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Dissecting the Finance Bill for the Fiscal Year 2022/2023
6 min read.Historically, Kenya’s collections have always fallen below the budget and previous governments have heavily relied on loans to bridge the gaps. Currently, we have a projected budget of 3.66 trillion yet we are projecting to collect 2.89 trillion in revenue collections. We do not need to dig too deep to understand the crisis.

As we crawl towards the final leg of the fiscal year 2022/2023, the National Treasury tabled the Finance Bill, 2023 (the Bill) before the National Assembly on Thursday, 4 May 2023. The Bill proposes a raft of tax changes that are geared towards expanding the tax base and raising revenues to meet the government’s ambitious budget proposal of KES 3.6 trillion for the year 2023/2024. This is an 8% surge from the 2022/2023 fiscal budget.
Following Article 210 of the Constitution of Kenya 2010 and Section 35(2) of the Public Finance Management Act which requires public participation in all public finance matters, the budget estimates were laid bare to the public in a bid to garner their input through the National Assembly until May 20, 2023. In retrospect to the call for public participation, Kenyans on social media did not hold back in giving their opinions. Some felt that the new taxes being proposed for introduction were an attempt by the new regime to choke citizens with taxes while others felt that this year’s proposed fiscal budget was more inclined towards helping the low-income earners, “the hustlers”.
Generally, while they are all positive changes and have been welcomed with open arms, there are other changes that brought about a heated debate among the members of the public. In this month’s column, we ask for our readers, what really are these changes?
Exemption of Liquefied Petroleum Gas (LPG) from Value Added Tax (VAT)
The current regime has made it clear that it aims at spearheading the country to 100% LPG usage by 2025. Over the past years, LPG has been on the decline following the re-introduction of the 16% VAT on cooking gas and the high costs of crude globally due to the Russia-Ukraine war. Kenya re-introduced a VAT of 16% on LPG in July 2021, causing a further rise in prices but was later halved to 8%, after a public uproar.
This fiscal year’s Bill proposes to slash the 8% VAT applicable to LPG and make LPG exempt from VAT. In addition, the importation of LPG is proposed to be exempted from import declaration fees and railway development levies. This move will ensure LPG becomes more affordable, hence reducing the appetite for wood fuel which has led to illegal logging in the past years. For a government that seems very keen on joining the global community in the efforts to mitigate the deleterious effects of climate change, this proposal is a welcome move and offers an assurance that the war on global warming will be won by action and not mere lip service.
Taxation of Employee Stock Ownership Profits (ESOP) benefits for employees of start-ups pushed forward
In the proposed Bill, Taxation of ESOP benefits for employees whose income is below Ksh 100 million and who have been in existence for less than 5 years will be deferred and not taxed immediately. The option is exercised but will be taxed within 30 days of the earlier of the expiry of 5 years from the date the option was granted, the disposal of the shares by the employee, or the date the employee ceases to be an employee of the eligible start-up.
Currently, employees pay taxes, immediately on the gains accrued between the dates they became eligible when they exercised the share option.
The proposal follows remarks made by Kenya’s President, Dr. William Ruto, during the American Chamber of Commerce regional business summit earlier in March this year, where he had hinted at the change stating that he had received complaints over the imposition of benefit tax “even before the value realized”. The shift is part of the government’s plan to make Kenya an attractive business destination.
Kenya Revenue Authority’s (KRA) power to adjust excise duty rates for inflation slashed
The Bill proposes to repeal Section 10 of the Excise Duty Act which empowers KRA,with the approval of the Cabinet Secretary, to by notice in the Gazette adjust the specific rate of excise duty once every year to take inflation into account. This comes as a relief, especially to business owners, who have often accused KRA of being insensitive by their constant inflation adjustment despite Kenyans struggling to make ends meet and businesses grappling with global shocks.
Introduction of Digital Assets Tax targeting
Very keen to target anyone who owns a platform or facilitates the exchange or transfer of digital assets, digital asset tax is proposed at the rate of 3% and will be applicable to the income derived from the transfer or exchange of digital assets. The Finance Bill mandates that individuals involved in transactions of digital assets such as Non Fungible Tokens (NFTs) and cryptocurrencies pay taxes. The Bill defines digital assets as anything of value that is intangible and generated through cryptographic or other means.
This proposal comes despite the Central Bank of Kenya’s repeated warnings against crypto transactions by financial institutions and the general public.
On the flip side, Kenya is ranked number one in Africa, in peer-to-peer cryptocurrency transaction volumes, hence this might be a great source of revenue.
Payment of 20pc for tax appeal deposit
Last year , tax experts raised constitutional questions over a proposal requiring firms and individuals to deposit half of the tax demands by the Kenya Revenue Authority(KRA) before escalating the dispute from the appeals tribunal to the High Court when the Bill was introduced. However, former treasury cabinet secretary, Ukur Yatani, said the proposed changes were aimed at encouraging out-of-court settlements for faster resolution of cases so as to unlock billions of shillings tied in legal processes for years. However, the bill was shot down by Members of Parliament arguing that it would harm businesses.
This year the bill proposes to introduce a requirement under section 32(1) of the Tax Appeals Tribunal Act for taxpayers who appeal the decision of the tribunal to deposit with the commissioner 20% of the disputed tax as security before filing an appeal at the High court. The Bill also proposes to introduce a new subsection under Section 32 of the Act that guarantees a credit of the security to the taxpayer by the commissioner within 30 days in instances where the hHgh Court decides in favor of the taxpayer.
While this proposal may be justified as an attempt to facilitate alternative dispute resolution mechanisms enshrined under Article 159 (2)(c) of the Constitution, it is clearly a manifest attempt to claw back the right to access to justice under Article 48 of the Kenyan Constitution. The proposal possibly makes it hard for taxpayers to get a fair hearing before the court when they feel aggrieved by KRA. Additionally,despite the assurance by KRA on the security of the deposit, there are likely to be significant delays, especially in tax refunds. This is because the commissioner has a history of delays, especially in tax refunds.
Digital Content Monetization Tax
The Value Added Tax was introduced in 2013 and a digital/electronic component was added in 2020. Another change was proposed-the VAT (Electronic, Internet, and Digital Marketplace supply) Regulations, 2023 in line with the current government’s plan to expand its tax base.
The 2023 regulations made it clear that the digital VAT will comprise of supplies made over the internet an electronic network, or any digital marketplace.
According to the proposal, content creators will have to pay 15% of their online earnings. It goes on to add that, digital content monetization means offering for payment entertainment, social, literal, artistic, educational or any other material electronically through any medium or channel
This includes advertisement on websites, social media platforms or similar networks by partnering with brands including endorsements from sellers such as brands.
This will ensure social media influencers are nabbed into the tax net hence addition of revenue collected.
Deduction of 3% deduction of one’s basic salary towards the National Housing Development Fund
This Bill in particular has caused a tiff between members of the public and the government. The Bill is proposing a 3% deduction of one’s basic salary towards the National Housing Development matched by another 3% from the employer. However, if one is not satisfied with the fund, there are two exit routes which are after 7 years or upon retirement whichever comes first.
A similar plan by the government to raise funds for the construction of Ksh 500,000 housing units annually was stopped in 2018 by the Employment and Labour Relations court. Employees were to contribute 1.5 percent of their earnings to the scheme. The court held that there was no public participation undertaken and that transparency in its implementation was guaranteed.
This Bill was proposed by the previous regime to achieve affordable housing, alongside Kenya Mortgage Refinancing Company and a host of tax incentives that enticed private developers to shift focus to low-income housing. That said, it mainly leans on a heavily packed backdrop whose main theme is a struggling economy that requires urgent intervention. So the question that has been lingering in everyone’s mind is: at this juncture, is saving for a house a priority? Should savings be made mandatory or should it be optional? And another thing, what if the next regime decided to do away with this fund, what happens to the taxpayer’s money?Where can they reclaim it?
Other notable changes were:
Changes in personal income tax rates
The proposal is to introduce a higher personal income tax rate of 35% on the income of individuals which is above KES 6,000,000 per year (KES 500,000 per month). The imposition of the 35% PAYE is expected to negatively impact those whose salaries are above Kes 500,000 per month due to the rates’ sudden spike from 5%.
Taxation of branches/permanent establishments
There is a proposed reduction of the non-resident corporate tax rate from 37.5% to 30% from January 2024. Related thereto, the Bill proposes to tax the repatriated profits of branch / permanent establishment. Repatriated profit is determined by assessing the profits of a branch for a year of income against the increase in the value of its assets.
Conclusion
Historically, Kenya’s collections have always fallen below the budget and previous governments have heavily relied on loans to bridge the gaps. Currently, we have a projected budget of 3.66 trillion yet we are projecting to collect 2.89 trillion in revenue collections. We do not need to dig too deep to understand the crisis. Delayed county remittances, civil servants’ salary delays, stalled infrastructure development as well as the obvious high cost of living are some of the glaring indicators. Therefore, it is advisable for the government to be keen not only on revenue collection but also on prioritizing expenditure.
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This article was first published by The Platform.
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Hate Speech: Rwanda Must Not Fall Back Into the Pre-Genocide Trap
To avoid mimicking the situation prevailing in pre-genocide Rwanda, the country must develop an independent and efficient judicial system that is able to enforce sanctions against hate speech.

During the years that preceded the genocide against the Tutsi, there was an increase in hate speech against people of Tutsi ethnicity and those who did not hold views similar to those of the government.
Members of the Rwandan Patriotic Front (RPF), a rebel group made up of Rwandan refugees that had launched an attack against the Rwandan army in the early 90s, were described in the media and by some government officials at the time as Inyangarwanda or enemies of state and as Abana b’inyenzi or children of cockroaches.
Rwandans of Tutsi ethnicity and members of the opposition not affiliated to the ruling party were repeatedly described as inyenzi, or cockroaches, as inzoka or snakes, and as ibyisto or spies. During the genocide these people were targeted, hunted down and killed.
After the genocide and the ensuing civil war that was ultimately won by the RPF, legislation that forbids the formation of political parties along ethnic lines and that punishes speech deemed hateful or promoting ethnic or racial division was passed. Moreover, over the decades, various high-ranking officials in Rwanda have been heard calling on the youth to actively participate on social media to neutralize, to refute and to fight against those who talk about things that are not relevant, that are not in line with Rwanda, or who share untrue stories that aim to spread the genocide ideology.
These measures have done nothing to counter hate speech, particularly against those who dare or are perceived to challenge the Rwandan government’s narrative or policies.
I know this because I have experienced it.
I returned to Rwanda from exile in the Netherlands in January 2010 intending to register my political party and run in the upcoming presidential election. On the day of my return to Rwanda, I visited the Kigali Genocide Memorial Centre in Gisozi and gave a speech urging unity and reconciliation. I said that for Rwanda to experience true reconciliation, we need to recognise all crimes committed in Rwanda, including the genocide perpetrated against the Tutsi and the crimes against humanity committed against the Hutu. My opinion was based on United Nations Report S/1994/1405.
Just three months later, I was arrested and dragged into a politically motivated judicial process. The courts in Rwanda convicted me of “grossly minimizing the genocide” and “conspiracy to harm the existing authority and the constitutional principles using terrorism, armed violence or any other type of violence”. I appealed to the African Court of Human and Peoples’ Rights, which ruled that the Rwandan state had violated my right to a fair trial. In 2018, I was released early by presidential pardon, after eight years of detention, five of which I spent in solitary confinement.
Since my release, I have continued to advocate for the establishment of genuine democracy and respect for human rights and the rule of law in Rwanda. My detractors have also been working hard on social media to turn the public against me and discourage me in my struggle by constantly using hate speech against me, describing me as a “genocide denier”, a “terrorist” and a “tropical nazi”. A TV Channel in Rwanda called My250TV has even gone as far as to openly state that “I should be arrested at least and killed at best”.
Three years ago, I flagged the use of hate speech against me to the agents of the Rwanda Investigation Bureau and was assured that the concerned individuals would be impressed upon to cease their actions. However, the campaign of hate against me continues unabated.
Since my release, I have continued to advocate for the establishment of genuine democracy and respect for human rights and the rule of law in Rwanda.
As soon as I published an op-ed that argued that having the largest number of women in parliament is not enough to liberate women in Rwanda and that without political reforms Rwandans would continue to seek refuge abroad, Rwandan officials of ministerial and ambassadorial rank as well as members of parliament joined in the smear campaign against me and publicly stated on social media that I support a “genocidal ideology” and that my speech is inciting yet another genocide in Rwanda. Others have even gone as far as claiming on international platforms that I had escaped justice for acts of genocide.
Hate speech is not only deployed against me; It is deployed against anyone. No one is spared —Rwandan or foreigner—who dares or is perceived to challenge the Rwandan government’s narrative or policy. We are referred to as abanzi b’igihugu or enemies of the state, as ibigarasha or waste, as those who imbibed the genocide ideology with our mothers’ milk.
Hate speech is also used against Rwandan refugees who have not returned to Rwanda, their refusal to return constantly attributed to their guilty conscience because of the crimes of genocide they committed in Rwanda. Moreover, in the same way that members of the RPF were described as children of cockroaches when they were fighting to return to their motherland, the descendants of public officials of the regime overthrown by the RPF are today described as “children of genocidaires”—but only when they challenge or question the Rwandan government.
Freedom On The Net 2022 has also observed that social media accounts with government affiliations regularly harass individuals who post online comments considered critical of the government. It reports that the Rwandan government has mobilized social media users to counter the views of individuals deemed to be “enemies of the state”. This so-called “Twitter Army” has systematically attacked and discredited individuals and media outlets that criticize the government. It also explains that these social media users are rewarded for their attacks with appointments or nominations to jobs at government institutions and private companies that have ties to the ruling party.
It is, however, important to also highlight the use of hate speech against Rwandan authorities by some of their opponents who described them as abavantara or foreigners and Inyenzi or cockroaches.
This so-called “Twitter Army” has systematically attacked and discredited individuals and media outlets that criticize the government.
What the foregoing demonstrates is that Rwanda has yet to attain reconciliation. It also shows that the country’s elites are failing to engage in healthy debate on the real issues confronting Rwanda today in a manner that reflects mutual respect and Rwandaness. It also gives the impression that the priority in Rwanda is to silence dissenting voices and restrict the freedom of expression.
But it does not have to be this way.
To counter hate speech, Rwanda needs to develop an efficient judicial system, one that is independent and able to competently enforce sanctions against anyone who uses hate speech. To avoid mimicking the situation prevailing in pre-genocide Rwanda, senior officials calling on the youth to use social media to challenge Rwandan government opponents must be explicit in the manner in which the youth should go about doing this. It should be in a manner that eschews hate speech and that reflects Rwandan cultural values of dignity, unity or Rwandaness, and nobility, as highlighted in the Rwandan Cultural Values in National Development, a document published by the National Unity and Reconciliation Commission.
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Divesting from Nigeria’s Crude Oil: The Indigenisation of Eco-Damage
As indigenous oil and gas firms take over from international oil companies, Nigeria’s coastal and marine ecosystems are experiencing extensive damage due to unsustainable practices and a lack of environmental commitments.

In recent times, international oil companies IOCs) have started divesting from Nigerian crude oil and gas. They are in the process of selling off their assets and exploring alternative sources of revenue. This trend has been triggered by several factors top among them being the global energy transition. Other reasons can be attributed to an unfavourable regulatory framework, COVID-19, and security concerns around crude oil infrastructure in the country.
Since Nigeria is a fossil fuel-reliant economy, the impact of crude oil and gas divestment on the country is already having some negative ramifications. One of OPEC’s leading oil producers with oil reserves totalling 37 trillion barrels, Nigeria has since the beginning of the exercise in 2006 suffered more than £16.6 billion worth of divested assets. Moreover, steep competition from its regional counterparts has led to a reduction in the proportion of investment in the initial stages of oil and gas exploration and production that Nigeria would normally attract.
The woes occasioned by oil divestments from Nigeria are even more significant, with very dire consequences for the environment being reported. Despite the IOCs’ efforts to divest away from crude oil activities, host communities and watchdogs have decried worsening environmental conditions following the sales, caused mainly by the activities and operations of indigenous oil and gas firms. Moreover, while some of the oil assets have been divested, the sale of the oil infrastructure by the IOCs or the taking over of such holdings by indigenous players is lagging behind. This has been reported as being due to bureaucratic protocols, and the cloud of litigations hanging over the divestment processes.
Current divestment realities
Nigeria currently has five IOCs still operating in the country: Shell Producing Development Company (SPDC), Chevron, TotalEnergies, ExxonMobil and Eni. An analysis carried out by British research and consulting firm Wood Mackenzie indicates that divestments in Nigeria since 2020 amount to US$1.1 billion.
However, the IOCs are reported as wielding only a minority control (about 45 per cent) of Nigeria’s oil production assets, compared to the amount held by the operating indigenous companies (about 47 per cent). Most of the oil and gas assets that have been divested so far are onshore properties situated in shallow waters. In the past decade, a total of 26 oil mining licences have been divested by the IOCs in the Niger Basin area of Nigeria, with even more to be sold in the near future.
Shell intends to sell off approximately US$2.3 billion worth of oil and gas assets, while Eni’s divestment plan amounts to about US$5 billion, with ExxonMobil looking to offload US$15 billion of its assets. On the other hand, both TotalEnergies and Chevron plan to sell their shares in the current Oil Mining Lease (OML) 118 including the stakes held in OML 82, 85 and 88.
The waves of assets divestments by the IOCs have triggered a flurry of interest from indigenous oil companies like Seplat, the Aiteo group of companies, Eroton, Neconde, First E & P and various other local players. Within the last decade alone, Shell has sold off its shares in OMLs 4, 38 and 41 to Seplat, OML 29 to Aiteo, OML 42 to Neconde, OML 18 to SPV Eroton and OML 17 to Trans-Niger Oil and Gas (TNOG). Meanwhile, First E&P have acquired OMLs 83 and 85 from Chevron. Other local oil companies such as Sahara Energy, Oando and Conoil were recently reported as nearing some form of takeover of assets from the IOCs.
The waves of assets divestments by the IOCs have triggered a flurry of interest from indigenous oil companies.
The oil divestment efforts have been greatly encouraged by the Nigerian government as they have paved the way for further acquisition of oil assets by interested indigenous players. In the past few months, the government has succeeded in leading the bidding rounds for 57 marginal oilfields with approximately 130 firms being granted Petroleum Prospecting Licences (PPLs) to develop the fields.
Impact on climate change
The sale of oil assets and infrastructure by the IOCs in Nigeria is in keeping with their obligation to ensure energy transition mainly as a result of campaigns from several quarters to further curb climate change. Evidence of this is seen in their various official corporate pledges to reduce their share of carbon emissions and eventually reach net zero by 2050. For instance, as stated in its 2020 Sustainability Report, Shell considers divestments to be a crucial aspect of its strategy to renew and enhance its portfolio, as it works towards its objective of becoming a net-zero emissions energy company. In addition, the company is exploring low and zero-carbon alternatives to reduce emissions from the fuel it offers to consumers.
Nonetheless, numerous indigenous communities in the region have decried the extensive damage inflicted on coastal and marine ecosystems due to oil divestments. Many of these communities have attributed much of the harm to the indigenous companies that currently possess a controlling stake in the oil assets. There is a lack of sustainability practices, environmental commitments and fewer reporting standards by the local oil and gas players especially in the Niger Delta area located in the south of the country.
For instance, in the Nembe region, where settlements tend to emerge from dense mangrove swamps, locals reported that an oil spill was left unattended for more than a month before measures were put in place to stop the leakage. Also, despite the clean-up operations that followed, water in the region remains contaminated with the mangrove roots covered in a black film. As a result, fishermen are now bringing in only a negligible fraction of their prior catch. The situation has persisted since the Aiteo Group acquired Shell’s local oil licence in 2015. And although both Aiteo and Nigeria’s regulatory bodies have attributed the spill to sabotage, residents, local authorities, and environmental organisations in Nigeria have pointed to defective infrastructure as the underlying cause. Data from the Stakeholder Democracy Network indicates that Nigerian companies are responsible for 35 per cent more oil spills compared to international companies.
Also, following the acquisition of oil assets by Nigerian companies, there has been a significant rise in greenhouse gas emissions caused by gas flaring, which involves the combustion of surplus natural gas extracted during oil production. This is supported by data from the flare tracker and reports from the Environmental Defense Fund and the Stakeholder Democracy Network.
Some IOCs such as Shell, have recently boasted in their yearly stakeholders’ reports of their commitments and achievements in curtailing gas flaring. However, Capterio’s FlareIntel tracker reported that the Nigerian firm Heirs Holdings, which purchased the oil license, witnessed an over eightfold surge in flaring the year following the acquisition. In 2021, the flaring produced emissions equal to those of at least 18,000 cars.
Following the acquisition of oil assets by Nigerian companies, there has been a significant rise in greenhouse gas emissions caused by gas flaring.
The Stakeholder Democracy Network has gathered data indicating that Nigerian companies tend to flare a lot more gas per barrel of oil extracted than the IOCs. The report also disclosed that domestic firms flare over 10 times more gas per barrel of oil produced, and even if the two companies with the highest flaring are excluded, the local firms still flare nearly five times more.
Therefore, while divestment of IOCs from Nigerian crude oil and gas may appear to be positive for the environment, the indigenous oil and gas firms taking over the assets and infrastructure lack environmental credentials and are facing increasing criticism for their negative impact on the environment.
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How Bureaucracy Is Locking Kenya Out of Transshipment Business
But for the bureaucracy bedevilling Kenya’s shipping sector, Indian Ocean Island nations could look to Lamu for transhipment while Mombasa has the capacity to attract major shipping lines in order to tap into this emerging business.

The transshipment business, which involves the handling of cargo for other ports, is now an area of keen focus for many ports the world over. However, administrative bottlenecks created by the Kenya Revenue Authority (KRA) have stymied Kenya’s transshipment business even as the Mombasa and Lamu ports face increasing competition from the other regional ports that are modernizing their operations even as new ones emerge.
But the tide is set to change if the new Managing Director of Kenya Ports Authority (KPA) Captain William Ruto makes real his promise to confront the issues that have made it difficult for the port to tap into an emerging business line that has led to the growth of other successful ports.
Ruto has indicated that he will impress upon the KRA to simplify their procedures by adopting industry standards practiced elsewhere—such as at the Tangier Med port in Morocco, where 85 per cent of the cargo handled is for other ports, translating to 7.17 million Twenty-Foot Equivalent Units (TEUs).
In an ideal situation, according to the new MD, the KRA is only supposed to approve the ship manifests once the shipping lines lodges them online, which in not the case in Kenya where the KPA is required to physically handle the transshipment containers that are landed at the ports. According to global standards, however, shipping lines, are only required to give notification of the ships that will carry the transshipment containers from the ports to the final destination. Simplified procedures have seen ports such as Singapore and Salalah in Oman handle over 90 per cent of their cargo as transshipment.
The port of Mombasa handled 1.43 million TEUs in 2021 compared with 1.35 million TEUs handled in the same period in 2020, representing an increase of 75,986 TEUs or 5.6 per cent. However, the KPA’s transshipment traffic was at an abysmal level, recording only 220,489 TEUs in 2021, a slight increase compared to the 175,827 TEUs recorded in 2020.
Lamu Port has the potential to become the biggest competitor to Salalah Port in Oman and the Port of Durban in South Africa in the transshipment business. Mombasa is also better placed than Durban to handle transshipments from Europe, China, and Singapore, all major world exporting countries; smaller vessels can be used to move cargo from the port of Mombasa to others on the Southern African coast.
Lamu Port could attract transshipment cargo for Tanzania, Mombasa, Somalia, and the Indian Oceans Islands of Comoros, Madagascar, Seychelles, and South Africa.
Although the KPA has striven to market Mombasa as a transshipment hub, reforms to tap into the business have been painstakingly slow even though the increased infrastructure at the port of Mombasa—dredging of the channel, rehabilitation of the berths, and the construction of the second container terminal—has increased the potential of the Mombasa port to handle more transshipment cargo.
Over seven years ago, a joint task force of the KPA and the KRA created a working template to increase the transshipment volume after collecting views from all the stakeholders involved in this trade and recommended a major transformation that, once fully implemented, would have seen more shipping lines find Mombasa port attractive for transshipment cargo.
In 2015, the joint task force visited three ports in Europe, Asia, and Africa that were close to Mombasa in size—and which have recorded significant growth in transshipment—to gather guiding lessons for the Mombasa port transshipment initiative. The selected ports were Tangier Med in MorrocoMorocco, Colombo in Sri Lanka, and Malta’s Freeport.
According to the team’s report, one of the major factors for the success of these ports is the manner in which they have simplified the processing of transshipment cargo, a vital lesson that Kenya, which has been associated with lengthy processes, could embrace. When the team visited the three ports iIn 2015, the transshipment process in Malta took less than 24 hours to approve, Colombo and Tangier Med both took less than 12 hours, whereas at the port of Mombasa it took 8 to 10 days.
“The shipping business is a complex affair that rides on predictable trends,” said Captain Ruto, a member of the delegation.
In all the ports visited, the transshipment business has been simplified through the use of Electronic Data Interchange (EDI) for faster clearance and approvals. Shipping lines in the three ports are only required to lodge manifests with customs for approval whereas in Kenya nine steps are involved, causing delays, with the ships earmarked to deliver cargo departing without loading the containers.
“The shipping business is a complex affair that rides on predictable trends.”
Delaying a ship is very costly and the daily average additional vessel operating costs incurred by shipping lines can range between US$20,000 and US$35,000 depending on vessel size, a demonstration of how crucial it is for lines to save time in the shipping industry.
Kenya has made significant strides following the fact-finding mission to the three ports. Vessel processing at Mombasa port went paperless when the Single Maritime Window System went live in June 2021, allowing shipping lines to lodge documents online and thus significantly improving clearing and turnaround times.
KenTrade, which runs the online cargo clearing system, worked with the Kenya Maritime Authority (KMA) to implement the system that facilitates ship clearance procedures by providing a single online portal for the sharing of information on the arrival, stay and departure of ships between the shipping lines/agents and the approving government agencies involved.
Since 8 April 2019, it is a mandatory requirement for national governments to introduce electronic information exchange between ships and ports. The objective is to make cross-border trade simpler and the logistics chain more efficient for the over 10 billion tons of goods that are traded by sea annually across the globe.
The requirement is part of a package of amendments in the revised Annex to the International Maritime Organization’s Convention on Facilitation of International Maritime Traffic (FAL Convention) adopted in 2016. It is intended to reduce or eliminate the manual, decentralized, duplicated, and unnecessarily lengthy processes in the maritime sector, which are affecting ships’ turnaround times and increasing costs at the port of Mombasa.
The FAL Convention recommends the use of the “single window” concept whereby the agencies and authorities involved exchange data via a single point of contact.
Another advantage of Mombasa as a transshipment hub is its capacity to attract major shipping lines. There are over 20 shipping lines currently using the port at Mombasa, the majority of which handle containers.
But what should concern Kenya most is the growing competition that is coming with the development of other regional ports and the emergencemergencee of new ones. Tanzania is inching closer to realizing several plans and strategies that have been initiated over the years to enhance its potential as a maritime country.
There are over 20 shipping lines currently using the port at Mombasa, the majority of which handle containers.
The country has direct access to the Indian Ocean, with a long coastline of about 1,424km at the centre of the east coast of Africa. It has the potential to become the least-cost trade and logistics facilitation hub of the Great Lakes region.
There is the planned expansion and modernization of Dar es Salaam port under the Dar es Salaam Maritime Gateway Project (DMGP). The DMGP will increase Dar es Salaam port’s capacity from the current 15 million metric tonnes annually to 28 million tonnes.
The improvement of maritime hard infrastructure has gone hand in hand with the overhauling of the soft infrastructure. The Tanzanian government has already introduced electronic systems that have made cargo processing and clearing easier. These systems include the electronic single window, which has reduced paperwork and has also removed the need to physically visit multiple government agencies and regulatory bodies to lodge documents as all this can be done digitally through the Tanzania Customs Integrated System (Tancis).
In May 2016, global port mega-operator DP World agreed to develop Berbera Port in Somaliland and manage the facility for 30 years, a move that is set to make it the most modern port in the Horn of Africa. Ethiopia has acquired a 19 per cent stake in the project, the other partners being DP World, with a 51 per cent share, and Somaliland with a 30 per cent share. The total investment of the two-phased project will reach US$442 million. DP World will also create an economic free zone in the surrounding area, targeting a range of companies in sectors from logistics to manufacturing, and a road-based economic corridor connecting Berbera with Ethiopia.
Port Berbera is now the closest sea route to landlocked Ethiopia, a journey of 11 hours by road. It has opened the route needed for growth in the import and export of livestock and agricultural produce.
Djibouti has undertaken significant developments in all its ports. The Djibouti International Free Trade Zone (DIFTZ) was officially inaugurated in July 2018. The initial phase, a 240-hectare zone, is the result of a US$370 million investment and consists of three functional blocks located close to all of Djibouti’s major ports.
The project has also created major business opportunities for Djibouti and East Africa as the region’s export manufacturing and processing capacity is expanded in key sectors such as food, automotive parts, textiles and packaging.
The Djibouti ports of Doraleh Multipurpose, Ghoubet and Tadjourah have all been completed in recent years. Doraleh Port is particularly strategically located, connecting Asia, Africa, and Europe. It can handle two and six million tonnes of cargo a year at its bulk terminal and breakbulk terminal, respectively.
Port Berbera is now the closest sea route to landlocked Ethiopia, a journey of 11 hours by road.
Another key milestone for the Djibouti ports is the standard gauge railway (SGR). A 750-kilometer SGR line connecting Addis Ababa with the ports in Djibouti has been constructed, cutting a three-day journey down to 12 hours.
Djibouti has also received global attention due to its strategic location. Virtually, all of the sea trade between Asia and Europe passes through the Red Sea on its way to or from the Suez Canal. As a result, Gulf and Middle Eastern powers, China, the United States, and France have developed great interest in this route and the country today hosts 5 military bases.
Having made significant gains in automating cargo clearing procedures and also expanded the port of Mombasa by constructing a second container terminal and a new port in Lamu, there is great need for the KRA to work with the other industry players to simplify transhipment cargo procedures. The capacity of Lamu Port—which is ideal for transhipment cargo owing to its deeper channel that can receive bigger vessels—has been under-utilised. In spite of its strategic location as a transshipment hub, the port has received less than 20 vessels since the three berths were commissioned in May 2021.
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