KPA To Be Dissolved, Replaced By A Liability Firm As Govt Sets To Privatise Lamu Port And Two Mombasa Berths

KEY FIGURES AT A GLANCE

Sh44bn Projected annual cash flow increase from Mombasa and Lamu ports post-PPP

Sh45bn Estimated rehabilitation cost for Mombasa berths 11 to 14, to be funded by the private concessionaire

Sh44.5bn Private investment being sought for Lamu Port development, including agri-bulk and liquid bulk terminals

5% Current capacity utilisation at Lamu Port, against a designed annual capacity of 1.2 million TEUs

45.46 million tonnes Total cargo handled at Mombasa Port in 2025, a record and up from 41 million tonnes in 2024

66 Commercial state entities being restructured into profit-oriented public limited companies under the GOE Act 2025

25 years Duration of proposed concession periods for Lamu Container Terminal berths and Mombasa Container Terminal 1

10,000 KPA employees whose employment conditions are at the centre of stakeholder concerns

The Kenya Ports Authority, the statutory body that has controlled every scheduled seaport on the country’s Indian Ocean coastline since 1978, is on the verge of extinction in its current legal form.

The government is in the final stages of repealing the KPA Act, a move that will dissolve the authority as a state corporation and reincorporate it as a Public Limited Liability Company under the Companies Act, simultaneously opening the door for private operators to take charge of three berths at Lamu Port and four berths at the Port of Mombasa under a public-private partnership framework.

Confidential disclosure documents from the government’s PPP process, seen by the Business Daily, show that KPA has already commenced the selection of private operators for Lamu Port berths 1 to 3, the Lamu Special Economic Zone, Mombasa berths 11 to 14, and Mombasa Container Terminal 1. The government expects the transition to generate additional cash flows of Sh44 billion annually from the two ports combined.

The legal scaffolding for the transformation was enacted in November last year when President William Ruto assented to the Government Owned Enterprises Act, 2025, which came into force in December.

The law repeals the State Corporations Act and converts commercial state bodies into profit-oriented public limited companies under the Companies Act, with the National Treasury as the central shareholder of record. It applies to entities where the government holds more than 50 per cent of share capital, and reorganises 66 commercial entities to operate as businesses rather than government departments, with dividends channelled directly to the Exchequer.

THE STRUCTURAL BREAK

Roads and Transport Cabinet Secretary Davis Chirchir has confirmed that KPA management will henceforth have full autonomy to make key decisions, including procurement of equipment, without prior clearance from the national government. Under the current model, KPA has been heavily dependent on concessional loans secured by the government to fund capital expenditure, a dependency the new framework seeks to permanently sever.

“The GOE Act will increase pressure on KPA to become profitable and self-sustainable. Public-private partnership transactions are the most effective way to achieve these goals. Once becoming a GOE, the authority is expected to operate as a commercial, profit-oriented entity,” the government’s PPP disclosure document states.

The reincorporation as a PLC is specifically designed to make KPA self-financing, ending its reliance on the National Treasury for borrowing.

The GOE Act separates ownership roles between the National Treasury and relevant line ministries, establishing performance contracts with each entity and a skills-based, largely independent board structure with tighter accountability and measurable targets. For KPA, adopting a PLC structure is projected to align terminal performance with Kenya’s growing port throughput, which reached 45.46 million tonnes at Mombasa in 2025, up from 41 million tonnes the prior year.

Constitutional law firm TripleOKLaw described the GOE Act as the most significant reset of Kenya’s state-owned sector since independence, noting that it makes “a further watershed” by repealing bespoke statutes that created commercial state corporations by legislative fiat, and converting them into limited-liability companies with an explicit mechanism to transfer their assets, liabilities, and businesses into the new vehicles.

WHAT THE PPP COVERS

At the heart of the restructuring exercise is the concurrent push to bring private capital into specific port facilities that the government has acknowledged it cannot upgrade on its own. The PPP framework as currently disclosed covers four distinct transactions.

For Lamu Port berths 1 to 3, the government is proposing a landlord concession model in which a private investor takes full responsibility for terminal handling operations for a period of 25 years, paying KPA agreed fixed and variable fees.

The port, constructed between 2014 and 2021 at a cost of approximately $480 million financed by the government, has been a colossal underperformance since it was commissioned.

KPA’s own data shows Lamu handled just 382 TEUs in 2021 and 1,779 TEUs in 2022, against an annual design capacity of 1.2 million TEUs. The port is currently estimated to be operating at just five per cent of that capacity.

The government is seeking up to Sh44.5 billion worth of private investment into the Port of Lamu alone, with a substantial portion targeted at developing the port’s agri-bulk and liquid bulk terminals, along with the Lamu Special Economic Zone, a 500-hectare parcel earmarked mainly for agricultural processing and warehousing activity servicing the LAPSSET Corridor connecting the port to Ethiopia and South Sudan.

For Mombasa berths 11 to 14, the proposed structure is a Design, Build, Finance, Operate and Maintain arrangement, under which the private investor would fund and execute a complete rehabilitation of a facility that was developed in 1967 and has not been modernised to international standards.

The PPP disclosure document puts the cost of this refurbishment at Sh45 billion. The work would include strengthening and deepening the quay, constructing a modern multipurpose terminal, building a container storage yard, and establishing a truck waiting area.

For Mombasa Container Terminal 1, comprising berths 16 to 19 built from 2012 onwards with Japanese financing, the proposed model mirrors Lamu, with a 25-year landlord concession requiring the private party to pay fixed and variable fees to KPA.

Under all four models, no public infrastructure will be sold. KPA retains ownership and regulatory oversight of the assets. Cargo operations are temporarily transferred to the private sector. The document’s language is unambiguous on the point: “The landlord model is expected to provide the private party undertaking day-to-day operations with the flexibility to make timely decisions while preserving public control over the strategic assets and functions.”

The model is not novel globally. Ports in Los Angeles, New York, Hamburg, Rotterdam, Tanger, Santos and Singapore all operate under landlord-type frameworks. Tanzania tapped DP World to operate part of Dar es Salaam port for 30 years in a deal that has piled significant competitive pressure on Mombasa’s traditional dominance of the northern corridor.

A FIVE-YEAR ROAD PAVED WITH OBSTRUCTION

The road to this point has been neither straight nor quiet. The government’s ambition to bring private operators into KPA’s port facilities has been in train since at least 2022, when the National Treasury under the previous administration first approached Dubai-based DP World with an invitation to table a proposal to finance, build and manage five major port projects. That process collapsed amid accusations of a secret deal, triggering fierce political opposition from politicians who are today in government.

When the Kenya Kwanza administration reversed course and embraced the same concept in September 2023, KPA Managing Director Captain William Ruto formally invited sealed bids for the qualification of private operators across the same four facility tranches. The tender, numbered KPA/052/2023-2024/CPS, set an initial submission deadline of October 12, 2023.

Within weeks, the process ran into the courts. The Taireni Association of Mijikenda, a civil society group that had previously challenged a 2019 attempt to hand Container Terminal 2 to a private operator, filed a constitutional petition in November 2023. Justice Chacha Mwita of the Milimani High Court issued conservatory orders suspending the tender on November 27, 2023, directing the government to respond within three days.

The association argued that the targeted berths were fully funded from public money and could not lawfully be disposed of under the PPP Act, citing the Sh60 billion construction cost of the Lamu berths alone and the Sh30 billion price tag of Container Terminal 2 berths 16 to 18 as evidence of the scale of public investment at stake.

The case was assigned to a three-judge bench constituted by then Chief Justice Martha Koome. The litigation extended into 2024, before the parties arrived at a consent agreement signed on April 2, 2024, and subsequently adopted as a court order by the bench.

The consent required KPA to comply with constitutional requirements and PPP legislation on public participation, value for money assessments, stakeholder involvement and local content obligations. It cleared the path for the process to resume, provided those conditions were met.

Then came a further legal blow. On September 24, 2025, the High Court ruled the Privatisation Act 2023 unconstitutional, invalidating a parallel government effort to privatise 11 additional parastatals including the Kenya Pipeline Company and the Kenyatta International Convention Centre.

That ruling did not directly extinguish the KPA PPP process, which is proceeding under the PPP Act 2022 and the newly enacted GOE Act 2025, but it reinforced the legal fragility of Kenya’s broader privatisation ambitions.

The Commission on Administrative Justice added its own pressure in February 2025, directing KPA Managing Director Captain William Ruto to release all privatisation-related documents to the public within 21 days, acting on a complaint from a human rights organisation that had been denied access. KPA’s information handling remained contested even as the transaction documentation was being finalised.

WORKFORCE: THE MOST EXPLOSIVE VARIABLE

Of all the fault lines in the restructuring, none is more politically combustible than the question of what happens to KPA’s employees. The authority employs approximately 10,000 staff. The Taireni Association’s 2023 petition was blunt: “With the coming in of the investors, the restructuring and staff reorganisation will ensue with attendant risks of redundancies and retrenchment.”

The PPP disclosure document attempts to address the concern through a voluntary secondment model. Under this arrangement, existing agreements between KPA and its employees are transferred to the new company. Staff would remain formally employed by KPA but have their services leased to the private operator. “The secondment will be voluntary,” the document states. KPA retains some berths under its own management, which the government argues creates a pricing counterbalance and preserves a pool of direct employment.

Maritime analyst Andrew Mwangura, who has closely tracked the port restructuring process, acknowledged the operational logic of the move but warned that workforce transitions must strictly comply with labour laws.

He noted that feasibility studies project KPA’s valuation could increase from three per cent to 13 per cent under various partnership scenarios, and that operational risk would be transferred to whichever entity is best positioned to manage it.

Shippers Council of Eastern Africa Chief Executive Agayo Ogambi said the rising throughput figures at Mombasa, growing at over 10 per cent annually, made private capital investment not only attractive but necessary.

He however issued a direct warning to the government: “The PPP must be transparent, ensuring public and national interests are safeguarded. Job security must remain a priority as the port supports millions of livelihoods and resultant job loss could be catastrophic.”

THE COMPETITIVE IMPERATIVE

Behind the bureaucratic restructuring lies a hard commercial reality. Mombasa handles cargo for over 200 million people across Kenya, Uganda, Rwanda, Burundi, South Sudan, eastern Democratic Republic of Congo and northern Tanzania. It is the largest port in East Africa and the second largest on the continent. But its position is no longer uncontested.

Tanzania has handed DP World a 30-year concession at Dar es Salaam port, with the Dubai operator investing heavily in capacity expansion.

The shift has already been felt at Mombasa: total cargo throughput dropped to 33.74 million metric tonnes in 2022 from 34.76 million tonnes in 2021, as landlocked Uganda, Burundi and Rwanda moved increasing volumes through the Tanzanian route. The 2025 rebound to 45.46 million tonnes signals a recovery, but the competitive threat from Dar is structural and long-term.

Mombasa currently requires 14 reach stackers, 43 terminal tractors and 11 forklifts to handle existing volumes. Tenders have been issued for 10 rubber-tyred gantry cranes and two ship-to-shore gantry cranes to match increasing cargo volumes.

KPA’s master plan for 2018 to 2047 envisages Lamu as a landlord port from the outset, with private operators running the terminals and KPA acting as infrastructure owner and regulator. Private participation is not a deviation from that plan but its intended fulfilment.

Whether the current iteration of that plan survives political pressure, legal challenge and the rigours of financial closure is a separate question.

The National Treasury has previously estimated that reaching financial closure on the PPP transactions would take at least three years from the point of financial structuring.

Bidders must form joint ventures with Kenyan firms holding not less than 15 per cent of the project company. The government has been simultaneously courting international port operators including DP World, whose managing director for sub-Saharan Africa told Bloomberg that the firm was actively eyeing Lamu under a lease arrangement.

What is certain is that the government has now assembled more legal architecture for this project than at any prior point in its long and turbulent history. The GOE Act provides the restructuring vehicle.

The PPP Act 2022 provides the concession framework. The 2024 court consent provides the procedural cover. What remains to be demonstrated is whether the execution will match the ambition, or whether Kenya’s most profitable state corporation will again find itself trapped between an urgent commercial need and an unresolved political fight.