Stop strange goings-on in port deal before scandal blows up in our face
What you need to know:
- We cannot afford another tender war.
- For once, let us deliver a transparently procured transaction.
President Uhuru Kenyatta should intervene to pre-empt an imminent scandal over the on-going process of selecting an international company to operate the second container terminal at the port of Mombasa.
If you did not know, the government has been procuring an international port operator to run our second container terminal under a 30-year concession.
The process has been proceeding well until the other day when the Kenya Ports Authority suddenly introduced new conditions whose effect was to fundamentally alter the rules of the game.
The rules of competitive international bidding do not allow you to arbitrarily change from one procurement method to another right in the middle of a tender.
And where circumstances force you to modify the tender requirements, natural justice requires that you give bidders adequate time to modify their bids in accordance with the new requirements.
It is baffling indeed that hardly 10 days before tender closing, the Kenya Ports Authority radically changed tender requirements, knowing very well that some of the bidders were not going to able to meet the conditions within the time frame of the tender.
The biggest contention in the saga is the manner in which KPA has muddled the so called 15 per cent local shareholding threshold.
Initially, the arrangement was that each bidder had to seek local joint venture partners and to cede to them 15 per cent shares in the concession.
KPA changed the local shareholding requirement to an arrangement where bidders have the option of offering 15 per cent free shares to the government.
Why is this requirement being introduced so late in the day? And how is national interest going to be served by direct government ownership of shares in a concession operating under supervision of the State-owned Kenya Ports Authority?
COMPLEX PROCESSES
In the corporate world, a major decision such as whether or not to tread the politically risky path of ceding free shares to a government of a developing country is impossible to achieve within a short time frame.
Furthermore, most of these companies had long completed the complex processes of negotiating shareholding agreements with serious local private companies, in accordance with the original tender requirements.
Clearly, KPA has tilted the playing field to favour foreign-government entities who are in the race. Indeed, a good number of international companies in the bidding for the lucrative tender are entities indirectly owned by foreign governments.
It does not surprise me in the least that the main dispute here is about the local shareholding rule. In the past, this is the rule which the political elite has employed to get free shares in privatised assets.
The most famous case is Mobitelea, the vehicle that powerful individuals under the Moi regime employed to acquire free shares in Vodafone Kenya Ltd, the largest shareholders in mobile company, Safaricom.
From the trends emerging, it would appear that the current elite has learnt better tactics.
Instead of creating a Mobitelea and facing the risk of being discovered, they now find it expedient to create confusion in the procurement process — fudge everything and in the process make it difficult to separate capable companies from incapable firms.
Apart from introducing confusion over the local shareholding rule, KPA also made a radical last-minute change in the procurement method.
Initially, the arrangement was that only bidders who passed technical evaluations would proceed to the stage of presentation of financial proposals.
This has been changed to a system where scoring will now be blended, the implication being that even technically inferior companies can now win by simply offering higher concession fees.
Didn’t we learn our lesson from that famous South African called Mr Roy Puffet during the concession of the metre-gauge railway?
We must not forget that port concessions tend to generate allegations of corruption. Last year, Djibouti filed an arbitration case in London alleging that the contracted port operator had paid bribes to elements within the Djibouti Ports and Free Zones Authority.
We cannot afford another tender war. For once, let us deliver a transparently procured transaction.
