A new regulation in Kenya requires operators to clear cargo in Nairobi after hauling it by rail from the Mombasa Port. The regulation, introduced in March, is part of a 25-year plan launched in 2005 to improve port revenue and enhance efficiency. The requirement to ferry inbound cargo directly to the modernised Nairobi Inland Container Depot (ICD) has created fear of imminent closure of container freight stations (CFSes) in Mombasa. The private facilities provide container cargo storage before inspection by authorities at the port.
Some CFSes are, however, associated with abetting smuggling and corruption at Mombasa Port. Some of the facilities are run by powerful businessmen, who could use their influence to get involved in cargo-clearing operations in Nairobi, and in this way spread corrupt practices.
According to Daniel Nzeki, a CFS owner and chairperson of the Container Freight Stations Association of Kenya, it would be unthinkable, just about unimaginable that CFS facilities could be used for underhand, fraudulent activity. ‘There may be temptation to do it but the Kenya Revenue Authority would immediately lock up the offending CFS and slap it with hefty fines, because CFSes are considered tax collection agents,’ he told ENACT, explaining that this is one of the tasks the tax authority assigned the facilities in 2008.
In July 2018, a report revealed secret packaging of contraband goods, including foodstuffs and agricultural products, in some CFSes. Employees of Kenya Ports Authority (KPA) and CFSes quoted in the report said that ‘unscrupulous traders’ were ‘secretly smuggling illicit sugar into the country.’ The sugar was reportedly smuggled into the country from the Somali port of Mogadishu though illegal land border entries. Some of it entered through unofficial ports aboard fishing vessels loaded with the illicit cargo from ships docked in the high seas.
Commenting on the secret packaging in a local newspaper in 2015, Nzeki said the problem starts with customs officials who are assigned the duty of carrying out inspection, but when compromised do not do it. ‘Suppose you … are assigned a customs (official) to your facility. It is assumed that the goods have been checked and there is no need for an intervention,’ he said.
According to the findings of a study, published this year, CFSes have undermined port efficiency for years, which Nzeki says is next to impossible. However, the study cites scanner breakdowns that cause a backlog of freight trucks. On some days, the line of trucks loaded with containers waiting to be scanned is several kilometres long. To reduce traffic, port marshals simply wave trucks on unchecked. This allows the smuggling of contraband through container terminals.
This helps cover up the malpractice, smuggling and corruption that the study associates with compromised customs officials and agents of some private dry ports. These actors exploit ‘profitable inefficiencies in container storage’ to circumvent state control with the help of compromised customs officials.
The CFSes emerged at Mombasa Port following a container capacity crisis in 2008. The KPA licensed the units in Mombasa as a ‘stop-gap’ extension of the container terminal. The facilities increased in number and became a profitable enterprise over time. KPA security officer at the Kisumu Port, Tom Ogwe, told ENACT that the list of investors includes prominent names from the Kenyan elite, including top politicians like the Mombasa governor.
The initial implementation of the regulation led to congestion at Nairobi ICD, which means there’s a likelihood that CFSes could also be licensed to expand operations beyond Mombasa. In addition to Nairobi, the government plans to open ICDs or dry ports in the hinterland towns of Naivasha, Taita Taveta, Kisumu. Neighbouring countries also have them in place.
Uganda's cargo traffic accounts for 80% of all transit cargo at Mombasa Port. In April, the country obtained land to build its own dry port in Naivasha. An ICD project is also underway in Kampala, while Dubai Ports World operates a modern inland dry port in Kigali, Rwanda. Thus the direct ‘railtainer’ service link to the Port of Mombasa will in future enable operators to trans-ship containers to a satellite dry port terminal at the commercial heart of the Great Lakes region.
As the volume of cargo increases throughout the northern corridor, which connects Mombasa to the hinterland, the need for container freight stations will also grow. These facilities will inevitably spread from the port of Mombasa to the vicinities of the newly developed ICDs. Such an eventuality is fraught with risks related to the spread of transnational organised crime which, up to now, has been confined to the port. To prevent this from happening, CFSes will have to be accompanied with robust controls.
An INTERPOL report published in 2018 shows that criminals use Mombasa among other seaports in the region to smuggle wildlife trophies and minerals out of East Africa. They also import illegal drugs and stolen vehicles into the region. International criminal networks exploit existing informal practices and petty corruption. Port workers who talked to ENACT on condition of anonymity say that smugglers and corrupt officials bypass surveillance by falsifying records and picking out specific containers to wave past scanners that could detect contraband. This is prearranged by some CFSes, where compromised customs officials give the contraband a clean bill of health.
The ICD expansion is a logical result of exponential growth at Mombasa Port, a gateway to East and Central Africa, serving five countries with a population of approximately 204 million people.
A recent Northern Corridor Observatory report indicates that productivity over a decisive five-year period has improved compared to the port charter baseline of 16.7 in 2013.
The spread of CFSes is also likely to lead to the growth of illicit activities, Ogwe says. Such activities could affect strategic towns such as Kisumu, Kenya’s largest lakeport town. After years of neglect, Kenya has embarked on the modernisation of the Kisumu port facility. The town has the potential to rapidly become the regional hub for inland water export and import trade across Lake Victoria.
Illicit activities are therefore likely to spread across borders to major Lake Victoria towns such as Jinja in Uganda and Mwanza in Tanzania, which would handle the growing volumes of cargo as trade grows across the lake. These towns are likely to experience ‘unintended consequences’ of advancement, such as increased criminality in the inland cargo storage facilities and inland water ports.
Criminal networks are likely to exploit official corruption to circumvent law enforcement and undermine legitimate cross-border trade. This calls for strict controls to ensure that any CFSes established away from Mombasa Port are subject to robust regulation. Checks at such facilities should be planned meticulously to ensure there are no loopholes that could encourage illicit activities or be exploited by criminal networks. CFSes should also be inspected regularly to ensure these strict controls are adhered to.
Deo Gumba, ENACT Regional organised crime observatory coordinator – East and Horn of Africa, ISS