simplifying trade processes for kenya's competitiveness

8/12/2019 SIMPLIFYING TRADE PROCESSES FOR KENYA'S COMPETITIVENESS

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BUSINESSPOST DEC/JAN 2014

MAGAZINE FOR THE ENTERPRISING38

ALEX KABUGA,Chief Executive Officer,

Kenya Trade Network Agency.


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COVER STORY

SIMPLIFYING

TRADETe going live of the KenyaElectronic Single WindowSystem on Oct. 31 is set toimprove trade by reducingdelays and lowering costs

associated with clearance andmovement of cargo

On June 20, President Uhuru Kenyatta

dropped a bombshell on agenciesinvolved in clearing and movement ofcargo: the current situation where

a container takes an average of 18 days to reachKampala from Mombasa was untenable, he saidin a statement issued by the Presidential PressService after a meeting attended by executivesof the agencies.


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For Alex Kabuga, it was justthe kind of high-level prompt-ing needed to accelerate thepace of implementation ofa technology platform that

could address the Presidentsconcerns. As CEO of KenyaTrade Network Agency(KenTrade), the PresidentKenyatta could as well havebeen talking to him.

The agency was set up in2011 through a legal noticeto facilitate trade by amongothers implementing atechnology-based system foreasing the clearance of cargo.

Known as the National Eletro-nic Single Window System,the project has potential totransform trade in Kenya andthe region.

The government has inrecent years been working onmeasures to improve cargoprocessing but currently thereis a clear sense of urgency.The Jubilee government hasadded impetus to the drive

for trade facilitation, says MrKabuga.

Tr ad e fac i l i tat io n isincreasingly being seen asone of the keys to unlock-ing the regions economicpotential. It is an issue thatthe President and his key advi-sors are taking seriously. Thisexplains his push for reformsat the port of Mombasa andthe introduction of technol-

ogy to efficiently serve theinterests of the entire East

Africa region.On Aug. 28, while commis-

sioning a new berth at theport, the President saidthat receiving, processingand transporting cargo tocustomers in a timely fash-ion is a critical indicator ofour ports productivity. For

close to a decade, the portof Mombasa, which servesKenya and landlocked neigh-bouring countries includingUganda, Rwanda, Burundiand Southern Sudan has beenblamed for slow cargo clear-ance. But port officials haveoften countered that it is thenumerous agencies involvedin the clearance process thatslow down the process.

It is a blame game that MrKabuga knows too well. Priorto joining KenTrade, he wasKPAs Project ImplementationTeam Leader- Single Window

System. Previously he hadheld the positions of Manager,Marketing & Public Relationsand later headed the InlandContainer Depot in Nairobi.

The genesis

He says the magnitude of theproblem became clear around2004-2005 when strongeconomic growth in Kenyaand neighbouring countriescaused a surge in importsleading to severe congestionat the port, with dwell timesextending up to 17 days. Thatis when it dawned on mostpeople that the ports capacity

was inadequate to handle the

rising cargo volumes.Cargo passing through the

port of Mombasa has beengrowing at an average annualrate of 7.4% since 2000. Last

year, the port handled 19.93mtonnes of cargo compared to9.13m tonnes in 2000.

Apart from infrastructurecapacity constraints, tradeexperts also knew that the

MOMBASA PORTGateway to the

Northern Corridor

and where most

cargo passes

through. KPA

and the Kenya

Revenue Authority

(KRA) initially

spearheaded the

search for ways

to increase trade

efficiencies.

his is a crosssectional project

with multiple,stakeholders. hecabinets approval

was necessary tothaw resistance


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process of clearing cargo bystate agencies was slow andtedious and contributed todelays. The private sector

was part ic ul arly vocal incalling for increased effi-ciency at the port. Alarmed

by the ports performanceand slow movement of cargoalong the Northern Corridor,neighbouring countries alsostarted putting pressure onthe government.

Initially, KPA and the KenyaRevenue Authority (KRA)spearheaded efforts to chartthe way forward. In 2005, acommittee was formed andtasked with coming up with a

solution. Our first task was aconduct a baseline survey toidentify the bottle necks and

this gave us a good ideaof what needed to be

done.Within three

months it hadcompletedt h e s u r v e yand identified,

among others, duplicity offunctions, manual proceduresand repeated submission ofthe same documents creatingopportunities for corruptionas some of the constraints.It was this committee that

crystallized the idea of imple-menting a National ElectronicSingle Window System. Thesystem was credited with thesuccess of the port of Singa-pore, among the busiest andmost efficient in the world.

Development partners,like the World Bank and JICA

which had projects touch-ing on trade facilitationstarted taking interest in the

committees work. In 2007, theTreasury took over the projectand put together a ministerial-level steering committee thatincluded the Treasury, theMinistry of Transport and theMinistry of Trade.

The then Treasury perma-nent secretary Joseph Kinyua(now State House Chief ofStaff and Head of PublicService) was particularly keen

on its implementation andis widely considered as theprojects champion.

In 2008, he led a team ofpermanent secretaries, senior

government and privatesector officials on a two-week mission to countriesthat had successfully builtsingle window environments.The tour took the delega-tion to Singapore, which haddesigned and pioneered itsown system in 1988, Malaysiaand Thailand among others.

The groundwork

Upon return, the teamstarted laying the ground forimplementation of a similarsystem. The first task wasgetting cabinet approval andendorsement for the conceptdue to its size and scope.This is a cross sectionalproject with multiple, wellestablished stakeholders.The cabinets approval wasnecessary to thaw resistance.

S e c o n d l y , i t w a sdetermined that a new, inde-pendent agency needed tobe established to drive theproject and coordinate theother agencies. Thirdly, theteam proposed the adoptionof the Singapore system dueto its success record.

Three years later, KenTradewas formed to facilitate inter-national trade in Kenya by

reducing delays and loweringcosts associated with clear-ance of goods at the Kenyanborders, while maintainingthe requisite controls andcollection of duties and taxes,

where applicable, on goodsimported or exported.

In May 2012, the cabinetapproved a government-to-government agreement for

PRESIDENTUHURUKenyatta, who

has emphasised

that receiving,

processing and

transporting cargo

to customers in a

timely fashion is

a critical indicator

of our ports

productivity; and

Joseph Kinyua,

State House

Chief of Staff

and immediate

Treasury PS who

has championed

the implementation

of the Single

Window system.

7.4%The annual growth rate

since 2000 in cargo vol-

umes passing through the

port of Mombasa. Last

year, the port handled

19.93m tonnes of

cargo compared to 9.13m

tonnes in 2000.


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the consultancy, acquisi-tion, implementation of theNational Electronic Single

Window System from Singa-pore Cooperation Enterprise.

Four months later, KenTra-de signed a contract withthe company for the supplyand implementation of thesystem including a three-yearmaintenance period afteroperationalization.

Single window prepsThe last twelve months haveseen a flurry of activities to getthe system ready for launch.

This is not a system thatyou can buy off the shelf,explains Mr Kabuga. We hadto develop a system designthat is compatible with ourtrade procedures.

But the most challengingpart was getting acceptancefrom the 24 agencies that willin the end be linked to thesystem. Some of them sawthe implementation of the

system as an intrusion ontheir mandates. There werealso fears that it could lead to

job losses.One of the strategies we

used was to involve stake-holders at every step of the

way, he explains. KenTradestarted by bringing togetherstakeholder groups compris-ing representatives from thegovernment agencies and the

private sector.Through these working

groups, the existing proce-dures of the various agenciesconcerning information andprocessing requirements

were analysed, documented,and simplified with a viewto streamlining trade proce-dures. Over a period of sevenmonths, KenTrade held over

216 meetings with stakehold-ers to ensure informationexchange and joint projectownership.

Although it was a demand-ing process, Mr Kabuga says it

was worth it. There is a goldenrule to process re-engineering:Do not automate a bad busi-ness process. This is becausenon-automated systems haveevolved in such a way thatto automate the documentcreation, decision-makingand record keeping is merelyto automate an older, lessefficient means of completinga transaction.

To avoid the pitfall, manyexisting document proce-

dures and business processeshad to be reengineered andsimplified so as to operate inthe most efficient way and toalign them with the system.

The Single Window isa business process drivenproject that uses technologyto simplify and automateprocesses thus eliminatinginefficiencies. It was thuscritical to get the processesright and then customise thetechnology to deliver them.

Wh ile the sy st em wa sbeing developed, attentionshifted to training end-usersand creating awareness ofthe technology platform inthe business community.

Top, clockwise: CEO Alex Kabuga speaks to Kiambu County-based importers during a

sensitization workshop held in Thika on Sept 6; the CEO presenting certificate to General

Manager Support Services Simon Kiplangat (left) as Amos Wangora, General Manager

Operations who is also the Project Director of Single Window System looks on; end user trainingfor clearing and forwarding agents based at Malaba, the busiest land border post in Kenya.


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Training of end users suchas shippers, clearing andforwarding agents is an ongo-ing process.

The emphasis on the train-ing is largely due to the factthat the greatest obstacleduring the initial phases ofimplementation is changingthe mindsets of the usersto switch from their exist-ing manual process to anelectronic means of tradedeclaration.

KenTrades roll out of thesystem reflects the momen-tum to ease the cost of doingbusiness in Kenya. Initially,the system was planned togo live in December but theagency went live two months

earlier. There is no time towaste, says the CEO. Thefaster we move, the sooner thecountry will start enjoying thebenefits of the system.

The window opensOn Oct. 31, the KenyaNational Single Electronic

Window went live. The systemis a computer tool for theelectronic processing of prior

authorizations, permits, certi-fications or approvals requiredby the various governmentbodies to carry out import andexport operations.

It integrates the systems ofstakeholders like KRA, KPA,Kenya Bureau of Standards,Kenya Plant Health Inspec-torate Services, Port HealthServices among others withshippers, clearing and freightforwarding agents and otherlogistics provides.

The system will also enableelectronic payments of tradetransactions. The systemrelies on Information and

communication technologyto simplify the sharing andprocessing of documentsamongst the agencies andconsumers of their services.

The implementation isbeing done by CrimsonLogicPte Ltd, a company owned bythe government of Singapore.The firm has implementedthe system in other countriesincluding Ghana, Mauritius,

Panama and Saudi Arabia.Estimates show that thesystem, one of the Vision2030 flagship projects, willhave cost nearly KSh900mby the time it is fully rolledout. Among the developmentinstitutions that have financedthe project is the World Bank,

JICA, TradeMark East Africaand the Investment ClimateFacility for Africa (ICF) amongothers.

In Nov 2012, ICF signeda grant agreement with thegovernment for KSh300mto support the project.Dar-es-Salam-based ICF isa public-private initiativethrough which donors,international and domestic

Marine Cargo

Present Single Window

Objective

10 days Max 3 Days

Air Cargo


Objective

5 days Max 1 Day

Road Cargo


Objective

48 hours Max 1 hour

Reduction in cargo dwell timeOne of the objectives of the Single Window Systemis to significantly reduce cargo dwell at the port by eliminating existing inefficiencies.

he Single

Window is abusiness processdriven project thatuses technology tosimplify and auto-mate processesthus eliminatinginefficiencies.


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corporations as well as NGOs,collaborate with Africangovernments and regionalorganizations, to improve theinvestment climate.

Mr Kabuga explains thatdue to the complexity of thesystem, it is being rolled outin modules. The most impor-tant milestone was going liveas this means we can startrolling out the modules.

The system went livewith eight modules includ-ing manifest submissions(sea and air), governmentagency permits, e-payments

and import declarationform. Another two modules,namely integration with KPAsKWATOS and KRAs SIMBAsystems will completed beforeend of December. By April, thelast five other modules will berolled out.

One o f the mo d ul esawaited with a lot of interest isDynamic Risk Management.The module will automate

risk management and ensureobjectivity in targeting andreleasing of cargo by govern-ment agencies.

Currently, the decisionto make a physical verifica-tion of cargo is subjectiveand prone to abuse. But bycreating a database of theprofile of users, the system willhelp officials scrutinize onlythose lodgements which raise

automatic alerts, or red flags.Mr Kabuga says this will

reduce the proportion ofphysical inspections to a smallpercentage of total consign-ments leading to time savingsin the clearing process.

Package of benefitsThe advent of electronicprocessing of trade docu-

ments will have wide rangingbenefits.

According to recent WorldBank Investment ClimateSurveys, Kenya comparespoorly in several areas oftrade facilitation such as thenumber of days it takes toclear import and export cargothrough ports and customs.

A trader aiming to export or

import goods has to submit atleast eight documents, makenumerous trips to govern-ment offices and, at times,part with something small

to hasten the documentsprocessing. At border towns,trucks queue for kilometresawaiting clearance due tothe slow speed of manualsystems.

Ac co rd ing tosome estimates,it takes about26 days for oneto completee x p o r t a s

we ll as import clea ranceprocesses. The cost of theseinefficiencies is then passedon to consumers. Theseindirect costs constitute asmuch as 44% of the total costof goods.

This has led to the high costof doing business making thecountry unattractive to inves-tors. In the 2013 edition of the

World Banks Doing BusinessIndex Kenya dropped sevenranks to position 129 glob-ally and position two in East

Africa. We expect our coun-

trys ranking to improve as aresult of the Single Windowmaking the country attractiveto investors.

The system will alsoconsiderably increase the

rate at which goodsand services are

delivered. Cargodwell time at theport of Mombasa,for instance, will

KSh40b

The estimated

annual savings to

be delivered by the

Single Window systemannually.

here is no time to waste. he faster we move, thesooner the country will start enjoying the benefitsof the system.

KENTRADEstaffand advisors

led by CEO Alex

Kabuga (second

left) celebrating

the going live

of the Kenya

National ElectronicWindow System

on Oct. 31.


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take a maximum of threedays down from eight daysand a minimum of one day atJomo Kenyatta International

Airport down from five days.

At the border posts, cargodwell time for both transit andintra-regional trade consign-ment will take a maximum ofone hour.

For business people, theSingle Window provides aconvenient and easy to use toolfor submitting their export orimport documents in a virtuallocation that communicates

with the relevant regulatoryauthorities. Traders no longerneed to visit many differentphysical locations to lodgedocuments and pay levies,taxes and other fees.

It is not just traders who willbenefit from reduced trade-related costs, and consumersfrom lower prices of goods.The government anticipatesimproved compliance withtax and regulatory regimes,

effective deployment ofresources and correct revenueyields.

Mr Kabuga says that duringits first year of implementa-tion, the system is expectedhelp the country save betweenKSh16bn and KSh20bn thatis lost annually through inef-ficiencies in the trade supplychains. When fully opera-tional, the Single Window

will save the economy uptoKSh40bn annually.

Automation of processeswill also remove subjectivity,which encourages corruption,

from trade processes andimprove transparency. Inaddition, it has potential toboost economic growth. Stud-ies have shown that reductionof time for export by one daycan increase export volumesby up to 10%.

The pilot phaseThe Single Window is current-ly being piloted with a select

group of users including 10government agencies, nineshipping lines, 22 clearing andforwarding agents and threefinancial institutions. At theend of the 30-day monitoringand testing period, the cover-age will be expanded to moreusers.

KenTrade is working withdevelopment partners toensure government agencieshave the necessary capacityto interface with the Single

Window. For example, TradeMark East Africa has support-ed the Tea board of Kenya andthe Poisons Board of Kenyato set up online portals thatare interfaced with the Single

Window.Mr Kabuga is quick to

point out that the Single

Window is not a panaceafor trade inefficiencies. Whileit has addressed the softinfrastructure issues in tradefacilitation, there is needto tackle the hard infra-structure and administrativebottlenecks. Some of them arealready receiving attention.

On Aug. 28, for instance,President Kenyatta commis-sioned berth 19 at the port

of Mombasa increasingport throughput by 30%. Aprogram of reforms currentlyunderway has seen the aboli-tion of trans-shipment bond,

removal of roadblocks alongthe Northern corridor, ration-alization of weighbridges, andabolition of scanning of transitcargo within the port and 24/7hour operations.

This has resulted in a 13.2%improvement of containeroff-take according to KPAsManaging Director GichiriNdua. Presently, operations atthe port are being reorganized

to improve the turn-aroundtime for ships, which hasreduced from 11 to 6 days.

On Nov. 28, the Presidentlaunched construction ofMombasa-Nairobi-Malabastandard gauge railway thatis expected to be operationalin 2018. It will run freighttrains with 54 double stackflat wagons carrying 216 TEUsper trip, reducing reliance onexpensive road transport.

Acc ording to off icialfigures, only 7.3% of cargoor 1,619 tonnes, landed atMombasa port is transportedby railway. Experts say thenew line has potential to cuttransport costs in the regionby more than 60%.

We are in the next fewyears going to increase railfreight from the current 4 to50%, said President Kenyattaon when launching construc-tion of the new railway.

Although it may not bea silver bullet, the Single

Window is the technologythat links all the other compo-nents of trade facilitation. It isindeed one of the most timelyinterventions in the tradesector.

While it [the Single window]has addressed the softinfrastructure issues intrade facilitation, there isneed to tackle the hardinfrastructure bottlenecks.

simplifying trade processes for kenya's competitiveness

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