Kenya’s dry port expansion could bring more illicit profiteering

First published by ISS Today

A new regulation in Kenya requires operators to clear cargo at the modernised Nairobi Inland Container Depot after hauling it by rail from Mombasa Port. This is part of a 25-year plan launched in 2005 to improve port revenue and enhance efficiency.

The government also plans to open inland container depots or dry ports in the hinterland towns of Naivasha, Taita Taveta and Kisumu. Neighbouring countries also have inland depots in place.

However, this means that container freight stations in Mombasa – which have for years provided container cargo storage before inspection by port authorities – may spread inland too. Many of these freight stations, which emerged at Mombasa Port following a container capacity crisis in 2008, are riddled with corruption and organised crime. Unless strict controls around them are enforced, they will bring these problems inland with them.

Several freight stations are associated with abetting smuggling and corruption at Mombasa Port. They are sometimes run by powerful businessmen who use their influence to get involved in cargo-clearing operations in Nairobi, and in this way spread corrupt practices.

Daniel Nzeki, a freight station owner and chairperson of the Container Freight Stations Association of Kenya, has a different view. He says freight station facilities would never be used for underhand, fraudulent activity.

“There may be temptation to do it but the Kenya Revenue Authority would immediately lock up the offending [freight station] and slap it with hefty fines, because [freight stations] are considered tax collection agents,” Nzeki told the ISS ENACT project on transnational organised crime. This was one of the tasks the tax authority assigned the facilities in 2008, he said.

But in July 2018, a report revealed secret packaging of contraband goods, including foodstuffs and agricultural products, in some freight stations. Kenya Ports Authority and freight station staff quoted in the report said ‘unscrupulous traders’ were “secretly smuggling illicit sugar into the country”.

The sugar was reportedly smuggled into Kenya from the Somali port of Mogadishu through 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 local media in 2015, Nzeki said the problem started with customs officials assigned with carrying out inspections, but when compromised, didn’t do the checks.

According to a study published this year, freight stations have undermined port efficiency for years, which Nzeki says is next to impossible. 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, the study found.

This helps cover up the malpractice, smuggling and corruption 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.

When the freight stations emerged in 2008, the Kenya Ports Authority licensed them in Mombasa as a “stopgap” extension of the container terminal. The facilities increased in number and became a profitable enterprise. More could be licensed now, with the expansion of inland container depots.

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 inland container depot project is also under way in Kampala, while Dubai Ports World operates a modern inland dry port in Kigali, Rwanda. The direct “railtainer” link to Mombasa Port will in future enable operators to ship containers to a satellite dry port terminal at the commercial heart of the Great Lakes region.

The expansion of inland container depots is a logical result of exponential growth at Mombasa Port, a gateway to East and Central Africa, serving five countries with a population of around 204 million people.

A 2018 Interpol report 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 told ENACT on condition of anonymity that smugglers and corrupt officials bypassed surveillance by falsifying records and selecting specific containers to wave past scanners that could detect contraband. This is prearranged by some freight stations, where compromised customs officials give the contraband a clean bill of health.

A Kenya Ports Authority security officer at the Kisumu Port, Tom Ogwe Otieno, confirmed that the spread of container freight stations could lead to the growth of illicit activities. 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 could quickly become the regional hub for inland water export and import trade across Lake Victoria.

Illicit activities are 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 could 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. Strict controls are needed to ensure that any freight stations established away from Mombasa Port are subject to robust regulation.

Checks at such facilities should be planned meticulously to eliminate loopholes that can be exploited by criminal networks. Container freight stations should also be inspected regularly to ensure these strict controls are adhered to. DM

Deo Gumba is ENACT Regional co-ordinator – East and Horn of Africa, ISS

This article was first published by the ENACT project. ENACT is funded by the European Union (EU). The contents of this article are the sole responsibility of the author and can under no circumstances be regarded as reflecting the position of the EU