Is the revamped Kisumu port a white elephant in the making?

An aerial view of Lake Victoria showing the newly refurbished Kisumu Port (front) and Kisumu Oil Jetty (back) on August 27, 2019. PHOTO | TONNY OMONDI | NATION MEDIA GROUP 

In Summary

• The revamped facility may not play the lake transport hub or network role as other ports in Uganda and Tanzania remain in sorry state.
• Two weeks ago, KPA managing director Daniel Manduku was enthusiastic about completion of the port facelift.

By EDWIN OKOTH
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Lack of supporting infrastructure is already making nonsense of all the efforts thrown into revamping the Port of Kisumu.

In fact even before the job kicked off, a feasibility study had warned that it would not make economic
sense unless a reliable railway system was linked to the lakeside city.

The report, which poured cold water on the refurbishment of the facility, says the port has slim chances of making business sense if both the standard gauge railway and the metre gauge railway fail to operate to feed it with cargo. Essentially that means the country is staring at another potential white elephant.

SORRY STATE

Even worse, the revamped facility may not play the lake transport hub or network role as other ports in Uganda and Tanzania remain in sorry state, according to the study commissioned by the Kenya Ports Authority, but which was seemingly ignored as money got pumped into the stillborn project.

While Kenya remains uncertain on how it will fund the SGR link to Kisumu, Transport Cabinet Secretary James Macharia recently revealed plans to revive the existing metre gauge railway at a cost of Sh3.8 billion, a plan that will remain to be seen after Mr Macharia himself ruled out the revival of the line for being ‘too vandalised’.

The feasibility report that was meant to guide KPA on whether the investment in the port upgrade was a worthy affair further scuttled hopes of its viability even if the SGR was to be built to the Kenya-Uganda border and especially if it reaches Kampala as per the plan since it will be cheaper to access Uganda by rail than by lake.

Furthermore, the Dutch firm, Royal HaskoningDHV noted in the feasibility study that there may be no clear cost advantage to attract cargo users to the port instead of using the road.
“In case SGR passes through Kisumu en route to Kampala, Kisumu is unlikely to capture very much Ugandan cargo, and will rely mainly on transit cargo for Rwanda, Burundi and North West Tanzania.

COMPETITION

‘‘The latter is also vulnerable to competition from the proposed SGR line from Dar es Salaam to Mwanza, and would rely to a large extent on the port of Mombasa being able to outperform the port of Dar es Salaam in terms of service quality and price,” the Dutch consultants wrote.

Only traffic from Nairobi and Kisumu to Bujumbura (where cargo volumes are minuscule) and from Kisumu to Mwanza) may have some cost advantages at minimum transport costing.

Lake transport is also said to be offering only a marginal transport cost advantage for cargo moving from Nairobi and Kisumu to Kampala, depending on exactly where in the Kampala area it is going to.
The findings add to the intrigues of the multibillion shilling port upgrade shrouded in secrecy and whose commissioning has been elusive for three months since the August 14 last-minute cancellation under mysterious circumstances.

Behind the scenes, a flurry of activities has marked the lakeside project dubbed ‘fruit of the handshake’ after both President Kenyatta and Opposition leader Raila Odinga made several supervisory visits to the works.

A ship assembly yard at the Kisumu dry port in Kisumu in May. PHOTO | ONDARI OGEGA | NATION MEDIA GROUP

Officials from the Transport and Infrastructure ministry as well as from the Kenya Railways and Kenya Ports Authority have shuttled between Nairobi and Kisumu for the last two months ‘preparing for the big launch’ but the closest is either ‘very soon’ or ‘any time from now.’

SH2 BILLION

“We have been booking and cancelling hotel reservations with the launch being said to be very soon, one week then long silence follows. We don’t even know when it will happen for sure and no one wants to discuss it,” a source at Kenya Railways intimated, requesting anonymity for fear of reprisals.

In the long wait the pool has been roiled by the latest summonses of KPA officials to the Directorate of Criminal Investigations over expenditures in the port project, a tip of the iceberg.

The Transport and Infrastructure CS, who insisted the port will be launched “very soon”, refuting claims that the project had been used by tenderpreneurs to make a kill with local politicians said to have made supplies at exorbitant costs and Kenya Railways said to have spent hundreds of millions under unclear circumstances.

“We saved the situation in the long run. Something like dredging works, which was initially planned to be done at Sh2 billion was done at Sh200 million so there was no so much wastage as may have happened if we did not intervene,” Mr Macharia said.

His revelation points to a larger scheme, planned or executed where insiders believe may not have been pegged on the success of the port and a cargo transit point, but as a money milking project.

The dredging, which the CS said could have cost 10 times more, was not even necessary according to some engineers involved in the project.

President Kenyatta, who has been hands on in the project, had also alluded to some pessimists who had written off the project and who may have attempted to overspend on some items such as revival of the ship.

PETROLEUM PRODUCTS
“The ship, which some people had advised that we sell as scrap metal has now gone to Uganda and brought wagons, which we will use for shipping petroleum products,” Mr Kenyatta said during a stop over in Mai Mahiu as he launched the second phase of the multibillion shilling SGR project last month.

On the face of it, officials continue to hype the justification for the port, which, they insist, will become the first point of call for cargo destined for the Great Lakes countries of Uganda, South Sudan, Northern Tanzania, Rwanda, Burundi and Eastern DRC.

Two weeks ago, KPA managing director Daniel Manduku was enthusiastic about completion of the port facelift.

“The past eight months, the Port of Kisumu has undergone an intensive upgrade and now it’s ready for operations of wagon ferries and vessels. This is expected to be a game changer in lake transport and business activities in Kisumu and its environs,” Mr Manduku wrote furthering his optimism that the port will now become a major regional hub for cargo and passenger transport.

The MD had overlooked the feasibility findings that capacity constraints at Uganda’s Port Bell and the seven other major ports around Lake Victoria will be key headwinds in making Kisumu port viable.
There are also no tangible plans to have similar upgrades in Ugandan and Tanzanian ports.

A world Bank report commissioned by the government of Uganda to test the viability of transport business around the port in 2016 blamed the dwindling fortunes around the lake basin region for lack of railway links.

The World Bank transport economists also found most ports around the lake to be in very bad condition, including old Port Bell and Jinja ports, raising the question of where the ship to Kisumu would be planning to deliver cargo when it starts operating.

WAGON TERMINAL

“The port was constructed in the 1960s as a rail wagon terminal, though it has limited facilities for berthing other types of vessels.

Port Bell has one mobile crane, and one forklift truck, both of which appeared to be dysfunctional.

The access road is narrow and constrained, reflecting considerable encroachment and parked vehicles.

The 9-km rail link is in poor condition, and has not been used for many years and is currently overgrown,” the economists wrote in 2016.

Added to the inconveniences of double handling (which will increase given that the port railway infrastructure is MGR and not SGR), longer transit times, and less frequent services, the cost advantages are wiped out and Kisumu is likely to face traffic deficiencies despite the heavy investment KPA and Kenya Railways have been pumping into its facelift.

In the anticipated launch, a five-decade old ship named MV Uhuru, on which Kenya Railways spent an unspecified sum, running into millions of shillings, to revive, will be used to ferry fuel to Uganda when the launch off takes place.

MV Uhuru, which had operated between Jinja, Mwanza, Musoma and Kisumu since 1966 before stalling in early 2007 is said to have found difficulty in getting approval to operate since there was no insurer willing to underwrite it, a mandatory requirement by the Kenya Maritime Authority.

FERRY PETROL

The Rail Wagon Ship, which had stalled for more than a decade, will carry wagons which KRC refurbished to ferry diesel and petrol across the lake in at least 14 hours per trip, further denting the efficiency and economic rationale.

In fact, due to lack of a railway line from Nairobi to Kisumu, the refurbished wagons had to go all the way to Uganda first and be carried by the ship to reach Kisumu.

To load the ship, which can only carry a maximum of 22 wagons with just slightly over a million litres makes no sense.

A railway connection was laid from the Sh2 billion idle oil jett, built by Kenya Pipeline two years ago to the main port about 1.7 kilometres away.
Expenditure will be obsolete
As it is now, the whole expenditure made to enable the movement of fuel to Uganda will be obsolete should Uganda build its side of the jetty and the direct loading of oil tankers made possible from Kisumu.

The targeted Uganda market for fuel export has also been dwindling with the latest data showing that Kenya has lost most of the East African fuel export market to Dar es Salaam
The value of Kenyan petroleum exports dropped 43 per cent from Sh2.1 billion in the first six months of 2018 to Sh1.2 billion in the first half of 2019 according to the Kenya National Bureau of Statistics.
The move has forced Kenya to cut its pipeline tariff for export fuel by half in the latest revisions published by the Energy and Petroleum Regulatory Authority