The Mediterranean Shipping Company (MSC) will play a critical role in the running of the second container terminal at the Mombasa port.
The Swiss shipping line is set to raise its stake in the Kenya National Shipping Line (KNSL), which is set to become the operator of the terminal.
This is despite concerns about shipping lines running port facilities not just in Kenya but in other jurisdictions.
Auditor General Nancy Gathungu has also questioned how Kenya identified MSC as a strategic partner KNSL in past audit reports.
MSC is set to increase its shareholding in KNSL, which will put it on an equal footing in shareholding with the Kenya Ports Authority (KPA), which currently owns a 74.8 per cent stake in the national shipping line.
This is according to disclosures that KPA, MSC and KNSL have made at the Common Market for Eastern and Southern Africa (Comesa) Competition Commission as they sought regulatory approval for the transaction that they said would give MSC and KPA joint control of KNSL.
MSC’s stake will be held by Shipping Agencies Services Sàrl (SAS), a wholly-owned subsidiary of MSC.
“KNSL will, as part of the joint venture, become the new operator of the Mombasa Container Terminal 2 (CT2) at the port of Mombasa in Kenya and commence offering freight forwarding services and container liner shipping services,” said the Comesa competition watchdog in a call to the public to give comments on the transaction.
It has given players up to March 22 to give submissions on the transaction.
"KPA will continue to operate Mombasa Container Terminal 1, Conventional Cargo Terminal, Shimanzi Oil Terminal and the Kipevu Oil Terminal, which are all based in Mombasa as well as the terminals in Lamu, Malindi, Mtwapa, Kiunga, Shimoni, Funzi and Vanga."
The Auditor-General has in the past cautioned about increasing MSC’s stake in KNSL saying KPA’s shareholding would be substantially diluted.
She has at the same time queried how the government settled on the Swiss company as a strategic partner.
“It is not clear how the strategic partner was identified and allotted 108,693 new shares… if the above is effected, the allotment of the shares would result in dilution of investment of the Kenya Ports Authority by 21.8 per cent from 74.8 per cent to 53 per cent of the ordinary shareholding in the company (KNSL),” said the Auditor General in the audit report on KNSL’s financials for the year to June 2019.
"The National Treasury has, however, provided a roadmap that will ensure that all the necessary steps will be followed in order to adhere to the laws, regulations and procedures for ensuring that public interest is upheld.”
KPA is building the Sh32 billion second container terminal, which is being financed by the Japan International Cooperation Agency (Jica), with construction being undertaken by the Japanese Toyo Construction Company.
The first phase of the second terminal, which was built at a cost of Sh26 billion, was completed in 2016 and is being operated by KPA.
There have been concerns about private-owned firms operating the terminal, with players citing the fact that it may take away business from Terminal 1 and, in turn, dent KPA’s revenues.
There have also been concerns about a shipping line – such as MSC and even KNSL – operating the terminal or other port facility, with experts noting that this could be to the detriment of its competitors.
The Merchant Shipping Act barred shipping lines from operating port facilities, but this was amended in 2019, giving the Transport Cabinet Secretary the powers to exempt government-owned companies from the requirement.
In the application lodged with the Comesa Competition Commission, MSC and KPA said the move would further enhance Kenya’s position as a logistical and transhipment hub.
“The proposed joint venture, combined with the ongoing expansion projects of Mombasa Container Terminal 2, will help position the port of Mombasa as a strong transhipment hub for liner shipping services in South-East Africa,” said the Comesa Commission, adding that it would also see more investments that will, in turn, increase job opportunities for Kenyans.