Bill on Mombasa Port will create trade barrier, says East Africa traders

Importers and exporters using the Northern Corridor have protested the passing of a Bill the Mombasa County that seeks to allow the county to collect port revenues.

They say the Mombasa County Port Authority (MCPA) Bill 2014 passed on December 10, will impose double taxation on business transactions on the transit route that links Uganda, Rwanda and Burundi with the port.

The Bill, currently awaiting assent by Governor Hassan Joho, seeks to create the County Port Authority, headed by a chief executive, to manage the port and set up an electronic Advanced Shipment Information System (ASHI) to monitor cargo and help in revenue collection.

Many businesses have termed the Bill unconstitutional and asked the governor not to assent to it.

The Bill comes amid concerns at the Kenya Maritime Authority (KMA) that counties on the Northern Corridor are imposing levies that are likely to increase the cost of doing business.

Association of Importers of Kenya chairman Peter Mambembe said the proposed MCPA is unconstitutional, as it did not follow the legal procedure of public participation.

“There was no public participation in line with the provisions of the law,” he said.

Mr Mambembe said the Kenya Association of Manufacturers (KAM), the Car Importers Association of Kenya (CIAK), the Kenya International Freight and Warehousing Association, the Container Freight Stations Association of Kenya and his organisation were not involved.

Amir Thoya, the Frere Town County Assembly representative who was behind the Bill, said they were targeting $5 per tonne of cargo handled at the port.

Based on the 2014 figure of 24.9 million tonnes of cargo handled at the port, this means that the county would earn $1.2 billion from the levy. This is the kind of money that the county chiefs are craving, given huge deficits in the devolved units’ annual budgets.

Mombasa collects about Ksh2.2 billion ($21 million) in revenue annually. In the 2014/2015 financial year, the county received Ksh4.4 billion ($42 million) from the national government against a budget of Ksh12 billion ($115 million), leaving a deficit of about Ksh6 billion ($57 million).

“By January we expect that the authority will be in place, establish the online system and start collecting the levy. We will also factor the revenue in our next budget,” said Mr Thoya.

Mr Mambembe, however, warned that the law will scare away users of the port, which is already facing competition from the port of Dar es Salaam, to which TradeMark East Africa, this UK’s Department for International Development (DfID) and the World Bank are funding a $565 million upgrade.

It is expected the project will boost cargo handling capacity from 14.6 million tonnes in 2013/14 to 28 million tonnes by 2020, posing serious competition to Mombasa port.

READ: Kenya, Tanzania in tight race for region transport hub status

Businesses say the law will create trade barriers within the corridor.

Law Society of Kenya Mombasa branch chairman Benjamin Njoroge said the Bill goes against the Constitution.

“Laws passed contrary to the Constitution will not hold, as they open avenues for lawsuits for interpretation in the courts. So why invite the wrath of people by passing faulty Bills?” he asked.

He said the MCPA will create “double taxation” and “two centres of power” at the port of Mombasa, which in the current Constitution, just like the airports, has been declared a national asset.

“But under the provisions of devolution, the County can establish its own small ports, for instance, at Tudor, Nyali and Mishomoroni seafronts for sea transport to generate its own revenue,” he suggested.

About 4,000 importers and 250 small scale clearing and forwarding agents are worried that “invisible” power brokers and cartels are behind the Bill.

One of the importers questioned why the County Assembly “rushed” the passing of the Bill in an “unfinished state.”

“The Bill is silent on how the County will generate revenue from the port when it is not linked to the tariff regime dealing with imports and exports,” he said.

Ultimate Maritime Consultants managing director Stanley Chai said county officers acted ignorantly by thinking that they would control any revenue coming from the port.

“They have not even said how they will collaborate with the Kenya Revenue Authority which is mandated to collect revenue from all cargo handled at the port. How will the system mesh with that of KRA so that there is no conflict?

Instead of coming up with such a law the county should seek ways of addressing the matter without creating conflict,” he said.

Mr Chai however said that there was also a need to review the Acts of Parliaments of Kenya Ports Authority (KPA), Kenya Bureau of Standards and KRA to change the ports’ ownership.

Citing the Copenhagen Malmo port, which is owned 50 per cent by Copenhagen City, 20 per cent by Malmo City and 23 per cent by private investors, the consultant said there was need to consider listing KPA or the Nairobi Securities Exchange and allowing Mombasa County to own a stake.

Contacted for comments, Governor Hassan Joho through his director of communications Richard Chacha said the Bill had not reached his desk for assent.

“He cannot comment on an issue that has not reached him; the only person who can comment is nominated Member of County Assembly Mohamed Hatimy,” Mr Chacha said.

Kenya Ports Authority chairman Danson Mungatana ruled out the possibility of the port sharing its revenue with the county government, saying the seaport is a national asset that cannot be forced to remit monies.

He was reacting to a statement by the governor and the Mombasa Senator Hassan Omar, who claimed the port was one of the county’s natural assets.