“It’s Time To Review Port Concession”
…Otunba Kunle Folarin
Since the first part of this interview was published last week, some people have called to voice their opinions on the issues that were raised. For the avoidance of doubt, the responses remained the opinions of Otunba Kunle Folarin (Vice Chairman, PCC) and not that of Shipping Position Weekly. We also acknowledge some printer’s error in certain parts of the interview, so we reproduce some of the mutilated portions. Thank you.
Are you satisfied with the way the terminal operators are running the ports?
The terminal operators can only run business according to the agreement they signed with the government, the agreement is not published, if the terminal operators say that they are producing at maximum level, you have no basis to compare what should be the maximum level. The terminal operator is saying that he has invested US$2million in equipment and infrastructures, but there is no way you can know whether he has an obligation to modernize equipment, to introduce technologies, to develop manpower, to ensure that he creates jobs for Nigerians; no one knows except the BPE, the stakeholders were not part of the deal, there was no public hearing, although the concessioning exercise was transparent because it was done openly but there was no public hearing on the desirability of concessioning or not, what are the elements that stakeholders expect from the concessioning regime? Apart from government intention to privatize and create a new system from public ownership to public- private participation, there was no contribution from stakeholders, from importers, exporters, foreign agents, haulage contractors, ports and harbours maintenance groups and so on, there were no stakeholders’ contributions. That is why when stakeholders now come out to say port charges should go down, infrastructure should be done, that ports should work 24 hours a day, to take delivery within 48 hours, these were the opinions that they were now suggesting after the concessioning. From this point of view, the concessionaires should be given a benefit of doubt but that does not foreclose the opportunity to say okay, it is now mid- term and its time to review the file and that there are certain things that we never thought about which should be your duty and obligation, lets review this agreement and include this obligations, then the concessionaires can now say that there are certain things they have assumed to be in place but are not there and we now want you as a landlord to provide windows and doors in your house so that we won’t be the one to be in charge of common user facilities.
In other words you are canvassing that port concession is due for a review?
There is the need for a review, a review from the perspective of both the service providers and the leasor of the terminals and also perhaps an opportunity to properly spell out the roles of Nigerian Port Authority and the BPE in concessioning. As it is now, NPA is seen as a junior partner in the deal, but it is the landlord, so there is a conflict, what are the responsibilities of a landlord, it must be spelt out in a more explicit way than it’s done in the agreement, what are the responsibilities of the concessionaire (it must be spelt out). So, at the end of the day, all the assumptions at the beginning and up till mid-term should be cleared, now the stakeholders should be involved in the review so that all the issues that have been raised by stakeholders on port charges, infrastructure, 48hour cargo clearance, storage area, bonded terminal transfer of cargo and so many other issues should now come up for discussion. The stakeholders now have an opportunity to say: ‘I want my cargo in this place and not Ikorodu or Lekki’. The entire instrument that binds the contract of affreightment to the shipping company should be in place, they will now come for discussion, if the bill of laden says Apapa port is the point of discharge, then why am I finding it in Badagry or Oworonsoki? All these issues will come out, unless the stakeholders are part of the review and their opinions and comments through the experience of the last five years are taken into consideration; we are most likely to have an agreement again between two parties that does not reflect the realities on ground.
Will you then say that port concession is a success?
Port concessioning exercise itself is desirable because the objective of the government is not difficult to understand, government wants a situation whereby we will have a modern port system that is productive and competitive in the region; if not in the world so that Nigerian port can rightly earn the status of a hub port system. On the other hand, government wants to reduce the cost of doing business in the port at the same time attracting foreign investment in port development. Apart from the effort of the last five to six years ago when the private quay was developed in Tin Can Island port, it was in 1977 that the government last developed any new port, apart from what has happened in Onne, in Rivers state whereby the operators improved on the infrastructure which they met on the ground which was started in 1984. Government now wants direct investments in the ports so that they can use the funds in developing or rehabilitating the infrastructure of the port because apart from port operations there is still need to continue to maintain port infrastructures so government will concentrate on making the port efficient and structured in way that it can produce and operate round-the-clock. Now talking about the implementation of the concessioning regime it is a different ball game because you find an agency of government which is the BPE that midwifed the concessioning regime, but we have the NPA who are the custodians of port operations also being part of that process, but not a major player in the decision, the decision of who gets a concession squarely rested with BPE, then you have the other stakeholders who are more or less contributing in a way and regulating functions in the ports, they were not part of the process, it was after these tings came up that questions were now being asked about who should supervise the post-concessioning regime, who should monitor it and to whom are the concessionaires answerable to, there are lots of questions being asked now, but they should have been asked before now.
Will they have been able to capture all these in the concession agreement?
Of course, because the agreement will spell out the obligations of the concessionaires to the agency of government that is giving the responsibility of supervising the concessioning project, it will also spell out the mandate of the concessionaires, when you talk about obligations, you talk about what is going to be their investments, what are the level of productivity expected of them, what are the level of charges they can levy, the infrastructures they should put in place, the human capacity development that should be in place, these are the obligations that already should have been spelt out in the concession agreement, so that the concessionaires knows their obligations before going into the agreement.
A lot of people are of the opinion that the Cabotage law has not been well implemented, what is your take on this?
Again if you look at the aspirations of those who ‘midwifed’ the Cabotage regime, they were very patriotic, the destination they sought to arrive at was to ensure that Nigerians will be in charge and in control of their destiny within their territorial waters and of course, have an opportunity for the involvement of Nigerians and the implementation of local content in the business generated by the country. These are the laudable objectives of the Cabotage law, then the process of the Cabotage regime seem to have given some kind of opportunity to Nigerians in term of manning, chartering and trade, these are the opportunities that are in it for Nigerians. Then came the big stick; the waiver clause. The waiver clause was part of the statue books of the Cabotage regime without being qualified; it simply says that where Nigerians can not supply the human capacity to man the vessels, supply the boats or build the vessel, the requirement will be waived. The waiver clause seem to talk in broad terms without qualifying it, to say, for instance, for two years or for one year the waiver will not be renewed or conditional waiver is given. For instance in manning, where you have to man a coastal vessel with a crew of about 10 people, there is nothing wrong for the waiver to stipulate that after the waiver is given, you must train two Nigerians alongside. So at the end of the first year of waiver you will have two Nigerians, at the end of second year, you will be given six instead of eight and the third year you will be given only four and gradually you will be taking on Nigerians. So within the last six years if you have qualified waiver clauses, you would have in fact achieved 100 percent manning by now. If you have qualified the waiver clause in ship building, you would have been able to be building the external components of boats in Nigeria now and maybe the machinery will now be imported, you would have succeeded in having ship yards and consequently the maintenance of crafts by floating docks and dock yards will be springing all over the place in Nigeria by now. We are talking of more than 2000 crafts operating in Nigeria as of today, if we have achieved ten percent of this, then it will be 200 vessels, can we say that in six years of Cabotage we have achieved that? What we need is a review of the Cabotage law to bring out all the experiences and all the issues that have been observed within the last six years so that the objective will be achieved. In the way it is now, it is impossible to achieve the objectives to develop ship yards, to have a 100 per cent Nigerian built vessels and to man the vessels, it will not be possible because the waiver clauses are not qualified, and there was no condition for the granting of the waiver.
Who do we hold responsible for this?
This is what happened, during the exercise leading to the public hearing, there were no wide consultations with stakeholders, people were just basking in the euphoria that the D-day has come and we are going to be in charge of about 2,000 ships, at least we can forget the foreign- going vessels, forget trading to India, Indonesia or to Europe, but at least we can take charge of the waters here, but what has happened? There was no wide consultation with stakeholders for inputs into what should be the element of the law, some people raised objections about the waiver clause but then they have to provide conditional waiver and these are the conditions for the waiver; you must include Nigerians in the operations of the business, this is now what the local content is trying to address.
Some have said that the problem with the waiver is the ministry of transport, do you agree?
When you talk about the ministry, if the law is very explicit about operating the Cabotage regime and not depending on a guideline that was midwife by the agency of government who is merely trying to interpret the Act that is before it, there must be an explicit document that does not give room for manoeuvre, it’s very explicit in what you must do, the waiver clause must also have a time line and reviewable, if you say okay I give you a waiver, it does not say it is renewable only if Nigerians can not satisfied the conditions that are required by the Act, that’s all its saying, if Nigerians can not comply with the conditions, every day it will just be like that because there was no deliberate effort to make sure that the Nigerian- built ship emerges from the Act, not by promotion or saying that Nigerians are encouraged to go into ship building, go and become seafarers in other to take advantage of the Cabotage Act, don’t leave it to promotion, but leave it to the law, let the law be very explicit and say that for every waiver clause granted, this percentage must be taken on by the service provider.
Some have said the fault of implementation should be put at the door step of NIMASA, do you agree?
NIMASA as an agency of government is charged with the responsibility of implementing the Act, they drew up a guideline and it is derived from the Act, they can not draw up a guideline that is a phantom and that has no basis from the law, so enforcement is the responsibility of NIMASA, to make sure that apart from those who get a waiver, there are probably hundreds who don’t have a waiver and are just operating as usual. Those who are contravening the law must be apprehended by NIMASA, NIMASA must have a strong inspectorate unit for Cabotage enforcement because today, I don’t think they have an inspectorate unit, it is not a matter of information and after a while it dies, you need a standing inspectorate unit that will as a matter of routine patrol and check documents and also do physical checking and make sure that there is no contravention of the Act, nobody will do it through the union saying that their jobs have been taken, people regard that as just rhetorical statements, they will show you the waiver they have gotten from the ministry.
How do you think the maritime industry can take advantage of the Local Content Act to further enhance Cabotage?
Compliance is the key; all the procedures and issues raised in the Local Content Act may go the same way as the Cabotage Act unless two things are put in place; an inspectorate for monitoring of compliance and also an active administration that is willing and capable of responding to observed lapses or inadequacies in the Act itself. There is no Act that will totally meet the aspiration or objective that led to the enactment of the Act, but if you have an administration and management that is willing and ready to monitor and respond to observations in compliance and in meeting the objectives of the Act, that is, the only way it will succeed. If the Act is saying that 80 percent of a particular operation is reserved for Nigerians or it is saying that 100 percent is for Nigerians, only where you observed it closely and monitor compliance that you can see that the gains are actually being enjoyed by Nigerians. The second thing is that those who will say that 80 percent of a particular operation is for Nigerians, but from observations, Nigerians can even do 100 percent of that.You can send an amendment to the National Assembly to say please we want you to amend this clause of 80 percent to 100 percent, the Cabotage law has not been reviewed for the past six years, you don’t have to even wait for six years, It is a dynamic situation, If the ministry and the agency have observed that it is going to be difficult to achieve 100 percent or that Nigerians cannot present one ship not to talk of 2,000 ships, they can now conclude that with the way things are going, we shall be forced to grant a waiver to deal with the situation, and if they don’t have an idea they can ask stakeholders’ opinions and by such, conclusions can be made to have a conditional waiver in one and leave the other one. I think it is very instructive now that in the Local Content bill, enforcement of compliance is a bigger responsibility than even the enactment of the law if the objectives are to be achieved.
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