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Lease out port to get higher returns, improve operations

BUSINESS
By Mbatau wa Ngai | Nov 21st 2015 | 3 min read
By Mbatau wa Ngai | November 21st 2015
BUSINESS
Containers at the Mombasa Port. [PHOTO: FILE/STANDARD]

Kenya Ports Authority (KPA) deserves commendation for taking steps to boost cargo handling at the Mombasa Port ahead of the completion of the expansion of the Suez Canal by the Egyptian government.

According to KPA’s Managing Director Gichiri Ndua, the plans are to construct and equip four berths which will provide an estimated 600,000 Twenty Equivalents Units (TEUS), a measure of container capacity.

Those doubting KPA’s wisdom of embarking on the road that would rapidly boost its capacity need only take a trip to Tanga and Dar es salaam ports to see the frantic efforts Tanzania is making to complete its expansion ahead of Mombasa so as to steal the latter’s thunder.

The new terminal, with an annual capacity of 1.2 million TEUs, is being funded jointly by the government and the Japanese International Corporation Agency (JICA) at a cost of Sh91.8 billion and is being implemented in three phases on 1,000 acres.

The terminal is scheduled to be operated by an international terminal operator through a 25-year concession

The Cabinet Secretary for Transport and the Attorney-General might make the process easier by listening to advice from Simon Sang, the Secretary-General of Dock Workers Union, who says that a concessionaire should only operate at the port after the KPA Act is amended to change its status from a service to a landlord.

Failure to amend the Act could mean that, given some Kenyans’ penchant for litigation, some busy-body would drag KPA to court in an attempt to stop the process. Even if the litigation fails, neither the government nor its people can afford a delay given the fast pace in which the rest of the world is moving.

The government might also consider taking an active role in the awarding of the contract to manage the berth under construction to ensure that the concessionaire has the capacity to give the country the best bang for the shilling. The concessionaire will do this in two ways.

First, whereas the amount of money offered is important as it will go a long way towards repaying the loan taken to put up the facility, the often-heard promises to entrench Mombasa’s position as a regional hub should not be taken at face value.

In any case, the country’s ambition is—or should be—to go beyond the region.

At the very least, the country’s ambition should be to become the Dubai of Africa, South of the Sahara. Towards this end, the government needs to step up efforts to establish a duty-free port. The facilities it builds should then be leased to different importers who have what-it-takes to compete with Dubai in terms of the range of products they import, quality and price.

Run efficiently, importers from as far as South Africa and Nigeria would not need to go to Asia and Europe to source their imports and would instead jet into Mombasa where they would be able to buy all their requirements.

If it turns out that Kenya Airways would need to be roped in to offer direct flights from these countries to Mombasa, so be it. This would give the country’s hospitality industry—particularly hotels at the coast—the much-needed shot in the arm.

At the very least, it would bring them well-paying visitors all the year round unlike the traditional tourists who are seasonal.

Second, the prospective concessionaire should be required to demonstrate that he has the capacity and willingness to train local employees so that they would be able to run the berths after the contract expires in 25 years. Failure to entrench this requirement in the contract would give the concessionaire room to bring all his senior staff, including supervisors, leaving Kenyans to only do the donkey work. This is—or should be—unacceptable.

Indeed, the government should take steps to discourage this practice as it not only robs the country the revenues it would earn were its people employed, but it also leads to sour industrial relations between workers when they have to take orders from foreigners who do not understand the local languages or culture.

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