Kenya is eyeing the lucrative shipbuilding and repair business after the completion of two modern shipyard facilities.
The two built by the Kenya Navy are the largest shipyards with a slipway in East Africa. Their completion opens a new frontier for the country as it seeks maritime hub status and to tap into the blue economy.
A slipway functions as a platform on which ships are secured and winched out of water into a working area for construction, repair, refitting and maintenance whereas a shipyard is a place where ships are built.
The military-run ship building agency, Kenya Shipyards Ltd (KSL), is at the heart of the government’s bid to ward off stiff competition from Tanzania for lucrative cargo transport deals with Uganda and Rwanda.
In what could be a response to Tanzania’s improvement of maritime infrastructure, Nairobi has now revived its Lake Victoria shipping routes and incorporated KSL.
The ship-building agency has been tasked with meeting Nairobi’s maritime infrastructure needs and dangling the carrot of lower costs and faster delivery of cargo to Port Bell, which could lure Uganda away from the Tanzanian route.
What started as a move to enable the Kenya Navy build and maintain its own maritime vessels and infrastructure has now become a key part of Nairobi’s move to defend big money cargo transport deals with Uganda and the hinterland.
The Defence ministry planned to have Kenya’s Navy become self-reliant in maritime infrastructure development and maintenance. But studies showed that the Navy would use at most 30 per cent of the infrastructure potential. Opening the facilities to civil use would maximise resources pumped into the venture. And KSL was born.
“KSL was formed, but separated from the Kenya Navy and established as a parastatal with the mandate of providing for all the ministries, departments and agencies, regional clients as well as international clients,” said managing director Brigadier Paul Otieno in an interview.
MV Uhuru rebirth
KSL began with refurbishing the 56-year-old MV Uhuru, a ship owned by Kenya Railways, and which has seen more than 50 million litres of petroleum products moved in 26 round trips to Ugandan ports this year.
MV Uhuru had stalled for over 15 years, and its revival and lucrative trips have seen Kenya Railways order for a new vessel from the shipyard.
But as Kenya and Tanzania tussle for the logistics deals on Lake Victoria, landlocked Uganda is the ultimate beneficiary, with transport costs for fuel coming down by 33 per cent, and cargo can now get to Port Bell in less than half the time it takes by road.
Trucking companies charge an average of Ksh33 ($0.29) to transport a tonne of oil to Uganda, for a trip that takes two days. Now Kenya Railways moves the same cargo in nine hours by ship, earning $10,826 for each kilometre. For Port Bell, which is 270 kilometres from Kisumu, it means Kenya Railways raked in approximately Ksh327 million ($2.923 million) between March and May 2021.
“The time taken to cover the distance from Kisumu to ports in Uganda and Tanzania has reduced by almost half. The transport costs have also dropped. Initially via road they used to charge $0.25 per tonne per kilometre. This was reviewed down to $0.17 per tonne per kilometre over water, which was shorter and that is why we are having a lot of business. And that is how the requirement for a second wagon ferry came in,” Brig Otieno said.
The MV Uhuru can now carry 22 wagons with a 70,000-litre capacity, more than four times what an average truck carries. This means that it would take four trucks and at least two days to move the oil that the 91-metre-long MV Uhuru can move in nine hours.
MV Uhuru initially made trips between Kisumu, Jinja (Uganda), Mwanza and Musoma (Tanzania) before the fall of the first East African Community in 1977. Kenya kept MV Uhuru while a twin vessel, MV Umoja, was given to Tanzania.
Kenya Railways has placed an order for a new ship that can carry up to 24 wagons. Construction started in May when President Kenyatta, his Burundi counterpart Evariste Ndayishimiye and the African Union Envoy for Infrastructure Raila Odinga launched the Kisumu shipyard.
Dubbed the MV Uhuru II, the new ship will cost Ksh3.5 billion when completed in June 2022. KSL is expected to make $1.8 million from the construction of MV Uhuru II, its first major revenue-earning project.
The MV Uhuru II will be the first ship to be assembled locally in nearly 70 years.
“We have charged the client (Kenya Railways) $31.48 million. Our mandate is to be sustainable and efficient in the manner of delivery of our core functions. So, we are also supposed to generate some revenue. Of that amount, I estimate around up to $2.69 million will be revenue generated for Kenya Shipyards Ltd,” Brig Otieno said.
Following a directive by President Kenyatta, all government maritime requirements will be met by KSL. This means that ships, jetties, piers and other infrastructure will be sourced from and maintained by the parastatal.
Kenya embarked on a similar project in Mtongwe in September 2020, which involves building a slipway shipyard with a capacity to handle vessels of more than 4,000 tonnes and 150 metres long.
Currently, Kenyan vessels that requires repair are taken to private firms such as SECO Marine and Offshore Engineering in Mombasa, or outside the country, which is expensive.
In Kisumu, KSL’s operations have already started benefitting locals as 530 residents work on assembling the MV Uhuru II. Brig Otieno estimates that once KSL is fully operational, at least 3,000 jobs will be created.
“Ship building is basically an assembly industry. You bring in steel; you construct the hull of the ship. You get, for example, engines from Rolls Royce, you get generators from Caterpillar, you get radars from Japan. Earlier on, we used to get all this labour from abroad, and that means foreign currency issues. A large chunk of that component is going to be done locally,” the KSL managing director said.
Damen Shipyards, a Dutch firm that has been supplying Kenya’s navy with vessels, is constructing MV Uhuru II but KSL intends to use the project as a starting point for full reliance on locals.
Additional reporting by Antony Kitimo