Privatisation Will Secure the Future of Kenya's Ports

Globally, the privatisation of ports began in the early 1980s and gathered momentum in the 1990s.

Privatisation created a more cooperative and productive work place, increased profitability and improved productivity.

Similar experiences can be found all over the world from Asia and the Middle East to Europe and South America.

However, the privatisation success story is yet to be experienced in Kenya, which appears to be resisting port privatisation.

Derailing a decision

When 80 per cent of the worlds’ ports are operated by private companies with higher productivity than state-owned ports, Kenya seems resistant to going ahead with privatising its Mombasa port.

Studies have clearly shown that port productivity is higher in concessioned ports compared to non-concessioned ports.

In Africa, ports have generally failed (with a few exceptions) to reach the international standards of 25-30 moves per crane per hour.

Kenya is no exception and the all too familiar waiting of vessels to berth is a risk to the country’s growth targets.

The Dock Workers Union in Mombasa continues to express concern about the loss of jobs that will result from privatisation. But is this really a factor?

The Kenya Ports Authority’s (KPA) plans include the conversion of berths 11-14 into a fully operational container terminal, which will surely create jobs.

The ports authority is looking for an investor to bring in a staggering $140 million (Sh12.1 billion) to the project and then run berths 11-14 as a fully fledged container terminal to support the activities of its own berths 16-18.

It is more likely that the new facility will create jobs, improve productivity, reduce cost of doing business in the port and assist in improving the supply chain into and out of Kenya, thereby creating opportunities economically rather than constraining or reducing them.

The private sector is also a major supplier of funds. In these economically challenging times, does Kenya want to spend its own money on port development when private operators can do this equally well?

Plans to convert berths 11-14 and construct the new Kipevu terminal could set the government back between $500 million (Sh43.35 billion) and $1 billion (Sh86.7 billion) if it does not attract private funds.

In 2006, Nigeria embarked upon an ambitious privatisation plan and concessioned all of its 24 state-run terminals.

The project was generally a success and handling rates in the container terminal improved.

In addition, the concessions secured over $1 billion direct investments for Nigeria and will generate $6.5 trillion (Sh563.6 trillion) of income during the 10-25 year concession period.

Tanzania is in private hands, so too are Mozambique’s largest ports and Madagascar’s.

There has been concern in Kenya that privatisation means sale, but this totally misrepresents the partnership that is intended.

Many ports prefer the Build Operate Transfer (BOT) mechanism, but port authorities can also choose to pursue the mechanism of a management contract, lease agreement or concession; the key is that the private sector is involved.

The port of Mombasa acts not only as a gateway for its own national cargo, but as a gateway to its neighbouring countries.

These countries have already started to look elsewhere for alternative routes in case the Mombasa corridor fails to cope with demand.

The time to act is right now.