Grain Handler Delays at Kenya Port Prompt Push to Break Monopoly

(Bloomberg) -- Kenyan lawmakers want the state-run port operator to license bulk grain-handling companies to end a monopoly at East Africa’s biggest port of Mombasa and boost government revenue.

Persistent delays in clearing cereals by Grain Bulk Handlers Ltd. have resulted in high demurrage costs for importers, according to a report by the National Assembly’s finance committee, which now wants the Kenya Ports Authority to license other players by 2022.

Kenya granted GBHL an eight-year exclusivity period for grains and other bulk cargo including clinker, coal and fertilizer that expired in April 2008. A subsequent attempt by KPA to license another specialized operator was blocked by the government, according to the report.

A key bone of contention for the lawmakers is the amount of money the monopoly, which handles about 98% of the grains passing through Mombasa, remits to the port agency. While players using conventional bagging pay KPA $10.40 per ton, GBHL is allowed to pass on only $3.85/ton, whereas it charges $13.50 per ton in bag and $16.50/ton in bulk.

“This price differentiation has presented a technical barrier to trade and competition,” according to the lawmakers.

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Importers turn to grain bagging whenever there’s a backlog of vessels awaiting clearance to discharge in order to avoid delays and demurrage.

Companies that have shown interest to build and operate specialized dry bulk discharge and handling facilities include Kilindini Terminals Ltd., Kapa Oil Refineries Ltd., Africa Ports and Terminals, Multiship International Ltd. and Kipevu Inland Container EPZ Ltd., according to the report.

In 2019, ships offloaded 2.7 million metric tons of grain, compared with 400,000 metric tons in 2000. The lawmakers project demand for grain-handling facilities will grow by 7% each year at the port that also serves Uganda, Rwanda, Burundi, South Sudan, Democratic Republic of Congo and Ethiopia.

KPA generated 50.2 billion shillings ($457.3 million) in the fiscal year through June 2020, a quarter of which was remitted to the government, making the agency the biggest dividend payer after telecommunications operator Safaricom Plc, according to a National Treasury report.

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