Eunice Machuhi
4 November 2009
Nairobi — The monopolistic tariffs enjoyed by the country's largest grain handling company were never approved by the government as required by the law, a Mombasa court heard on Wednesday.
The High Court was told that the Transport and Finance ministries did not approve the discriminative low tariffs awarded to Grain Bulk Handling Limited (GBHL) by the Kenya Ports Authority (KPA).
The KPA board, High Court judge Jackton Ojwang' also heard, did not approve the tariffs, and KPA admitted in their documents filed in court that there was a monopoly given to the grain handler as a result of the tariffs.
While making submissions in a case where Coast Silos and J. B Maina and Company have challenged the stevedoring and shore handling concessionary charges granted to GBHL by KPA, Mr Mohammed Balala said that the latter enjoys a total reduction of Sh675 ($9 ) as it only pays Sh150 ($2), while other conventional grain handlers pay Sh825 ($ 11).
While relying on KPA's documents, Mr Balala said that a confidential memo from the authority's finance and audit committee to the KPA board noted that it was not profitable conducting business with GBHL compared to other operators due to the low tariffs.
He said the preferential levy on GBHL was uneconomical and not based on any rational commercial principal.
"KPA had a duty to act based on commercial principles. But it has clearly admitted that it licensed GBHL to compete with them, and therefore there is no profit being made. The reductions of tariff are in contravention of the Restrictive Trade Practices, Monopolies and Price and Control Act," Mr Balala said.
KPA he said had further admitted that any business handled away from GBHL had a beneficial effect to them, noting that the government made much less but it would have gained more if other operators were allowed to come in.
In addition, Mr Balala noted that the national food security was in the hands of one company, and there would be a food crisis as witnessed a few months ago, if the company was unable to cope with the demand.
The court had earlier been told that in 1992, KPA and GBHL entered into an agreement in which the latter was allowed to render port services.
The deal also allowed the firm to set up silos outside the port while enjoying port services such as berths for loading and offloading goods, and by a further agreement, it was granted land to build a store.
Before it could start operations, it entered into another agreement with KPA which gave the tariff reduction that is being challenged for cereals and fertilizer shipped into the country.
In 2003, the then minister for Transport and Communications, Mr John Michuki was quoted saying that the tariff difference between GBHL and other quayside operators was excessive and that the tariffs they enjoyed and the land they acquired was of a preferential nature and has never received approval from the KPA board.
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