Piracy knocks fresh produce exports - Africa Business Daily

Piracy knocks fresh produce exports - Africa Business Daily

Rampant piracy in the Gulf of Aden has nearly doubled the cost of exporting Kenya’s fresh produce pulling the country’s growers into the long drawn campaign to rid the key Indian Ocean route of Somali fighters.

The Fresh Produce Exporters Association of Kenya – an industry lobby – says its members have lost $12 million (Sh900 million) in additional costs arising from piracy since October last year.

“The cost of transporting avocado, mangoes, pineapples, or vegetables to Europe has risen by at least $2500 (Sh187,500) per container mainly driven by increased shipping and insurance due to rampant piracy,” said Stephen Mbithi, the FPEAK chief executive.

Exporters say the lack of a joint strategy to fight the pirates has emboldened the attackers, giving shipping lines and insurance companies a free hand to adjust their costs for the bulky produce that cannot be exported by air.

Dr Mbithi says plans by 11 member states of the Inter –Governmental Authority on Development (IGAD) to wage a joint war against piracy had suffered a still birth leaving the battle in the hands of highly outnumbered and mainly European forces.

The Djibouti Code of Conduct signed by the 11 governments promised to suppress ‘Piracy and Armed Robbery’ against ships in the Gulf of Aden and the West Indian Ocean but the plan ran out of steam after the signatories failed to allocate the resources to needed to wage the war.

“Confidence in the route improved and charges started coming down in the hope that the regional force would curb the problem. But by October last year, most shipping lines lost hope as it became clear that the promise was not being backed up by any action,” Dr Mbithi said
Kenya Shippers Council has reported an increase in the number of attacks on cargo ships in the last two months – pushing the cost of maritime conveyance up as shipping lines pass on incidental charges to transporters. More recently, concern has been rising among exporters that shipping lines may abandon the route altogether forcing them to use the more costly and long West African route.

“While most shipping lines have adjusted their charges upwards by between $100 (Sh7500) to $120 (Sh9000), negative advisories continue to be issued to cargo ships plying the Horn of Africa route and we are not sure when this will end,” Mr Gilbert Lang’at the Kenya Shippers Council’s CEO told the Business Daily.

The incidental costs linked to piracy include sea freight rates, insurance, time (longer voyage), operational cost of handling perishables and surcharges to cover deviation or war risk as vessels avoid the Gulf of Aden for longer more costly route via the Cape of Good Hope in the South.
Fresh produce exporters have warned that these costs are pushing them to the limits and may soon make shipments to Europe unviable.

“This is a double punishment to the horticulture industry who cannot deliver their produce to European partners in time and must pass on the increased charges to our customers in a market that is already facing stiff competition from South Africa and Chile,” said Dr Mbithi.

Last week, the Kenya Association of Manufacturers sent an appeal to its members for information that can be used to compile a report quantifying the real cost of piracy in the Indian ocean.

“Higher transport costs have made our exports less competitive and is increasing the cost of imported inputs,” KAM notes in the statement to members.

Attempts to get the comment from the Kenya Maritime Authority failed as the Director General Ms Nancy Karigithu was said to be out up to next week.

Ms Karigithu had earlier appealed to the insurance underwriters and the shipping lines to stop adjusting their prices upwards saying the government was doing everything to contain the situation in the Indian Ocean coastline.

But local shippers fear inaction could force the insurance underwriters to declare the region a war zone, forcing vessels to avoid it all together.