Japan protests at State’s handling of port tender

The expansion of the Port of Mombasa is facing headwinds after Japan, the main financier, raised concerns over delays on part of Government in processing a loan agreement entered in March this year.

Japan International Cooperation Agency (Jica), which coordinates official development assistance, also fears the Government plans to disregard an agreement on the construction of phase two of the project.

Jica protested over the slow pace of the Government in committing on the project for phase two, which involves the construction of Berth 22.

In a letter dated August 7 2015 to the Principal Secretary, Ministry of Transport and Infrastructure, senior representative of Jica Koji Noda expressed concerns over delays towards processing a loan agreement signed on March 9, 2015. “Jica is deeply concerned about the slow pace towards loan agreement effectuation whose dates are given as within 120 days from the signing date. The loan agreement was signed on March 9, 2015,” Noda said in the letter copied to National Treasury Principal Secretary Dr Kamau Thugge and Kenya Ports Authority Managing Director Gichiri Ndua.

Jica said despite extending the deadline after the expiry of 120 days stipulated on the loan agreement, Kenya has still not heeded. The extension is coming to an end early October this year. “There are still a lot of steps to go before the deadline hence we are afraid that the current slow pace of processing the matter by the ministry will negatively impact the project,” reads the letter. “We request for a meeting to enable smooth implementation of the project by the executing agency, KPA.”

This is the second time the Japanese agency is expressing displeasure over port expansion plans.

In June, Jica protested against the manner in which the National Treasury had meddled in the process of selecting an international company to operate the second container terminal at the Mombasa Port. In a letter dated June 3, 2015, the chief representative of Jica, Mr Hideo Uguchi complained over major alterations on the requirements over the ongoing procurement process.

Misleading information

And he warned that this could affect Japan’s aid: “Any cancellations at this stage will affect future assistance to Kenya.”

The financier claims a misleading amendment in the addendum that the winning port operator for phase one may be invited to develop phase two. “Jica not only financed phase one, but also signed a loan agreement with KPA in March 2015 for the construction of phase two. More so, Japan has already received an official request to finance phase three which is under positive consideration,” reads the letter in our possession.

The addendum proposes that the conceding authority should determine the financing mechanism for the two phases which may include the Build Operate and Transfer (BOT) model under Public Private Partnership: “This is a misinterpretation of the current commitments by both governments as the concession plan clearly states that BOT for the port is not a viable option.”

Kenya signed a Sh25 billion loan with Jica for the second phase of the Mombasa expansion project in March 2015 as part of Sh50 billion commitment by the Government of Japan to fund the facility.

The same month, President Uhuru Kenyatta, on a visit to Tokyo, agreed with the Prime Minister Shinzo Abe to accelerate cooperation in infrastructure development in Mombasa.

This money is expected to finance the construction of a new container terminal by reclamation of the West Kipevu to create additional three berths. With the new terminal, the access road is expected to hold 750,000 twenty-feet equivalent of containers annually.

KPA Managing Director Gichiri Ndua referred this writer to Treasury for comment. When contacted National Treasury Henry Rotich termed the changes through addendums a normal process in any tendering process. “This is a normal practice to clarify issues to bidders,” said Rotich.

He said so far six addendums have been done to clarify emerging issues in the tender for selection of the operator of the second container terminal. “All the issues raised by Jica have been clarified,” he told Weekend Business, blaming the current standoff to vested interests in the projects at the port.

Japan is Kenya’s single biggest lender and source of Official Development Assistance with most of the money lent to Kenya on concessionary terms. Already, the Japanese have been involved in the design of the Hoima-Lokichar-Lamu crude oil pipeline and are also involved in the expansion of the Mombasa Port.