Which way forward for the Kenya Transport and Logistics Network?
The Kenya Transport and Logistics Network (KTLN) was recently established by the President, through an Executive Order. KTLN is meant to enhance efficiency and coordination in the transport sector through fortifying public private dialogue and leveraging on the efficiencies and synergies of the relevant state agencies. It is hoped that through KTLN, the country will be able to achieve its strategic agenda of becoming a regional logistics hub.
The state agencies under KTLN are the Kenya Railways Corporation (KRC), Kenya Pipeline Company (KPC) and the Kenya Ports Authority (KPA), all of which have been brought under the coordination of the Industrial and Commercial Development Corporation (ICDC) as holding company.
Ministerial responsibility for KTLN and these state agencies has been vested in the National Treasury. Prior to the Executive Order, KRC and KPA were under the Ministry of Transport, Infrastructure, Housing and Urban Development while Kenya Pipeline Company was under the Ministry of Petroleum and Mining.
Arising from these changes, there are a number of issues that investors would be keen to see considered so as to ensure that the ease of doing business is enhanced and KTLN does indeed achieve its objective of propelling Kenya into a regional logistics hub.
To begin with, KTLN does not include the roads agencies such as the Kenya National Highways Authority and the Kenya Urban Roads Authority. The success of a logistics hub would invariably require that the road networks are also strengthened and this being the case, collaboration between KTLN and the roads agencies will be of paramount importance. KTLN should therefore put in place a mechanism to ensure increased synergies and effectiveness in its workings with these agencies.
Another issue for consideration is the relationship between KTLN and the National Treasury on one hand and the relevant regulatory agencies on the other hand. KPC for instance, is one of the energy sector entities and it therefore goes without saying that the Ministry of Petroleum and Mining and the Energy and Petroleum Regulatory Authority (EPRA) will continue to have oversight and regulatory control over its operations. As KPC has now been brought under the National Treasury, investors will be keen to see that there is no disruption in the management of the pipeline network or KPC’s operations and more importantly, no additional layer of bureaucracy introduced. The specific role of KTLN, the National Treasury and the Ministry of Petroleum and Mining in the new set up may therefore need to be clarified.
The approach towards engaging with private sector could similarly do with some clarification. Case in point would be the procurement, development, implementation and monitoring of public private partnerships (PPPs) involving KPA, KPC or KRC. While the intention is for KTLN to provide a one stop shop for dialogue with the private sector, under the PPP law, a private party developer can only be procured by the relevant agency. This means that a railway project can only be procured by KRC, a port project by KPA and a pipeline project by KPC. There is therefore need to consider how public private dialogue will be facilitated on such projects through KTLN.
Consideration should also be given as to the nature of financial and performance guarantees that will be provided to parties contracting with KPC, KRA or KPA. Investors, for instance, will be interested to understand whether ICDC in its capacity as holding company for KPC, KPA and KRC, will be in a position to provide parent company guarantees or other support on contracts entered into by these entities.
As regards ongoing strategic projects involving KPC, KRA and KPA, there is need to develop strategies to ensure no disruption on account of the changes as some of these projects are critical to the Government’s developmental objectives under the Big Four Agenda and Vision 2030. A good test case will be the Nairobi Commuter Rail Services Project that has already come under the coordination of ICDC through KTLN. This project is listed in Kenya’s priority list of PPPs, with KRC as the contracting authority. It will involve rehabilitation of the existing railway line, doubling of sections, putting in place supporting infrastructure, design and provision of rolling stock and operation of the commuter rail link between Nairobi’s central business district and the Jomo Kenyatta International Airport.
KTLN clearly has its work cut out for it. On their part, investors will be keenly watching to see the strategies put in place to ensure that the new structure promotes ease of doing business in the country and ensures that ongoing projects are not adversely affected.
The article was also featured in the Business Daily on 3 November 2020.