Big money, self-interest mar Tororo Inland Port

By Joseph Were

Museveni’s decision that could change how every business in Uganda operates

In April 2007, President Yoweri Museveni chaired a meeting at State House Nakasero to discuss the proposed Inland Dry Port at Tororo near the Kenya-Uganda border at Malaba.

In attendance was a small carefully selected team of ministers, representatives of shipping agencies, manufacturers, and traders.

As the meeting was about to start two men walked in; they were Mr Godfrey Kirumira and Mr Tom Mugenga. Both are prominent Ugandan businessmen. A source at the meeting says Museveni became visibly restless at their entry.

At issue were three questions; whether the proposed inland port should be located at Tororo or in the Namanve-Mukono; who should development it, and whether the developer should be given a 10-year monopoly to ensure they recoup their investment.

As Museveni listened attentively, Mr Issa Sekitto of Kampala City Traders Association (KACITA) made the following remark: “Mr President, this single decision could be the second most important contribution you make to the development of Uganda comparable only to your toppling of Obote.”

Perhaps inadvertently, Mr Sekitto had struck a raw nerve.

Leading industrialist, Mr James Mulwana told the president that if the inland port is built in Tororo and the operators are given a monopoly, Ugandan manufacturers will for the first time take to the streets in demos to oppose it.

After that meeting, the president wrote to Beatrice Wabudeya, the Minister in charge of the Presidency, instructing her to convene a meeting of the stakeholders and pursue establishment of the inland port but not as a monopoly.

According to a major stakeholder, this position was agreeable.

But Great Lakes Ltd had already signed an agreement with the then Tourism, Trade and Industry Minister Janat Mukwaya to build, own, and operate an inland port in Tororo.

Uganda Inland Ports, citing tendering irregularities, sued and in October 2007 the High Court declared the agreement null and void. Great Lakes’ lawyer, Mr Kanyerezi Masembe, warned that if its deal is cancelled, the government faces a huge compensation bill for breach of contract. The government re-tendered the project, and a new entity called Great Lakes Ports Ltd, won. Uganda Inland Ports sued again.

On the face of it, the case which is before High Court judge Anup Singh Choudhry, is clear: Did the government flout Public Procurement and Disposal of Public Assets Authority (PPDA) regulations when it awarded a company called Great Lakes Ports Ltd the tender to build an inland dry port in Tororo?

So, what is going on? Apparently, although other countries have easily established inland dry ports, the Ugandan case has become a political hot potato and is mired in corruption and self interest.

At the centre of it all is a letter President Museveni wrote on July 30, 2008 in support of granting Great Lakes a monopoly over Uganda’s international trade and transport.

Implications

If Museveni’s wish that the inland port be built in Tororo is implemented, the whole of Kampala will change. Uganda’s major international trade offices would shift to Tororo, the Inland Container Depots (ICD) around Kampala, the Uganda Revenue Authority head office, the numerous car depots, warehouses, and even some industries will have to relocate to Tororo. Businesses at the Busia, Katuna, Mutukula, and Entebbe import and export handling border points will also either relocate or be shut down.

Of course, a plethora of new offices and operations will open in Tororo, Malaba, Busia and Mbale and spark an unprecedented economic boom.

Secondly, if President Museveni decides that the proposed new inland port be given a 10-year monopoly, all the local offices of major shipping lines like SDV Transami, Spedag, Interfreight, Kenfreight, Maersk, and Multiple ICD will have to shut down.

Despite the project’s legality and viability being queried, a company called Great Lakes Ports aka Great Lakes CFS Ltd, has already fenced off a 342-acre piece of land in Malaba that is proposed to hold the inland port facilities, car park, industrial park, and other facilities.

Big money

Commenting on the decision to award Great Lakes a monopoly, a representative of an international shipping company said: “Museveni knows it. Even if the monopoly operator of the inland port charges just US$200 per container that enters Uganda, that person and his grandchildren would not need to ever work again. That is what Jaffer is doing at Mombasa.”

Mr Mohammed Jaffer of Grain Bulk Handlers Ltd and one of the richest people in Kenya is the main shareholder in Great Lakes Ltd. He is paid per tonne of bulk cargo that enters the port of Mombasa.

“He has a monopoly for handling bulk cargo at the port,” the source said, “now he wants to get a monopoly for handling all cargo in Uganda.”

Another Kenya tycoon, Mr Ashok Doshi of Doshi Ironmongers, is a major shareholder.

Rumours of big bribes abound around the project. A major one is that it is being pushed vigorously because a top person in the Ministry of Trade pocketed Shs 300 million. The other one is that the project’s forte, the 300-acre land in Malaba, was acquired dubiously.

Great Lakes Project Manager, Patrick Wamala-Musoke, does not deny the role of big money at stake. He told The Independent: “We are investing over US dollars 200 million. The government is not required to put in even a penny. So I do not know why anyone should oppose this.”

2011 politics

But if the money is big, so is the politics.

On a visit to Denmark, President Museveni was reportedly accosted by Danish MPs demanding an explanation as to why he is creating the monopoly.

The European Union has also reportedly written to Museveni sternly warning against the project. But the proponents also appear to have their political tramp-cards.

Musoke told The Independent: “Western Uganda has got oil. What has the east got in all these years of Museveni rule apart from shutting down Jinja as the industrial town? So the east should get this.”

Interestingly, none of the stakeholders in Great Lakes Ltd is from the east, prompting many to question their selflessness.

Well, Great Lakes is pushing the Tororo Inland project as a vote winner in 2011.

Museveni is also being told that the project will ensure greater national security.

“Under the current arrangement some special containers come right from source to Kampala via Through Bill of Lading without being inspected,” a source privy to the discussions said, “so Museveni is being told: What if it is something dangerous?”

As his political support wanes, President Museveni is grappling with the threat of an increasingly restless, donor-backed opposition not to mention the threat of international terrorism. So he is highly amenable to the security argument.

The smaller traders under KACITA and the Uganda Clearing and Forwarding Association (UCFA) are also concerned about counterfeits. According to the Great Lakes proposal, all major stakeholders in fighting counterfeits, UNBS, URA, security will be centrally located in Tororo. This should make their job easy.

Those behind Uganda Inland Ports and against Great Lakes include: The Private Sector Foundation of Uganda (PSFU), the Uganda Manufacturers Association (UMA), the Uganda Freight Forwarders Association (UFFA), Rift Valley Railways (Uganda), tea and coffee exporters and over 10 operators of Inland Container Depots (ICDs).

In a memo to the government they warn: “Awarding exclusivity to the company basing on unachievable promises is unrealistic and shall in the medium term ruin the economy through inevitable cost increases after existing investments have been wiped out.”

The Tororo Inland Port is such a big decision that it is being seen as the single major reason why Ms Janat Mukwaya was removed as minister for Trade. She had many public battles with URA’s Commissioner General, Ms Allen Kagina. Kagina backs the position of UFFA. Another member of this camp is Maggie Kigozi, of UIA. Together they are proposing a “Fowarders Village” at Namanve.

But while Kagina is an insider in the government through ethnicity, Mukwaya is very close to Museveni for historical reasons. She was the head of his household in the Luweero bushes for five years during the war ensuring that Museveni got choice meals even as other fighters fed on wild berries and that his socks were clean.

But the new players are also equally important to watch. New Finance Minister Ms Syda Bbumba’s actions will be interesting. Kagina is answerable to her as minister but Bbumba is also a very close pal of Mukwaya. So will Bbumba support Kagina or Mukwaya on this one?

The new Trade Minister, Kahinda Otafiire is equally interesting. He usually shoots off in controversial fashion, but what are his standing orders from Museveni on the Tororo Inland Port? Will he follow them or rebel? Remember there is big money involved.

Tororo’s viability

Uganda urgently needs to cut its cost on imports and exports.

Figures are scanty but importers claim it takes goods up to 15 days from Mombasa to Kampala. Ten days are spent on processing documents.

A comparable 2008 study in Rwanda by FIAS, the Investment Climate Advisory Service of the World Bank, showed that although the global average export time should be 10 days, in Sub-Saharan Africa exporting requiring 36 days on average.

This impacts on the rate of creation of private investment, jobs, GDP growth, and poverty reduction.

Impediments include the number of documents required, time, cost, handling, and number of signatures required. In Rwanda, imports require 70 days and 50% of this time is spent on paper work.

As a result of the study, Rwanda government is refurbishing Isaka Dry Port in Tanzania in a bid to cut the import/export time. The distance from Isaka Dry Port near Dar-es-Salaam to Kigali is 1,620km, relatively shorter than that from Mombasa to Kigali, 1792km.

Rwanda also awarded its first licence for an ICD to SDV Transami in Gikondo Industrial Park that opened on October 8.

Before this, only the state-owned company Magasins Généraux du Rwanda (Magerwa) had a monopoly on bonded warehousing in Rwanda. SDV is supposed to provide competition.

According to Raghu Dayal, the founder managing director of Container Corporation of India, “Dry ports are really a yard for cross-border trade”.

The Ethiopia Dry Port Enterprise has two dry ports in Mojo and Semera. Even countries with sea ports have dry ports to ease the customs, packaging, containerisation, and inland shipment services. Pakistan has eight dry ports and India has 137.

Kenya has ICDs in Nairobi, Kisumu, and Eldoret.

The idea of an inland dry port for Uganda has been around for over a decade. Initially it was mooted as the Kampala Inland Dry Port but died down in 2004 after government failed to raise the US$10 to US$15 million for it. However, as the very public disagreement between the Ministry of Trade and URA has shown, it barely understood the concept.

The Great Lakes plan revolves around extending the Mombasa seaport to Tororo. But Ugandan goods would remain CIF Mombasa. Converting Tororo or any other inland dry port into an internationally recognised port is a complex process not being addressed at the moment.

Great Lakes’ infrastructural centre-piece is the rail. It says Uganda has been losing over US $2,000 per 20ft container due to inefficient handling. Naming a US $100 Transit Service Charge Fee introduced arbitrarily by Maersk in 2004, it accuses the international shipping lines of reaping from a “plethora of unjustified charges”.

Ironically, Great Lakes’ plan rests with allying with the very international shipping lines it is criticising. Its other major activities; faster evacuation of containers, acquisition of trucks to ferry them to Changamwe, and acquisition of locomotives for faster haulage are all almost exclusively focused on Mombasa. That means the Tororo port will merely be another ICD yard.

URA’s Kagina says the Great Lakes’ proposal will actually perpetuate the continued loss of revenue to shipping lines, ICDs and multi-national forwarders.

Kagina said goods being cleared through Malaba and Kampala are done for free, while the dry port will charge an additional fee.

But Mukwaya says the tariffs would be closely monitored.

URA also says under the law, an inland port is an extension of a port and is normally in the same country. Question: Can Mombasa extend into Uganda?

Already, Uganda and Kenya have invested US $14m to make Malaba a one-stop, 24-hour customs clearance post.

“This will only make business more expensive because traders would have to still go back to Malaba to clear their goods,” she said. She is also against URA moving its main operations to Tororo.

To this, Great Lakes’ Musoke says: “She is supposed to create solutions for collecting taxes even if Uganda decides to build supermarkets in mid-air. So why is she opposing this?”

Apart from Jaffer and Doshi, Mr Brown Ondego, chairman of the disgraced Rift Valley Railways (RVR) consortium that failed to revamp the Uganda-Kenya railway, completes the triumvirate. Kirumira and Mugenga are Great Lakes local face although as somebody said, “they may be rich here but in the Jaffer league, they are really small fry”.

Mr Musoke, the project manager’s connection is because he worked in the marine section of Mombasa port and has very little managerial experience. His two-year stint as General Manager of the Kenfreight ICD at Bweyogerere near Kampala ended abruptly when he was asked to resign. He denied that the Ugandans in Great Lakes are mere fronts for other powerful people.

If Great Lakes’ dream to create the inland port at Tororo succeeds, this group will have created an extension of their Mombasa operations to Uganda.

Cutting costs

According to the document they have supplied to the Ministry of Trade, they aim to cut freight costs and time and create a facility to service southern Sudanese business.

Their biggest challengers are the representatives of the big shipping lines, leading industrialists, and indigenous Ugandan big businesses. They speak mainly through their lawyer, Mr Enos Tumusiime, who once managed Uganda Railways and helped send it to its grave. His career there ended amid allegations of poor performance and corruption. Since then he has carved out a niche as a transport sector lawyer-cum-expert.

Their main argument is that the government would be making a mistake to grant a single entity the monopoly over handling of all imports and exports into Uganda.

They claim that the liberalisation of the forwarding business from the Transocean (U) Ltd of the 1980s has resulted in a 20% drop on freight costs between Mombasa and Uganda.

“If Great Lakes can be efficient in reducing transport costs, there should be no monopoly because shippers (importers and exporters) will automatically utilise their services,” they said in a prepared statement.

The main costs are haulage (75%) and dues to the Kenya Port Authority and the Kenya Revenue Authority (15%).

Secondly they say, about 11 “inland port” facilities already exist and their heavy investment in the business will be lost.

“Each of these firms has invested over US dollars 10 million to set up their ICDs and infrastructure,” one of them said, “a heavy loader forklift alone costs about US $2 million. Some have three of them. If the Tororo Inland Port is allowed, all these will be redundant and over 20,000 jobs will be lost.”

Thirdly, they say locating ICDs near Kampala makes better business because it is more centrally located to serve both the Central Corridor from Tanzania and the Northern Corridor through Mombasa.

A leading industrialist said since the establishment of an inland port is supposed to bring services closer to the end-user and most industries are in and around Kampala, then the inland port should be closer to them not over 200km away in Tororo.

Great Lakes will increase the cost of exports as coffee exporters in Masaka will have to pick and return containers from Tororo, a return journey of over 500km.

“We are removing barriers but these people are adding more. Currently a container is only handled at Mombasa and at the destination in Kampala. Under their arrangement it will move from Mombasa to Mariakani handling facility, to Tororo Inland Port and finally to destination in Kampala,” he said.

“The central location is perfect for onward business to Rwanda and Burundi,” the Kenfreight General Manager, Mr Hussein Kiddedde said, “imagine a repeat of the Kenya riots when the country has only one inland port on the Northern Corridor through Kenya. That would be disaster.”

Lastly, they say, they have been working with the Uganda Investment Authority and the Uganda Revenue Authority to develop the “Forwarders Village” in the Namanve-Mukono area.

They argue that there is already a gazetted industrial park in the area and it’s only logical that the inland port is located nearby.

“Even forwarders who are located in town realise that the congestion has become too much,” said Kiddedde, “They are working on plans to relocate.”

Patriotism

The forwarders accused Great Lakes CFS of colluding with Ministry of Trade officials to frustrate other sector stakeholders. They claim the tendering process for the Tororo Inland Port has been fraught with gimmicks that smack of fraudulent behaviour.

They complain that interested bidders were given just three weeks for a project that will cost over US $200 million and set up a monopoly of Uganda’s international trade and transport infrastructure for 10 years and that one of the conditions was demonstrated ability to enter agreement with RVR.

“It is crucial to note that the position of CEO of Rift Valley Railways and the position of Great Lakes Ltd are held by the same Kenyan citizen (Mr Ondego). Clearly a conflict of interest,” they say.

The Rwanda dry port project is a Public Private Partnership (PPP) with Rwanda Tea Authority, and Intraspeed, a freight handling company.

In Uganda, leading industrialist Mukwano, Nice Plastics, and freight operators are proposing a PPP arrangement.

In its report subtitled: Action Plan to reduce Transportation costs of Uganda’s shipments passing through the port of Mombasa, Great Lakes Ports Ltd says, “The profit figures for the Uganda freight logistics industry are mindboggling. That 90% of Ugandan freight logistics industry is controlled by foreign multinationals who have admitted investing back only a miniscule of the windfall should be worrying to all patriotic Ugandans.”