Lack of funds forces State to lease out Mombasa, Lamu port assets


KPA William Ruto (right) conducts a tour of Mombasa Port on Friday last week. With him are KPA  Board Chairman Benjamin Tayari (centre)  and Kenya Revenue Authority Board Chair man Antony Mwaura (third left).

Photo credit: Kevin Odit | Nation Media Group

Lack of adequate funds has forced the government to backtrack on its earlier opposition to the privatisation of key infrastructure at the ports of Mombasa and Lamu.

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).

Speaking to the Nation, KPA Managing Director William Ruto said those selected to run the facilities on a 25-year lease will have to invest more to make them operate at maximum capacity.

“In Mombasa Port, for instance, the four berths require more than Sh30 billion to operate at maximum capacity and the government cannot fund it. That is why we are inviting private companies to come in and do the business,” said Mr Ruto.

The MD singled out Morocco’s Tanger-Med Port, which has emerged as the largest in Africa in terms of cargo capacity, saying, most of its facilities are run by private companies.

“The port has been operational since 2007 and has achieved record container and cargo volumes in a short period of time. The original facilities were built to handle a capacity of 3.5 million twenty-foot equivalent units (TEUs), but a recent development project has increased this to a maximum of nine million TEUs as it is run by those who specialise in each sector,” he said.

On the reason for lowering the requirements for bidders, Mr Ruto said: “Very few companies are worth $1 billion, so we reviewed to $300 million to give many companies a chance.”

On Friday, KPA chairman Benjamin Tayari said the agency was seeking to lease part of the Mombasa and Lamu ports to private operators under a landlord-type management system.

"Leasing our port facilities is not new as we have seen companies like Grain Bulk Handlers, Portside among others doing a great job and employing many Kenyans," said Mr Tayari.

He added: “We do not want the issue to be politicised, so we will be calling all politicians from the region and other port stakeholders to brief them on the progress.”

Last week, stakeholders raised questions about the revised qualifications of the potential port operator, raising questions about the reasons behind the move, with the latest call for bidders having lower requirements than the previous one.

KPA issued a public notice on September 6 inviting bidders to bid for the operation and management of critical facilities at Mombasa and Lamu ports, followed by a revised call with lower qualifications six days later.

If KPA goes by the latest requirements, it may not be able to meet its agenda of increasing efficiency as the new operator will be required to meet lower loading and unloading speeds than the current benchmark.

According to the initial call for tender, a prospective port operator was required to guarantee 50 container loading and unloading moves per hour, but this has been reduced to 20 moves in the addendum, which is questionable given that the KPA operates between 24-26 moves per hour.

KPA also lowered the guarantee payment from $1 billion (Sh146 billion) to $300 million (Sh43 billion) annually, which is also less than the amount the agency earns each year.

According to the latest records, the port of Mombasa generated about $400 million (Sh55 billion) in the 2021/2022 financial year, which is $100 million (Sh14.6 billion) more than the new operator has to share annually.