KPA will overstep its mandate by engaging in last-mile delivery business

Containers being offloaded from a ship at the Port of Mombasa. [Kelvin Karani, Standard]

The Kenya Ports Authority’s (KPA) announcement that it plans to become a full-fledged logistics player, offering end-to-end transport and last-mile deliveries through a partnership with COSCO Holdings has sent shockwaves throughout the industry.

At the heart of the concerns lies the contract itself, which is skewed heavily in favour of the Chinese company. KPA’s arguments regarding improved port efficiency, lower freight costs, and reduced demurrage lack evidence and contradict stakeholder concerns, raising doubts about the true motives behind this venture.

Another issue that has sparked controversy is the decision-making process within KPA. The management allegedly bypassed the board in awarding exclusive rights to the company. This lack of transparency and deviation from established governance procedures not only raises concerns about accountability but also undermines the principles of corporate responsibility and good governance.

Furthermore, KPA is overstepping its core mandate by venturing into the last-mile delivery business. The primary function of KPA is to manage and operate port facilities. Deviating from this could potentially divert crucial resources and attention away from the efficient management of port operations, which could have unintended consequences on the efficiency of the ports.

The move by KPA is also expected to have repercussions on the operations of the Standard Gauge Railway (SGR), a critical component of Kenya’s transportation infrastructure. The potential negative impact on SGR operations could disrupt the established supply chain, jeopardising the livelihoods of hundreds of businesses relying on last-mile operators.

The Kenya International Freight and Warehousing Association (KIFWA), representing over 1,200 clearing and forwarding firms, has expressed strong opposition to KPA’s plan. KIFWA sees this move as a significant threat to local businesses, arguing that the exclusive deal with the Chinese firm may favour a single multinational company at the expense of the numerous local players. KIFWA has threatened a major strike, which could have severe consequences, including the paralysis of the SGR and substantial losses for the operator.

Moreover, the decision by KPA to enter the last-mile cargo delivery business contradicts a directive from the head of state. The president had directed that all port functions revert to the port of Mombasa to prevent job losses and avoid introducing unnecessary bottlenecks in port operations. Going against a government directive raises concerns about the decision-making process within KPA and the potential implications for broader governmental strategies.

Critics argue that there is no void in the transport and logistics sector in Kenya, questioning the value a monopolistic foreign player could bring and the issues they aim to address. The scepticism revolves around the notion that introducing an external entity may not necessarily resolve existing challenges within the sector. Furthermore, voices against KPA’s expansion into the last-mile delivery business emphasise the need for the organisation to adhere to its core mandate. The primary focus should remain on operating, managing, maintaining, and regulating port operations, rather than diversifying into unfamiliar territories.

KPA management should provide assurances to Kenyans and East Africa before engaging in direct competition with its own customers in the transport and logistics services. It should ensure timely and efficient vessel berthing to address the existing 10-day delay for containerised vessels. Additionally, KPA should eliminate challenges associated with container loading, transfers, and scanning, which are identified as persistent issues in Mombasa port operations. It is also important to enhance port security, and especially prevent the constant pilfering of transit cargo in the yards.

After facing criticism, KPA re-advertised the tender, a move that will solve nothing. Any player selected to enter the end-to-end goods delivery business will face insurmountable hardships trying to elbow out over 1,200 established players in the transport and logistics sector. KPA should focus on addressing existing challenges and collaborate with key stakeholders to enhance overall port efficiency and services.