Port privatisation not the answer, says association

By Patrick Beja

Mombasa port can be modernised and made more efficient, without necessarily privatising or concessioning it.

Institute of Chartered Shipbrokers (ICS) that opened its second Africa office in Mombasa last week, says what is needed to bring it up to par with leading ports like Dubai and Singapore, is appropriate legislation.

ICS Kenya chapter chairman Said Nadhir, says the Government should change the management culture and policies of the port to give autonomy to Kenya Ports Authority (KPA).

"There is bureaucracy even in purchasing items to facilite operations, and this cannot make the port competitive," said Nadhir who is also the director of the Seabulk Shipping Services.

Officials of Dubai Ports World, based at the Djibouti port visited Mombasa last year at the height of congestion, and said they would accept if they were offered to manage the Mombasa port.

Port of Singapore Authority (PSA) and Dubai Port World (DP World) are 100 per cent government-owned but are so efficient that they manage container terminals in more than 30 countries with a combined throughput of 97 million twenty foot equivalent units (teus).

This represents 20 per cent of world throughput of the market share.

Action needed

Nadhir says PSA was ranked second in world terminal operations in terms of hierarchy with container throughput of 54 million teus while DP World came fourth with 44 million teus in 2007.

KPA currently handles only about 650, 000 teus annually, but containers are at times stuck at the port terminal due to efficiencies.

"If PSA and DP World were able to achieve that much, while they retain their parastatal status, why (has) our parastatal failed to emulate this kind of examples?" he posed.

The answer lies on failure by the Government to act on the changes taking place in the external environment, Nadhir argued. He says it would be unfair to blame KPA for laxity until the Government formulates policies and laws to facilitate growth and independence.

Nadhir said the Government has over the years denied KPA the necessary legislation to facilitate its operations and blocked every action to improve performance.

He welcomed the latest efforts by Government to invest billions of shillings in developing port facilities in Mombasa and Lamu but noted that proper legislation was required to run them efficiently and profitably.

"There is no point of establishing a free port in Mombasa when there is no legislation and policy to facilitate efficient management," Nadhir warns.

In an interview last week, Nadhir explained that Mombasa port was costly because Kenya Revenue Authority (KRA) preferred charging duty and value added taxes based on local value of goods as opposed to transaction value.

He explained that taxation on local values based on price old data leads to inflation as importers transfer costs of imported goods to consumers.

Some importers delay in collecting cargo from the port while seeking to have taxation based on transaction value and end up abandoning the goods due to high storage charges and punitive taxation.

"Importers have letters of credit as evidence of transaction value for the imported goods. This is accepted by the World Trade Organisation and should be allowed in Kenya," Nadhir said.

Radical Proposals

According to Nadhir, KRA is responsible for delays in clearance of cargo at the port because of declining to use the transaction value forcing importers to contest the use of local value, which is mostly way above the current cost of goods such as vehicles overseas.

"Prices of imported goods are high because importers are forced to pay duty based on local value and cannot pass the benefits of low prices in foreign markets to consumers," he says.

Some of the proposals by experts include giving KPA powers to charge the taxman storage fees for cargo not cleared from the port, after a given period of time.

The Singapore Port Authority introduced such a system 20 years ago, to resolve congestion, and it succeeded.

"KRA should have its own storage yard for storing disputed cargo as opposed to using Mombasa port.