Ship­pers seek stake in Kenya’s line

Govt to re­struc­ture own­er­ship of Kenya Na­tional Ship­ping Line

The East African - - BUSINESS - By GITONGA MARETE Spe­cial Cor­re­spon­dent

Multi­na­tional ship­ping lines are scram­bling to con­trol the Kenya Na­tional Ship­ping Line (KNSL) as the gov­ern­ment looks to re­vive the strug­gling paras­tatal.

Sources say that PIL, Maersk and Mediter­ranean Ship­ping Com­pany (MSC) are all eye­ing con­trol of the ship­ping line, with a guar­an­tee of han­dling over Ksh500 mil­lion ($5 mil­lion) worth of busi­ness from gov­ern­ment an­nu­ally.

In March this year, the gov­ern­ment an­nounced plans to re­vive the paras­tatal by re­struc­tur­ing its own­er­ship. The ship­ping line has been ail­ing for decades and pre­vi­ous ef­forts to re­vive it have failed.

“Ne­go­ti­a­tions are at an ad­vanced stage for the exit of for­eign share­hold­ers who have ex­pressed de­sire to cease work­ing with KNLS, which has be­come a paras­tatal,” State House spokesman Manoah Esip­isu said in Mom­basa.

How­ever, it is un­der­stood that ne­go­ti­a­tions for re­struc­tur­ing have stalled, with PIL and Maersk an­gling for the busi­ness. MSC is not will­ing to exit since its money is held up in the com­pany.

It is also es­ti­mated that at least Ksh200 mil­lion ($2 mil­lion) will need to be pumped into KNSL to make it op­er­a­tional.

MSC is un­der­stood to have in­vested more than Ksh50 mil­lion ($500,000) in KNSL more than 20 years ago.

The ship­ping line was formed in 1987 un­der the Com­pa­nies Act as a Joint Ven­ture be­tween the gov­ern­ment of Kenya and Un­i­mar, a Ger­man com­pany. Kenya Ports Author­ity owned 70 per cent and Un­i­mar held a 30 per cent stake.

Un­i­mar later in­vited DEG, a Ger­man in­vest­ment com­pany work­ing in de­vel­op­ing coun­tries, to take up half of its shares.

How­ever, in the first five years of op­er­a­tion, KNSL ex­pe­ri­enced liq­uid­ity prob­lems due to lack of fi­nan­cial con­trol among agents in Europe, which led to huge for­eign debts from con­tainer leas­ing com­pa­nies.

At the time, KNSL was lim­ited to trad­ing in con­tainer­ised goods only while most in­ter­na­tional trade to re­gional ports is ei­ther con­ven­tional or bulk cargo. To re­vamp op­er­a­tions, MS Ocean­freight Ltd was brought on board; un­der the new ar­range­ment, KNSL shipped con­tainer­ised cargo with MSC as the ser­vice provider.

In 1996, through MSC, Hey­wood Ship­ping in­jected Ksh53.4 mil­lion ($534,000) into the com­pany and got two di­rec­tor slots with vot­ing pow­ers.

Speaking dur­ing an in­ter­view with The Eastafrican, KNSL act­ing man­ag­ing di­rec­tor Joseph Juma said there was need to en­act a law to guar­an­tee al­lo­ca­tion of cargo by the gov­ern­ment to bring the car­rier afloat.

He said that just like Kenya Air­ways is pro­tected by law such that there are re­stric­tions on for­eign air­lines fly­ing to lo­cal des­ti­na­tions and spe­cial treat­ment by the Kenya Air­ports Author­ity, the same should be done for the sea na­tional car­rier.

Mr Juma said one of the ways of re­viv­ing KNSL would be to al­lo­cate a per­cent­age of cargo to be shipped thor­ough the line, and en­cour­age part­ner­ships with ma­jor in­ter­na­tional ship­ping lines. This is in ad­di­tion to gov­ern­ment cargo that should as a mat­ter of law be shipped by KNSL.

“Each year, Kenyan im­porters pay over $3 bil­lion as freight charges to for­eign firms and if we would al­lo­cate at least five per cent of this to KNSL it would be a ma­jor boost,” he added.

Im­ports are shipped into the re­gion on cost, in­sur­ance and freight (CIF) terms, mean­ing that all charges are paid in the source coun­try while ex­ports go by free on board (FOB) terms, where case rates are paid abroad.

“By im­port­ing CIF and ex­port­ing FOB, ev­ery­thing is paid for in the for­eign coun­tries, so we lose on both sides. The in­dus­try does not ben­e­fit from mar­itime trade,” Mr Juma said.

He said KNSL would re­main in the dol­drums if the gov­ern­ment does not ini­ti­ate ur­gent mea­sures to re­vive it, and that the pro­cure­ment law should en­sure that im­porters use lo­cal ship­pers.

Ev­ery year, Kenyan im­porters pay over $3 bil­lion as freight charges to for­eign firms.” KNSL act­ing man­ag­ing di­rec­tor Joseph Juma

Pic­ture: File

The paras­tatal has the po­ten­tial to han­dle over $5 mil­lion worth of busi­ness from the Kenya gov­ern­ment.

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