Port privatisation now Kimunya’s nightmare as opposition mounts

Laban Walloga | NATION Dockworkers demonstrate outside the KPA main gate against port privatisation last week. They were repulsed by the police officers who fired teargas at them. 

By JAINDI KISERO jkisero@ke.nationmedia.comPosted Monday, March 7 2011 at 22:00

In Summary

• Government set to license multiple private companies to take cargo handling services in all conventional berths at the Kilindini Port

Key cargo handling services at Mombasa port will be undertaken by private operators if plans to privatise the facility are sanctioned, a new report by a consortium of advisers has disclosed.

The report by advisers led by Dutch consultants CPCS Transcom, which was retained by the government to advise on the transaction, has proposed a complete transfer of responsibility for the port to private operators.

If the proposal is accepted, the government will license multiple private companies to take over stevedoring services in all conventional cargo berths at Kilindini Port.

Stevedoring covers shore handling of cargo delivered to open storage areas within the port and then onto trucks or rail cars.

The private players will also be allowed to do all ship-to-shore movement and handling of cargo, rendering the massive operations department of the Kenya Ports Authority redundant.

The CPCS Transcom Consortium includes Standard Investment Bank, CB Richard Ellis, Centre for Development Consultants and local legal firm Mboya & Wangongu.

The group was contracted to provide advisory services on the privatisation transaction in December 2009.

If its proposals are taken on board, the private licensees will pay an annual fixed licence fee of between $50,000 (Sh4 million) and $150,000 (Sh12 million), plus a throughput fee measured by the volumes of cargo handled.

The second part of the privatisation will involve inviting private sector players to build a new container terminal on berths 11 to 14 and then transfer management and temporary ownership for an agreed fee.

According to documents seen by our sister publication, The EastAfrican, the consultants have advised that the new container terminal be privatised through what is referred to as a BOT concession — build, operate and transfer.

Apparently, the consultants have even gone ahead to test the appetite in the market for the two projects among both potential international and local investors.

The report says that several local investors have expressed interest in the stevedoring transaction. Among them are existing operators of container freight stations Mitchel Cotts and Interpel Investments.

CPCS Transcom has also held discussions with potential international players who have shown an appetite for the BOT concession contract.

Prominent among these are APM Terminals of the Netherlands and SDV Transami. Both have wide-ranging interests in container terminals in Africa.

For instance, APM Terminals operates a 1.2 million twenty-foot equivalent units (TEU) container terminal at the Apapa Port Complex in Lagos, which was a concession by the Nigeria government in 2006.

Will the experiment work in Kenya? Indeed, what initially looked like no more than the usual opposition to privatisation by trade unions has now evolved into a huge political standoff involving not only the dockworkers union, but a movement that has galvanised the political elite of Coast Province on a scale never witnessed before.

What is more, the controversy is being fanned by the highly emotive issue of the ethnicity of the top government officials driving the privatisation project — with much being made of the fact that Transport minister Amos Kimunya, his permanent secretary Cyrus Njiru, chief executive of KPA Gichiri Ndua and the majority of the board are all from related ethnic communities.

A stakeholders’ workshop organised by the Transport ministry and the Treasury to mobilise support for the project was almost disrupted by street demonstrations in Mombasa.

Such has been the political pressure that even the Privatisation Commission, which coordinates all privatisation transactions in Kenya, made a tactical retreat, coming out to assuage the anti-privatisation campaigners by making the less than candid assertion that the government was yet to make up its mind on whether to proceed with privatisation of the port.

In an advert published in the newspapers, signed by chief executive Solomon Kitungu, the commission said that the plans to privatise KPA were yet to be tabled before the Cabinet for approval.

Clearly, the Privatisation Commission did not want to openly admit to the anti-privatisation campaign that plans to privatise the port were at an advanced stage — and that the government had even gone to the extent of contracting consultants at huge expense to advise on the transaction.

To muddy the waters further, members of Parliament and ministers are joining the fray, riding on the anti-privatisation wave sweeping Mombasa to gain political mileage.

Vice President Kalonzo Musyoka put out a written statement assuring the public the government was not about to sell the family jewels.

And Trade minister Ali Mwakwere promised that he and other elected leaders from Coast Province would mount a campaign within the Cabinet to block plans to sell the strategic asset.

All indications are that the project is going to be politically difficult to deliver, especially if the proposal goes to Parliament and the Cabinet.

During the stakeholders’ seminar in Mombasa, Mr Kimunya dismissed the campaign by the Dockworkers Union as a short-lived affair, predicting that the anti-privatisation group would lose steam after the forthcoming elections for new office bearers of the union.

The minister presented the matter almost as a fait accompli, warning that the sector stood to lose billions of shillings that the Japanese government had committed to funding a new container terminal at Kipevu.

He said the Japanese credit was conditional on the government privatising the port.

It will be interesting to see how Mr Kimunya handles the politics. He may consider forcing through the transaction by introducing regulations under the KPA Act — thus circumventing the Cabinet and Parliament.

Incidentally, the CPCS Transcom report more or less suggests that this option exists for the ministry. In sections of the report on legal issues, CPSC Transcom opines that under the existing KPA Act, the Transport minister has powers to make rules regulating licensing of stevedoring services at the port.