A company owned by former governor Ali Hassan Joho has ended a 24-year monopoly in grain handling at the Mombasa port by billionaire and industrialist Mohammed Jaffer.
This is after the Court of Appeal allowed Port Freight Terminals Limited to set up a second grain handling facility at the port, handing Jaffer competition in the lucrative industry for the first time since he launched Grain Bulk Handlers Limited (GBHL).
This is the second such loss for Jaffer after the Kenya Kwanza government allowed Tanzanian billionaire Rostam Aziz to set up a cooking gas plant and storage facilities at the Mombasa port that had for years remained under the tight leash of the Kenyan tycoon.
GBHL began operations at the Mombasa port in 2000 after being given exclusive rights to handle all the grain that was being imported into Kenya for the next eight years in order to recoup its profits.
The contract was initially set to conclude in 2008, but it was extended on the orders of then Prime Minister Raila Odinga. Since then, no other company has been allowed to set up a second grain handling facility due to various technicalities introduced by powerful state actors.
In 2021, Portside Terminals Limited was awarded a $45 million (Sh6.4 billion) contract to construct a facility on its private land adjacent to the port. This decision was, however, challenged by Busia senator Okiyah Omtatah who went to court seeking to stop Portside from commencing construction.
Last Friday, Judges Pauline Nyamweya, Imaana Laibuta, and George Odunga of the Court of Appeal ruled that the High Court made an error in preventing the Kenya Ports Authority (KPA) from awarding the deal to Portside Freight Terminals for constructing a second facility at the port.
“In view of the foregoing, we find merit in this appeal and hereby set aside the judgement and decree of the High Court of Kenya at Mombasa delivered on July 18, 2023,” ruled the judges.
“The trial court erred in holding that the invocation of the Specially Permitted Procurement under section 144A of the PPAD, 2015 violated the Constitution.”
In July last year, Justice Onyiego of the High Court issued a declaration that KPA’s board of directors acted beyond its legal powers (ultra vires) and without authority in purporting to undertake the procurement process, which is the mandate of the managing director.
The judge noted that the whole process in seeking to award Portside Freight Terminal the tender was done in an ‘electric speed’ (four days) and that the KPA board had no mandate to oversee the procurement.
“By virtue of the board approving the contract, it created a monopoly. It acted beyond its legal powers in discriminating against other players and Kenyans in the second grain bulk handling facility,” said Justice Onyiego.
He added that the KPA violated the legitimate expectations of the petitioner and other stakeholders.
“The board had no intention of opening the door to other stakeholders, am convinced that KPA acted beyond its powers,” said Justice Onyiego.
He said the CS National Treasury acted irregularly and that the licence issued to Portside Freight Terminal was null and void, while noting that the board approved the award of licence before amending KPA’s masterplan.
The judge noted that the general power to oversee the amendment of KPA master plan to serve its users lies with the board, but changes ought not to be done in boardrooms but through engagement with stakeholders.
The court was informed that, despite the Kenya Ports Authority’s (KPA) master plan indicating that the second grain handling facility should be located at Dongo Kundu, the circumstances surrounding the issuance of the license changed. Originally, the KPA had planned to use its own resources to finance the development of the facility.
Portside Freight Terminals Ltd argued before the court that the petition had been filed for collateral purposes, aiming to uphold the existing monopoly, which is not in the public interest. The company contended that the case was brought as a smokescreen to intentionally delay the project for the benefit of current operators.
Furthermore, Portside Freight Terminals Ltd asserted that when it invested its funds in the facility, it was under the condition that it would be used by everyone, emphasizing the inclusive nature of the arrangement.
