President Ruto revives plans to lease five ports in Sh1.4trn U-turn

President William Ruto’s administration will lease the operations and management of five vital ports through an ambitious Sh1.4 trillion public-private partnership (PPP) aimed at revitalizing the country’s maritime industry.

In what appears to be a change of heart on a proposal by the previous administration to hand over the ports to private investors, Kenya Development Corporation (KDC), a development financial institution, has revealed that the Kenyan Kwanzaa administration is looking for private sector players to run the divisions. Kilindini Port, Dongo Kondo Port, Lamu Port, Kisumu Port and Shimoni Fisheries Port aim to make the Northern Passage competitive.

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“The ports face the challenge of congestion and, therefore, greater dwell times for cargo. The ports will be leased/franchised to private operators with an owner-type port management system,” says the KDC in its presentation to potential investors.

The Kenya Trade Route has recently come under intense competition with landlocked countries such as Uganda, Burundi and Rwanda preferring to use the Tanzanian Route.

Both countries have sought to renovate their ports, or build new ones (the port of Lamu in the case of Kenya and Bagamoyo in Tanzania), battling landlocked nations by promising faster evacuations of goods.

The Northern Corridor – a multimodal trade route connecting landlocked countries in the Great Lakes region with the Kenyan seaport of Mombasa – competes for goods with Tanzania’s Middle Corridor.

The Central Corridor is a transport and trade route connecting Burundi, Uganda, Rwanda and the Democratic Republic of the Congo with the Tanzanian Navy.

Official data shows that the volume of cargo handled by the Port of Mombasa decreased for the first time in five years, as players point to increasing competition from Dar es Salaam.

Total shipments passing through the port fell to 33.74 million metric tons last year from 34.76 million tons a year earlier, according to data compiled by the National Statistical.

Part of the two countries’ plan to improve their trade routes was to build a standard gauge railway (SGR), a modern railway that was faster and could carry more freight.

At the height of last year’s election campaigns, the Ruto-led Kenyan Kwanzaa Coalition opposed a similar plan that had been mooted by the previous administration of Uhuru Kenyatta, claiming that selected infrastructure assets had been secretly sold to Dubai Port World FZE.

The coalition alleged that Kenyatta illegally sold the ports of Mombasa, Lamu and Kisumu, but the previous government indicated that it had not entered into any agreement to lease the assets.

But with the Mombasa port facing stiff competition due to its weak capacity, the Ruto government is turning to private investors for its renovation.

The Kenya Ports Authority (KPA) and the Lapsset Corridor Development Authority have been appointed as executing agencies for the planned lease.

The state projects to raise 1.4 trillion shillings ($10 billion) through a public-private partnership exercise.

Moreover, the government is seeking private investment of up to Sh42.1 billion ($304 million) in Lamu Port, with a large portion of the funds being used to develop the port’s agribulk and Liquibulk terminals.

Roughly three-quarters will be published in advance, with the government selling point to investors being what it believes to be expected strong growth in both imports and exports.

The investment in the Agribulk terminal is earmarked for the lion’s share of the planned capital injection at Sh29.1 billion ($210 million) with 78.0 percent of this amount expected to be made up front.

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“Agribulk import demand at Lamu Port is expected to increase from 547,000 tons in 2023 to 3.3 million tons in 2045. The investment will enable facilitation of import and export to meet demand for grain requirements, and create job opportunities.” pitch.

The investment in Liquidbulk Terminal has been earmarked for Sh13 billion ($94.0 million) with 65 percent of the expected amount as a pre-investment.

Storage tanks at Lamu Port are expected to be the highest cost component, gobbling up Sh4.2 billion ($30.0 million).

“The demand for imports of refined petroleum products and exports of crude oil in Kenya is expected to increase from 6.8 million tons in 2020 to 19.3 million tons in 2045. Imports of refined oil captured by the Lamu port are expected to increase from 395,000 tons in 2023 to 2.6 million tons in 2045. Crude oil exports through Lamu Port are expected to increase to 3.0 million tons.

In April, all agencies handling cargo in the Port of Mombasa were instructed to clear them within 24 hours, as part of measures taken by a multi-agency team.

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