What you need to know:
- The exclusive deal has raised eyebrows, attracting the attention of investigative agencies.
- Rival firms have protested the allocation, saying they’ll push for equality in the sector.
A private company linked to the family of Mombasa Governor Ali Hassan Joho is set to finally take over operations of a taxpayers’-funded inland cargo terminal in Nairobi, in a controversial deal that has triggered protests from competing logistics firms.
The Mombasa-based Autoports Freight Terminals Ltd has received Kenya Railways Corporation (KRC) exclusive right to use of the Nairobi Freight Terminals (NFT), strategically located near the Standard Gauge Railway (SGR) terminal in Syokimau, locking out from the station other players who use the new railway cargo services.
A notice by the Kenya Ports Authority (KPA) dated August 17th 2021 indicates that the company will start handling all containerised and conventional cargo from the terminal starting October this year.
“Kenya Ports Authority has received a request from KRC to issue you with official communication to allow cargo consignees/importers for both container and conventional cargo to nominate their consignments from the load port to KR Nairobi Freight Terminal (NFT). The facility is a bonded warehouse and will be operated by M/S Autoports Freight Terminal (AFT) and is connected to the SGR line. This allow more importers to use SGR,” read the notice from KPA acting MD John Mwangemi to Kenya Shipping Agent Association CEO Juma Tellah.
Importers will be required to endorse in the Bill of Lading ‘Cargo in transit to NFT c/o. Autoports Freight Terminal-Nairobi to have their cargo ferried to Nairobi by the Joho family linked firm, as per the notice.
Mr Mwangemi, in his memo, says NFT has the capacity to handle containerised and conventional cargo, has a warehouse and modern container-handling yard. The facility will host government agencies that are involved in cargo intervention, namely Kenya Revenue and Kenya Bureau of Standards.
He said NFT is expected to be operationalised in October 2021, giving the Joho family firm a near-monopoly over rivals.
“Arising from the above, the Authority has no objection to the KR request to have importers do direct nomination as well as change point of delivery to NFT c/o. Autoports Freight Terminal- Nairobi for cargo currently not nominated by importers,” says Mr Mwangemi.
Even before the directive comes into effect, rival logistics companies have protested the allocation claiming the government will lose revenue and also cause losses to traders who some have long-term transportation contracts with other logistics firms.
Container Freight Stations (CFSs) Association of Kenya chairperson, Daniel Nzeki, said members “will push for equality” in the sector.
“We have always advocated for equality in trade facilitation amongst all our members. We look forward to seeing KPA extend the same treatment to the others,” said Mr Nzeki.
Kenya International Freight and Warehousing Association (Kifwa) chairperson, Roy Mwanthi, termed the move as unfair arguing that other conteainer freight stations (CFSs) will incur losses and could even force some to close.
“The move will eat into ICD share of cargo, which will not only affect private firms in the sector but also government revenues. We’re asking KPA to open the same window to all CFSs as this is an unfair and unbalanced trade deal,” said Mr Mwanthi.
KRC approved AFT’s application to lease part of KRC’s land at the Nairobi Freight Terminal (NFT) in Nairobi South at its 410th Special Board Meeting held on September 26, 2018.
The board also agreed to lease to Autoports 26 acres out of the total 36 acres at the NFT for a period of 45 years as from December 1, 2018, subject to the logistics company paying a stand premium of Sh78 million, exclusive annual rent of Sh19.5 million, an application fee of Sh5,000, pegging fees of Sh50,000, three months’ security deposit of Sh4.88 million and administrative charges of Sh100,000; all totalling Sh103 million.
The exclusive deal raised eyebrows, attracting the attention of investigative agencies considering the strategic location of the public facility.
Autoports also secured a preferential deal to transport cargo from Mombasa to Nairobi over a 10-year period at up to 80 per cent discount. This is against the maximum volume discount of 10 per cent allowed in the corporation’s tariff book.
The company negotiated with KRC a special rate of about Sh45,000 to transport a wagon of loose cargo from Mombasa to Nairobi, down from Sh214,700 as per the KRC tariff book released in December 2017, which took effect in January 2019.
To be given the special rate, Autoports convinced the KRC board of guaranteed business volumes promising to move 1.6 million tonnes (or 24,615 wagons) annually.
Autoports would ideally pay KRC Sh5.28 billion to transport the 24,615 wagons it has promised to move at the preferential rate of Sh45,000, but will now pay about Sh1.1 billion, which translates to a difference of about Sh4.17 billion per year in a deal that will last for 10 years.