Private clearing firms to lose state business in changes

State Department for Shipping and Maritime Affairs Principal Secretary Shadrack Mwadime

State Department for Shipping and Maritime Affairs Principal Secretary Shadrack Mwadime during a tour of the new Kenya National Shipping Line facility in Mombasa on December 14, 2022.

Photo credit: Kevin Odit | Nation Media Group

Private clearing and forwarding agencies could lose the lucrative business of clearing government cargo.

This comes as the government pursues a law change to revive the Kenya National Shipping Line (KNSL) and Government Clearing Agency (GCA) to handle government imports and exports.

Once implemented, the move will see all government cargo being imported or exported by air, water or land cleared by the state-owned enterprises, leaving tens of private firms with no business.

The government hopes to turn around GCA and KNSL into profit-making institutions within the shortest time and save more than Sh3 billion spent annually on private shippers and clearing and forwarding agents. 

State Department for Shipping and Maritime Affairs Principal Secretary Shadrack Mwadime said GCA is capable of generating revenue worth Sh500 million annually through clearing and forwarding services. 

While touring the agency’s offices in Shimanzi in Mombasa, the PS said revamping the agency’s operations will result in significant savings to the government in the form of demurrage charges and penalties which it currently pays to private firms.

Mr Mwadime said the move will also ensure safety and confidentiality in the clearing of sensitive government cargo.

GCA was established to clear cargo for ministries, departments and agencies (MDAs). Unfortunately, due to underperformance, MDAs decided to clear their goods through private clearing and forwarding agents. 

In the current government, the functions of GCA have been transferred from the National Treasury to the State Department for Shipping and Maritime Affairs. 

President William Ruto’s administration plans to table a Bill in Parliament to speed up the revamping of KNSL. Previous efforts to turn around the agency were hampered by a law that prohibits ship owners from port operations such as clearing and forwarding, running terminals or container freight stations.

Ship owners are also currently barred from offering crewing agency services, operating a port facility and being a shipping agent or terminal operator.

Amendment introduced

In a Bill sponsored by National Assembly Majority Leader Kimani Ichung’wah, the Ruto administration wants MPs to amend the Merchant Shipping Act by deleting the prohibitive Section 16 of the law.

“Amend Section 16 of the Merchant Shipping Act which restricts ship owners from providing the services in the maritime industry,” the Bill’s memorandum reads.

The National Assembly Transport committee is expected to review the proposal once Parliament resumes this February.

Yesterday, Kenya International Freight and Warehousing Association chairman Roy Mwanthi said the government agency has been operating on a low scale and they have no objection if it only deals with government cargo. 

“We have no objection to that plan but what we do not want is government interference with private cargo. It should let that be competitive,” he said.

KNSL was established in 1987 as the national seaborne trade carrier but collapsed under years of mismanagement and massive debt.

Its shareholding has been a subject of political controversy, with the latest move likely to stir up the dust that was raised during former President Uhuru Kenyatta’s endeavours to revive the entity.

The new development comes as the Ruto administration continues to reverse key port operations decisions made by former President Uhuru Kenyatta’s government.