Coastal states see opportunity as the landlocked pay the price

A ship docked at the port of Dar es Salaam in Tanzania. Photo/Shutterstock

By The East African

Sometime in August 2021, Senga, a start-up logistics firm, analysed the troubles for landlocked countries doing export-import business in the region.

Among the problems it found was that goods were taking longer to exit ports and the landlocked countries were completely dependent on the physical and trading infrastructure of transit countries.

Then there were inefficient border crossings, a transport system in the hands of cartels and ever-increasing transport costs.

The reality, now, is that exports from East Africa, too, are getting stuck in various ports as a number of vessels suspend or delay picking of commodities due to the Houthi attacks.

Along the Northern corridor, that serves Uganda, South Sudan, Rwanda and the DR Congo, coffee and tea from Uganda and Kenya was in March stuck in warehouses as exporters experienced high cost of sea freight due to increasing demand of vessels.

This is not a new problem entirely as transportation of goods is often hampered by bad roads, blocked highways from violent clashes or conflicts especially in countries such as the DRC or South Sudan. However, these often affect a particular country, rather than becoming a regional problem, and countries can often run for Plan Bs.

Since last November, the problem went beyond the region as major shipping lines stopped or temporarily halted Red Sea operations affecting the supply chain in different sea port states.

As a result, there has been a delay in delivery of cargo and picking up of empty containers in ports including those in Kenya, Tanzania and Djibouti.

The cost of sea freight immediately went up by $500, on average, per container as global trade volumes decreased by 42 percent, according to a situational report by the United Nations Conference on Trade and Development (UNCTAD) report released in March.

Shipping firms have raised freight costs further this week due to the ongoing attacks with no hope of ending soon.

The Red Sea Canal is the shortest import route to ports in eastern Africa from Europe. The alternative route via the Cape of Good Hope adds at least 4,000km on the shipping distance, which brings attendant costs.

It is something coastal states like Tanzania, Kenya and Somalia could see as an opportunity, however.

Musalia Mudavadi, Kenya’s Prime Cabinet Secretary and Cabinet Secretary for Foreign and Diaspora Affairs argued in March that Nairobi is pooling landlocked countries, especially those dependent on Kenyan sea ports, to “assess the concerns of the oft-forgotten landlocked countries and contentious issues or conflicts relating to maritime access.”

According to Nairobi, the geo-strategic constraints that landlocked countries face are increasingly becoming major drivers of conflicts on the continent.

Mudavadi cited recent border closures and diplomatic shutdowns between countries in the region. For example, Ethiopia, which is seeking port accesses has run into diplomatic rift with Somalia, which last week expelled Ethiopia’s ambassador after Addis made overtures to autonomous authorities in Somalia.

Africa has 16 landlocked countries with a combined estimated population of 378 million people. Kenya, Somalia and Tanzania serve landlocked Uganda, Rwanda, Burundi, Malawi, Zambia, South Sudan and Ethiopia.

But these coastal countries can’t guarantee certainty on trade when shocks happen beyond their borders.

“With the Red Sea waterway crisis, many Eastern African states have been affected economically and security-wise. However, when the cost of shipping, freight insurance, and goods goes up due to the Red Sea crisis, the impact is possibly double for the landlocked states that rely on the coastal countries,” Mudavadi said in a lecture on Kenya’s Grand Strategy in a Changing World, delivered to the USIU-Africa on March 21.

According to UNCTAD, seaports play a crucial role in trade, facilitating over 80 percent of global merchandise exchange. But where landlocked countries in East Africa have poor infrastructure themselves including irregular air transport, the percentage of relying on imports going higher.

UNCTAD says long distances to the sea, poor road or railway have left these countries “with far higher bills to import and export goods by road and rail. In many places, poor infrastructure and border bureaucracy add time, cost and complication.”

Moronge Obonyo, an advocate of the High Court in Kenya and international trade law expert at the International Relations Society of Kenya told The East African.that uncertainties such as those in the Red Sea where Houthis have been attacking ships may mean higher costs for landlocked countries.

But coastal countries like Kenya, Tanzania and Somalia can take advantage by being alternative supply sources, helping landlocked countries keep their overheads lower.

“Logistics businesses in these countries can get alternative suppliers from Asia, Central and Southern Africa whose hinterlands do not have well-networked road transit corridors,” he said.

And though this may not exactly fill the shortfalls, a consistent supply is better than none.

“Efficient transport through these countries, may be a welcome boon to lower the overall transit costs. Insurance brokerage businesses can also tap into the new business.”

“Overall, a seamless logistic operation would be the best bet to benefit the landlocked countries. In the case of Ethiopia and South Sudan, Kenya stands to gain by being closer to these countries geographically and having a port that can serve these two countries,” said Obonyo, also an international trade law lecturer at the Jomo Kenyatta University of Agriculture and Technology.

There are those who see a security opportunity in the crisis even though the initial quest for sea access itself is a security threat as seen in recent Somali protestations to Ethiopia. As countries yearn for certainty, the hand of regional organisations such as Intergovernmental Authority on Development could get stronger at pushing for integration.

“The added advantage of a coastal state is the presence and needs of a landlocked country. A natural symbiotic relationship exists between these states,” argued Nasong’o Muliro, Senior Researcher on Foreign Policy and Security at the Global Centre for Policy and Strategy, a Nairobi-based think-tank.

“When costs of shipping, freight insurance and goods go up for coastal states, it doubles for the landlocked. This cost is simply passed on to landlocked states.

“We have 16 landlocked countries in Africa, a massive population that must jolt Africa to take a cooperative approach on responding to the Red Sea crisis. East Africa needs to take a lead, rallying one voice on the crisis in this strategic waterway,” he told The EastAfrican.

Tea exporters in Mombasa said about a quarter of March’s delayed on shipping schedules for about 2-3 weeks as the incoming ships took longer routes.

“It used to cost a tea exporter $2,442 to ship a 40-foot container to Russia, Kenya’s fifth biggest market for the beverage in October but today it is Ksh930,857 ($6,513) to the nation and other neighbouring regions,” said Hassan Bule, a Mombasa-based tea buyer.

Mr Bule said the Russia-Ukraine war has also impacted costs over by the longer distance that ships have to navigate to reach their final destination following the closure of the Black Sea route.

Despite demand and high prices, exorbitant freight cost has impacted negatively on Kenya’s exports to that region, a move that has seen the demand for the commodity wane.

“Ship turnaround time has remained a challenge as some shipping agents with contract with tea exporters have either delayed picking tea at Mombasa port or some have suspended their trips completely. This has seen the volumes of tea exported to Russia and other neighbouring countries such as Kazakhstan, Kyrgyzstan, Uzbekistan and Azerbaijan significantly dwindled,” said East African Trade Association managing director George Omuga said.

“We have engaged Kenya Ports Authority to give priority such ships as we meet shipping agents to discuss on way forward about the skyrocketing freight costs which is also affecting port of Dar es Salaam.”

These were hardly new lamentations as regional blocs such as East African Community had done own surveys and reached similar findings. Three years on, however, both coastal and landlocked countries face higher costs resulting from a disrupted supply chain, but also impacted by security challenges along main sea and land routes.