Tanzania Government Battles Cargo Costs, Shipping Shortages, and Currency Woes.
May 23, 2024Adonis Byemelwa
The government is working to address the escalating costs of cargo transportation from Europe and Asia via sea routes, but shipping companies report that no resolution has yet been reached. The surge in transportation costs has been linked to security issues in the Suez Canal area, where piracy incidents have been reported. Consequently, ships from Asia are opting for longer routes around South Africa, leading to higher shipping expenses.
There is also a shortage of ships, as many are now delivering cargo to Europe instead of Africa, coupled with a scarcity of containers.
Due to this increase, Tanzanians are expected to face higher prices for goods, including clothing such as various types of garments, bags, wallets, and shoes. Additionally, car parts like tires, building materials including tiles, locks, handles, aluminum, and office supplies like paper are also affected.
In light of this concern, on Tuesday, May 21, 2024, speaking to Clouds TV in Dar es Salaam, the Permanent Secretary of the Ministry of Transport, Professor Godius Kahyarara, said they have agreed with stakeholders and government institutions on short-term measures to find a solution.
"One of the steps is to ensure we use the opportunities we have, for example, companies that can assist in connecting the cargo to Tanzania.
I want to reassure Tanzanians that although prices have increased, we will ensure that consumer prices are not affected. We discussed with the Tanzania Revenue Authority (TRA) to look at how the estimated taxes can be managed so they do not quickly follow the rising prices," he said.
He also mentioned that they have a strategy to speed up the clearance of cargo at the port to reduce operational costs. "Thirdly, we aim to enhance the infrastructure for moving cargo from the port to its destinations. Investors have shown us various equipment currently being installed at the port, some of which will start being used next week and have a high capacity for unloading cargo from ships," he said.
Meanwhile, Martin Mbwana, the Director of the Kariakoo Business Community (JWK), speaking to PanAfricanvisions recently, said a solution has not been found despite meetings with the government.
“They have not provided a definitive solution to the problem because the cause of the price increase for one container is the cost and shortage of containers and ships. So even though TRA is looking at keeping the price low, we must understand that goods are stuck in China and there are few ships,” he said.
He said they expected a permanent solution if efforts were combined with Kenya to share cargo. "If the Kenyan government strengthens loading operations, the business will move there. Shipping companies like Maersk, TIL, and Costal are private, so we should look at how we can combine ships to carry East African cargo.
Large ships come to unload in Singapore, while small ships go to places like Durban, Mombasa, Dar es Salaam, and elsewhere. Therefore, we should find our ship to carry our cargo; that would at least be a temporary solution," he said.
When asked about the government's action, Mayasa said they have not received any government instructions regarding ongoing measures.
"So far (this evening), there are no instructions regarding prices because what we are paying for is the time containers take to travel here, and that is when the freight costs need to be paid. Up to now, there is no consensus or any changes," she said.
Regarding taxes, she said they cannot suddenly decrease, stating that even shipping companies have not yet determined the exact prices to charge their customers. "We are just trying to give estimates, considering the customer’s involvement and the company’s benefit, with current estimates ranging from US$8,000 (TSh20.7 million) to US$10,000 (TSh25.9 million) from US$2,500 (TSh6.4 million).
Another company, Silent Ocean, which announced a slight change in shipping costs starting May 18, 2024, to address the challenge, is also awaiting direction from its management.
"Our country has seen a significant increase in port trade because there are many economic activities taking place, and neighboring countries have increased the production of raw materials such as minerals. We have had the same 12 berths for all these years," he said.
The TPA Director explained that due to security challenges in the Suez Canal, many ships are now taking longer routes via the Cape of Good Hope, extending travel time by 18 days.
"When they were passing through the Suez Canal, it took them 30 days to go and return to China to pick up cargo. Now the time has increased by 18 more days, so as you know, most product production occurs in China, Japan, and Korea, and they ship goods to other areas. Now, if ships were coming every month, it means the cargo receiver depends on monthly deliveries, but the time has increased by 18 more days."
"So, what has happened now is that ships that used to bring cargo to us in Africa are now taken to deliver cargo to Europe or America because it is more profitable than bringing our cargo," he said. He mentioned they are in the process of increasing the number of berths for Dar es Salaam and the construction of the Bagamoyo Port in the Coast region.
"We have already announced tenders and are at an advanced stage of negotiations with investors; some companies have shown interest in building. For Dar es Salaam Port, we plan to build 10 berths starting with two, then another two, and eventually six, depending on our discussions."
He also mentioned operational improvements, citing the DP World company as part of the strategies to expedite cargo unloading. "So, they have increased equipment, and soon we expect to activate two modern machines for unloading containers, significantly reducing the ship waiting time." Another strategy he mentioned is: "We have talked to some shipping companies, and if they bring cargo at a lower price, they will not queue up but will enter directly, unload, and leave."
Efforts to reach TRA officials were unsuccessful as the phone of Commissioner General Alphayo Kidata rang without being answered. Amid these transportation challenges, Tanzanian businesses are also grappling with the weakening of the Tanzanian Shilling against the US dollar.
The depreciation of the Shilling has exacerbated the situation, making imports more expensive and further straining local businesses. The government’s economic policies and external factors such as global inflation and fluctuating commodity prices have contributed to the currency's decline. This depreciation impacts not only the cost of imported goods but also increases operational costs for businesses relying on international trade.
The government's business operations have come under scrutiny as stakeholders demand more effective solutions. The need for improved infrastructure and streamlined customs processes is becoming more pressing.
Despite promises of reform and increased investment in port facilities, the implementation of these measures has been slow, leaving many businesses uncertain about the future. The government’s commitment to enhancing trade efficiency and reducing costs remains a critical focus as the country navigates these economic challenges. The stakes have never been higher.
source:panafricanvision
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