor and vice versa, giving exporters and importers the much needed alternative of ports choice.
In the same way that a shipper in inland Berlin, Germany has a choice between using the port of Hamburg or the port of Bremen, a shipper in Nairobi will have the choice between Mombasa and Lamu.
It is, however, in Northern Tanzania, Rwanda, Burundi, parts of eastern DRC and Uganda where consumers of port services will most likely be spoilt for choice.
Mombasa, Tanga, Bagamoyo and Dar es Salaam – they remind one of the North European port competition among Lehavre (France), Antwerp (Belgium), Bremen and Hamburg (Germany) ports all within about 800km with adequate road and rail network connection inland.
All are major European ports with world-class reputation, competing for cargo from the same hinterland. However, service level, port costs and specialisation are the major differentiation and the reason one may choose a port instead of another.
A new SGR is proposed from all the four East African ports – Dar es Salaam, Bagamoyo, Tanga and Mombasa – and the road networks are undergoing an upgrade. The Tanzania rail network to be linked with the Kenyan one between Voi and Moshi, will give customers in northern Tanzania, Rwanda and Burundi a wide option of supply chains to the ports.
East African ports will find themselves under increasing competition from rail and road. With reduced border formalities and NTBs, rail and road transport is likely to be faster than sea transport for the intra-regional trade, including along the East African coast.
Value added services would play a big role in attracting both cargo and ships to one port instead of another port. It will be interesting to see how our major ports in East Africa will respond to this anticipated fierce competition.
Mr Kututa is a shipping and logistics consultant.
