Countroversy Rock Sh39B Dongo Kundu Project

A controversy is brewing over the first phase of the proposed Dongo Kundu Special Economic Zone at the Port of Mombasa.

This follows claims that powerful forces within the Kenya Ports Authority (KPA) and the Japan International Co-operation Agency (Jica) are plotting to have the tender for the Sh39 billion project varied to favour a particular company.

The tenders, which were advertised last month, will see the successful bidder set up key facilities on a 3,000-acre piece of land, with the developments expected to boost the economy of Mombasa and the country.

In the latest twist, KPA has moved to amend the criteria for eligibility and qualification to bid for the project, in what is seen as a plot to tailor the tender in favour of a particular company. 

“Further to our submission to you, vide letter reference PDM/2/4/1 dated 31st August 2022, and your subsequent concurrence letter, vide  Ref TC-22-358™ dated 17th October 2022, and follow-up meetings that have been held in respect to the above subject, we seek your confirmation in amending the eligibility and qualifications subsection,” reads a letter from KPA’s acting managing director John Mwangemi to Jica Kenya chief representative Iwama Hajime, dated December 7, 2022.  

Sources privy to the intrigues reveal that at the heart of the request to amend the requirements is a plot to extend the time period for the tender from the current five to 10 years, to up to 15 years, to suit a particular company.

Jica guidelines have always set the time period for such tenders at five years, which may be extended up to 10 years for large-scale projects.

“Upon your confirmation and concurrence, KPA will proceed to issue the confirmation as addendum 1 to the above subject Tender,” says Mwangemi in the December 7 letter.

According to the tender, the contractor is expected to dredge a special berth, clear the site, build facilities, including the administration building, and set up a security system and information and communication technology hub. 

This entails the construction of a free trade zone, port, logistics hub and industrial zone where companies using Mombasa Port would be allocated space to set up depots. Dredging of the berth will include widening and reclaiming of land for 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.

The project is part of Kenya’s industrialisation plan, boosted by the revised draft SEZ Regulations (2019), which offer incentives to companies operating at the zone.

Incentives covered in the new regulations include exemption from VAT; corporate tax reduced from 30 per cent to 10 percent for the first 10 years, and 15 per cent for the next 10; exemption from taxes and duties; and county-level advertisement and licence fees.