State begins merger of ports, railway and pipeline services

The transport and logistics sector is set for a major transformation following the launch of the Kenya Transport and Logistics Network that brings the running of the ports, railway services and pipeline under one parastatal.

The new outfit will manage the Kenya Ports Authority, Kenya Pipeline Corporation and Kenya Railways under the Industrial and Commercial Development Corporation (ICDC).

Treasury Cabinet Secretary Ukur Yatani will today preside over the signing of the network’s framework agreement in Mombasa.

A programme of events shows board chairmen of the three parastatals will grace the event besides the network’s chairman John Ngumi, who also chairs the ICDC.

After the official signing, the team will tour some installations of the three agencies domiciled in Mombasa.

The framework and operation of the parastatal is yet to be unveiled and understood by many in the logistics sector. Some stakeholders are demanding clarity and a legal framework to support the new arrangement. Some experts, however, have confidence in the new arrangement, saying it has worked efficiently in other countries including South Africa.

Earlier, the Dock Workers Union threatened court action to force the government to enact and amend relevant laws. Already the declaration of KTLN, through an Executive Order on August 7, has had ripple effects at KPA where the appointment of the managing director has been suspended by the board to seek clarity.

Sought clarity

“We have suspended the recruitment until after 30 days when we will proceed,” KPA board chairman Joseph Kibwana, a retired military general, told The Standard last week.

He said the board has sought clarity to avert legal hurdles that may arise from the formation of KTLN.

Kibwana said the team formed under the new arrangement had started meeting and was expected to provide guidelines on recruitment of the ports authority MD in a month.

The KPA board and MD are answerable to the Transport Cabinet Secretary while KPC and its board answers to the Energy CS. The Kenya Railway MD and board answer to the Transport CS. These three parastatals are each backed by separate Acts of Parliament.

Under the KPA Act of 1986, the ongoing recruitment of an MD was to end with the board forwarding names to the Transport CS for formal appointment.

Other stakeholders said they were waiting for the government to give a framework on how KTLN will operate without compromising efficiency. There are fears the merger could derail decision making and implementation of policies.

Shippers Council of East Africa CEO Gilbert Langat told The Standard in a recent interview that the establishment of KTLN was in line with the Mombasa port stakeholders charter to consolidate institutions and reflect on time and cost. However, he said stakeholders were yet to be briefed on the statutory powers of the new outfit and were not sure if it will lead to efficiency and reduction in the cost of doing business.

Langat also noted he does not understand how the boards of the different corporations will be harmonised to work efficiently.

Slow processes

“We still have the boards of the three entities in place and we do not know what powers they will have under KTLN. We are worried that decision making may take long in the large organisation. The pace of implementation may slow down and lead to delays. It will also require more resources to achieve efficiency,” he argued.

Express Shipping and Logistics East Africa CEO Sylvester Kututa said the success of KTLN will depend on how the various laws setting up the three paraststals will be harmonised.

Kututa, who is vice chairman of the Kenya Ships Agents Association and a former director of Kenya Maritime Authority, said the State-owned Transnet in South Africa oversees rail, port and pipeline in a similar model as KTLN and has ensured transport and logistics functions are not fragmented.

“This idea is good but its success depends on the leadership, structures and harmonisation of the Acts. We have always had the problem of people and the power play,” he said.

Roy Mwanthi, chairman of the Kenya International Freight and Warehousing Association, said they were not opposed to the merger, but feared it could lead to slow decision making and blame games in the sector.

“We fear decision making on cargo will be slow. We do not want the huge agency to result in blame games,” Mwanthi argued.

The Dock Workers Union, which represents more than 5,000 Mombasa port workers, warned early this month that although it does not oppose the formation of KTLN, proper supportive legislation should be enacted.

Union General Secretary Simon Sang called on the MPs to push the Government Owned Entities (GOE) Bill of 2014 that is gathering dust in Parliament.

The Bill was intended to bring sanity in State corporations by instilling good governance, strategic accountability, professionalism and appointments without political conditions.

“To ensure that KTLN does not lead to bureaucracy, Parliament should process the Government-Owned Entities Bill without further delays,” Sang said.

The government in an earlier communique’ said KTLN will leverage the efficiencies of the State agencies to achieve Kenya’s agenda of becoming a regional logistics hub.

The new structure is expected to lead to the lowering of the cost of doing business through the provision of port, rail and pipeline infrastructure in a cost effective and efficient manner, and within acceptable shared benchmark standards.

The new framework, according to the government, also allows for the centralisation and coordination of operations without amending the existing laws or causing undue disruption to the legal structuring of the State entities.

In the new arrangement, ICDC will act as a holding company to the three agencies, and will be responsible for the management of the State’s investments in ports, rail and pipeline services.

Joint operations

Going forward, the State agencies are required to enter a joint operations agreement within 30 days that will reorganise individual entity structures, resources, operations and services.

State House Spokesperson Kanze Dena Mararo, in a statement issued on August 7, said the reorganisation will help establish a seamless and coordinated national transport and logistics network.

The ICDC board will be responsible for securing the achievement of the commercial vision and objectives of KTLN through the board of directors of each entity.

Further, the National Treasury has been tasked to strengthen its internal capacity by securing technical skills and competencies needed to oversee investment portfolio management, and the setting up of monitoring and reporting of the financial performance of State corporations.

[Philip Mwakio, Patrick Beja and Willis Oketch]