Saturday, October 18, 2008

Dubai World keen on taking over Port of Mombasa

Kenya's Port of Mombasa has begun 24-hour service but experts say it is not yet clear of its financial difficulties. Dubai Ports World has expressed interest in running the port weighed down by container management problems.

As the government seeks the 12th managing director for the Kenya Ports Authority (KPA), Dubai Ports World said in interviews with local media that it is more than keen to run the Mombasa Port. If that happens, massive equipment investment would be in the works and ship turnaround cut to just three hours like they did in Dakar, Senegal, and Djibouti.

They are partners and managers in Sokhna port of Egypt, Aden and Jeddah. Their entry would appreciably change the politics of the port which acting Finance Minister John Michuki insinuated last week was regarded as a “village project” by some politicians.

DP World operates several ports in the world after it became economical to separate ownership and operation globally. However, not everyone thinks handing over management is the missing link.

“The suggestion that the management of the KPA be handed over to international experts is misguided as it means handing statutory powers and authority of KPA to private parties,” said one of the better-regarded former port bosses, Jonathan Mturi.

“What is possible however is that KPA can concede or concession some of its functions to private operators once appropriate regulatory mechanism have been put in place.”

Under its business model DP World manages more than the Djibouti Port, including container, oil terminals and berths and marine services, Djibouti Airport and a free trade zone. The port has become a byword for efficiency, especially in handling massive cargo from Ethiopia after a fallout with Eritrea, who almost exclusively handled their exports before.

DP spokesman Anil Singh said the group has been waiting for the port to complete a feasibility study, a process that would pave the way for private players.

“We would want to be involved sooner than later. We have been waiting for an indication,” Singh said.

The firm goes into a port as a partner with port owners where they obtain management rights or/and equity participation. A lot of legislative work may need to be concluded singularly in regard to public private partnership (PPP) in Kenya before they can come in.

Amongst the projects in Kenya expected to take off soon is the Dongo Kundu US$330 million expansion encompassing dredging of a second container terminal and establishment of a free trade area.

Politics has stunted the expansion of the port and for years it has been relegated to taking in the so-called feeder ships, as the larger vessels cannot berth at the domestically exalted facility.

But the smaller vessels are also experiencing problems and threatening vessel delay surcharge for slow turnaround.

Beyond the administrative level, there has been brisk economic growth in Kenya and the region that saw port cargo grow by 10.7% last year. In 2003, it was handling cargo estimated at 12 million tonnes annually.

This has shot up to slightly under 16 million, only exacerbating the administrative chaos that have become a permanent feature of the deep-sea port. In terms of twenty-foot equivalent unit (TEU), the growth has been faster at 22% with a total of nearly 600,000 containers handled.

Last week, Minister Michuki was sent to the port to resolve the mounting crisis. A close examination of the crisis shows several factors, other than poor planning, have contributed to the problem.

One of them is a railway system that clears an estimated 6% of the cargo - instead of the ideal 70% - leaving the rest either piling at the port or at the Container Freight Stations (CFS) licensed by Kenya Revenue Authority (KRA) to shift the clearance problem from the port area.

Despite concessioning of the railway and some new investment, roads continue to bear the brunt of the heavy containers.

Another problem lately has been poor interfacing between the KRA Simba online clearance system and the port’s Kwatos IT system. Last week, Michuki wrung out promises from the two players that systems would be interfaced to eliminate the problem.

The other issue is the few cranes for offloading ships at the port. Indeed, the slow speed has contributed to lengthy waiting time for ships; one-and-a-half day now according to KPA, previously up to four. Dar es Salaam, half the size of Mombasa and with up to seven days waiting time has been transshipping cargo to the later worsening the mess.

Michuki told the officials to swiftly write to Treasury to get authorisation for financing for the crane.

But even that should be a short-term solution given the fact that the port was built for 250,000 containers yearly and is reckoned to have handled some 585,367 containers last year. The problem has only deteriorated with slow clearance and the presence of over 7,000 unclaimed containers that the government wants destroyed.

On 18 August, a concerned President Kibaki ordered that the port extend operations for 24 hours daily to ease the problem.

But what emerged during the crisis consultations last week was that Kenya Bureau of Standards (Kebs) has been slow in crafting a 24-hour shift for its staff, forcing the minister to write to the parent ministry, that of industrialisation, for intervention.

Kebs is crucial in the game, as it has to verify that all cleared cargo meets local standards.

Minister Michuki went one up by ordering customs officials to wear uniform and that clearing agents stay off the port area to stem human contact and resultant corruption. As he put it rather humorously, characters with no debating club affiliation should not hold idle debates at the port area.

Nevertheless, the port crisis seems to be somehow petering out, at least according port PRO Bernard Osero. Waiting containers have gone down by nearly 50% since July while waiting by ships has almost been eliminated.

DP World says the port needs major rehabilitation and new equipment. The spokesman said they would be happy to make a difference.

“The process of making the initial changes takes between three and six months,” Singh said.

Meanwhile, the Dubai group is opening a new container terminal in Djibouti this December and it has already cut waiting time in Dakar from seven days to three hours. Mombasa certainly can do with that efficiency.