PUBLISHED ON March 24th, 2015

A proposition with handcuffs

The Dock Workers Union, the union which represents the majority of workers at the port of Mombasa, Kenya, has stated that it now supports the idea of offering a concession to the private sector for the new 450,000 teu container terminal under development, but only if this first phase development focuses on transhipment traffic.

In other words, only if it keeps its hands off the gateway cargo that its members have traditionally handled at the port’s public container terminal.

The Kenya Ports Authority (KPA) has commenced the concession process inviting bids from eligible parties on an international basis in order to have an operator in place well in advance of the handover of the first phase, scheduled to take place in March 2016.

The first phase development features two berths with lengths of 300m and 210m and depths of 15m and 11m respectively and also includes, as part of the JICA loan funding the terminal development, the supply of two ship-to-shore gantry cranes and four rubber-tyred gantries. While any professional operator will wish to finesse the terminal with ancillary equipment, IT systems and manpower training etc, it is basically designed as a package so as to allow the rapid start-up of operations.

Two additional development phases are envisaged – Phase 2 that will be implemented between 2016 and 2019, which will take available capacity up to 1.2m teu per annum, and Phase 3 which has been pencilled in for implementation between 2020 to 2023. Interestingly, the call for tenders for the first phase also notes that “…it is envisaged that the winning bidder of Phase 1 will be given first right of refusal to operate Phases 2 and 3 depending on the financing option”.

It is thus to be expected that this concession, which has been a long time coming, will be very hotly contested. Equally, it is hard to imagine that the operator successful in winning phase 1 will relinquish any opportunity to secure phases 2 and 3.

Transhipment conundrum

Of course the DWU’s tacit consent to the idea that Mombasa’s second container terminal can be operated on the basis of focusing only on transhipment cargo is not at all grounded in reality – it is simply ‘spin’ or some sort of convuluted logic that does not appreciate the operating and financing realities behind the development. Vessels do not carry transhipment cargo exclusively and as such any vessel calling Mombasa would potentially have to call two terminals, the new terminal for transhipment cargo and the public container terminal for gateway cargo. This is a ridiculous proposition which is prohibitive both operationally and financially.

Transhipment is also at the low end of a terminal’s earning ability and it is clear that it would not generate sufficient revenue to meet the KPA’s repayment requirements for the JICA loan. All the more so as it is understood that the JICA loan costs have spiralled due to currency fluctuations and the KPA lateness in deploying the funding under the terms of the loan.

Given the foregoing, it seems the battle to gain union acceptance of a privately operated container terminal in Mombasa is not yet won. The picture also promises to be further complicated by the recent formation of Jumuiya Ya Kaunti Za Pwani, a union of the six coastal region counties which aims to empower its citizens economically and whose leaders have already stated that they oppose the privatisation of the port of Mombasa and its operating divisions.

The political machinations which have traditionally encompassed the idea of privatisation in the port of Mombasa are clearly not over yet.

Source: Hellenic Shipping News

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