Fred Seka There have many new developments on the Northern Corridor Route linking Kenya's port of Mombasa to Uganda, Rwanda, Burundi and Eastern DR Congo over the past three months. The changes are all aimed at improving the flow of goods to the landlocked countries, especially Rwanda, Uganda and Burundi.
Clearing and forwarding agents are some of the major key stakeholders in this business. Edward Ojulu spoke to the chairman of Rwanda Freight Forwarders Association (ADR), Fred Seka on what these developments mean for business in the region and people in general.
What has changed in the way business is done through the Northern Corridor?
A lot of things have happened on the Northern Corridor during the past three months. Heads of states of partner states took a decision to establish a single customs territory and tasked their respective revenue authorities to implement the decision.
The objective is to facilitate trade by eliminating unnecessary delays. The Northern Corridor had been characterised by delays in clearing and transporting goods, congestion at Mombasa and rampant loss of containers.
We visited the port recently and we noticed that Kenya Ports Authority has moved to improve efficiency. The Government of Kenya has removed roadblocks and reduced weighbridges. All these changes have helped traders cut costs in several ways. In the past, clearing agents in Kenya would charge for clearing goods in Mombasa, then while crossing into Uganda, the Ugandan agents would also charge and finally Rwandan agents.
Each of the three transactions cost money--about $300 per container in Kenya, $100-$200 bond fee per container in Uganda and about the same bond fee in Rwanda. This is in addition to local clearing fees of $100 per container. All together, it costs a trader over $800 on clearing fees alone to deliver goods to Kigali from Mombasa.
How is this going to change in real money terms?
With a single territory, there will be no requirement for transit bond on Uganda or Rwanda-bound cargo. Instead, we shall have a fixed rate per container of about $300-$400--this is a reduction of about a half of the costs. A bond is like some kind of guarantee that goods transiting to Rwanda, will not end up in Kenya or Uganda. When a clearing firm executes a bond for a client, it is guaranteeing that the goods will reach their destination.
So, before you remove the goods and put then on transit, you deposit with the revenue authority the amount of money equivalent to the value of their taxes. In most cases, this is a lot of money and clearing firms have to signup for insurance cover and then charge importers a commission. This too increases the cost of doing business. With the removal of transit cash bond, traders will spend less and when businesses pay low costs, they may pass on the benefit to consumers in terms of lower prices.
With roadblocks and checkpoints removed, incidents of corruption will be minimised. It is the officials who have been in-charge of these roadblocks that have been taking bribes. Now that they have been removed, there will be nobody to demand or take these bribes. The maximum number of days a truck will spend on the road from Mombasa to Kigali is 5 days.
It used to be weeks because of roadblocks and weighbridges. The longer a truck stays on the road, the more costs to maintain the drivers. These costs are not absorbed by the truck owner, but are passed on to a trader who in turn passes them on to a consumer.
Kenyans fear that Rwandans and Ugandans will take their jobs when clearing goods at Mombasa under the single customs territory starts. Are their fears genuine?
That reasoning came about because of lack of proper information. It is true that Kenyans used to control 100% of the clearing business in Mombasa which they will now have to compete for with other clearing firms from partner states. When the presidents made the decision, for a single customs territory--that means clearing all goods from the first port of entry, they were looking at the bigger picture, not just clearing jobs.
The new arrangement will be guided by the principle of mutual recognition. That means Kenyans are free to handle any business--whether Rwanda or Uganda-bound. When Rwanda clearing agents open an office in Mombasa, the employees will be Kenyans because it is expensive to maintain Rwandans in Mombasa. So nobody will lose a job to another person.
We are looking at how to partner with our Kenyan counterparts in Mombasa--whereby we can handle the business from here while they deal with it from the other side, whenever necessary, and we share the commission. As Rwanda, we plan to have one office in Mombasa and equip it with all the necessary equipment. We have 115 member-companies and not all of them can open offices in Mombasa.
With proper information passed on to all, we are now in a state of collaboration because no one is going to lose. When we visited Mombasa, our colleagues took care of us--they hosted us to dinners, transported us from our hotel to the port and showed us around. We appreciate the goodwill gesture extended to us by our Kenyan counterparts.
Have traders started feeling the impact of the removal of roadblocks and improved services at the port of Mombasa?
It may be too early to feel the impact, but what I can say is that there are no more delays at roadblocks and weighbridges. It now takes 2-3 days for a truck to arrive here from Nairobi. I encourage traders to use the Port of Mombasa because things have really improved.
Kenya Ports Authority now has an office in Kigali, how are your clients making use of that facility?
In a few weeks to come, we shall be able to pay port fees from here. This will eliminate the need to travel to Mombasa with money and pay physically or the cost of transferring money through the banking system. Therefore, we shall be able to pay port fees and taxes from here, and once all these have been paid, you are entitled to take possession of your goods.
Is there business in Rwanda to sustain all the 115 clearing companies?
Yes. If it was not there, they would not continue to operate. In fact more people want to join the profession. If Rwanda is importing and exporting, then clearing agents have business.
We are key partners in revenue mobilisation because we convince our clients on the benefit of complying with tax obligations. That is why you see that some of them are now in blue channel whereby they don't have to line up with everybody to clear--because they have showed that they are tax complaint.
Today, we are not seen as working to help traders dodge taxes. We are now called customs agents--which mean that we collect duties on behalf of customs. As an association, we are focusing on building capacity among our members to be able to handle big business because prospects for growth are big.
The market is growing and soon we shall be handling business from Juba, Burundi, Uganda etc. To handle such business, our members must be able to read and understand the relevant documents.