Inside new plan to put Sh32bn port terminal in private hands


The new container terminal at the Port of Mombasa. PHOTO | KEVIN ODIT | NMG

The Kenya Ports Authority (KPA) has settled on a Swiss firm to run Mombasa port Container Terminal 2 (CT2) to fulfill a loan facility requirement for the construction of the largest cargo handling facility.

The Mediterranean Shipping Company (MSC), the second global largest shipping line after Maersk, is set to play a critical role in the running of the Sh32 billion CT2 through the Kenya National Shipping Line (KNSL).

KPA, MSC and KNSL have made a request to the Common Market for Eastern and Southern Africa (Comesa) Competition Commission as they seeking regulatory approval for the transaction that they said would give MSC and KPA joint control of KNSL.

In the approval request, MSC through its wholly-owned subsidiary Shipping Agencies Services Sàrl (SAS) is set to raise its stake to 47 per cent in KNSL while KPA would relinquish about 21.8 per cent of its shares from national shipping line from 74.8 per cent to 53 per cent of the ordinary shareholding.

“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.

The National Treasury and Ministry of Transport, Infrastructure and Urban Development say they have put in place a roadmap that will ensure that “all the necessary steps” will be followed in order to adhere to the laws, regulations and procedures so that public interest is upheld.

Details of the partnership come few months after the implementation of the new Merchant Shipping Act which bars private shipping lines from operating port facilities.

The privatisation of the new terminal was part of the loan agreement signed between the Japan International Cooperation Agency (JICA) for a loan of Sh32 billion for the construction of Phase II of the terminal in 2017.

The loan from the Japanese government through JICA is within the Special Terms for Economic Partnership (STEP) and comes with an interest rate of 0.2 percent and a repayment period of 40 years including a 10-year grace period.

One of the conditions for funding of the terminal by the Japanese government was that it would be operated privately.

KPA floated the tender to run the terminal where the bidders reportedly included Hutchison Ports Investments, DP World, PSA International, China Merchants Holdings and SSA Port Terminal.

However, following claims of interference of the process with reports that some bidders were colluding with senior KPA officials, the tender was suspended and it was expected to be floated once CT2 is operationalised this year.

Kenya has continued to revive KNSL which was started in 1980s to be Kenya’s official shipping line majority-owned by KPA. In the recent agreement with MSC, KNSL will be a parent company but it will use the former’s assets since it does not own any ship. This means MSC which has access of over 550 ports globally will be responsible for shipping and handling government cargo.

Previously, Maersk, the Danish international container shipping company which owns berths 13 and 14, had a 100 percent monopoly over what Kenya imports which raised questions on how it managed to acquire such rights.

Public Investments Committee last year raised the red flag on privatisation of port facilities saying the public are likely to get a raw deal.

It is estimated that government cargo costs an average of Sh14 billion in freight charges per year while local destination charges cost another Sh34 billion.

A vessel calling report by the Kenya Ports Authority (KPA) indicated that Maersk line topped the list by 35 per cent share of twenty feet equivalent units (teus), surpassing its closest rival, MSC, by a margin of 19.9 per cent.

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