Forget naysayers, Lamu port remains a viable investment

MV Spirit of Dubai at the Port of Lamu, July 19, 2021. [Kelvin Karani, Standard]

First things first! The whole idea of a second seaport on Kenya’s coastline is not new. It was first mooted way back in 1970 when the Government realised that it needed to address the operational constraints at the Port of Mombasa, access channel restrictions, and natural limitations in overall capacity expansion.

Therefore, the Port of Lamu is the result of a bold move by the Government to plan and ensure that as a country, we are not saddled by the challenges of overreliance on the Port of Mombasa with all the constraints it has. In developing the Port of Lamu, several key factors regarding the Port of Mombasa were considered.

Key among them was the fact that having a port in a fully urbanised area restricted opportunities for new storage facilities. Moreover, connectivity between the island and the mainland proved inadequate and led to congestion as witnessed by the high traffic snarl-ups caused by trucks.

Complicating matters further was the fact that the Port of Mombasa, with one access channel was not wide enough to accommodate incoming and outgoing ships simultaneously. With such limitations, it is hardly surprising that in its wisdom, the Government deemed it fit to mitigate risks associated with one access channel, including safety and security by developing a second bigger port with a wider entry and exit channel.

The limitations with the Port of Mombasa are also well articulated in the strategic framework for the Port. According to the Kenya Ports Authority (KPA) National Ports Master Plan 2018-2047, the Port of Mombasa can only be developed up to Berth 29. And even with that additional wiggle room to expand, it placed a small caveat that further development would require massive capital investment by way of reclamation and dredging. Clearly, any demand for port facilities beyond berth 29 would need to be accommodated elsewhere.

John Mwangemi, acting MD Kenya Ports Authority. [Courtesy]

Capacity vs demand

Investment in new port facilities such as the Port of Lamu is informed by the need to grow capacity on the back of the envisaged economic activity in the long term. Capacity enhancement is essential if our ports are to continue to play their facilitative role in trade and business locally and along the transit markets of Uganda, Rwanda, Democratic Republic of Congo, South Sudan, Ethiopia, Tanzania and Burundi.

According to the IMF, the Kenyan GDP is expected to grow at 7.6 per cent in 2021 and stabilize at 6 per cent over the medium term. The World Bank also projects a growth of 4.5 per cent in 2021 and stabilize at 6 per cent in the medium term. Similarly, the World Bank estimates an even higher growth in the transit markets of Uganda at 6.3 per cent, Rwanda at 7.5 per cent, DRC at 4.1 per cent, Tanzania at 6 per cent, South Sudan at 3 per cent, and Ethiopia at 7.5 per cent in the medium term.

Based on the medium- and long-Term projected GDP growth, and the economic activities in the local and transit market, Kenya Ports Authority in its National Port Master Plan 2018-2047 forecasted demand for both the Port of Mombasa and the Port of Lamu. The strategic direction KPA has taken is to build capacity ahead of demand.

Limitations at Port of Mombasa

With current limitations at the Port of Mombasa, it is quite clear that it cannot handle the entire hinterland potential up to the year 2047, notwithstanding the terminal capacity that will be developed in the Dongo Kundu Special Economic Zones and Free Trade Area.

Therefore, part of the traffic growth must be handled at the Port of Lamu, where enough space is available to expand terminal capacity. The cargo shift is especially needed for commodities that require much space and generate a lot of traffic, such as containers, vehicles, and general cargo such as liquid and break bulk.

Diversification and cargo mix

When all is said and done, a port cannot be viewed in isolation of its critical components if it was to remain competitive. For instance, the infrastructure and facilities available ought to meet the demand for handling all types of cargo with a good cargo mix.

Each seaport has a specific footprint linked to its unique mix of cargo and passenger handling, logistics, and industrial functions. Shimoni Port, for example, is being developed to specifically serve the fishing industry. The fact that Mombasa has handled everything in the past has to some extent necessitated a strategic approach for Kenya to enhance her regional competitiveness.

Section of the LAPPSET Corridor in Lamu County. [Robert Menza, Standard]

Take the LAPSSET Corridor for example where the Government has decided to create components that will generate wholistic value out of the entire Corridor. Here, a Special Economic Zone aims at resolving the imbalance of trade created by inadequate exports. It is instructive that top ports in the world maintain their positions because of value addition activities around them which generate a lot of throughput.

The championing by Government of the creation of special economic zones to generate more imports and exports couldn’t have come at a better time. It is for that we must anticipate the envisaged cargo growth by investing in capacity through the creation of more ports.

Maritime and shipping trend

As a country, we must also remain alive to key trends in the shipping business that include mergers and acquisitions, collaboration among shipping lines, evolution of panamax and post panamax vessels and how they have impacted on the shipping industry. We must continually ask ourselves about how we intend to remain competitive to the host of shippers and shipping lines for specific trade routes, geographical regions, and other ports to which we are connected.

As opposed to standalone ports a more integrated and holistic logistics value chain is essential in offering shippers a competitive advantage.

Shippers, logistics service providers, and shipping lines do not necessarily choose a port, but they consider the benefits of an overall network cost and performance.

Therefore, a well-coordinated logistic and distribution function of seaports with the cooperation of various service providers is what facilitates the integration of ports in advanced logistical and distributional networks through a new range of high-quality value-adding services.