Mombasa Introducing New Container Tax

Kenya's port city of Mombasa, a major trade gateway to east Africa, will start charging new taxes on shipping containers, its governor said on Thursday, defying opposition from the national government in Nairobi.

Governor Ali Hassan Joho told Reuters the extra revenue levied by the local authority would be used to repair pot-holed roads and crumbling infrastructure in the ancient Indian Ocean hub.

"There is absolutely no way that you are going to have a world-class port city in a rotten city. Those interests have to move in tandem," Joho said in his office in Mombasa, which funnels trade to and from landlocked South Sudan, Uganda and Rwanda.

The central government in Nairobi had opposed the new levies proposed by the local authorities, warning that they could undermine recent reforms to speed up the processing of goods through the port.

Officials in Nairobi also worry the tax could hand an advantage to rivals such as neighbouring Tanzania, which is building a $10 billion mega port in Bagamoyo to go alongside its facility in Dar es Salaam.

The port levies could yet become the biggest test of Nairobi's ability to challenge decisions by local governments which can charge new taxes using powers granted to Kenya's regions under a 2010 constitution.

Kenya Ports Authority (KPA), the port operator, also opposed the levies which would see shipping firms pay $20 per tonne of exports and $20 per tonne to clear imports.

Each ship would also pay $60 for inspection, $60 per square metre for compulsory spraying against disease and $40 per container for verification.

KPA chairman Danson Mungatana told Reuters that the port would not be able to collect the levies proposed by the county government as it would be illegal for it to do so.

"I am also waiting to see how they will do this," Mungatana said. "The port, by constitution is a national asset, and therefore any legislation by a county or any other body that contravenes this constitutional provision is null and void."

Businesses and residents in Mombasa often point to high unemployment, rubbish-strewn streets and mouldering government offices as proof that Nairobi has neglected Mombasa despite the vast importance of the port to east Africa's biggest economy.

Joho said Kenya would not lose trade to Tanzania after the new taxes. "Efficiency is what attracts business," he said. "How do you direct a container to go to Dar es Salaam or Bagamoyo because of 40 dollars, the argument just doesn't work."