Will Kenya logistics experiment work?

Port of Mombasa. FILE PHOTO | NMG

By JAINDI KISERO
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Summary

• If the experiment works, the stage will have been set for future adoption and copying of the South African system where the running of state-controlled rail, port and pipeline companies are under one roof.
• Similar systems exist in Germany where you have Deutsche Bahn owning and controlling transport and logistics assets and in France where you have the logistics conglomerate, SNFC.
• Whether what has worked in South Africa will work here remains to be seen.

It’s been six months since president Uhuru Kenyatta pronounced the executive order No 5 of 2020- when he appointed the business executive and former chairman of Kenya Pipeline Company, Mr John Ngumi, to steward the new entity known as the Kenya Transport Logistics Network (KTLN).

This, more or less, is a superstructure that is supposed to synchronise the operations of three key strategic parastatals, namely, Kenya Ports Authority (KPA), Kenya Railways Corporation (KRC) and Kenya Pipeline Company (KPC).

According to the executive order, said that synchronisation of the operations of the three parastatals will happen under the co-ordination of the state-owned Industrial Commercial Development Corporation (ICDC). Mr Ngumi was named as the chairman of ICDC.

We all greeted this announcement with a dose of scepticism mainly because the establishment of this new body came completely out of the blue.

There was no legal framework spelling out the powers and functions of this new entity nor an enabling legislation to establish Kenya Transport Logistics Network as a legal personality.

Indeed, this presidential executive was strange and unusual because the large parastatals whose activities the new outfit was supposed to coordinate are autonomous state corporations created by their own acts of parliament, complete with their own boards and management.

A small correction: KPC is a company limited by guarantee but 100 per cent owned by the government. Questions arose.

How was this KTLN and the ICDC with an expanded mandate going to relate with existing boards of the three parastatals? What would happen to existing loans and contracts?

Last week, I caught up with Mr Ngumi to engage him and to have him explain what this experiment he is conducting is all about.

First, he insisted that KTLN was not a company. The entity was an entity charged with the role and responsibility of merely providing what he described as a ‘framework for management, co-ordination and integration of public, port, railway and pipeline services’.

Where is the legal basis for creating this new animal? According to Ngumi, all that has been done was to introduce coordination of operations of these three large strategic corporations without amending existing laws or causing undue disruption in their operations.

He maintained that what had been done was within the existing laws pointing out an example in the KPA Act that specifically spells out that KPC is obliged coordinate its operations with KRC.

Will the experiment work? It is too early to tell. But what is clear is that this KTLN thing will have major implications in the governance of the three strategic parastatals. Power centres are bound to start shifting.

In the first place, the new arrangement has shifted ministerial responsibilities over these three large parastatals from the Ministry of Transport to the National Treasury.

Secondly, all chairmen of the boards of the three strategic parastatals have been roped in the KTLN experiment since they have all been appointed to sit on the ICDC board.

The way I see it, these directors of ICDC will not just sit there as some namby-pamby figureheads without specific powers in the running and management of the affairs of KRC, KPC and KPA.

You will read in the fine print of executive order, that there will be ‘reserved matters’ on which these KTLN directors will have a final say. The list includes budgets, target setting, expenditure reports and decisions on borrowing.

If the experiment works, the stage will have been set for future adoption and copying of the South African system where the running of state-controlled rail, port and pipeline companies are under one roof controlled and owned by the conglomerate- Transnet.

Similar systems exist in Germany where you have Deutsche Bahn owning and controlling transport and logistics assets and in France where you have the logistics conglomerate, SNFC.

Whether what has worked in South Africa will work here remains to be seen. But whichever way you look at it, the case or synchronisation and co-ordination of the operations KPC, KRC and KPA cannot be gainsaid.

We are in an unprecedented race with our regional neighbours for new investment in transport and logistics corridors, inland ports and logistics zones.

To win the race, we will need a more concerted approach in co-ordination of logistics infrastructure projects and in developing new regional supply chains.

We must maintain our competitive edge as the regional hub for transport and logistics.