Kenyan Parliament Report Calls For Licensing More Grain Handling Firms by 2022

Handling of imported wheat and other grains at Eastern Africa’s biggest port, the Port of Mombasa in Kenya, in the next year could receive a boost if a proposal by a committee of Kenya’s Parliament is implemented.

The report by Parliament’s departmental Committee on Finance and National Planning proposes to Kenya Ports Authority (KPA), a state-owned enterprise that owns and operates all ports in Kenya, to not only provide critical infrastructure for grain bulk handling but also expedite authorization of the design, development, and commissioning of other grain bulk handlers to enhance efficiency in handling of grains by 2022.

Currently, Grain Bulk Handlers Ltd. (GBHL), a private company which began operations in 2000, is the sole licensed entity handling all grain imports into Kenya for domestic consumption and onward delivery to the countries of Uganda, Rwanda, and Burundi.

However, an investigation by a parliamentary committee has exposed delays in grain handling at the port and price disparities, especially for wheat and maize, a trend the Members of Parliament (MPs) attributed to lack of competition with grain handling services.

Pushing for Competition

According to Gladys Wanga, committee chair, “KPA should fast-track authorization of design and development and commissioning of other grain bulk handlers to optimize revenue collection.”

Kenya’s Cereal Millers Association (CMA), which represents 40% of the cereals market in Kenya, also has supported the proposal for more grain handlers, saying it would help address the risk of food insecurity should there be a delay by the monopoly grain handler to deliver the grains across the region in time.

CMA says licensing of more grain handling companies at the Port of Mombasa is long overdue because “one handler has led to delays in clearance of cereals and payment of high demurrage charges by clients. The rates charged to GBHL by KPA are lower than those charged to other conventional handlers, and this makes it difficult for other handlers to penetrate the market.”

Currently, GBHL pays KPA $3.85 per tonne of grain but charges $10.40 for every tonne of grain for other professional bulk handlers.

GBHL’s charges to millers exceed what would be paid if the grains were collected directly from KPA by $5.6 per tonne, according to KPA.

However, KPA insists even with GBHL’s monopoly, the grain handling service could be “competitive” and “millers could be enjoying other advantages at GBHL and hence not collecting their grains directly from KPA conventional handling methods.”

But contrary to KPA’s view, Esther Passaris, Nairobi Women MP, says the market is not competitive since “smaller grain bulk handlers are charged $7 for every tonne by KPA, which is unfair trade.”

Kenya has an estimated 56 wheat millers and 156 maize millers and has to import between 2 million and 2.7 million tonnes of wheat annually through the Port of Mombasa to plug the national deficit, according to CMA.

“It is because of these large amounts of grain imports that CMA recommends more grain handling companies at the port of Mombasa,” the report says.

Monopoly Formed

GHBL in 1992 signed a wayleave with Kenya Ports Authority, the state operator of the Port of Mombasa, and obtained a licence in 2000 to operate berths III and IV at the port for 35 years, paving the way for the company to invest in mechanized grain handling facilities, vessel handling, bulk transport terminals, warehousing, and transportation services.

To enable GBHL to create adequate grain handling capacity and also recoup its investment in the business, KPA agreed not to allow any entity to develop or operate similar facilities for 18 years starting from February 2000.

Before GBHL was engaged by KPA, the committee’s report observed “there was a very serious problem of congestion at the Port of Mombasa with many ships docking (with grain) but with no facilities available to offload the incoming cargo.”

“The congestion led to huge losses in demurrage, delays in discharging cargo, and some of the cargo expired while still on the ship,” the MPs said.

But with the expansion and modernization of the Port of Mombasa over time, the port is no longer congested, and the country’s grain value chain players, such as the Cereal Millers Association, Kenya Ships Agents Association, Kenya Transporters Association, and the Freight and Forwarders Association, separately pushed for an end to the GBHL monopoly that had conferred special status on the company.

Increasing Throughput

“Considering that business at the Port of Mombasa has risen to millions of tonnes, the committee feels other players should be licensed so as to bring competition and fairness in grain bulk handling,” the committee’s report said.

By 2019, throughput at the Port of Mombasa increased to 34.44 million tonnes, up from 30.92 million the previous year, an increase of 11.4%.

Between 2015 and 2020, GBHL, which handles up to 98% of all imported wheat and maize, handled a total of c 14,467,597 tonnes shipped to the Port of Mombasa by 513 ships, resulting in an annual handling volume of 2.41 million tonnes brought in by 85 ships every year.

GBHL’s exclusive grain handling period granted by KPA expired in February 2018 when the port’s operator was supposed to commence the process of liberalizing the grain handling business, although this has yet to begin.

“Kenya imports more than 90% of the wheat that we consume but because we have one firm that handles dry grain, it can dictate the price it charges for handling the grains,” said David Mboni, Kitui Central MP.

A few private companies have previously expressed interest in setting up grain bulk handling infrastructure at the port, including Kilindini Terminal Ltd., Kapa Oil Refinery, Africa Ports & Terminals, Multiship International, and Kipevu Inland Container EPZ Ltd.

However, KPA says the Port of Mombasa has “limited berths of handling specialized cargo, including dry bulk grain discharge, due to the congestion experienced at the port especially during emergency surge in importation and on humanitarian crisis.”

But in its report, the parliamentary committee reminds KPA of what is contained in the port operator’s 2018-2047 Master Plan that specifically identifies locations ready to be developed for discharge grain vessels, including the new Port of Lamu, Dongo Kundu Special Economic Zone, Garissa, and inland Port of Kisumu, with support of public/private partnerships.

Previously, Kilindini Terminal Ltd., had applied to KPA for wayleave to operate grain handling services at the Port of Mombasa, but the proposal “is being reviewed to establish its viability and optimal location,” according to a previous statement by the KPA Board of Directors.

However, GBHL says the company “offers faster discharge of bulk grain vessels, leading to lower freight rates and guaranteed vessel discharge of 9,000 metric tons per weather working day (pwwd) on bulk carriers.”

The company tells its clients it helps them “reduce costs by enabling changing from bagged to direct bulk deliveries road and rail with minimal losses of grain, leading to reduced insurance costs.”

GBHL says it has a total storage capacity of 245,000 tonnes with “discharge through two or three Bühler port lines onto a modern conveyor system, which transfers grain from the ship hatch to the silos at the rate of a maximum of 600 tonnes per hour and 12,000 tonnes per working day.”

Shem Oirere, contributing writer

From Second Quarter 2021 MILLING JOURNAL