Construction of the first phase of Kenya’s free-trade zone — the Dongo Kundu Special Economic Zone at the Port of Mombasa — which was set to start soon after the government called for bids for the project, could be in jeopardy.
The Daily Nation has learnt that some individuals interested in the tender are working behind the scenes to amend tender requirements to favour some companies.
This is after interference by some individuals, with sources at Kenya Ports Authority confirming that more than a month after the tender was advertised, none of the bidders had requested any addendum officially.
On November 15, KPA advertised a tender for the construction of key facilities on the 3,000 acres earmarked for the project that is billed to turn the coastal city of Mombasa into an industrial hub.
According to the tender, the contractor is expected to carry out dredging of a special berth, clearing of the site, building the administration block and utilities and setting up security system and an information and communication technology hub for the project.
Kenya received a loan from the Japan International Cooperation Agency (Jica) signed on February 27, 2020, towards the cost of the Mombasa Special Economic Zone Development Project (Port Sub-Project).
As per the Jica guidelines, the time frame is usually five years and may be extended up to 10 years for large scale projects, but those with an interest to win the tender want to change the guidelines to 15 years, to favour one particular company.
In a letter dated December 7, 2022, and addressed to Jica Chief Representative Iwama Hajime, KPA Acting Managing Director John Mwangemi requested concurrence, seeking confirmation in amending the eligibility and qualification of some of the tenders.
“Upon your confirmation and concurrence, KPA will proceed to issue the confirmation as Addendum 1 to the above subject tender,” said Mr Mwangemi.
The dredging of the berth will include widening of the quay of up to 300 metres long, 50-metre-wide and 15 metres deep and reclaiming the land for construction of the project.
According to the finance proposal, the whole project will be under a Jica loan scheme structured as a Sh6 billion grant and a Sh50 billion concessional loan payable within 30 years.
In September, the resettlement plan for the affected individuals was completed, ahead of the launch of the project.
KPA developed the compensation framework with the support of Jica, following recommendations of the National Land Commission (NLC) that the government identifies a solution to the land issues to pave the way for the project.
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A compensation policy was developed, submitted and approved by the Cabinet, with a total of 1,648 claimants to be resettled on 357 acres. Those to be compensated are from Dongo Kundu, Mwangala, Mrongondoni, Kaya Mtongwe, Mbuta and Siji villages, and 2,585 structures will be affected.
According to KPA, the project includes creation of a free-trade zone, a free port, a logistics hub, and a mega industrial zone where major players and regional countries using Mombasa port will be allocated parcels of land to set up their key depots.
Mombasa port serves a number of landlocked countries in East Africa including Uganda, South Sudan, Rwanda, Burundi and the Democratic Republic of Congo.
The project is part of Kenya’s industrialisation plan spanning 10 years and is boosted by the revised draft SEZ regulations (2019) that offer incentives to companies operating in the zone.
Among the incentives is exemption from value added tax, reduced corporate tax from 30 per cent to 10 per cent for the first 10 years and 15 per cent for the next 10 years, exemption from taxes and duties payable under the Customs and Excise Act (2014), the Income Tax Act (1974), the EAC Customs Management Act (2004), and stamp duty, and exemption from county-level advertisement and licence fees.
The main focus of the free-trade zone is strengthening key sectors such as agro-processing, textiles, leather, construction, ICT, hydrocarbons and mining. The location is strategic, with the objective being to decongest Mombasa port and ensure quicker turnaround for freight logistics companies. BY DAILY NATION