The Port of Mombasa was lucky to survive the mistakes that had been made in the years before 2007, in particular the failure to develop the facility’s infrastructure in order to keep up with the growth in the quantity of cargo handled. This may not hold going forward given recent geo-economic and political developments. Unlike Kenya, our competing regional ports may have learned a vital lesson about the need to develop sufficient port infrastructure to keep up with future developments. They have been keen to create linkages with private sector capital. In Kenya, on the contrary, efforts to concession infrastructure development for ports in Kenya have been met with intense opposition from various actors.
Previously without an alternative, the landlocked countries of Uganda, South Sudan, Burundi, Rwanda, and the Democratic Republic of Congo (DRC) had no option but to pay dearly for Kenya’s failure to develop its port infrastructure to keep up with the growth cargo. The lack of capacity reached crisis point in 2007 when the port experienced immense operational challenges.
Dar es Salaam Port was then in a dire situation and had, indeed, relied on Mombasa Port to address its congestion problems by using Kenya as a transshipment port to avoid long delays for cargo destined for the Central Corridor – largely mainland Tanzania, Burundi, Rwanda, DRC, and Zambia.
The wake-up call came in 2007 when shipping lines threatened to designate Mombasa a demurrage port. This would justify liners calling at the port to charge the unpopular Vessel Delays Surcharge (VDS) – a punitive fine for an inordinately long delay that can be as high as KSh35 million per day depending on the vessel’s size or the type of cargo on board. Although in reality VDS was not claimed – except by oil and LPG vessels that faced storage capacity constraints – the threats were numerous.
Earlier projects to improve cargo evacuation efficiency and avoid delays had not implemented. To create room for the proposed expansion and free the port from congestion, the Kenya Ports Authority (KPA) created extra capacity outside the port in 2007 by allowing private sector players to operate custom-bonded facilities that came to be known as Container Freight Stations (CFSs). Since they were seen as a temporary measure, requiring them to apply the KPA tariff, they profited from the demurrage charges they levied against over 60 per cent of the cargo imported that could not be cleared within the 7-day free storage period.
CFSs became highly lucrative and rapidly proliferated, their number growing to over 10 within a span of just a few years. The extra capacity they created after they became permanent (without, however, being anchored in any policy framework) gave KPA breathing space to develop the infrastructure – mainly the new container terminal, the extension and deepening of berths, and the dredging of the ship channel to accommodate huge vessels – that significantly improved ship turnaround and cargo dwell time.
Mombasa Port is today the largest and busiest seaport in East Africa in terms of the volumes handled. The port serves as a crucial gateway for trade, facilitating the import and export of goods for Kenya and its transit market that also comprises Tanzania, Somalia, and Ethiopia.
However, it is the growth of cargo volumes for the region – and consequently the shrinking capacity at the Mombasa Port – and the emergence of competing ports that should worry Kenyan policymakers who should urgently fast-track the remaining port capacity infrastructure development as well as keenly focus on the other underdeveloped hinterland infrastructure for Lamu Port.
The Kenya Ports Authority (KPA) has proposed a number of projects that must be fast-tracked in order to deal with the growing volume in both domestic and transit cargo.
The new Kipevu Oil Terminal (KOT) – an offshore island facility at the Port of Mombasa that was completed in January 2022 – has paved the way for the construction of Berth 19B to replace the old terminal. According to the KPA Managing Director, Captain William Ruto, the new berth will create a 240-metre-long terminal with a 300,000 Twenty-Foot Equivalent Units (TEUs) container stacking yard.
Also proposed is the construction of Phase 3 of the second container terminal. Once completed, the project will increase the second container terminal capacity by 400,000 TEUs. The project is expected to be funded by Japan, which has financed phases 1 and 2 through the Japan International Corporation Agency (JICA), according to Ruto. KPA is also planning to set up the Dongo Kundu Special Economic Zone once the resettlement of the area’s residents is finalised.
The Kenya Ports Authority (KPA) has proposed a number of projects that must be fast-tracked in order to deal with the growing volume in both domestic and transit cargo.
KPA should be lauded for the significant expansion and modernisation efforts it has undertaken since 2009 in order to keep up with the growing demands of regional and international trade. Currently, the Mombasa Port can handle 2.1 million twenty-foot equivalent units (TEUs) annually. However, the port handled approximately 1.6 million TEUs in 2023 and will reach its full limit unless the proposed projects are undertaken immediately. The facility, which now has 19 berths, can only accommodate only 10 more.
There is a market of over 385 million people in Eastern Africa, huge unexploited economic opportunities, and a growing demand for port infrastructure to drive growth. Cargo throughput – the total volume of cargo discharged and loaded at the port – has been registering impressive growth. For instance, the port moved 18,063,051 tons between January and June 2023, up from 17,474,311 during the same period in 2022 tons, a 3.4 per cent increase.
According to the report of the biannual performance of the Northern Corridor Transit Transport Coordination Authority (NCTTCA), in the half-year period ending June 2023, transit volumes recorded 5,412,121 tons – a 4 per cent increase – compared to 5,195,115 tons in the same period in 2022. The main transit markets for the port of Mombasa are Uganda (61 per cent), South Sudan (17 per cent), the Democratic Republic of Congo (DRC) (14 per cent) and Rwanda (4 per cent). Of the total transit volume, 89 per cent were imports and 11 per cent were exports. Thanks to huge marketing efforts by the KPA, cargo destined for Burundi through the port of Mombasa more than doubled in the first six months of 2023 compared to the same period in 2022. DRC, Rwanda, and South Sudan also recorded cargo growth in the reporting period, reaching 90 per cent, 39 per cent, and 72 per cent, respectively. The total transit cargo through the Mombasa Port grew by close to 12 per cent.
The Port of Mombasa comprises Kilindini Harbour, Port Reitz, the Old Port, Port Tudor, and the whole of the tidal waters encircling Mombasa Island. The port has a capacity of 2.65 million twenty-foot equivalent units that will be exhausted in the near future. “The Africa’s Port: Fast-tracking Transformation” report lists Mombasa alongside Lagos (Nigeria), Dar es Salaam (Tanzania), and Cape Town (South Africa), as among the facilities with infrastructure deficits in the short-term.
“Existing Port infrastructure is often inadequate to meet demand. As a result, several major ports, including Lagos, Mombasa, Dar es Salaam, and Cape Town, are on the verge of reaching their capacity limit, which can lead to costly congestion issues,” the report states.
Compiled by Africa CEO Forum and Okan – a strategy consulting and financial advisory firm – the report notes that without investment, and considering the growth in demand, the situation risks worsening.
Globally, vessels are growing bigger as ship owners seek to maximise profits by carrying more cargo while running fewer ships, and shippers want to get lower freight costs through economies of scale. The biggest ships in the market, such as Maersk Emma, MSC Oscar, and others, are now almost 20,000 TEUS in capacity. Ports thus face the challenge of providing space to accommodate these behemoths. Also, global ship operators are seeking partnerships to provide seamless services – from the source to the end market – and port development plays a key role in this new supply chain.
As a result, cutthroat competition between ports is growing, with huge investments being made in a bid to attain hub port status. East African ports cannot ignore this growing need. In Kenya, the idea of privatising the ports has not been fully embraced because of political considerations – rather than economic ones – and this might cause Kenya to lose its position as a regional hub.
Globally, vessels are growing bigger as ship owners seek to maximise profits by carrying more cargo while running fewer ships.
The idea of Lamu as an alternative port was first mooted in 1975. A year before the end of his second term, the late President Mwai Kibaki was joined by the then Ethiopian Prime Minister Meles Zenawi and South Sudan’s President Salva Kiir in laying project’s foundation. The then KSh2 trillion port – part of the Lamu Port South Sudan Ethiopia Transport Corridor (LAPSSET) – was projected to contribute between 2 and 3 per cent of the Gross Domestic Product (GDP) to Kenya’s economy. When Uhuru Kenyatta succeeded the late President Mwai Kibaki in 2013, his administration gave the LAPSSET project a wide berth and instead threw its entire weight behind the Standard Gauge Railway (SGR) as Uhuru’s legacy project. The government failed to allocate sufficient resources to the project, with the first three berths taking over eight years to complete. It is planned that the port will have 32 berths, to be constructed by private sector players. The port is underutilised because of lack of hinterland infrastructure to link it to the transit markets of Ethiopia and South Sudan.
Dar es Salaam Port is undertaking infrastructural and institutional reforms similar to those undertaken by Kenya in the early 2010s that now threaten our position as a regional hub if the country constructs the six proposed berths at Bagamoyo and in Dar es Salaam with public-private partnership financing and addresses its hinterland infrastructure. The US$421 million Dar es Salaam Maritime Gateway Project (DMGP) has been under implementation since 2017 to improve the effectiveness and efficiency of Dar es Salaam Port for the benefit of public and private stakeholders by strengthening the physical infrastructure as well as the institutional capacity of Tanzania Ports Authority.
The project is being financed by the government of Tanzania jointly with the World Bank and the UK’s Foreign, Commonwealth & Development Office. It involves the reconstruction and deepening of berths 1 to 7 to 14.5 metres so that the port can comfortably handle large vessels. Berths 8 to 11 will also be upgraded and deepened while the entrance channel and the turning basin are to be deepened to 15.5 metres. The project will also improve the rail platform and linkages within the port.
The port is underutilised because of lack of hinterland infrastructure to link it to the transit markets of Ethiopia and South Sudan.
The construction of a new roll-on, roll-off (RoRo) terminal at the port has boosted its capacity to efficiently handle much larger vessels and to improve the turnaround time for car carrier ships coming through. The construction of the first dedicated RoRo infrastructure ramp and terminal in the port began in 2018 and was completed and became operational in March 2021, enabling the port to start hosting Post-Panamax vessels. Motor vehicles are now driven off the ship and straight onto the adjacent spacious berth that has a handling capacity of 3,000 vehicles at a time, or over 200,000 per year.
But even as we ponder how to bring on board strategic partners with the capital needed to develop the port and hinterland infrastructure, our rival ports have already moved ahead. In October this year, Dubai-based global port operator DP World signed a 30-year concession agreement with the Tanzania Ports Authority to operate and modernise the multi-purpose Dar es Salaam Port, connecting Tanzania and the wider region to global markets.
The port will connect to the hinterland of sub-Saharan Africa through a network of roads, highways, railways, and dedicated freight corridors and ports, supporting the growing demand for logistics solutions across the continent and connecting businesses in the region to global markets. The modernisation of the port includes potential investments in temperature-controlled storage facilities to enhance Tanzania’s agricultural sector, as well as greater connections to rail-linked logistics and the future development of a special economic zone together with the port’s broader logistics sector.
“We are honoured to partner with the Government of Tanzania to revitalise the port of Dar es Salaam. This is in line with Tanzania’s strategic development plans and is a testament to the visionary leadership of H.E. Samia Suluhu Hassan. The development will deliver trade opportunities for the region, connecting East Africa and broader sub-Saharan Africa with global markets, driving economic growth, job creation, enhanced access to products and services, and creating value for all our stakeholders. Alongside other ports that we operate, this concession agreement marks another milestone in our collective efforts to leverage DP World’s global and local expertise to enhance the region’s supply chain to support the economic growth of the entire continent,” commented Sultan Ahmed Bin Sulayem, Group Chairman and CEO of DP World.
Ethiopia, Lamu Port’s key target, has turned its focus on Berbera Port in Somaliland, which is set to become the most modern port in the Horn of Africa once it is completed. The Gulf states’ growing interest in the Horn of Africa region due to geopolitical and strategic considerations saw DP World enter into an agreement to develop and manage the facility for 30 years in May 2016. The total investment of the two-phase project will reach US$442 million. DP World will also create a free economic zone in the surrounding area, targeting a range of companies in sectors from logistics to manufacturing, and a road-based economic corridor connecting Berbera with Ethiopia.
The port deal with Somaliland – a region that declared autonomy from Somalia in 1991 but which is still not internationally recognised by the international community – has increased Somaliland’s credibility as an independent state. Port Berbera is now the closest sea route to Ethiopia, an 11-hour journey by road. The port opens up opportunities for huge growth in the import and export of livestock and agricultural produce. DP World Group Port officials say that the port, which can currently handle 150,000 TEUs, will expand into handling one million TEUs of 20 and 40-foot mixed units.
Ethiopia, Lamu Port’s key target, has turned its focus on Berbera port in Somaliland, which is set to become the most modern port in the Horn of Africa once it is completed.
In addition, Djibouti has undertaken extensive developments at its port, increasing efficiency at the Doraleh Terminal that handles over 90 per cent of the cargo that passes through the country. Djibouti International Free Trade Zone (DIFTZ) was officially opened in July 2018, creating major business opportunities for Djibouti and East Africa as the region’s export manufacturing and processing capacity is expanded in key sectors such as food, automotive parts, textiles, and packaging.
The other regional port that has come under private management is Malindi Port in Zanzibar. In May this year, Africa Global Logistics (AGL) signed a contract to manage the container terminal at the port. Under the agreement, AGL will be responsible for cargo handling operations and marine services at the Malindi port. The company has also committed to investing in the modernisation and development of the port. AGL also plans to build an offloading area outside the port, which is needed to relieve the serious congestion at the port.
Although the Kenyan government is overwhelmed by foreign debt, infrastructure projects that connect to the rest of the continent are crucial. There is a growing need to depoliticise the privatisation of the port and the hinterland infrastructure. Failure to consolidate our gains will see us lose our grip as the regional transit hub.
