KENYA PORTS AUTHORITY
THEME
Port Strategies for Harnessing the African Blue Economy & Investment Options
TOPIC
'Investment Opportunities and Infrastructure in the Blue Economy
PMAESA CONFERENCE 2016
27th November to 1st December 2016
Port Sudan, Sudan
Catherine Mturi-Wairi
Managing Director
Kenya Ports Authority
November 2016
INTRODUCTION
The term "Blue Economy" or "Blue Growth" has surged into common policy usage, all over the world and discussions have accelerated since Rio+20, the 20th anniversary of the United Nations Conference on Sustainable Development (UNCSD), held in Rio de Janeiro, Brazil on June 20-22, 2012.
A "Blue Economy" approach to sustainable growth usually recognizes different use and non-use values of ocean and other "blue" resources. It promotes the coordination of relevant activities and industries to enhance the overall value.
Although the scope of the Blue Economy may differ for different countries, many agree that the appropriate use and conservation of marine, inland aquatic and coastal resources can contribute to food security, job creation, and inclusive and sustainable economic growth, as well as to climate change mitigation and adaptation:
- the extraction of living and non-living resources aquatic resources such as fish - whether wild or farmed - mineral, oil and gas, generates direct incomes to the population;
- ground water and inland surface water bodies, such as lakes and rivers, provide vital drinking water and critical input to food production;
- surface water bodies provide natural infrastructure for shipping industry, along with infrastructure constructed by humans such as ports;
- healthy coastlines provide natural protection to coastal population against waves and winds;
- beautiful blue nature itself is an asset to local tourism industry; and
- The blue nature provides global public goods of ecosystem services such as the climate-regulating function of the oceans (including carbon sequestration) and the biodiversity of healthy aquatic ecosystems.
The opportunity and challenge is how all of these activities and industries can be coordinated and resources managed so that the Blue Economy brings about the maximum benefits to society in an inclusive and sustainable manner.
Kenya has a number of aquatic resources that have great potential for contributing to the growth of the Blue Economy. The country is strategically placed within the Indian Ocean coast, and has several large lakes including Lake Turkana, Lake Victoria( 2nd largest fresh water lake in the world) and several rivers. Kenya's marine transport sector is valued at over Ksh 73 Billion while the fisheries sector alone Contributes 0.45% of Kenya's GDP equivalent to Ksh.20.88Billion. (Kenya Maritime Fact Book, 2015)
The Government of Kenya has demonstrated commitment towards the Blue Economy through the creation of several State Departments focusing on different aspects of the Blue Economy, through Executive Order No.1/2016, Organization of the Government of the Republic of Kenya, May 2016. This Blue Economic development model for Kenyan marine waters is poised to accelerate economic growth in the country, create new frontiers for development, bring employment and address the food security deficit in coastal areas, all in a sustainable manner.
THE ROLE OF PORTS IN THE BLUE ECONOMY
Ports are key players in trade facilitation and cargo fluidity in the entire supply chain. Approximately 90 per cent of international merchandise trade is currently handled by seaports from coastal areas. Shipping not only moves en masse the World Cargo Trade, but also remains the most cost effective way to consolidate volumes of global freight a board. Since trade cannot take place without transport, and shipping remains the most important and cost effective form of international cargo transport, ports play a central role in global economy.
There is a high degree of dependence and a necessary complementarity role of ports with the hinterland trade facilitation activities and the very existence of a port at the end of a trade route largely influences the attractive intermodal transport connectivity and enhances growth of spatial economic activities. For developing countries, the role of ports is even greater, with their trade structured in such a way that, whilst they produce and export bulky and unprocessed raw materials, they constitute transit interface for consumer markets for manufactured products from the developed countries.
When the port merchandise and productivity increases to greater than simple cargo handling, inter modal flow and transshipment, shipping companies are rapidly established around the port to facilitate shippers. Similarly, the companies which are sources of goods, markets and trade fairs agglomerate. Other commercial activities like banking and finance industry are established. Agencies and sector regulators come in. Shippers also require cargo storage and consolidation facilities and freight stations. Other social economic activities such as health facilities, education and transport logistics and observatories are set.
Altogether, international ports have the capacity to rapidly create their own Industrial and Economic Processing Zones (EPZs) and commercial Port Cities.
The linkage between the port and the economic activities in the region brings skilled population to the port city to invest in port-related value addition and logistics services in the tertiary sector. These services make the port more competitive with more integrated port functions. The port gains sophistication and the port-interface enhances specialization to meet the world standards.
It goes without saying that ports are important crystallization points for maritime economic activities: whether cruise shipping, coastal shipping, international shipping, passenger ferries, fishing, mining of marine minerals, oil drilling, offshore or maritime monitoring, they all require ports and port infrastructure. There are strong synergies with international shipping, which not only provides the overseas cargo, but also shapes the main ports
The Case of the Port of Mombasa
The Port of Mombasa is a critical nerve centre of business serving Uganda, Rwanda, Democratic Republic of Congo, Northern Tanzania, Burundi South Sudan, and Somalia. The Port is well connected in the region, with over 33 shipping lines calling and providing direct connectivity to over 80 ports.
The Port is managed by Kenya Ports Authority (KPA), a statutory body established in 1978 by an Act of Parliament, Cap 391 of the Laws of Kenya Part IV Section 12, with a mandate to maintain, operate, improve and regulate all scheduled seaports along the Kenyan coastline.
The Authority is also responsible for the management of other smaller seaports including: the Old Port in Tudor creek, Funzi, Kilifi, Kiunga, Lamu, Malindi, Mtwapa, Shimoni and Vanga. KPA also manages Inland Container Depots in Nairobi, Eldoret and Kisumu and has liaison offices in Kampala (Uganda), Kigali (Rwanda) and Bujumbura (Burundi) that cater for transit countries. Kisumu Lake Port is also under KPA's mandate.
The Port of Mombasa has 19 deep-water berths with a total length of 3,844 metres and dredged depth that ranges between 10 and 15 metres. It has six container berths with a length of 1400 metres (including the new container terminal), two bulk cement berths and two bulk oil jetties for tankers.
Port Traffic
Port traffic is a useful barometer of a country or geographical region's economic performance. As the domestic or regional economy grows, so does the volume of goods passing through the port. Over the last ten years, traffic through the Port of Mombasa increased by 7.1 percent per annum, rising from 14.419 million tons in 2006 to 26.73 million tons in 2015.
Port Throughput (DWT ''000''): 2006 – 2015
Container Traffic
Port of Mombasa has experienced phenomenal growth in container traffic. Over the last 10 years i.e. between 2005 and 2015, Container traffic has more than doubled, rising from 476,355 TEU to 1,076,118 TEUs, a compound rate of growth of 9.4%.
Container Trafic (TEUs): 2006 - 2015
Transit Traffic
About 70 percent of Port of Mombasa traffic is destined to the local market with the rest shared between Uganda, Rwanda, Burundi, Tanzania, Democratic Republic of Congo, South Sudan and Somalia. Uganda is the major transit point with its traffic claiming 78 percent of transit share.
Transit Market Share: 2015
INVESTMENT OPPORTUNITIES AND INFRASTRUCTURE DEVELOPMENTS
Expansion of Mombasa Container Terminal
Mombasa Port Development Project (MPDP) consists of construction of a new container terminal on a total area of 100 hectares and capacity to handle 1.5million TEUs per annum. The main objective of the project is to expand container handling capacity of Mombasa Port to match future trends, stay competitive in cargo handling and facilitate economic development in Kenya and neighboring countries.
Upon completion, the new terminal will have a front length of 900 meters for berths 21, 22, and 23. It is funded by Japan International Corporation Agency (JICA) and the Government of Kenya and will be implemented in three phases.
Phase I
Phase I was completed and handed over on 29th February 2016. The terminal is now fully operational with the first ship having berthed on 25th April, 2016 to mark the beginning of operations at the new container terminal. Phase I has provided an additional capacity of about 550,000 TEUs. This will increase the port capacity to handle the growing traffic and facilitate national and regional economic development.
Phase II
The Government has completed negotiations with the Government of Japan through JICA which culminated into signing of a loan agreement to finance development of Phase II. Detailed designs are currently underway and will be completed by May 2017. Construction is set to start in June, 2017 and it is expected that the works will be completed by 2019. Phase II will involve construction of Berth No. 22 which will be 250 meters long with additional capacity of about 500,000 TEUs.
Phase III
Phase III involves the development of Berth 23 which will be 300 meters long and is expected to add an additional capacity of 500,000 TEUs once completed.
Conversion of Berth 11 - 14 into Container Berths
In order to create additional container handling capacity, the Authority considers the conversion of current conventional cargo berths 11-14, constructed between 1956 and 1959 into modern berths. Currently, the berths are increasingly being used for container handling although they do not have the requisite equipment such as Ship -to- Shore Gantry Cranes, among others.
The project will entail infrastructural modification to berths 11 to 14 to support loading from modern container handling equipment and procurement of handling equipment. Construction and equipping of the berths will take approximately 2 years from June 2017. This project is expected to provide capacity of 900,000 TEUs per annum.
Development of Crude Oil Handling Facility
Expansion of the current Container Terminal by constructing Berth 19 (completed in 2013) and the construction of a second Container Terminal, as well as the need for development of a modern petroleum products handling facility necessitated relocation of the Kipevu Oil Terminal (KOT).
The inception, concept and preliminary designs of the new KOT which will be an island offshore facility have been completed and the detailed designs are now in progress all under KPA internal funding with consultancy services from NIRAS Port Consults from Denmark. KPA will identify appropriate funding mechanisms to enable the project to be successfully undertaken during this Plan period. Already expression of interest for the construction has been sent.
Dongo Kundu Special Economic Zone (SEZ) and Freeport
The project is one of the flagship projects to be implemented under Kenya's Vision 2030. It involves development of an SEZ and free port facilities on 3,000 acres of land owned by the Authority in Dongo Kundu area through Public Private Partnership arrangements. The development of the Southern Bypass to facilitate access to the area is underway. The Authority completed the Master Plan for the Special Economic Zone (SEZ) and Free Port at Dongo Kundu in 2015.
Development of Small Ports - Shimoni Port
Development of Shimoni Port has been a national priority and is in line with the National Transport Sector Policy and KPA's Strategic Plan. It provides an avenue through which the Authority can contribute to the development of rural communities, create employment and entrepreneurial opportunities, as well as improve living standards of citizens. It also improves Kenya's competitiveness as a maritime and logistics hub, while creating additional capacity and options for handling the growing demand in cargo arrivals at the Port of Mombasa.
KPA carried out a feasibility study on Master Planning for Small Ports, 2013 in which Shimoni Port was identified as the most viable investment for the maritime sector. KPA has prioritized development of Shimoni Port through PPP and currently tendering for the Transactional Advisor is in progress.
Development of Kisumu Port and other Lake Victoria Ports
The project involves development of Kisumu Port into a modern commercial Lake Port to serve the growing trade in EAC region. The project's objective is to facilitate the efficient and safe movement of goods and people through the port of Kisumu to serve both the local and regional East African market. The project entails improving the physical infrastructure. This comprises the necessary civil works and dredging in and around the port of Kisumu.
Capital Dredging
Recognizing that the shipping industry is shifting towards large vessels that cannot come to the Port of Mombasa due to draught restrictions, KPA embarked on capital dredging of the navigational channel and anchorage basins, maintenance dredging of areas in front of the existing berths and ancillary works such as installation of navigational aids, anchorages, tide gauge and acquisition of tide prediction software, to allow access of post-panamax vessels.
The project was carried out in two phases. Phase I covered the navigational channel, turning basin, the proposed new berths 20-23 at the second container terminal and the ancillary works. The first phase commenced in February 2011 and was completed in April, 2012.
Dredging for Phase II is required to accommodate the development of various upcoming projects such as the Dongo Kundu Freeport, Relocation of KOT and development of a Gas Fired Electricity Generation plant (GFEGP).
Green Port Initiative
KPA has developed a Green Port Policy (GPP) for the Port of Mombasa. GPP is a pro-active, comprehensive approach to address the negative Environmental impact of port activities and operations.
This policy will enable KPA realize its goal of being an e-port which is green and consequently be a leading port in the sound stewardship and management of the environment. This will increase Port competitiveness and hence attract trade.
A number of green port projects under Mombasa Port Resilient Infrastructure Project (MRIP) estimated to cost $ 36.11million are being implemented. These projects are expected to further enhance sustainable, safe and healthy work environment that will lead to improved labour performance, efficiency and productivity in operations.
Construction of Port at Lamu and LAPSSET Transit Corridor
Lamu Port is one of Kenya's Vision 2030 flagship projects, with a regional outlook. Its objectives are to enhance regional and economic integration, facilitate trade, and increase interconnectivity between African countries – i.e. South Sudan, Ethiopia, Uganda, DRC- Central Africa and Kigali. It will enhance Kenya's position as a gateway and a transport hub to the East African Sub-region, the Great Lake Region and beyond, and provide a reliable access to the sea for Northern/Eastern parts of Kenya, South Sudan and Ethiopia, which have hitherto remained without direct access to the sea.
The cost for construction of the Lamu Port and procurement of requisite equipment is US$ 5,300 million. The cost for the Short-term Plan for Lamu Port Project, including the development of the first 3 berths is US$ 664 million. Construction of the first three berths has started and it is expected to be ready by 2020.
Conclusion
In its endeavour to facilitate and promote global maritime trade, Kenya Ports Authority has, therefore, initiated key infrastructural development projects whose implementation to successful completion will transform the country and the region. The projects have far reaching impacts in mitigating capacity gaps, while improving operational efficiency at the Port of Mombasa. These development of the port infrastructures augurs well with the overall goal of the blue economy concept.