State shipping line plan will save Sh305 billion, MPs told

The Transport ministry yesterday defended its proposal to amend the Maritime Shipping Act, amid fears that this could lead to the takeover of Kenya Ports Authority.

Maritime PS Nancy Karigithu, in a presentation to Parliament on behalf of CS James Macharia, said the proposed law would revitalise the moribund Kenya National Shipping Line (KNSL).

Section 16 of the Act bars shipping lines from operating or owning a ship, a situation the workers said has allowed brokers to thrive.

At the same time, there are concerns Kenya is losing Sh305 billion annually in transportation charges paid out to shipping lines, most of them foreign.

KNSL remains a private company established under the Companies Act hence operates outside the bounds of the State Corporation Act.

In defence of the proposed changes in the law, PS Karigithu said the country will be spared destination charges "which are spurious and have no verifiable basis."

It is estimated that government cargo costs an average of Sh14 billion in freight charges per year while local destination charges cost another Sh34 billion.

In comparison, KPA currently contributes Sh3.2 billion in annual taxes and dividends which is way low compared with what Kenya pays out.

But MPs opposed to the plan, especially those from Coast, claim that the amendment is a ploy by the government to allow brokers to take over management of KPA.

The proposed change gives the Transport Cabinet Secretary power to exempt operators from adhering to some sections of the Act.

The import of the legislation was for the Cabinet to make KNSL, which is technically insolvent, more vibrant and hence create jobs in the shipping value chains.

The Transport committee chaired by David Pkosing (Pokot South) yesterday began taking views from stakeholders on the amendment, factoring the Coast MPs' concerns.

Karigithu said the government believes that with KNSL controlling the Mombasa Terminal, the cost will reduce significantly.

“By running local shipping line the money can be retained in Kenya thus saving on foreign exchange. Destination charges have turned Kenya into an expensive destination for maritime transport,” the PS said.

“Oil products carried on ships chartered by KNSL will be able to enjoy priority berthing, faster discharge and therefore, nil demurrage.”

A group of port workers yesterday castigated a section of MPs from the Coast for perpetuating unemployment in the region, especially in the maritime sector.

The representatives of about 80 workers associations criticized the lawmakers for blocking amendments to the Maritime Shipping Act, saying it has locked up jobs for locals.

The law being deliberated in Parliament will allow the KNSL to own and operate ships at Mombasa port.

The members of the workers associations staged a protest at Parliament buildings to push for the changes.

Betty Makena of the International Transport Workers Federation said Kenyan workers are subjected to harsh working conditions and poor pay.

“The international shipping lines are scared that with KNSL being in operation, they will not have a chance to exploit Kenyans employedt in the companies,” Makena said.

“We are shocked that MPs are opposing the revival of KNSL yet thousands of youths lack jobs and hotels are closing doors. The port is our only hope,” she added.

During the committee session, MPs raised concern over why KNSL is attached to the Transport department yet it deals with maritime issues.

The other issue is the place of Mediterranean Shipping Company (MSC) in the new arrangement since it owns 47 per cent of shares at KNSL. KPA controls the majority shares (53 per cent).

“With the current arrangement, it means that 47 per cent of the benefits that will accrue from the change in the law would go to MSC,” Mumias West MP John Naicca said.

However, the committee resolved that they will vouch for the amendment to open the locked potential of the Mombasa port.

Pkosing assured the ministry and the workers' groups that they will rally other members of Parliament to consider approving the law changes.

The ministry defended MSC involvement saying despite working with KNSL for years, it has influence in the global market.

“MSC has promised to bring other cargo from other regional ports to Mombasa. This will transform the port to a transshipment hub in East Africa,” Karigithu said.

She further allayed fears that private companies are positioning themselves to take advantage of the law change to operate the Sh30 billion second container terminal.

“KNSL is a subsidiary seeking to use CT2 to drive productivity. Furthermore, KNLS will be paying a lease fee to KPA.”

At least 18 shipping lines sought conservatory orders exempting them from requirements of the Act, a case argued to have made them bolder in perpetuating abuse of workers.