Kenya Railways slapped with Sh13bn port fees

The Kenya Railways Corporation has been slapped with a massive Sh13.6 billion bill, mostly for hiring giant cranes to handle cargo at the Mombasa Port after the Chinese operator of the Standard Gauge Railway supplied it with dysfunctional equipment worth at least Sh2 billion.

BLEEDING

The Kenya Ports Authority (KPA), which was forced to intervene to rescue the situation, has now written to Kenya Railways demanding payment, which includes related support costs for operating the cranes, creating friction between the two key State agencies, with the Chinese caught in the middle.

The KPA demand notice, which put the hiring of the cranes alone at Sh7.7 billion for the 13,104 hours they have been used at the port of Mombasa, also includes additional costs comprising transfer of empty containers from the SGR yards and unnamed programmes implemented by KPA in Mombasa and Nairobi.

According to the confidential communications, the Ministry of Transport had approved the arrangement to have KPA bill KRC after the Rail Mounted Gantry (RMG) cranes supplied by the China Roads and Bridges Corporation (CRBC) as part of the SGR operations contract to load cargo on the trains failed.

“The Authority (KPA) has continued to provide resources in form of equipment and labour to facilitate the operations of the SGR project. This is due to the fact that the Rail Mounted Gantry Cranes (RMGs) at the Port Reitz Marshalling yard are yet to be operationalised. The purpose of this letter is to request you to remit Sh13,618,517,755.21, being the amount reimbursable covering the period January 1, 2018 to June 30, 2019,” KPA managing director Daniel Manduku wrote on July 4.

Kenya Railways did not immediately respond to our queries over the costly demand, despite promising to do so “in due course”.

Documents seen by the Sunday Nation however detail that KRC had sought the intervention of the Chinese contractor on a plan of action to replace the moribund cranes that were still bleeding the corporation more money as they continued to stay idle at the port.

COUNTERFEITED

The CRBC declined to comment on whether it was going to foot the bill KRC is under pressure to pay after it was forced to hire cranes from KPA. The firm deflected questions within its operational wing, the Africa Star Railways Operations, which also referred us back to the parent firm, before going quiet since last week.

Documents also show the Chinese contractor is currently dismantling and replacing the cranes that failed to work two years after they were installed.

A week ago, CRBC wrote to Kenya Railways consultants detailing plans to replace the six cranes, with two having been demolished already while the third one is set to be dismantled by August 30.

“The two Henan Mine RMGs have been dismantled. Two ZPMC RMGs will be shipped at the end of July to arrive at Port Reitz by the end of August. After 10 days for customs clearance and transport, installation is estimated to commence on September 10 and be completed by October 16, ready for an acceptance inspection,” CRBC general manager for the Mombasa-Nairobi SGR project An Aijun wrote on July 19.

The dysfunctional cranes were manufactured by Chinese crane builder Henan Mine Crane Company Ltd. It remains unclear how the firm, which boasts of supplying electric hoists, electric winches and different types of cranes including the European standard overhead crane, supplied the dysfunctional ones in Mombasa that have failed to work despite efforts to repair them by experts from China.

The Sunday Nation also tried to contact the crane manufacturer in vain, amid claims by insiders at the Mombasa port that the crane builder may have been counterfeited, with the six giant cranes said to have begun dropping containers, raising safety concerns.

REPLACE

KRC is understood to have tried to engage the Chinese railway builder over the cranes without any response in the past.

The next supplier, according to the CRBC brief, is its own sister company based in Shanghai. China Communication Construction under which CRBC falls also owns the Zhenhua Heavy Industries Company Ltd (ZPMC), a heavy-duty equipment manufacturer, and a state-owned company listed on A and B shares on Shanghai Stock Exchange, which is expected to deliver cranes and save KRC from the piling bill. ZPMC also supplied the cranes KPA hired out to Kenya Railways.

The dysfunctional rail-mounted cranes at Port Reitz were set up at Sh2 billion by CRBC as part of the controversial SGR operations and maintenance contract to handle cargo on the Mombasa-Nairobi SGR.

Transport Cabinet Secretary James Macharia had pledged to have the cranes replaced.

Mr Macharia said he had met officials of CRBC in May and agreed to replace the cranes in “a few weeks”.

LOSS-MAKING

“The cranes will be replaced by CRBC. We had a meeting with them on Thursday and that was the agreement. The first two cranes are expected to be replaced in the next few weeks. I am made to understand that their shipment has already started. Eventually, we shall get new replacements for the six,” Mr Macharia told the Sunday Nation.

The contractor is said to have abandoned the equipment after they malfunctioned.

Crane loading and offloading ironically falls into the various layers of payments Africa Star Railways Operations Company tied KRC to pay every month for the running of the loss-making SGR.

Together with a raft of other variable factors, the loading and unloading fees and maintenance charges are used to calculate the quarterly service payments made up of both Kenya shillings and US dollars, according to a skewed Operations and Maintenance Contract the details of which the Sunday Nation revealed in May.