Treasury should stop meddling in ports deal

On July 5, I wrote that engineering consultants would soon lock horns over the multi-billion-shilling Phase II of the expansion of the Port of Mombasa, which is funded by the Japan International Co-operation Agency (Jica). I also asked who would investigate brokers who threaten public servants with dire consequences if their clients don’t get the tenders they want?

Jica, the tendering process for the expansion of the port, officially known as Mombasa Port Development Project, and brokers have been in the limelight since the Saturday Nation’s front page story a week ago on Saturday.

But there is a significant change. Quite apart from civil servants being compromised, the long-standing development-based relationship between Tokyo and Nairobi is threatened.

Jica’s senior representative Koji Noda wrote to the Principal Secretary in the Ministry of Transport on August 7 and said Jica was deeply concerned about the slow pace towards effecting the loan agreement.

Jica’s chief representative Hideo Eguchi wrote on June 3 to the Treasury Principal Secretary regarding meddling in the tender saying he had serious concerns over major alterations to the on-going process.

Quite apart from the “deep concern” expressed by Noda and the “serious concerns” raised by Eguchi, the latter’s letter carries this weighty statement: “Any cancellations at this stage will affect future assistance to Kenya from the Government of Japan.”

AMENDMENTS

What is going on? First, the National Treasury has introduced eleventh hour amendments to the port tender documents pertaining to the procurement of the company that will operate the two terminals that constitute the expansion of the port.

This is called a landlord port model by which the Kenya Ports Authority owns the port, inclusive of infrastructure, but does not run it. This is instead carried out by the private sector.

This is what a brief for the parliamentary Public Investments Committee dated June 25, 2015 says: “Kenya Ports Authority intends to establish a landlord type port management structure, which is considered to be the best practice for port authorities in the world. It should therefore develop the infrastructure and thereafter supervise the operations by an independent terminal operator.”

It is the process of selecting this entity in which the Treasury is meddling. It has introduced amendments midstream, after bidders have been shortlisted, and done so without informing Jica, which is funding the port as per a Sh32 billion March, 2015 Loan Agreement. What did the original request for proposal which Jica and other stakeholders know, state?

“A prequalified bidder that submits a bid as a joint venture or consortium with a Kenyan entity or otherwise at the time of prequalification shall provide details of the joint venture or the consortium agreement. The Kenyan entity shall have a share of not less than 15 per cent of the total share of the project company for the entire contract period.”

What change has Treasury introduced? That “shareholding of at least 15 per cent by Kenyan citizens in the project company or an offer to the Government of Kenya of at least 15 per cent free carry interest in the project company.”

U-TURN

This after-thought demand for shareholding by government in a concession is untenable because government cannot supervise itself. It means Principal Secretary Kamau Thugge would sit on the boards of KPA (landlord) and the firm (tenant) running the port. And much to the chagrin of Jica, the Treasury’s amendments the conceding authority (selected port operator) shall determine the financing mechanism for Phases 2 and 3 of the port and this may include a build, operate and transfer model.

But, Jica points out that it was agreed in the concession plan that an operate and transfer model, which a Treasury U-turn now favours, was not a viable option for the port of Mombasa. So, it would appear vested interests have leaned on Treasury to change the rules midstream.

Treasury has in turn leaned on KPA, hence the slow progress. Jica is persuaded the Treasury is acting on behalf of persons keen to see one of the 12 bidding firms selected operator of the Mombasa port. Suspicion has centred on a Middle East company.

For me the way forward is to revert to the original concession agreement in order to inspire confidence, demonstrate goodwill to lenders and let the best bidder win. As things stand, the Treasury’s treatment of Jica – a longstanding development partner — has elevated contempt to a new level.

Opanga is a media consultant; [email protected]