Suez Canal hike set to also affect trade in Sub-Saharan Africa

Egypt has imposed a 15% and 10% increase in transit fees on all vessels passing through the Suez Canal
The hike is a result of the global inflation
The hike is set to affect Sub-Saharan African traders who depend on the canal for its exportations

On Saturday 17th of September 2022, Egypt announced that it would increase the transit fee for all vessels passing through the Suez Canal.

The Suez Canal authority released a statement noting that transit fees for tankers passing through the canal will rise by 15%. A 10% increase would be implemented for dry bulk carriers and tourist ships. This hike will take effect from the 1st of January 2023.

While this initially felt like a sub-regional issue, its impact may spread across the entire continent, particularly in East Africa.

The chief executive officer of the Shippers Council of Eastern Africa (SCEA), Gilbert Lagat, noted that East Africa is dependent on the port for its exports bound to Europe, and its imports from Asia. In effect, the hike in transit fee is due to affect East African traders.

“East Africa depends on most of its imports from Asia, which uses an alternative channel, whereas goods being exported from the region have to pass through the Suez Canal. This will complicate export, and some ships might opt to change their destinations considering the economies of scale.” Lagat said.

“We hope as shippers we shall come up with solutions or renegotiate with the authority for better rates.” He added.

East African exports to Europe majorly include agricultural produce. Crops like coffee, tea, tobacco, cut flowers, fruits, vegetables, and fish. Others are textile and clothing, and handicrafts, are the region's chief exports overseas.

The subsequent hike in the transit fee is a result of global inflation. Suez Canal Authority Chief, Osama Rabiee, stated; “The increase is inevitable and a necessity in light of the current global inflation rates.”

However, experts have noted that the hike in fees won’t have a massive effect. Tim Huxley, chairman of Mandarin Shipping told CNBC, “Oil prices are currently dropping and so if the canal prices itself out against the competition (which is going round Africa) then the Canal Authority would lose out.” A few other analysts share his sentiments.