Kenya’s International Freight and Warehousing Association (Kifwa), representing cargo handlers, is implementing a strategic shift to counteract price undercutting and enhance earnings. The core of this strategy is the introduction of minimum service fees, set to be enforced from December 1, 2023. While this move aims to mitigate inflation’s impact, it will inevitably lead to increased costs for cargo exporters and importers, thus altering the business landscape.
Minimum pricing strategies are widely used to ensure fair income for producers and service providers. However, consumers of these products and services often bear the brunt of higher prices. According to Kifwa’s national chairman, Roy Mwanthi, this measure is essential to address a situation where some traders have exploited a lack of minimum charges, charging as little as Sh3,000 for clearing cargo worth millions of shillings. Such practices will come to an end as the new pricing structure takes effect.
Under the revised rates, the cost of obtaining an Import Declaration Form, which formerly stood at approximately Sh2,000, will now require a minimum payment of Sh5,000 for both 20-foot and 40-foot containers, irrespective of whether the goods are transported by air, sea, or land.
To clear a 20-foot container, a minimum fee of Sh15,000 will apply, while a 40-foot container will incur a cost of Sh25,000, or 1.5 percent of the total Cost, Insurance, and Freight (CIF).
Regarding export services, clearing and forwarding agents will introduce a fee structure of $100 (Sh14,987.99) for 20-foot containers and $150 (Sh22,481.99) for 40-foot containers for local dealers. Transit services will be priced at $100 (Sh14,987.99) and $200 (Sh29,975.39) for 20 and 40-foot containers, respectively.
Vehicle importers will see an adjustment in clearance costs. For vehicles with an engine capacity of up to 2000 cc, the clearance cost will be Sh15,000, while those with engine capacities ranging from 2000 to 3000 cc will incur a cost of Sh20,000. Vehicles exceeding 3001 cc, along with buses, trucks, lorries, and specialized vehicles, will be subject to a Sh30,000 clearance fee per unit.
Beyond these changes, Kifwa has also established minimum charges for various other services, including transshipment and bond extension services. These steps are intended to combat unfair business practices that have plagued the industry.
The association’s decision to introduce these charges is in response to unscrupulous middlemen exploiting the system without bearing the typical business costs. Leonard Njiru, Mombasa branch Kifwa chairman, highlights the issue of middlemen paying agents meager wages while taking the lion’s share of profits. Importers have also taken advantage of this situation, demanding price cuts by citing competitors with supposedly cheaper rates.
For the first time, clearing and forwarding companies are introducing minimum charges for land, sea, and air freight services. As a result, traders will have a standardized fee structure to adhere to, reducing the practice of haggling for the lowest cost.
These measures, initiated by Kifwa, aim to bring stability and fairness to the Kenyan cargo handling industry. The adjustment signifies a shift away from cutthroat price competition toward a more balanced and consistent pricing structure. Importers and exporters must prepare for these changes as they become effective on December 1, 2023.
Photo (Angeline Mbogo)
By: Montel Kamau
Serrari Financial Analyst
21st October, 2023
