Kenya and Tanzania are set for yet another head-to-head on trade and investments as UAE’s logistics firm DP World starts rolling-out investments at the Port of Dar es Salaam.
This is after signing a deal with Tanzania Ports Authority (TPA) in October last year to operate Dar es Salaam Port in a 30-year concession agreement, a move expected to step up competition between Dar and the Port of Mombasa mainly on transit business to the hinterland.
Privatisation of port facilities and expansion to improve cargo handling capacity formed the bulk of activities at regional ports last year, with President William Ruto’s government also keen to enter into Public–Private Partnerships in running parts of the Ports of Mombasa and Lamu.
In a major move to improve efficiency and what is a straight-on challenge to Kenya, DP World Group is moving to invest over $250 million (Sh39.3 billion) in the next five years to upgrade the Dar port.
According to DP World Group chairman and CEO Sultan Ahmed bin Sulayem, the investment could increase to $1 billion (about 157 billion) over the concession period, including hinterland logistics projects.
“The development will deliver trade opportunities for the region, connecting East Africa with global markets, driving economic growth, job creation, enhanced access to products and service and creating value for all stakeholders,” Sulayem said in a statement.
This, as President Samia Suluhu continues to term Tanzania as the new investment hub in the region, as it seems to be competing with Kenya.
Tanzania targets at least $15 billion about Sh2.4 trillion annual Foreign Direct Investments by the end of 2025, above Kenya’s $10 billion (Sh 1.57 trillion) target.
The TPA-DP World deal is expected to improve efficiency at the Port of Dar es Salaam in what could make it more attractive, with a possibility of swaying business towards the Central Corridor which runs from the port into the hinterland.
Kenya serves the region’s landlocked countries through the Northern Corridor that runs between Mombasa (Kenya), Uganda Rwanda, Burundi and Eastern DRC.
According to TPA director general Plasduce Mbossa, DP World will lease and operate four of the 12 berths at the port, with its performance evaluated after every five years.
The Tanzanian government is also looking for investors to operate another set of four berths.
Kenya Ports Authority on the other hand is in the process of selecting firms for PPP projects, including a planned concessioning of port assets to improve overall service delivery.
According to KPA, the move to lease part of port facilities has potential to generate at least $10 billion (Sh1.57 trillion) annually by 2030.
Facilities that KPA intends to place under the private firms’ management are four berths (11-14) at the Port of Mombasa and the Mombasa Port Container Terminal 1.
At Lamu Port, KPA will hand over the three berths constructed at a cost Sh40 billion by China Communication Construction Company (CCCC), and funded by the government.
It closed the tendering process on November 16, with selection process currently underway.
It also intends to have the Lamu Special Economic Zone run by a private entity.
Recent expansions at the Port of Mombasa include the Second-Container Terminal, which has seen Mombasa’s annual capacity increase to 2.1 million TEUs, as it remains among the top five ports in Africa.
Kenya is also banking on the new Sh40 billion Kipevu Oil Terminal to grow petroleum products export.
The new terminal has a capacity to accommodate four ships concurrently with a capacity of 200,000 tonnes each.
Kenya has lost about 20 per cent of its oil export business in recent years to Dar.
On transit business, Mombasa has lost about 10 per cent of business to Dar es Salaam in the last two years, industry data by the Shippers Council of Eastern Africa (SCEA) shows, even as Kenya remains the main trade route in the region.
"From the recent moves by TZ and Central corridor to attract the transit business starting from petroleum to Tea and construction of infrastructure, it is a threat," the Shippers Council of Eastern Africa told the Star.
The shippers council however feels the two ports of Mombasa and Dar should not be in competition, but instead complement each other as they serve same region.
KPA recently made adjustments on the charges on containers that over stay the free period, in what is seen to favour importers and exporters.
While Tanzania allows up to 30 days frees storage at Dar, Kenya is riding on efficiency and modernisation of the port and equipment to ensure the Northern Corridor remains attractive.
Transport CS Kipchumba Murkomen has since noted that with the planned PPP, Kenya will further improve its position among leading ports in the region.
“Our container turnaround time is two days when our neighbour’s take 38 days. We are one of the most efficient ports in the continent. With our planned PPP, we shall be far ahead in facilitating regional trade and creation of more jobs for our people,” Murkomen said.
Both Mombasa and Dar are competing for transit business in the neighbouring landlocked countries, with the recent move by Uganda to opt for Tanzania as an alternative importation route for petroleum products rattling Kenya.
Kenya has been aggressively marketing the Naivasha Inland Container Depot where it has extended special tariffs for importers from the region. Transit import containers going through the Naivasha ICD have up to 30 days of free storage, before they start attracting charges.
Uganda is the biggest transit market for Kenya, accounting for about 83.2 per cent of transit cargo.
South Sudan takes up 9.9 per cent while DR Congo, Tanzania and Rwanda account for about 7.2 per cent, 3.2 per cent and 2.4 per cent respectively.
KPA is also banking on the Kisumu Port to drive trade volumes which according to KPA managing director, Captain William Ruto, it is an important hub for the East African Community trade.
Concession of port assets is open to local, regional and international investors, according to CS Murkomen, with DP World among potential partners.
Speaking in Mombasa last November, during the launch of KPA’s five-year strategic plan 2023-2027/2028, the CS Murkomen said Kenya must do better to remain ahead of the game.
“We will not sleep because we want to attract foreign investment. What we should do now is to make it as open as possible for Kenyans, regional investors and international investors. Whether it is in a Special Economic Zone or in some berths,” he said.
Already, there are investors at the port who are dealing in oil, grain handling and other commodities.
Meanwhile, Kenya is working on addressing delays, multiple road user charges, cross border charges and other Non-Tariff Barriers (NTBs) to make the Northern Corridor more attractive.