Focus CFS breaking new ground in freight industry

By EUGENE OMILO

While Kenya’s dream of operating a 24 hour economy has remained partly elusive over a number of concerns to the business community, a player in the Container Freight station industry has dared to lead the pack in venturing into round the clock operations.

Focus Container Freight Station in Mombasa’s Kipevu area is yet unrivalled in terms of longer working hours as it is the only CFS operating nonstop.

With a yard measuring 12,000 square meters coupled with an additional 10,000 square meters worth of storage area in two warehouses, Focus CFS has distinguished itself as an emerging market leader in logistics.

The firm is involved in movement of containerized cargo, motor vehicle units handling and receiving deconsolidated cargo, inventory and distribution.

The General Manager Ms. Saada Hamid notes that the CFS’s proximity to the Port literary makes it an extension of the Container terminal at the Port, a fact that she says gives her firm a competitive edge.

In addition to the storage which easily handles a capacity of 5,000 twenty foot equivalent units (TEUs),  the firm has invested in three new Reach Stackers  with four full time operators making service delivery to be quick.

The turnaround time for trucks at the facility is so high, Ms. Hamid says her firm utilizes a mere one fifth of the company’s total output capacity.

She concurs with the CFSA chairman Mr. Meshack  Kipturgo that  with the kind of facilities that most CFS’s have invested in and the underutilized capacity of most others, it is time the Kenya Revenue Authority releases transit cargo for clearing by CFS’s.

“This  will more so work with the CFS’s that are closest to the port,” she says.

She further explains that it is not logical to have the port congested with Transit cargo when most CFS’s remain underutilized.

Mr. Abdi Mohamed who is the Administration Manager at the facility says the company has categorized its clients in two batches, the KPA nominated clients and the Direct clients.

The Direct clients, he explains, enjoy premier rates that include additional free days over and above the nominal four free days.

“This way, our services are more flexible as opposed to being fixed and we are open to negotiate rates with our clients,” he says.

The two decried the inefficiency at the port and the poor road network around the port area which they say directly affects service delivery to their clients.

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The history of Kenya’s CFSs

By EUGENE OMILO

According to the chairman of the CFS Association Mr. Meshack Kipturgo, the concept of CFS’s itself is not new since many countries around the world have such facilities to help ease congestion at the receiving port.

In Kenya, he says, the continued pile up of cargo towards the late 1990s especially after the El Nino rains that destroyed the road network lent credence to the use of CFSs to not only ease congestion but also to contribute to quick clearance of cargo.

“The first CFSs became operational in the year 2002 with the permission of KRA after the fulfillment of set requirements,” he says.

“This was followed soon after by other pioneer CFS’s but due to continued cargo volume, the number has grown and now stands at 14 CFSs under the CFS Association,” explains Mr. Kipturgo adding that it is after this development that there arose a need to have an association to guide the operation of the facilities. 

He says the association provides a common platform for members to share their views as well as a front with which to bring up pertinent issues of concern.

Mr. Kipturgo who is also the Managing Director of logistics giant Siginon Group says the CFSs now play a very significant role not only in cargo clearance but also in the overall economy of the country including the creation of employment and collection of revenues for the government.

Ordinarily, importers are allowed four free days within which to move their cargo but due to the nature of the logistics chain, this is mostly not possible hence the need for them to make special arrangements with the CFS’s for continued storage until when they are ready to move the cargo.

This function, Mr. Kipturgo says, is very unique to CFSs and even after the completion of the second container terminal at the port or the second port in Lamu, the role and importance of the CFSs will not wane. 

KMA’s Mrs. Nancy Karigithu also agrees that though the increased space available in the port may limit the usage of the CFSs if the current limited scope of their function is sustained, the broader role of a typical CFS will still be needed.

“They should be very useful in handling goods for home use, warehousing, re-export, temporary storage for onward transit or outright export and in some instances even transshipment traffic,” she explains adding that this may however require a review of customs procedures and risk management regime to improve flexibility of CFS services.

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Regulator to enforce standards on service delivery

By EUGENE OMILO

CFS operators have raised concerns over poor tariff structures dictated to them by the Kenya Ports Authority amongst other pertinent issues which they say affect their profitability.

The tariff structure in particular, touches on the original revenue structure for CFSs’ income which was based on demurrage penalties on late clearance of cargo.

This arrangement, however, has proved unsustainable with improved response from importers over the years.

KMA notes that such structures had the potential of encouraging inefficiency whereby CFSs could deliberately delay container transfer to generate revenue from importers.

As such, the Authority  commissioned a survey to establish the real time costs of the CFS operations and the report has largely informed the ongoing review of the cost structure between KPA and CFSs.

Mrs. Karigithu says it is expected that payment to CFSs will be based on container turnover handled at CFSs as a measure of efficiency and effective performance.

On the issue of over stay containers, the director general says KMA is raising the necessary awareness and working with concerned agencies for timely statutory interventions on over stays.

She says with the Authority’s broad mandate to regulate, coordinate and oversee the country’s maritime affairs, the key objectives are to strengthen maritime administration to create an enabling environment for the development of national capacity in the sector.

By undertaking its roles, she says the Authority expects to address the current issues of concern such as the lack of accountability for costly delays in the flow of cargo, the absence of structures to sustain efficiency and quality of maritime transport services as well as the ineffective coordination of consultation among maritime service providers and general lack of standards on service delivery.

Towards this end, she adds, the Authority is in consultation with key stakeholders to develop Key Performance Indicators for maritime transport services in the country. 

The process will be enriched with the support of development partners with the aim of having all service providers develop among themselves service level agreements against which they will be held accountable for the services they deliver. 

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CFSs - Catalysts for socio - economic development

By EUGENE OMILO

Container Freight Stations (CFS) play a critical role in trade and in the development of the national economy despite the negative publicity arising out of the general lack of knowledge on the role of CFSs and the lack of a clear framework by the government on the licensing and operations of the facilities.

By providing additional cargo storage and diverse clearance facilities to port users, the facilities are one stop centers, making logistics and supply chain dynamics easier and impacting positively on overall costs of doing business for the benefit of the economy.

CFS’s in general have given the port of Mombasa additional cargo holding capacity which would otherwise not have been available if the KPA had continued to handle these goods within the port area.

The maritime regulator, Kenya Maritime Authority, also concedes that the absence of structures to sustain efficiency and quality of maritime transport services is a challenge, the role of CFSs cannot be undermined.

“Without CFSs, the congestion at the port of Mombasa could have been impossible to manage in view of the limited infrastructure at the moment,” says KMA Director General Mrs. Nancy Karigithu.

Mombasa Container Terminal General Manager Mr. James Rarieya who is also a member of the CFS Association’s executive committee observes that it has been virtually impossible to extend the stacking capacity further within the present port limits due to the natural barriers that surround the container terminal.

“CFS’s have therefore provided the much needed relief to the port of Mombasa by providing this critical capacity,” says Mr. Rarieya.

He continues that this factor alone has contributed to the port being able to handle 770,000 twenty feet equivalent units (TEUs) in 2011, well beyond the actual port container handling capacity at 250,000 TEUs.

This capacity has over the years been increased to 500,000 through investment by the Kenya Ports Authority (KPA) in equipment with high handling capacity and paving of areas previously designated for stacking general cargo to a level that can hold containerized cargo.

Though critical to regional trade, the CFS’s have continued to face various challenges with major amongst them being what operators refer to as ‘negative cargo transfer policy issues.

The policy does not allow transit containers to reach the CFSs.

According to Mr. Wilfred Oluga who is the vice chairman of the CFS Association and Managing Director of Awanad Enterprises, there is significant increase in container through put at the port of Mombasa which shows that there will be a massive congestion problem if KPA and KRA  maintains the status quo in the handling of transit cargo.

Paradoxically, he says, there is idle space at the CFSs most of which are underutilized, registering container occupancy at very low levels, some as low as 20% utilization.

“There is relative stability and growth in the greater East and Central Africa region which is largely served by the port of Mombasa. Countries like South Sudan are fast becoming important players in the import business further straining KPA’s capacity to handle transit containers,” he explains, to show why KRA should consider releasing transit cargo to the CFSs.

      The trend has been as follows in the recent past:

2005                       2006                       2007                       2008                       2009

436,671                 479,355                 585,367                 615,733                 618,816

Further, operators say dwell time of transit containers is longer under the current arrangement which also contributes to the pile up.

Though KRA’s has cited the fear of cargo diversion as the main reason why transit cargo cannot be released to CFSs, Mr. Oluga says operators are willing to put up additional bond to address the concerns.

“Considering  all these concerns, one can see why it makes a lot of sense to allow transit containers to be handled at the CFSs which currently operate below 50% space utilization,” argues Mr. Oluga.

But even with increased bonds, Kenya Maritime Authority Director General Mrs. Nancy Karigithu thinks otherwise.

She says  with the current lack of clarity on treatment of delays arising from the various parties involved in cargo clearance and transfers and the attendant penalties that are passed on to importers, this may generate more outcry if CFSs were to handle transit traffic.

“ The ideal situation would be to transfer such cargo to a KPA facility away from the port such as the Inland Container Depots in Embakasi, Kisumu or Eldoret or any other  facility outside the port but which is fully under KPA control,” she suggests.

On the other hand, Mrs. Karigithu pegs the underutilization of CFSs to the fact the CFSs have grown in number while volume of cargo has not changed much.

“Cargo is nominated by KPA to CFSs, and the volumes handled by a CFS depend on the performance of a shipping line such that if a shipping line is doing very well, the CFS will be able to handle greater volumes,” she explains.

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