Logistics Costs and Average Transit Time of a 20 Foot Container, Mombasa – Nairobi

Logistics Costs and Average Transit Time of a 20 Foot Container Mombasa Nairobi

Source: CPCS Transcom (2010) Analytical Comparative Transport Costs Study Along the Northern Corridor Region.

Moving freight inland in developing countries can be a complex and costly endeavor prone to delays since infrastructure issues are compounded by regulatory problems. While a lack of capacity and maintenance of the road system hinders road circulation, various regulations such as checkpoints are the major sources of delays as public authorities adopt rent-seeking behavior. The above figure provides an example of the time and costs involved in moving a 20-foot container carrying regular consumption goods from Mombasa, Kenya’s main port, to Nairobi, the main city and capital located 430 km inland.

A share of the logistics costs concerns standard transport and terminal charges such as sea shipping rates and port handling charges. The shipping lines charges are more controversial since they include fees such as delivery order fee, bill of lading fee, and piracy risk surcharge (the freight forwarding community often call those “junk fees”). All these charges put together are almost equivalent to the sea shipping rate. The inland routing costs are the contracted rate of the trucking company. More than 40% of the total logistics costs are indirect costs due to delays that include additional and inventory demurrage costs, but also bribe costs paid at a wide variety of police “checkpoints” and weighting stations, which can alone add more than $1,000 for an import container, depending on the value of the cargo. For instance, due to low-profit margins trucking companies have a tendency to overload and pay a bribe at the weight stations to be allowed to go through.

The Mombasa-Nairobi segment takes on average 29.8 hours, most of this time spent at various regulatory delays, such as waiting at the two weight stations (+ 6 hours), delays to several police checkpoints (+2 hours; there can be 8 to 10 such checks for the 430 km journey) and other driver delays such as rest and personal errands (+ 11 hours). Under normal circumstances, the latter would be unnecessary for such a short distance, but the various regulatory delays force the driver to rest a night during transit. A similar distance in North America would be serviced in less than 6 hours. Therefore, such a system hinders economic development because supply chains tend to be unreliable while consumers and manufacturers pay higher prices for goods and inputs. In such a setting, various public authorities use freight transportation to generate income in a rent-seeking (predatory) fashion.