National shipping line revival plan signals lower freight costs

The revival of the State-owned Kenya National Shipping Line (KNSL) is set trigger price wars with foreign-owned ships with the promise to offer discounted freight charges.

Maritime and Shipping Principal Secretary Nancy Karigithu told Parliament that the Government will be able to influence pricing for imports, exports and insurance premiums through discounted rates.

The dormant shipping line will be revived and allowed to take over the Sh30 billion Kenya Ports Authority second container terminal, which was opened in September 2016 and can handle about 550,000 twenty- foot containers per year.

“By controlling its own terminal, KNSL will influence the efficiency of cargo operations reducing time and excessive operational costs,” she told the National Assembly’s Transport Committee.

She said it will offer discounted rates and ink partnership with SGR to make it cheaper to import goods in Kenya.

The company has the sole mandate to handle government cargo and also tap into private cargo. This means it will ship government goods and State tenders offered to private investors such as import of subsidised fertiliser.

The Government will seek to allocate a percentage of cargo to be shipped through the line and encourage partnerships with major international maritime companies.

Kenya imported goods worth Sh1.76 trillion in 2018, up from Sh1.72 billion in 2017. The discounted pricing could force other shipping lines to lower their costs in the race to grow and defend market share.

“In addition, special rates can be negotiated with the SGR for dedicated locomotives that will work towards a faster uptake of cargo which will then result t in cost saving for KNSL,” she said.

Ms Karigithu said reviving the shipping line will save the country over $20 million in demurrage cost that Kenya incurs on oil imports in commercial ships.

Kenya paid out $23 million (Sh2.3 billion) in demurrage or penalties for delayed evacuation of goods from ships due for its oil imports in 2017.

The foreign shareholders in the dormant shipping line include Mediterranean Shipping Company and MS Oceanfreight Ltd.

Multinational shipping lines have been angling for control of the KNSL as the government looks to revive the struggling parastatal.