fter a successful rollout of the Container Guarantee (CG) solution in Tanzania, preparations are now at an advanced stage to extend the trade solution in Kenya with live operations expected to kick off during the second half of this year.
Six shipping lines in Tanzania are now availing Viaservice’s Container Guarantee, according to John Mathenge, the Managing Director of Viaservice in Tanzania, a subsidiary of the Swiss-based Group, Viatrans SA, which was a pioneer in introducing CG in the region.
Viaservice is currently partnering with MSC Tanzania, Messina, Inchcape Tanzania (Hapag Lloyd), WOSAC (One Network Express (ONE), WEC lines, and CMA-CGM. Over 50% of the licensed clearing and forwarding companies in Tanzania have now signed for the container guarantee service, according to Mathenge.
Deployed in 2020 in Tanzania, CG fully secures the commercial interest of shipping lines while allowing their customers, largely clearing, and forwarding agents and shippers, the flexibility of using a business-friendly alternative to container cash deposit.
The CG entails the issuance of a guarantee by Viaservice in favour of the shipping line or agent on behalf of registered customs agents, freight forwarders, and shippers against which the shipping line or agent waives the container cash deposit.
To safeguard their interests, shipping lines routinely require cash deposits before the cargo leaves the port as a security for the return of the empty container. The deposit varies between $500 to $24,000 per TEU depending on the cargo’s destination (Domestic or Transit to other land-linked countries). These deposits have long been, and still are, imposing huge financial burdens from idle resources which create considerable cashflow problems, which inevitably translate into the high cost of doing business in the region.
Morgan Lépinoy, managing director and global head of trade facilitation at Viatrans, said that the Viaservice in Tanzania was the first entity to be established in Africa with the objective of facilitating trade through innovative digital and financial solutions.
Through its subsidiary in Tanzania, Viaservice is covering both domestic and transit traffic to Zambia, Malawi, the Democratic Republic of Congo (DRC), Rwanda, Burundi, and Uganda, and the solution has already freed over USD 7 million in working capital, according to Mr. Lépinoy.
“It addresses the challenges of Container Deposits, one of emerging markets’ major trade barriers which consumes enormous working capital. Estimated at USD 1.5B in East Africa alone, Deposits substantially increase the cost of doing business,” Lépinoy added.
Assessment of the West Africa region is slated for the end of this year with deployment projected in 2024. Other regions in Africa, Southeast Asia, and South America are also in the expansion plan, according to Lépinoy.
“The CG service offers a huge value proposition to both the Shipping lines and their customers hence its huge traction in Tanzania,” Mathenge said.
All past attempts to offer alternatives to container deposits failed since they were insurance-based, cumbersome, unsustainable, and broke the liability chain.
“Viaservice CG is not insurance and maintains a liability chain. It makes the whole process more efficient, powered by a digital platform, which improves transparency and user experience. But most importantly it has proven to effectively increase competitiveness for SMEs, leveling the playing field for them to compete with larger players for cargo” Mathenge said.
Riding on the success of the CG in Tanzania, the company is now enhancing its trade facilitation solution with a view to bridging the huge financing gap that continues to undermine the growth and expansion of the transport logistic sector, Lépinoy said.
Welcoming the move for CG Kenya’s entry, the Federation of East African Freight Forwarders Associations (FEAFFA) acting Executive Director Elias Baluku said that the CG will help provide a sustainable solution to the perennial non-tariff barrier of container deposit, therefore, lowering the overall cost of doing business thus enhancing trade competitiveness.
“Use of technology to manage the CG cycle has reduced human intervention thus saving time while increasing transparency and accountability of transport logistics services,” Baluku said.
The Intergovernmental Standing Committee on Shipping (ISCOS), which has signed a working Memorandum of Understanding (MoU) with Viaservice has been pushing for the elimination of cash deposits.
ISCOS Secretary General Daniel Kiange said it is a trade barrier at both the Mombasa and Dar es Salaam ports.
“We have suggested doing away with cash deposits as a container guarantee security and moving to the use of other forms of guarantees,” he said.
Key stakeholders, according to Mathenge, that are currently working with Viaservice to ensure the success of CG in the region include the Tanzania Freight Forwarders Association (TAFFA), Kenya International Freight Forwarders Association (KIFWA), FEAFFA, Tanzania Ship Agents Association (TASAA) and Tanzania Shippers Council (TSC).
Other private institutions include the Kenya Ship Agents Association (KSAA), the East African Business Council (EABC), and the Shippers Council of East Africa (SCEA).
In an earlier interview, SCEA Chief Executive Officer (CEO) Gilbert Langat said that the cost of container deposits affects final consumer prices.
“We can no longer afford to import large quantities since each container is subjected to about $500 in deposit, and the amount doubles for a 40-foot container, hence making it very expensive to traders who import millions of units. The cost is directly passed on to the consumers,” Langat said.