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Kenya invites private players in port sector

Kenya invites private players in port sector

The Kenyan government is looking for private investors to take over the management and operations of five important ports in the country. This move aims to strengthen the competitiveness of the maritime sector and generate $10 billion in revenue for the financially struggling government.

Traditionally, Kenya has served as the main gateway to the East Africa region through the port of Mombasa. However, neighboring Tanzania has been posing increasing competition. To address this challenge, the government is reviving a previously abandoned plan to lease sections of Kilindini Harbour, Dongo Kundu port, Kisumu port, and Shimoni Fisheries port to investors through public-private partnerships.

In addition to these ports, the government also plans to lease the underperforming Lamu port, which has seen minimal traffic since its opening three years ago. Despite significant investment, the port has handled less cargo than expected. By involving private investors, the government hopes to revitalize the Lamu port and unlock the potential of the other four ports. The proposal also includes the development of the Kisumu port as a major hub for petroleum product transportation.

The Kenya Development Corporation (KDC), a state-owned development authority, has prepared a detailed plan to attract private investors for the management and operations of these ports. The Kenya Ports Authority and the Lapsset Corridor Development Authority will be responsible for implementing the leasing process.

The ports currently face challenges such as congestion and longer waiting times for cargo. The plan is to lease or concession the ports to private operators who will manage them as landlord-type port facilities, aiming to address these issues.

This decision by President William Ruto’s administration marks a change of approach, as similar plans by the previous government were canceled amid controversies and allegations of illegal activities involving global ports operator DP World.

The current attempt not only seeks private operators for the five ports but also aims to attract $304 million in private investment for the facilities. Some of the investment will be directed towards developing agribulk and liquid bulk terminals at the Lamu port, as well as storage tanks, to improve competitiveness and attract more shipping lines.

The KDC’s prospectus suggests potential increases in cargo volumes at the Lamu port, projecting greater demand for grain imports and exports. The agency is seeking investments of $210 million for agribulk terminals and $94 million for liquid bulk terminals. Additionally, they are looking for investments of $30 million in storage tanks to meet the expected demand for refined oil product imports and crude oil exports.

The Kenyan government believes that leasing the ports to private investors will enhance the competitiveness of the northern corridor, which not only serves Kenya’s hinterlands but also landlocked neighboring countries such as Uganda, Rwanda, Burundi, South Sudan, and parts of the Democratic Republic of Congo (DRC).

The northern corridor, historically reliant on the port of Mombasa, has faced increasing bottlenecks and competition from Tanzania’s central corridor, where more importers and exporters are opting to use the port of Dar es Salaam.

Statistics from the Kenya National Bureau show a decrease in cargo volume handled by the Mombasa port, the first decline in five years. Meanwhile, the port of Dar es Salaam recorded an increase in throughput during the 2021/2022 financial year, surpassing Mombasa in the World Bank’s Container Port Performance Index.

With these private investments, Kenya aims to regain its competitive edge and strengthen its position as a major maritime hub in the East Africa region.

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