Kenya disowns port deal promises made to Dubai

A Container Terminal within the Port of Mombasa. PHOTO | KEVIN ODIT | NMG

Kenya has disowned promises of a July tender made to Dubai Port (DP) World that would have allowed the UAE-based firm to offer a bid for development, operation and management of the country’s four ports.

DP World said the Kenyan government had promised to issue a request for a commercial proposal for the port deals before the August 9 General Election.

Kenya had agreed to offer preference to DP World, owned by the government of Dubai and one of the world’s largest port operators, in a deal inked between the two States.

The Treasury has disowned the existence of such a deal and denied ever mentioning plans to issue a tender by July.

Under the deal, DP World was to deploy its money to build three berths at the Mombasa port, develop cold storage supply chains in Kisumu and Naivasha and to build a special economic zone in Lamu.

The Dubai firm was to submit a commercial proposal to equip and operate the three completed berths in Lamu.

“We have not received any tender documents and we expect to compete with any other players when this is floated. What we were told is the request for proposal will come out by the end of July,” an executive of DP World told the Business Daily in an interview.

“The government-to-government agreement was signed proposing us to take part in the process. It was an agreement to explore how we can provide gateways into the country and the hinterland.”

Kenya has denied promising the Dubai firm that it will issue notices for the port deals this month.

When requested comments on whether the request for proposal (RFP) will be issued this month, Treasury Cabinet Secretary Ukur Yatani replied “No,” via text without offering any explanations.

Typically once an RFP is issued bidders are given weeks to fill and submit bids outlining the amount of investment required, financing options and a feasibility study which could take months.

DP World first entered the fray in Kenya in 2014 when the government floated an international competitive tender to concession the second container terminal in Mombasa.

Port operators from China, Japan, Singapore, Netherlands and several other countries participated in the tender.

The Chinese group, PSA International, which had partnered with a local firm, Multiple Hauliers, had the highest marks, with DP World emerging second.

The process was then cancelled amid political undercurrents.

The Treasury Cabinet Secretary previously confirmed that DP World were among many port operators being explored by the government as potential private partners to run the new Lamu Port.

Mr Yatani said the government was seeking private players to run Lamu Port after spending Sh50 billion on building the initial berths, which are underutilised due to insufficient equipment.

Lamu Port was launched last year following delays linked to funding shortfalls to kick-start operations of all three berths.

The first berth was launched last year without completing construction and installation of equipment, prompting the new port’s authorities to borrow kits -- including cranes, trailers, gantries, oil spill response and marine equipment -- from Mombasa

DP World says the traditional dominance of the Port of Mombasa in East Africa is being challenged by other regional facilities that are attracting more investment and are less resistant to reform.

Turkish, Emirati, South African, and Chinese investors are leading the pack in a bid to refurbish and expand East Africa’s ports.

Industry experts say ports that shun partnerships with experienced foreign investors are set to lose out as competition for market share intensifies.

Lamu Port is yet to announce any port management tenders and has the potential to serve as a trans-shipment hub for the region.

The port can accommodate big container ships owing to its depth and save time and logistics of getting to Salalah Port in Oman.

Salalah is the biggest port in the Arabian Peninsula and most ships in Eastern Africa use it for most trans-shipment, potentially putting it in direct competition with Lamu.

Lamu Port is also earmarked to serve the southern part of Ethiopia and South Sudan.

DP World has a controversial record. In February 2006, an announcement by DP World that it was taking over management of six US ports in a $3.7 billion (Sh436 billion) deal kicked up a controversy in Congress, mainly on security considerations. Under pressure and public scrutiny, DP World dropped the deal.

In 2012, Djibouti filed an arbitration case in London against DP World, claiming that the firm bribed an official to secure concession to run Dolareh – the largest container terminal in Africa.

Though Djibouti lost, the case revealed insights into dealings between corrupt elites and global concession operators.

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