Why Kenya must regulate maritime business without killing competition

BUSINESS DAILY

The prime Cabinet Secretary Musalia Mudavadi’s recent call for practical reforms and a stronger government-private sector partnership to unlock investment in the maritime sector is timely and necessary.

Maritime transport carries more than 90 percent of Kenya’s external trade. With the port of Mombasa’s throughput projected to reach between 52 million and 61 million tonnes by 2030, Kenya needs a clear regulatory framework for maritime transport services.

It needs rules that protect cargo owners’ interests, promote Kenyan participation, and hold operators accountable without discouraging investment, competition, or innovation.

Presently, maritime transport services are regulated under the Kenya Maritime Authority (KMA) Act, 2009, which provides the framework for merchant shipping and maritime service providers.

However, provisions on KMA’s powers, tariffs, local ownership, and commercial integration require greater precision. Unclear rules create compliance costs, invite inconsistent enforcement, and expose regulators and businesses to litigation.

One of the most contentious issues under the 2024 regulations is local participation and ownership.

The fourth schedule requires local shipping lines, ship agents, and cargo consolidators to operate through joint ventures with Kenyan nationals in which foreigners are minority shareholders. The practical effect is majority Kenyan ownership, although the regulations do not state a precise percentage or clearly define how ownership, voting rights, and beneficial control are measured.

Increasing Kenyan participation is a legitimate policy objective. However, rigid ownership rules could discourage foreign investment, restrict competition, and create barriers to entry without necessarily improving trade facilitation. A better approach would focus on whether an operator is properly regulated, financially and technically capable, compliant with Kenyan law, and able to provide efficient, competitive services.

Ultimately, effective regulation must not be anti-business. Shipping lines need certainty; cargo owners need transparent charges; logistics providers need equal treatment; and regulators need power grounded in law.

If local content requirements are to remain, parliament should provide clearer direction through amendments to the merchant shipping Act, ensuring that the framework promtes Kenyan participatin while remaining investor friendly.

Tarrif regulation is another major concern. The 2024 regulations require operators to apply a tariff filed with KMA and notify the authority of changes. Filling promotes transparency and enables KMA to investigate undisclosed or inconsistent charges.

The regulations do not explicitly seem to confer power to approve, reject, cap, or delay commercial tariff approval. This distinction matters. Freight rates and surcharges respond to fuel prices, exchange rates, insurance, security risks, congestion, and vessel capacity. Cargo owners, however, see an effective regulator as one that deters arbitral and frequent price increases.

For this, KMA must be mandated to approve freight and surcharges being levied and promote, support, and relevant training and vertical integration.

The review should therefore establish a clear and legally defensible balance between commercial freedom and consumer protection. The current tariff approval period of up to 90 days should be reconsidered, with a target of less than 30 days where possible. Faster regulatory decisions would provide businesses with certainty while allowing KMA to monitor unjustified or anti-competitive charges.

The regulations should also strengthen KMA’s authority to address service failures and poor performance by establishing performance-based oversight supported by service level agreements and give KMA clear powers to sanction government agencies and private service providers for persistent service failures, delays, inefficiency, or malpractice.

The port of Mombasa will be judged not only by its infrastructure but also by predictable costs, efficient services, fair dispute resolution, and quality competition. A legally defensible framework can promote Kenyan participation, protect shippers, attract investment, and reward efficient operators. Getting that balance right is essential if Kenya is to strengthen its position as the maritime and logistics hub of Eastern and Central Africa.