DEAL

Shippers push for reforms on container deposits at Mombasa

Secures deal that will remove cash deposit requirements by shipping lines.

In Summary

•It is estimated that the East Africa region could unlock over $1.5 billion (Sh193.5 billion) in working capital currently held in container deposits.

•This is expected to catalyse investment for business growth and expansion.

Containers at the Port of Mombasa's Second Container Terminal
Containers at the Port of Mombasa's Second Container Terminal
Image: CHARLES MGHENYI/File

Shippers are now banking on a deal with a Swiss firm subsidiary operating locally to address container deposit challenges at the Port of Mombasa.

This includes the removal of cash deposit requirements by shipping lines, and advanced settlement of container demurrage, damage, and total loss charges.

The move is expected to enhance business cash flows and improve container turnaround efficiency among other benefits, expected to reduce the cost of doing business. 

The Shippers Council of Eastern Africa has entered into a Memorandum of Understanding with Viaservice Kenya Limited, a subsidiary of Swiss-based Viatrans SA, to achieve the plan.

The firm provides trade and transport logistics facilitation solutions in the East African region.

The collaboration will facilitate the deployment of Viaservice Container Solution (VCS), a business-friendly alternative to container deposit, a major non-tariff barrier that continues to undermine efficiency and competitiveness of the Port of Mombasa and adjacent transport corridors, thereby increasing the cost of doing business for shippers.

Under the MoU, members of the Shippers Council of Eastern Africa (SCEA) will be given a discounted rate.

SCEA acting CEO Agayo Ogambi exuded confidence that VCS will not only help in addressing the business and financial constraints associated with container deposits,  but also improve cargo logistics efficiency thus lowering the cost of doing business.

“Container deposit is one of the perennial problems identified in the SCEA’S Logistics Performance Index (LPI) affecting shippers and the implementation of VCS will provide a big relief,” Ogambi said.

Viaservice director and managing director and global head of trade facilitation at Viatrans SA, Morgan Lépinoy, welcomed the partnership, saying it underscores the company’s global strategy of leveraging stakeholders’ partnership to innovate and implement shipping and transport logistics solutions, that align to business needs.

VCS offers an alternative to container deposit systems, freeing up valuable business working capital that would otherwise remain tied up in deposits.

“The business model, already deployed in Tanzania since 2020 has proven not only to improve cash flow for shippers, clearing and forwarding agents, and shipping lines but also enhance container turnaround efficiency, thus boosting the competitiveness of businesses, particularly SMEs, ports, and transport corridors,” he noted.

It is estimated that through VCS, the East Africa region could unlock over $1.5 billion (Sh193.5 billion) in working capital currently held in container deposits, catalysing investment for business growth and expansion.

 The VCS operates seamlessly through an online platform, ensuring ease of use and flexibility for users.

The partnership comes amid growing throughput at the Port of Mombasa, where containerised cargo traffic recorded a compounded annual growth of 3.5 per cent last year, growing from 1.42 million TEUs to 1.62 million TEUs.

Considering that the deposit varies between $500 (Sh64,500) to $2,000 (Sh258,000) per TEU, depending on the cargo’s destination and taking into consideration the container traffic for 2023, shippers parted with about Sh811 million to 3.2 billion on container deposits.

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