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Battle to Privatize Mombasa Port Linked to KPA Board Wars

GBR Team 25/11/2019

Determined efforts to wrest control of a multi-billion shilling container handling terminal at the Port of Mombasa from the Kenya Ports Authority could be behind the woes that have rocked the management of the state company in recent weeks, sources indicate.

This morning the Directorate of Criminal Investigations has summoned the entire board of KPA to its Kiambu Road Headquarters to answer to charges of approving fraudulent tenders worth Sh2.9bn.

In an email addressed to General (rtd) Joseph Kibwana who chairs the KPA Board and his members, the directorate says:

“The DCI has reasons to believe that you were involved in the unprocedural approvals or that you all have information that can assist in the ongoing investigations.”

The accusations relate to procurement procedures for the revitalization of Kisumu Port, Makongeni goods shed yard, and production of concrete barriers.

However, sources close to Management vigorously deny the charges and insist all the procurement was above board and had been planned for all along.

Instead, some cite the repeated failure to privatize the lucrative Container Terminal Two as the likely source of the surfacing crisis that threatens to paralyze the Board and top management of KPA.

The recently completed facility, built at a cost of Sh30billion with Japanese funding, has been the object of concerted efforts to prise it away from KPA and hand it to Swiss-registered, Mediterranean Shipping Company (MSC).

A series of legal moves that would have seen MSC seize control of the terminal, were halted in the High Court of Mombasa last month.

A three-judge constitutional division bench of the Superior court ruled that an amendment made to the law, allowing the state-owned shipping line to operate port-handling facilities was unconstitutional.

In July this year, amendments were made to the Merchant Shipping Act inserting a clause that would allow the Kenya National Shipping Line to run port handling facilities.

KNSL is the sea-equivalent of national air carrier Kenya Airways but has been moribund since its inception and owns no vessels. It is however, 40 per cent owned by MSC, a shipping line with government holding the remaining stake.

Since its enactment in 2009, the Merchant Shipping Act, Kenya’s most comprehensive maritime statute, prohibits owners of ships and shipping lines from running port facilities or clearing services owing to conflict of interests.

MSC, owned by the Italian Aponte family, is the world’s second largest shipping line after A.P. Moller-Maersk and ranks just ahead of Cosco-China and CMA-CGM of France.

Queries by GBR to MSC by email regarding its local ownership or shareholding did not yield a response.

In July, President Kenyatta signed into law an amendment that allowed the cabinet secretary for transport to exempt KNSL and by extension MSC from the provision of the Act barring them from operating port facilities.

Although the Japanese-funded CT2 was built with a view to privatization for more efficient and profitable operation, the move has been opposed stridently by the Dock Workers Union over fears of job losses.

Community-based pressure groups have also joined in petitioning court against privatization.

The Japanese government on the other hand expressed dismay at the seeming single-sourcing of a private operator for the new terminal rather than through open tender as per Kenya’s procurement laws.

Amidst all this, KPA leadership which has followed ministerial directions to engage KNSL/MSC in the privatization talks has been silently opposed to the move.

According to a source close to management, KPA is already under tremendous financial pressure as it has to remit millions of shillings monthly to a Kenya Railways Company escrow account to pay for the Standard Gauge Railway.

Treasury has also demanded for surplus operations funds from KPA.

“KNSL will be the death of KPA,” said the source who wished to remain anonymous as they are not authorized to speak for the company.

Net profit at the Authority surged 76 percent this year to Sh15.9bn up from Sh9bn last year on revenues of Sh48bn on higher volumes handled. This was attributed to expanded port capacity with CT2, the standard gauge railway line to Nairobi, and the expanded Internal Container Deport.

Board Intrigues

It is with this knowledge and the silent opposition to privatization that sources feel some Board members hold conflicting interests and are now orchestrating to remove management and break up the Board.

Reports say many on the Board were incensed when one member, Conrad Thorpe, a former British soldier, rebuked the KPA Managing Director Dan Manduku in a letter which he sent directly to the MD rather than through the Chairman, and which, subsequently became public. In the letter he also dismissed a special board meeting called by the chair.

“The Authority of which you are an MD is a mess,” said Thorpe who joined the board last year. “Our reputation is laughable and the city of Mombasa and more widely the shipping stakeholders around the world are shamed by us.”

Thorpe added that KPA is not being run as it should.