PAST MISTAKES

Past leasing deal comes to haunt Mombasa port privatisation

A Kenya Railways leasing deal signed 25 years ago featured prominently in Murkomen's session with MPs

In Summary

•In January 23, 2006, The KRC signed a concession agreement with Rift Valley Railways Kenya to manage and run its assets a deal that was to run until the year 2031.

•Members of parliament are now raising concerns that the privatisation of the port of Mombasa might end up like the botched Railways deal.

Roads Cabinet Secretary Kipchumba Murkomen appeared before the Departmental Committee on Transport and Infrastructure on November 9.
Roads Cabinet Secretary Kipchumba Murkomen appeared before the Departmental Committee on Transport and Infrastructure on November 9.
Image: EZEKIEL AMING'A

The ghosts of a shoddy leasing deal between Kenya Railways and Rift Valley Railways over 25 years ago have come back to haunt the bid to privatise the port of Mombasa.

The deal which saw Kenya Railways lose billions worth of infrastructure and assets, featured prominently when Roads Cabinet Secretary Kipchumba Murkomen appeared before the Departmental Committee on Transport and Infrastructure.

Members of parliament are now raising concerns that the privatisation of the port of Mombasa might end up like the botched Railways deal.

On January 23, 2006, The KRC signed a concession agreement with Rift Valley Railways Kenya to manage and run its assets a deal that was to run until the year 2031.

However, the termination order was put into effect following RVR’s failure to meet the set operating targets and agreements.

Kipchumba Murkomen was quick to note that unlike the Kenya Railways deal that was done without public participation and without any consultations, the port concession will undergo the processes and the firms will be required to deposit a set percentage before taking over the operations.

“We are not privatising these facilities we are entering on a Public-Private Partnership where 15 percent will still be controlled by Kenya Ports Authority after 25 or 30 years when the lease ends everything will be reverted back,” said Murkomen.

Kenya Ports Authority (KPA) has said it wants to lease parts of key ports to generate at least $10 billion (Sh1.5 trillion) annually by 2030.

In the planned leasing deal, he says there will have to be milestones to be achieved and each of the competing concessionaires bidding for the work will indicate how much they value as the minimum to be paid to KPA.

Submission to the transport committee showed that the government is planning a lease of between 25 to 30 years.

Murkomen added that, unlike the RVR where the concession was free and a lot of areas had not been ironed out, the ports deal is public, and the assets to be concessionalised have been publicized.

“We have a problem from the RVR lease deal where somebody is demanding $2billion (Sh303 billion) as part of compensations and that person did not give anything to this country, the concession he received it for free, he did not transfer any benefit in fact most of our assets were vandalized,” added Murkomen.

Murkomen who was accompanied by KPA boss William Ruto explained that the projects are being implemented under the authority’s 25-year port master plan.

In the past, there have been concerns about private-owned firms operating KPA facilities, with players citing the fact that it may dent KPA’s revenues due to secrecy in the lease agreement.

“What we are doing here is not being done by KPA alone, we are supported by Treasury through the PPP directorate at the ministry,” added the CS.

According to the management of the Kenya Ports Authority (KPA), new operators seeking to lease the Mombasa and Lamu ports and the Lamu Special Economic Zone will have to pay more than $700 million (about Sh103 billion).

The state agency has been seeking private investors to take over the operations and management of five critical port facilities – Mombasa and Lamu ports, Dongo Kundu Special Economic Zones, Kisumu Port, and Shimoni Fisheries Port through a public-private partnership.

KPA has already begun the process of leasing nine assets, which include the Lamu Container Terminal berth 1-3, Lamu Special Economic Zone, Mombasa Port’s berth 11-14 and Mombasa Port Container Terminal 1.

Kenya’s trade route has recently come under intense competition with the landlocked countries of Uganda, Burundi and Rwanda preferring to use the Tanzanian route which has seen total cargo passing through Mombasa, drop to 33.74 million metric tonnes in 2022 from 34.76 million tonnes in 2021.

Tanzania has been giving Kenya stiff competition in building trade with their landlocked East African neighbours, as business people in the region complain about deficiencies with Kenya’s port at Mombasa.

 

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