Mr. President, elevate Dongo Kundu to a lucrative business hub

As a midlevel officer in Citibank Dubai In 1993, I suggested we open a branch in the recently established Jebel Ali Free Zone (JAFZA). My bosses’ reaction was “Why? It’s a dead port. A white elephant.” But I had seen the future. Two days before I had met the chairman, Sultan Bin Suleyem and he had captured my imagination. He told me that there were 300 companies registered in Jebel Ali Free Zone. He had set himself a personal target to reach out to 20 companies every month. That’s 240 per year and was expecting a 25 per cent success ratio. This would give him a 20 per cent growth, and he was happy with that.

I was fascinated with this idea and I believed that he could make it happen. I kept monitoring Jebel Ali for the next 25 years. I also made a mental note that I would set up another Jebel Ali in Kenya at some future date. In fact, I made it a cornerstone of my campaign for Governor of Mombasa in both 2013 and 2017. Fast forward 25 years later. Jebel Ali has 7,500 companies, employing 144,000 people, contributing 24 per cent of the country’s GDP, and $87 billion of trade passes through. This contribution far surpasses all the glamorous hotels and airlines that have made Dubai so famous. Why aren’t we doing the same in Mombasa?

Ironically, the idea of Jebel Ali Free Zone is neither original nor unique. Dubai has borrowed its business model from Singapore. The Ruler, Shiekh Mohamed so impressed with Singapore’s success that he sent his top ten young leaders to Singapore with a simple mandate. Go to Singapore, live there for three years, watch, learn, play and come and duplicate that success story here.

Singapore model

Emirates Airlines is fashioned on Singapore Airlines. Jebel Ali on Singapore Port, the focus on trading, on developing Human Resources skills and welcoming international human capital by creating a living environment that was second to none is borrowed from Singapore.

Dubai perfected and improved on the Singapore model.  The whole world came and Dubai surged into a world class city. Shiekh Mohamed is a student of Lee Kuan Yew – just like our President is an admirer of Lee Kuan Yew.

Today there are concerns that Kenya will lose the Port of Mombasa to the Chinese. These fears are unfounded. The port was never put up as collateral for SGR, so how can they grab it? What is at risk is the biggest opportunity that Kenya has, which is the Dongo Kundu Free Zone. That is our Jebel Ali. Dongo Kundu has the opportunity to radically transform the economies of Mombasa and Kwale and make a massive contribution to the economy of Kenya.

It has the capacity to create 20-30,000 new jobs within the next few years and make Mombasa the trading and manufacturing hub for the Comesa region. Why should Kenyans go to Dubai to buy cars that come from Japan? Why can’t we bring that market to Kenya? Goods manufactured in Dongo Kundu Mombasa would be Comesa products and therefore duty free in the whole Comesa region. What are we waiting for?

Infrastructure projects

Japan and China are competing for Dongo Kundu. Ask yourself why. Japanese estimate that setting up Dongo Kundu will cost $385 million. The Chinese estimate $400 million. Both estimates include the cost of building two berths costing $150 million. Where is the logic of building two berths when the Port is a few kilometers away and the port still has underutilized capacity?Remove the berths from the project and we have a project cost of $250 million. Most infrastructure projects are done on a debt to equity basis of 70/30 meaning that Kenya has to raise 30 percent in equity and international banks will finance the remaining 70 percent. International banks have already expressed a willingness to finance Dongo Kundu on a project risk basis – meaning that they will take the risk on the project.

This will no longer be a Kenya Government debt. KPA generates a profit of Sh10-15 billion per year. Clearly, KPA can afford to put up Sh2.5 billion per year for each of the three year’s estimated construction period. So, why are we going cap in hand to the Chinese and Japanese to give away our Crown Jewels? The Chinese have already asked for a 50 year lease. We are setting up a Chinese colony in Mombasa for the next 50 years.

There are clear and compelling reasons Dongo Kundu must happen immediately. Fortunately, the infrastructure is already under way. There are obvious reasons we must, as a country own Dongo Kundu 100 per cent and as a country, can afford to finance this critical project ourselves. Let us not impose on ourselves the mistaken belief that we are poor, and that we need Chinese and Japanese capital even at the cost of selling ourselves short.

I have two great fears. First, our veteran politician Mohamed Jahazi told me that they were discussing Dongo Kundu in Mombasa Municipal Council in 1962 – and we are still discussing it today.

I hope we will not be discussing this project 50 years hence. Second, this project might end up with either the Chinese or Japanese.  Mr President, do not give this away.

Mr Shahbal is Chairman of Gulf Group of Companies.