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Kenya: Foreigners can now compete with locals for maritime sector

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Kenya: Foreigners can now compete with locals for maritime sector

Kenya: Foreigners can now compete with locals for maritime sector
Photo Credit: Business Daily

Foreign-owned shipping lines are set to extend their dominance of Kenya’s maritime sector after the High Court overturned a section of the law that has confined them to cargo haulage in the last five years.

A ruling delivered by Justice George Odunga on January 23 effectively renders section 16(1) of the Merchant Shipping Act, 2009 ineffective, denying State agencies a weapon that they have used to block shipping lines from engaging in other businesses.

The section states: “No owner of a ship or person providing the service of a shipping line shall, either directly or indirectly, provide in the maritime industry the service of crewing agencies, pilotage, clearing and forwarding agent, port facility operator, shipping agent, terminal operator and container freight station.” Last month, Justice Odunga prohibited the Kenya Ports Authority (KPA) from invoking the law to discriminate against shipping lines eying its second container terminal. The ruling was made in a case where APM Terminals, which has links with Maersk shipping line, moved to court to challenge KPA’s bid to block it from the tender to operate the first phase of its second container terminal.

“Leave is hereby granted to apply for an order prohibiting KPA from denying the applicant opportunity to participate in tender no. KPA/007/2014-5/CS for qualification of concessionaire for phase 1 of the second container terminal on the grounds that the applicant had ‘a relationship prohibited under section 16(1) of the Merchants Shipping Act 2009,” the judge ordered.

The ruling also opens maritime opportunities to providers of quayside services, general ship contractors, haulage, ship brokerage, cargo consolidators, ship repairers and maritime trainers who had been restricted by the law. The final judgment on the legality of a section of the law which prescribes a fine not exceeding Sh1 million or three year imprisonment for offenders is still pending in court.

The KPA has already complied with Justice Odunga’s ruling, accepting bids from shipping lines seeking to operate the first phase of its second container terminal. “We will comply with the order and prequalify all the bidders including those that have been put in by shipping lines,” said KPA board and legal services general manager Muthoni Gatere. “The bidders will be expected to complete the tender documents within 45 days and if all goes well we anticipate the tender should be awarded by June this year.”

Apart from KPA, the sector’s regulator, Kenya Maritime Authority has relied on the restrictive Act to check the dominance of foreign firms. The foreign-owned shipping lines, for instance, currently control 92 per cent of Kenya’s international trade. According to John Nyarandi, KPA general manager corporate services, the winner will be expected to recruit and train staff, buy equipment and install systems among other logistics. “The terminal will be commissioned on March 1 when we expect the first container to be lifted off a vessel. In order to ensure that everything is in place on that day we have to give the firm adequate time to prepare,” he said. 

Some of the top firms that are completing to operate the first phase of the container terminal with a capacity of 450,000 TEUs – half the capacity of the current terminal – are Hutchison Ports Investments based in Hong Kong, DP World (Dubai) and PSA International from Singapore. Others are China Merchants Holdings and SSA Port Terminal, all listed in the top 10 world terminal operators.

Chinese companies including China Merchants Holdings and Danian Ports Ltd which has partnered with China Road and Bridge Corporation also put in their bids. The latter is the firm constructing the standard gauge railway line from Mombasa to Nairobi.

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