Commerce

Watchdog blocks KPA, MSC container terminal deal

Friday, June 10th, 2022 03:07 | By

Common Market for Eastern and Southern Africa (Comesa) has rejected a joint application by Kenya Ports Authority (KPA) and Mediterranean Shipping Company (MSC) that would have given the two equal control rights over Sh32 billion Mombasa Port Container Terminal Two.

Comesa Competition Commission said the joint venture, which has been shrouded in secrecy, does not adhere to rules and procedures to uphold public interests, creating an unfair playing field for member states in the shipping sector.

“The Committee for Initial Determination determined that the merger is likely to substantially prevent or lessen competition in the common market or a substantial part of it and be contrary to public interest,” commission’s chair Mahmoud Momtaz said in a statement.

According to the regional competition authority, the transaction is likely to negatively affect trade between member states, with the potential of resulting in massive job losses. The Mombasa terminal, which is under contention, is the largest cargo handling facility funded by Japanese loans through Japan International Co-operation Agency (JICA).  As part of the deal, the terminal is to be operated privately with a repayment period of 40 years under JICA’s Special Terms for Economic Partnership (STEP).

Operate the terminal

The controversy of the deal emerged after Kenya suddenly settled on Swiss firm MSC through its subsidiary Shipping Agencies Services Sàrl to privately operate the terminal after the 2019 amendment of the Merchant Shipping Act which previously barred private operation of port facilities.

Kenya National Shipping Line (KNSL), owned by KPA, therefore relinquished its stake to 53 per cent from 74.8 per cent while SAS acquired more shares to 47 per cent since KNSL lacks the requisite assets to own any ship.

Comesa has now given a raft of conditions to approve the joint venture. Among these is that the two parties must commit that KNSL will operate CT2 under a common user facility principle and not exclusively allocate the capacity to MSC shipping lines, arguing that this will bolster the productivity of the multibillion terminal.

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