PUBLISHED ON January 12th, 2015

Privatisation could turn around Port of Mombasa fortunes

The search mounted by the Kenya Ports Authority (KPA) last month, for a private sector player, to operate the first phase of the Sh27 billion second container terminal at the Port of Mombasa, could be a game changer. This is if it is handled transparently and the contract awarded to the most competitive bidder.

No vested local or national interests should interfere with the bidding process. The mandarins at Harambee House and their friends in Parliament, who have often been accused of interfering with the tendering process leading to the awarding of contracts to shadowy briefcase companies with no capacity to deliver, should be warned to keep off the goings on at Mombasa Port.

The facility is on a tight race to retain its position as a regional shipment hub. The race is made all tighter by the fact that Eritrea, Djibouti and Tanzania have all embarked on ambitious port expansion projects whose success would see Mombasa lose its pre-eminence. It has not been lost on observers and analysts that the Port of Durban, South Africa, is also flexing its muscles and seeking to stretch its tentacles to the Great Lakes region.

But the good news is that the competitors’ plans to take business away from KPA will succeed only if the authority rests on its laurels and fails to innovate. The ongoing expansion of the port facilities with the new terminal projected to have a capacity of 450,000 20-feet containers (TEUs) after completion of Phase I in March 2016 is but a first step. The port’s capacity is projected to increase to 1.2 million TEUs after the project is completed in 2019. The government and Japan International Co-operation Agency, who are funding the project, were unanimous that only a private player with global experience and connections in the maritime trade at that level can fully unlock the potential in the new investments.

It is also gratifying that other stakeholders are stepping up their game to ensure the country reaps maximum benefits from its Sh27 billion investment. The regulatory charter the transport stakeholders signed last October, is particularly significant as it benefits the country’s economy in two key areas.

Regulatory mechanism

First, it shifts the challenge of dealing with issues affecting overloading to a self-regulatory mechanism as opposed to the old method of attempting to enforce legislation which failed because of corruption. Under the Self-Regulatory Axle Load Limit Charter, KPA is required to share information in advance with other cargo inspectors on the weight of the containers received based on ship manifests.

This will ensure that cargo exceeding the allowable limit of 56 tonnes, the maximum vehicle weight under the East African Community (EAC) Control Bill 2013, will only be released to be transported through the rail. The rail currently loads less than ten per cent of the cargo generated through Mombasa Port. The result is that compliance to the axle load limit remains below 75 per cent, despite the enactment of the new EAC law in 2013. The charter directs that weighbridges be installed at all cargo loading points in Mombasa where Kenya National Highway Authority is required to second staff to ensure that cargo weighed at the stations is not weighed along the corridor. The charter also requires Kenya Maritime Authority to develop regulations that will compel shippers of containers to verify their gross weight prior to their release at various loading points.

Second, the enforcement of the charter is expected to reduce incidences of corruption, which together with bureaucratic delays at the port due to poor infrastructure, burdensome documentation rules, lengthy custom procedures and fixed port charges account for a whopping 40 per cent of the total transport costs on the Northern Corridor.

The result is that it costs $1,300 (Sh118,300) to transport a 20-tonne container from Mombasa to Nairobi while it costs $3,400 (Sh309,400) to transport a similar container from Mombasa to Kampala and $6,500 (Sh591,500) to take the same cargo from Mombasa to Kigali. Incredibly, this is more than double the $1,200 (Sh109,200) it costs to ship the same cargo from Japan to Mombasa.

Not surprisingly, the high costs of road transport within the Northern Corridor region compared to shipping and air transport has meant that only 23 per cent of EAC’s total exports and ten per cent of imports are intra-regional.

This has held back economic growth within the countries along the region. This explains the huge interest Presidents Uhuru Kenyatta, Yoweri Museveni (Uganda) and Paul Kagame (Rwanda) have shown in initiatives to improve the flow of goods within the region.

It also explains Tanzania’s ambitious bid to snatch business from Kenya. It is doing so by modernising its ports and railways while also staking a claim on import and export cargo from DRC. These are the ambitions that all transport stakeholders have no choice but to improve, otherwise they will be left biting their thumbs while others are enjoying their lunch. Petty squabbles at the port must be dealt with expeditiously. These include the differences between Kenya Revenue Authority and clearing and forwarding firms that has seen some of the latter locked out of the clearing house.

The other differences revolve around the dock workers and KPA management over plans to hand-over the new port facilities to private sector players. Instead of resorting to endless controversies, all sides, including the Transport ministry should sit down and craft a win-win strategy. This might involve seconding some existing staff to the new operator without any salary reduction or loss of accumulated benefits to ensure the port remains number one on the East African coastline.

Source: Standard Digital

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of TradeMark Africa.