The planned launch of the first berth in Lamu port this month will require the government to fast track other related infrastructural projects for it to benefit the country, industry players warn.
Lamu, the president announced during the recent Mashujaa day celebrations, will begin its operations, initially as a transshipment hub for global shipping lines. It will be supported by a special economic zone that is expected to attract investors from across the world, to undertake various economic activities, he added.
Although touted as a transit port when the idea was conceived during Kibaki tenure, its development has been faster than the other infrastructural projects required to open up corridors connecting Kenya, Ethiopia and South Sudan, who were the main transit target market.
George Wachira, an oil and gas expert, in an article published in Business Daily last month, lamented that the infrastructure to feed and evacuate cargo from the new berth is far from ready – an unfortunate mismatch of project planning and implementation.
The Lamu Port-South Sudan-Ethiopia-Transport (Lapsset) corridor project was intended to link Lamu Port to South Sudan via a Lamu-Garissa-Isiolo-Lokichar-Juba highway and to southern parts of Ethiopia via the Isiolo-Moyale road which is already in place. For sustainable business at the new Lamu port, he offered, the westward-bound highway will need to be constructed sooner than later.
The consultants who conceptualized the project identified six components of the project. In order to become a transportation and commercial hub for the region, Kenya would have to, at a minimum, develop: (a) a commercial port of international standards capable of handling high volumes of containers and other goods traffic; (b) a free trade zone along with the port to foster the growth of trade and commercial activity to make the area a commercial hub; (c) a new beach resort city having facilities of international standards for native and international tourists; (d) an airport capable of being an air hub for the region; (e) a railway network to enable movement of goods from the port and the free trade zone to other parts of Kenya and the countries of the region; and (f) a road highway network to support the capacity of the railway network and provide for greater movement of goods into more areas.
Apart from opening up the remote under-developed Northern region, Lapsset would tap the huge transit markets. Its direct line of sight with Addis Ababa allowed for the shortest link between the two cities. Ethiopia’s dependence on imported goods had shifted 98 percent of its traffic to Djibouti port which was about 85 percent of the whole port’s traffic in 2009.
Due to inefficiencies and high cost of over-reliance on Djibouti port alone and the huge demand to satisfy a population that stood at close to 100 million people then, the long terms solution for Ethiopia lay in the construction of the second port in Lamu.
South Sudan, which relies on Mombasa and Port Sudan in the North, was expected to import huge tons of materials for reconstruction after decades of turmoil. Lamu port was the most convenient route. The considerations for this choice took into account several factors including security, number of borders to cross, nature of the terrain, length of the route, accessibility to the West and East by the sea.
A shift in Geo-politics in the Horn of Africa has worked against Kenya for its new transport corridor. Ethiopia’s new Prime Minister Abiy Ahmed, this year’s Nobel Peace Prize winner for his efforts to reconcile with Eretria, ambitions to be the regional economic powerhouse has seen him take keen interest on access to more sea routes.
The new prime minister created a rapport with Eritrea administration shortly after ascending to power. In the deal, he restored Ethiopia’s access to the ports of Massawa and Assab. Since Eretria gained independence in 1993, Ethiopia became a landlocked country. A month later, a vessel docked at Massawa for the first time in 20 years.
Ethiopia is also opening another corridor- the Berbera Corridor Project that will connect the country to Somaliland. In May 2016, DP World, a global mega port operator agreed to develop Berbera port and manage the facility for 30 years.
The groundbreaking ceremony was held early this year, by Somaliland president, who said the investment would “bring economic stability and create employment opportunities for our youth”.
According to authorities, it is expected that the project will increase trade volumes with Ethiopia by 30% when it is completed in early 2022. Port Berbera is now the closest sea route to Ethiopia, a journey of 11 hours. The company running Berbera Port is now 51% owned by DP World, with Somaliland holding 30% of the shares, and Ethiopia 19%.
Another significant shift is the completion of Standard Gauge Railway (SGR) connecting Addis Ababa to Djibouti- a $2.5bn, 750km project, cutting a three-day journey down to 12 hours.
The Chinese-built railway began commercial operations in January 2018 and currently carries goods from the Djibouti port to Ethiopia’s Modjo dry port, situated 76 km from Addis Ababa. The facility can transport 106 containers in a single route, making it the first trans-boundary and longest electrified railway on the African continent.
“Using the Lamu port to trans-ship cargo which would otherwise be offloaded at Mombasa for the Northern Corridor appears inefficient and unlikely to pass tests in respect of costs from import ports to final importer location,” Wachira said.
According to Kenya Ports Authority (KPA), Lamu is expected to serve as a transshipment hub for the East African region, and the larger horn of Africa. Kilindini port cannot handle a Suezmax, Neo-Panamax or Chinamax class vessels, because of its shallow depths, he said, a challenge that will easily be offset by presence of Lamu due to its 18 meters natural depth.
Kenya has not been able to attract a huge consignment of transshipment business although it dredged the channel and increased yard capacity by the construction of a new second terminal.
The Port of Mombasa last year received the largest ever vessel christened ‘MV Ever Diamond’ with an overall length of 295m, a breadth of 32 m, a dead weight of 55515 tonnes and a gross tonnage of 52090.
In this voyage the vessel loaded a record 9000 full export containers, 1500 empties and discharged 1919 import containers.
In the eight months to August this year, the port of Mombasa handled 22.8 million tons up from 20.7 million tonnes in 2018. Although transshipment increased by more than 131.9 per cent, from 698,705 last year to 1,619,960 this year, the proportion of this to the total volume is still considered low.
Since the KPA started operating the second container terminal, and in close working relationship with Kenya Revenue Authority (KRA) and Kenya Ships Agents Association (KSAA), there has been efforts to reform how transshipment cargo is processed, the main culprit of shipping lines shying away from Mombasa port.
A task force visited transshipment hubs in Africa, Asia and Europe which have recorded significant growth in transshipment, to gather guiding lessons for Mombasa port’s initiative. The selected ports were Tangier in Morroco, Colombo in Sri Lanka and Malta port in Malta.
According to a report from the task force, one of the major factors of success for 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 process, can now embraced.
Transshipment process in Malta takes less than 24 hours to obtain all the necessary approvals from Customs and the port, Colombo and Tangier takes less than 12 hours, whereas at the port of Mombasa, it took 8-10 days when the task force took the trip about 3 years ago.
“The shipping business is a complex affair that rides on predictable trends,” Captain Ruto William, who in charge of port operations said in an earlier interview.
In all the ports visited, transshipment businesses have been simplified to allow faster clearance and approvals using Electronic Data Interchange (EDI).
Also the ports visited have modern risk management systems that allow Customs to make advance risk profiling and targeting and the process of resolving cases of targeted cargo has also been simplified and takes minimal time.
Without the hinterland connection, Lamu port will also be required to fast-track the proposed Sh250 billion Lamu Special Economic Zone (SEZ) project.
The government says it has received a Privately Initiated Investment Proposal (PIIP) from the China Merchants Port Group Company Limited (CMPort) for development of the Lamu SEZ.
It has three components. Construction and management of berths one to three of Lamu Port, refurbishment of berths 11 to 14 of the Port of Mombasa, future investments of berths 23 of the port of Mombasa and development of New Lamu Industrial City (NLIC).
Veronica Okoth, the director for economic and macro pillar at the Vision 2030 Delivery Secretariat, told the Senate committee on Trade and Tourism that the CMPort proposal envisages the New Lamu Industrial City to include the mainland of Lamu and Manda Island with a total area of 213.60 square kilometres, out of which 30 square kilometres is required for the industrial zone.
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