Riddle of cancelled port tender

The sudden cancellation of a tender for grain handling at the Mombasa port has fuelled speculation of a new tussle between Prime Minister Raila Odinga and Transport Minister Chirau Mwakwere.

The tender which would have ended the monopoly enjoyed by Grain Bulk Handlers Ltd for the past eight years was cancelled in another advertisement on Saturday.

No reasons were given for the cancellation, announced by Kenya Ports Authority (KPA) procurement and supplies manager Yobesh Oyaro, just three days before the bids were to close today.

The advertisement on September 22 was expected to pave the way for interested companies to bid for the business. However, Mr Odinga Monday explained that the Government cancelled the tender following a request by the parent ministry to put it on hold.

Outstanding issues

Mr Odinga said it was at Mr Mwakwere’s request that the tender was suspended until the Kenya Ports Authority resolves outstanding issues related to grain cargo handling.

“It was after this request from my office that I allowed it to be suspended,” Mr Odinga told the Nation on phone from France.

The tender, whose advertisement had initially been pushed by Mr Mwakwere, was aimed at freeing the business from Grain Bulk’s eight-year monopoly. The company is associated with businessman Mohamed Jaffer.

Mr Mwakwere had endorsed the KPA board’s decision on April 30, which resolved to “eliminate unhealthy competition in the business”.

Transport permanent secretary Abdul Razaq Adan Ali ordered the cancellation in what is likely to surprise firms that were interested in offering bids before today’s deadline.

Mr Ali said the Prime Minister had argued that allowing a second grain handling facility at the port “may undermine investor confidence especially in light of the efforts being made to promote private sector investment”.

He said Mr Odinga had directed that an advertisement calling for expression of interest in a second container terminal “must be suspended immediately to allow further discussions on the issue”.

In a September 28 letter, Mr Ali said the Prime Minister also asked that KPA’s acting managing director, Mr James Mulewa, to submit a report on the justification of setting up another grain handling facility that could be discussed by a cabinet committee on infrastructure.

In May, however, Mr Mwakwere had written a letter to the PS indicating his approval of the liberalisation of the business and proposed an immediate public advertisement for competitive bids from interested firms.

“The question of the location of an additional bulk grain handling plant need not be the concern of KPA so long as it will not be within the port premises,” Mr Mwakwere said.

In resolving to invite bids, the KPA management argued that competition will enhance efficiency and attract more traffic to the port.

“Analysis of growth in grain bulk handling business over the last eight years has shown that the volumes handled have risen beyond the original design capacity of the existing facility,” argued a KPA report dated July 31, 2008.

“Allowing for competition is a preferred option as it is in line with current liberalised economic policies as well as ensuring compliance with government pieces of legislation.”

Under the current lease agreement, Grain Bulk was given exclusive rights to handle bulk grain for a period of eight years to enable it recoup its investment.

That monopoly ended on February 15, 2008, allowing KPA to tender for a second facility. According to the KPA report sent to Mr Mwakwere, there have been many requests from potential investors interested in engaging in the business, including the Kenya Bulk Handlers Ltd, Mombasa Maize Millers and Coast Silos Ltd.

Members of the KPA board meeting on April 30 resolved that the handling of grain at the port be liberalised to eliminate monopoly and encourage healthy competition.