Shutdown of Changamwe Oil Refinery was telltale sign of collapsing economy in Coast

Changamwe Oil Refinery. [Maarufu Mohamed, Standard]

The skies over Changamwe, Mombasa's hitherto industrial area, are clear. The fumes of smoke that bellowed out of the chimneys of public and private factories are no longer on the skyline.

Some private firms like the Apparel Export Processing Zones (EPZ) that employed hundreds of young men and women have reportedly relocated to other countries or just closed down.

Ashton Apparel (EPZ) Limited and Mombasa Apparel (EPZ) Limited recently laid off over 7,850 staff. The two firms issued a redundancy notice on September 28, 2023.

One of the biggest blow to Mombasa's struggling economy could be the shutdown of the Changamwe Oil Refinery, situated on the West of Mombasa island.

Businesses that had blossomed in the Changamwe area, powered by the now obsolete oil refinery, are no more, marking the first sign of a collapsed economy of the area.

Opposite the refinery, or a few metres away, huge yards for trucks that transported part of fuel oils and bitumen to other parts of the country or neighbouring countries have shut down.

Freight stations

In its place are container freight stations (CFS), also struggling for business due to the expanded cargo handling space at the port and the rollout of Standard Gauge Railway (SGR) freight services.

Data show that 580,000 metric tons of cargo was ferried every month in 2023 by the SGR. This volume could have been hauled by 1,600 trucks, each with a 40-tonne capacity per day.

The ripple effects of the shutdown of the refinery swept far and wide. However, those who bore the biggest brunt were the over 1,000 permanent and casual workers who lost their jobs.

Former Kenya Petroleum and Refinery Limited (KPRL) General Manager John Mrutu said the workload of the refinery was not fixed as during peak time, more people were hired.

"No doubt that the collapse of the refinery adversely affected Mombasa's economy. Most extra workers were outsourced to do general jobs like maintenance, cleaning, security, etc," he said.

In 2013, a year before its ultimate death, the Changamwe Oil Refinery processed about 1.6 million tonnes of crude oil per year, mostly transported through the pipeline, although some by trucks.

There are different theories as to what led to the collapse of the refinery, the sole plant in Eastern Africa, whose 45 tanks have since 2013 been converted into storage facilities for oil import.

The State's theory is that a refinery situated near the shores of the Indian Ocean went under because its technology was obsolete, and it was expensive to upgrade it.

In 2009, an Indian firm, Essar Engineering Service Limited, bought a 50 per cent share of the refinery from Shell in what was to be a Sh3 billion modernisation plan for the refinery.

Engineer Moses Mbaru said he was among the KPRL staff who were airlifted to India to train on modern refineries and new technologies after Essar, ahead of the upgrade of the refinery.

"It was a big loss to shut down the processing of crude oil at the refinery. Employees used to go home with Sh100,000 a week depending on the job category," recalled Mbaru with nostalgia.

Mbaru said KPRL had no problem with cash flow and that workers were given many incentives like meal allowances, overtime pay and travel allowance on top of their salary.

"When I quit in 2013, I had a problem securing a job because all the oil firms that approached me could not match the salary I used to earn at KPRL," said Mbaru.

Mbaru and other workers interviewed believe the refinery was killed by oil merchants whose interests were to import refined oil products, marking the second theory.

"Essar bought 50 per cent from Shell and was supposed to provide technical assistance and training of the workforce in the botched Sh3 billion upgrade of the refinery. But still, it was frustrated by some government functionaries, just like the private oil firms that owned part of the refinery. Forces that wanted to import refined oil played a part in killing the refinery," he said.

However, Mrutu said the refinery could not compete with those in the Gulf region due to the rigid tax regime in the country that makes processing crude oil locally costly.

"Crude was subjected to 30 per cent capital tax and 16 VAT while in the other refineries in the Gulf region, it was zero-rated. It was 50 per cent costlier to process crude oil locally," he said.

He added: "I cannot agree on a scheme to kill it, but at some point, a parliamentary committee visited Gujarat to see the kind of refining facilities that were being put in and the tax regime. Unfortunately, and as far as I can remember, no report was prepared."

Energy and Petroleum Cabinet Secretary Davies Chirchir has disclosed that the Kenya Pipeline Company (KPC) is financially sound to take over the defunct State-owned Kenya Petroleum Refineries Limited (KPRL) to increase its storage capacity and diversify operations.

KPRL, which was originally set up by Shell and British Petroleum Company (BP), has now been converted into a storage facility and handed over to KPC.

It has 45 tanks with a total storage capacity of 484 million litres.

"All properties owned by the defunct KPRL like 100-acre land in Changamwe, and other parcels in Nyali and Kilifi are intact. I hope we will build a new refinery," said Mrutu.

The economic ruin in Mombasa swept to neighbouring Kilifi County, where Kenya Co-operative Creameries KCC's Marikani Milk Factory and Kilifi Cashew Nut Factory collapsed.

The death of the Mariakani Milk factory in 1996 was a big blow to dairy farmers in Kilifi and Kwale counties who operated under the Mariakani Milk Scheme.

Mr Kennedy Charo, a farmer from Kaloleni, said farmers used to sell their milk at the plant at good prices.

"After its collapse in 1996, we were left under the mercy of brokers," he said.

He said the milk scheme had vehicles that collected the milk from farmers. The scheme also kept records that helped to facilitate farmers' payments later.

"Since its collapse, we have been having difficulties selling our milk and getting good returns. Most farmers gave up on dairy farming, which was our main source of income," said Mr Charo.

At the factory, most of the machines had been vandalised while others had been destroyed by rust. Locals said it would be difficult to revive the plant without getting new machines.

In Mariakani, other giant firms that also died almost the same time in the 90s are the Dynocell Battery Factory and Kilimanjaro Fresh Water, which employed hundreds of locals.

Meanwhile, in Kilifi, Shida Mwandoro, a resident of Kaembeni in Ganze, recalls with nostalgia how three decades ago, cashew nut farming was the main economic activity in Kilifi County.

With the collapse of the cashew nut cooperative societies in the early 90s due to politics and mismanagement, the then-thriving Kenya Cashew Nut Limited (KCNL) became a shadow of its former self.

Since the 1990s, brokers have dominated the industry, buying directly from farmers at very poor farm gate prices and selling to processors, leading to the decline of the sector as most farmers abandoned the crop.

KCNL was privatised in 1987 but finally closed in 1990, dealing a devastating blow to farmers in the Coast whose livelihoods depended on the crop.

Mr Mwandoro, 60, reminisces how the economy of Kilifi was booming in the 80s, as machines at the vibrant factory roared with life, while farmers continuously supplied it with raw nuts.

Farmers in Kilifi and Lamu, the biggest cashew nut producers at the Coast, said when the KCNL factory died, so did their hopes and fortunes as they directly depended on it.

A 2021 report by the Nuts and Oil Crops Directorate indicates there was a total of 23,158 hectares of land in Kilifi, Kwale, Lamu, Tana River, and Taita Taveta under cashew nuts, a slight increase from 22,690 hectares in 2020.

"I remember very well, it was on February 16, 1990, at 1 pm, when we were summoned and told the factory had been closed indefinitely," says Mr Kitsao Mlandi, a former machine attendant at the factory.

In a recent interview, Kilifi Governor Gideon Mung'aro said the collapse of the nut sector was a big blow because it was the biggest employer, and directly or indirectly supported thousands of families.

Firm collapse

Mr Mlandi, a former worker at the factory, said shares were bought fraudulently by an investor and used as collateral for a bank loan, leading to the collapse of the State firm.

"At the factory, there were 2,000 permanent employees and 3,000 casuals. No company in Kilifi has employed as many people as the cashew nut factory did," said Mlandi.

In Kwale, at the Ramisi stage along the Likoni-Lunga Lunga highway, a chimney spews a cloud of white smoke high above the flat land terrain.

Men and machines race against time following the revival of Ramisi Sugar Factory by Kwale International Sugar Company Limited (Kiscol) in 2012.

Like many factories in the country, Ramisi Sugar Factory collapsed in the 1980s due to mismanagement and political interference, dealing a blow to the sugar farmers in Kwale County.