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On September 8, 2020, an official signing ceremony to inaugurate a framework agreement for the establishment of the massive Kenya Transport and Logistics Network (KTLN) took place at the KPA offices. The network is intended to bring together Kenya Ports Authority (KPA), Kenya Railways Corporation (KRC) and Kenya Pipeline Company Limited (KPC) under the coordination of the Industrial and Commercial Development Corporation (ICDC) following an Executive Order issued by President Uhuru Kenyatta on August 7, 2020

The merger is flatly and blatantly illegal, as the President has used executive orders to fundamentally alter state corporations that were established by Acts of Parliament. Only Parliament can make such changes. Okoa Mombasa plans to take appropriate legal action to protect the rights of those affected if the merger is not immediately rescinded. The President is not above the law.

These incredibly complex monopolies, KPC, KPA and KRC that manage 1) a vast pipeline network that moves petroleum products across the country by charging oil marketing companies that use this facility, 2) a huge ports agency that operates a Mombasa, Lamu and inland port facilities; and 3) a passenger and cargo services on a meter gauge and a newly launched SGR respectively and are each governed by a separate Act of Parliament.

We, the members of Okoa Mombasa, know the history of ICDC as a gravy train for the privatization of state assets over the years. This reputation stands out like a sore thumb and we fear that this consolidation of the country’s port, rail and pipeline services in ICDC is a ruse to transfer these highly liquid state agencies to local and foreign predatory and shadowy vested interests at the Treasury. This could also be a ploy to bail out the loss-making SGR by centralizing the revenues for easy appropriation.

With a total revenue base of Kshs 73 Billion and combined asset base in excess of Kshs 360 Billion as at June 2018, KRC recorded the lowest revenue Kshs 1.7 Billion in 2018 that rose to 13.5 Billion in 2019 and the least profit of Kshs 362 Million in 2017 compared to Kshs 8.5 and 6.9 Billion that KPC and KPA raked in respectively. This ploy in which two profitable entities, KPC and KPA are being loaded with the baggage of a loss making KRC with its skunk SGR under whose debt agreements it is melting must be exposed.

It is the reason the President and his men are marching the country back to the old order with what they are calling Executive Order their new name for roadside decrees or public rally declarations. It will be remembered that on one weekend in June 1984 the late President Moi addressed a rally at Afraha Stadium, at which he announced that the Kenya Farmers Association (KFA) would be no more and in its place an outfit called Kenya Grain Growers Co-operative Union (KGGCU) would be established.

With this declaration, the KFA the largest farmers’ organization incorporated in 1923 was illegally taken over to form the KGGCU monolith paving way for successive state appointees who mismanaged and brought the 80,000 member association on its knees, stripping it of all assets and dipping its huge profits leading to the death of hopes and dreams of millions of farmers and their children.

A similar bizarre case of Presidential impunity was when the Kenya Air Force a unit formed on June 1, 1964, was disbanded by President Moi and replaced with 82 Air Force because of an attempt by some of its personnel to overthrow the President. As a Court Martial would rule in theft by servant case affecting one officer who challenged the jurisdiction of his accusers the Court agreed with the accused that the Armed Forces Act had not been amended in 1982 following the disbandment of the Kenya Air Force and subsequent promulgation of the 82 Air Force. The Air Force, therefore, had remained as the Kenya Air Force under section 3(2) of the Act.

A second Court Martial overruled the officer’s objection, tried and convicted him, but upon appeal at the High Court, the Superior Court observed that the 82 Air Force did not exist in the law of Kenya and that Kenya Air Force had not been deleted from the Armed Forces Act (Cap 199) noting that 82 was just a nickname for the Service and its personnel were officers of the Kenya Armed Forces.

Brinkmanship, abusing state power to sabotage profitable legal entities to bankruptcy and using executive authority to trump the law should have ended with the promulgation of the 2010 Constitution. The Presidency cannot decree any law out of existence, repeal or oust the management of a parastatal as the order in question purports. Presidential decree/orders cannot repeal laws and or dissolve legal entities. Presidential orders are administrative in nature not legislative. Secondly, the Presidency is not a constitutionally mandated law-making body. A Presidential order merging legal entities is executive overreach. Consequently, the Presidential order purporting to merge KPA/KPC/KRC is both illegal and unconstitutional.

The President claims that KTLN will lower the cost of doing business, streamline management and coordination and integrate port, railway and pipeline services. But by the same breath also admits that due to the huge need for cash to meet the Government’s planned spending, it was found better to have the parastatals domiciled at the Treasury a revelation that discounts the claim that this decision is a belated implementation of the recommendations of the Presidential Taskforce on Parastatal Reforms published in 2013. The assertion that this merger can be done without having to amend existing laws offends the Taskforce report which recommends that an overarching law the Government Owned Entities Bill 2013 should be enacted as the first step to these reforms at both National and County level.

A draft Kenya Development Bank Bill (2020) published by the Treasury in May 2020 in which ICDC was to be merged with IDB Capital Ltd and Tourism Finance Corporation (TFC) to form the Kenya Development Bank (KDB) a single cross-sector lender with “sufficient scale, scope and resources” has also been shelved and ICDC exempted from such plans as a result of this order. It is instructive that this move is markedly similar to the decision to transfer Kenya Airways to Kenya Airports Authority that raised eyebrows some months back, the suggestion that Kenya Meat Commission be transferred to Kenya Defense Forces and now KPA/KRC/SGR/KPC and ICDC be transferred to the Treasury.

We find the old centralizing narrative offensive in a governance system in which crucial functions are devolved. To suggest that consolidation of disparate state entities whose assets and liabilities have not been valued cannot be presented as a solution to mitigating inefficiency.


Okoa Mombasaand International Center for Policy and Conflict