MPs set two-year deadline for Kenya Shipyards to ditch treasury funding

Kenya Shipyards Limited is facing pressure to prove that its growing shipbuilding and repair business can sustain itself without relying on government funding, with MPs setting a two-year deadline for the corporation to become financially independent.

The National Assembly Committee on Defence, Intelligence and Foreign Relations wants the state-owned firm to strengthen its commercial operations and increase internally generated revenue, arguing that its investments in modern technology and expanding maritime projects should provide a foundation for long-term financial stability.

The demand was made during a visit to the corporation's facility in Kisumu, where the committee, led by Vice Chairperson Abdullaih Bashir, the MP for Mandera North, examined its achievements and ongoing efforts to develop Kenya's shipbuilding industry.

Bashir said the corporation had demonstrated its ability to deliver major projects and should now focus on generating sufficient income to finance its activities rather than continuing to depend on allocations from the Exchequer.

"We have seen what it can do. It has potential. After two years, you should completely wean yourself from the exchequer," Bashir said.

Since its establishment in 2020, KSL has undertaken several projects aimed at expanding the country's capacity to build, maintain and repair vessels locally.

Its achievements include constructing MV Uhuru II, a modern 100-metre vessel used to transport petroleum products across ports on Lake Victoria. It has also rehabilitated MV Uhuru I, which was originally built in the 1960s.

The corporation has extended its work beyond vessel construction to developing fishing ports, water ambulances and specialised fishing boats. Some of these projects have been implemented in Homa Bay, Muhuru Bay, Sio Port and Usenge, helping support fishing activities and water transport.

KSL Head of Production, Brig Peter Muthungu, told the legislators that investments in advanced production equipment had improved efficiency and increased the corporation's ability to manufacture vessels within the country.

Among the technologies introduced are fibre-laser cutting machines, robotic welding systems and High-Density Polyethene (HDPE) boat construction technology.

Muthungu also pointed to savings achieved through direct dealings with equipment suppliers, which have helped lower procurement costs.

"Direct engagement with equipment suppliers has cut costs from 718 million to 366 million shillings," he said.

Despite the improvements, the committee questioned the corporation's continued dependence on Treasury support, especially as it handles projects with a combined value of Sh6.22 billion.

Muthungu explained that the financial pressure was partly linked to the way payments are made under its contracts. Since payments are tied to the completion of specific project milestones, KSL often spends money on ongoing work before receiving the corresponding revenue.

He added that the corporation was also committing substantial resources to developing essential infrastructure, further affecting its cash flow.

The committee maintained that improved payment arrangements with clients, alongside responsible financial management, would help the shipyard improve its financial position and move towards self-reliance.

Looking ahead, KSL is seeking to expand its commercial activities through opportunities at the Port of Mombasa, where the limited availability of regional ship repair facilities presents room for growth.

The corporation has proposed building a graving dock designed to accommodate vessels measuring between 185 and 285 metres.

The planned facility could allow KSL to attract as many as 32 ship repair contracts annually, compared with its present capacity to service five vessels at a time.

Its other expansion plans include developing port infrastructure at Lake Turkana, introducing passenger ferry services and carrying out surveys of other water bodies to identify additional opportunities in the maritime sector.

The plans are expected to widen the corporation's operations as it seeks to increase its commercial activities and meet the two-year target set by MPs to operate without depending on Treasury funding.