Kenya: Port Modernisation Unlikely Before 2013
Tuesday, 10 May 2011
Current plans to privatise Kenya’s Mombasa port have pit hot-button politics against the desperate need to modernise and expand a key infrastructural asset. As the largest seaport serving East and part of Central Africa, Mombasa handles 80% of the cargo arriving by sea into the region. The port processes 19m tons of throughput traffic annually. Growth is projected at 10-12% a year, driven by economic growth, strong regional trade, beginning oil production in Uganda and the rise of new markets in post-conflict areas Southern Sudan and eastern DR Congo (DRC). Neighbouring ports such as Tanzania’s Dar es Salaam have lured away some of this transit traffic. But Mombasa remains the favourite entry point for most traders, simply because Kenya is closer to major inland markets and overland transport is not cheap, in particular as long regional railways are only sluggishly rehabilitated.

Mombasa is grossly unprepared to meet this demand: The port has one container terminal and a channel that is too shallow to accommodate large modern ships. Port facilities are operating at three times their designed capacity. With existing hardware, the port could conceivably accommodate another 25% increase in traffic. But to meet long-term demand, KES163bn (USD2bn) will be needed over the next decade to finance expansion.  

A KES5.2bn dredging project to deepen the port channel has been in the works for a while now, backed by government funding. Japan has also offered JPY25bn to build a second container terminal, the first phase of which could be completed by 2015. However, this financing may be contingent on privatisation.

Proposed Public-Private Partnerships
Three public-private partnership (PPP) projects have been proposed by Kenya’s privatisation commission, and assessed by Canadian transport consultants CPCS Transcom. The government-owned Kenya Ports Authority (KPA) would retain ownership of the port itself, but key services would be built and operated by private companies:

1.    Conversion of berths 11 – 14 (not in use) to a small container terminal:
  • The consultants recommend a 25-year build-operate-transfer (BOT) concession from KPA to a private investor.
  • Estimated cost: KES5bn for infrastructure development; KES6bn for new equipment.

2.    Private provision of stevedoring services (cargo handling):
  • The consultants recommend either area leasing or individual operating licenses to be granted to private companies for a fixed annual fee by the KPA, a common practice at many ports.
  • This would hopefully increase productivity levels through introduction of modern equipment and practices: KPA dock workers are currently clearing at 15 to 20 movements per hour – less than half the international average, and low even by the African standard of 25.

3.    Privatisation of the inland container depot (ICD) at Eldoret:
  • The consultants recommend a management contract or lease concession of 5 to 10 years to a private transport company.
  • No facility or infrastructure development would be required, just a small investment to purchase new equipment.
  • The ICD is located along the Mombasa-Kampala rail route and could serve as an important transfer point from rail containers to trucks for cargo heading inland to Uganda, Rwanda, Burundi, Southern Sudan and the DRC.

In a report submitted to the government earlier this year, CPCS Transcom concluded that these partnerships are Kenya’s best option to meet demand. Far too much cash and expertise are required for the government to achieve this on its own. Rolf Nielsen of global shipping operator Maersk says business does not see KPA as a “sleepy parastatal”. The organisation offers good leadership, but lacks the capacity to specialise across multiple operations in need of new technology.

If privatisation goes ahead, it will take two to four years before the impact becomes noticeable. The small container terminal at berths 11-14 could be built by 2012 if work started now, while the Japanese-funded terminal would realistically debut in 2016 or 2017.

But work is almost certainly not going to start now. The local Dock Workers Union (DWU) has launched a vociferous campaign against any mention of the words “port” and “private” together. In April 2011, a court case was filed in protest. Insiders say things can not move forward until that is settled, and it may take even longer than usual due to ongoing reforms to Kenya’s judicial system.

Job losses are rightly feared due to widespread inefficiencies - some estimate that one third of KPA’s 7,000 employees hold unnecessary positions. But the DWU conveniently ignores that privately financed expansion could create more jobs even as it streamlines operations. Heading into next year’s election, coastal politicians have been more than happy to “stand behind the people” on the emotional issue. There is minimal public understanding of what privatisation actually means, and misinformation runs rampant through local media.

There is strong political will in pockets to work with investors, beginning with Kenya’s transport minister who seems to have a competent long-term vision for the port. But if plans are pushed beyond the 2012 election - which is looking likely, given the energy that Kenyan public servants devote to campaigning, and the subject’s emotional vote-gathering appeal - , efforts to win over parliamentary committees will be at least partially lost to political realignment. Rumours are circulating that Japan may withdraw its support if local opposition to privatisation continues. Many observers believe the private-led expansion will eventually go through after the elections, but for now, efficiency gains are sacrificed to local politics.

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Comments (1)Add Comment
Privatization: At what cost?
written by Subsaharanite, September 04, 2011
Privatization of public companies in Kenya has always been ridiculed by the gross misconducts. In many cases, the people within the echelons of power strategically dispose of government owned companies for more than one reason and often, for the wrong ones. They develop a good story that may be partly based on facts, feed it to people. The public being not so keen on what goes on in within the corridors of power agree or do not question the manner in which privatization takes place.

Take for example in an election year, more often, the ruling class would want to raise campaign money and often, they either sell off government property at throw away prices to corrupt individuals who give them kickbacks or to their cronies. In most cases the former is the easier route while the latter happens when the cost is not so high. In many other cases, individuals interested to purchase such an asset from the government approach those in control like the minister in charge and propose a good deal in which the said minister or his political affiliations are to get a sizable kickback. These deals are usually too good to be ignored. So echoes of privatization are soon heard everywhere. In my opinion, the intention of the 'minister' in charge should be further looked at before privatizing the port

Even though privatization of the port would certainly streamline its operations, we do not know exactly at this point whether this is the main reason for its disposal. This port is known to be an entry point to drugs worth billions of shillings. The perpetrators are well known and with their drug money, they can easily afford to own part of this port. This would further aide their illicit trade. It is thus pertinent to rid drug trafficking through the port before thinking of selling it.

Thirdly the said minister championing the privatization campaign has a tainted reputation when it comes to privatization. He is known to have disposed off a top 5-star Hotel to a Libyan company at a throw away price a few years ago when he was in charge of the finance ministry. What was intriguing in that case was the fact that the deal was done without public consultation and no public announcements were made. With such a reputation, I will not be surprised to discover that he has already identified a possible buyer and all is waiting to do is hoodwink the public into concurring with him.

Further, there are more logistical and infrastructural impediments that need to be looked at in order to make the sell of this port profitable to the government. For example, logistical pitfalls that clog the port should be streamlined in order to make it more attractive to the public. Operations at the existing railway line should also be improved given that even if the port is able to handle more cargo, it would just pile up in storage if it is not hauled out.

Besides this. there has been talk of development of another port in Lamu that would handle more cargo. The government wants to involve the private sector in its development and it seems several parties are interested. It would a be a more prudent idea to accelerate the development of the new port rather than putting more pressure on the Mombasa Port which is already in a logistically clogged physical location.

Lets not look at the ports, privatization from the benefits that would accrue from its sell, lets look also at the possible peripheral vested interests that the 'government' has on this sale. We may discover that the real intentions for selling this port are quite different from what we are being told. For additional commentaries of African issues, visit my blog at

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