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Post Reply: Supreme Court Nullifies Joho Family's Sh5.8 Billion Grain Facility Deal at Mombasa Port

<blockquote><div class="quotetitle">Quote from <a class="profile-link highlight-moderator" href="https://lawguide.co.ke/understanding-law/legal-forum/profile/lawyer/">Lawyer</a> on July 1, 2025, 6:00 am</div><div id="pl-6715"  class="panel-layout" ><div id="pg-6715-0"  class="panel-grid panel-no-style" ><div id="pgc-6715-0-0"  class="panel-grid-cell"  data-weight="1" ><div id="panel-6715-0-0-0" class="so-panel widget widget_sow-editor panel-first-child panel-last-child" data-index="0" data-style="{&quot;background_image_attachment&quot;:false,&quot;background_display&quot;:&quot;tile&quot;,&quot;background_image_size&quot;:&quot;full&quot;,&quot;background_image_opacity&quot;:&quot;100&quot;,&quot;border_thickness&quot;:&quot;1px&quot;}" ><div
			
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	<p dir="ltr" data-pm-slice="0 0 []">On June 30, 2025, the Supreme Court of Kenya delivered a significant blow to Portside Freight Terminals Limited, a company linked to the family of Mining and Blue Economy Cabinet Secretary Hassan Joho. The court nullified a Sh5.8 billion deal that had granted the firm permission to construct a second grain bulk handling facility at the Port of Mombasa, ruling that the Kenya Ports Authority's (KPA) decision to award the license through the Specially Permitted Procurement Procedure (SPPP) was unconstitutional and unlawful.</p>
<p dir="ltr">The ruling, delivered by a five-judge bench led by Deputy Chief Justice Philomena Mwilu, underscored the importance of adhering to constitutional standards in public procurement processes. The court's decision stemmed from a legal challenge initiated by Busia Senator Okiya Omtatah and the Dock Workers Union, who argued that the procurement process lacked transparency, fairness, and competitiveness, violating Article 227 of the Kenyan Constitution and the Public Procurement and Asset Disposal Act (PPDA).</p>
<p dir="ltr">The controversy surrounding the grain facility deal began when KPA awarded Portside Freight Terminals Limited a license to develop and operate a second grain bulk handling facility at the Mombasa port. The project, valued at approximately $45 million (Sh5.8 billion), was intended to enhance the port's capacity to handle grain cargo, which is critical for national food security and economic stability. Portside Freight Terminals, along with associated firms Heartland Terminals Ltd and Portside CFS Ltd, proposed to develop an offshore berth and an overhead conveyor belt system to facilitate grain handling, at no cost to KPA.</p>
<p dir="ltr">The decision to award the license through the SPPP, a method that allows procurement without competitive bidding under exceptional circumstances, sparked widespread criticism. Critics, including Senator Omtatah, argued that KPA failed to demonstrate exceptional circumstances that justified bypassing competitive tendering. The KPA's master plan had designated areas such as Dongo Kundu or Lamu Port for such a facility, raising questions about why Portside was allowed to develop the facility on its private land near the port.</p>
<p dir="ltr">The legal battle began at the High Court, where Senator Omtatah and the Dock Workers Union challenged the procurement process. The High Court ruled in their favor, declaring the license null and void due to its non-compliance with procurement laws. The court found that the KPA board, rather than its management, had improperly approved the license, overstepping its authority. Additionally, the court noted that the decision to use SPPP amounted to single-sourcing, which disadvantaged other firms, including Kilindini Terminals Ltd, Mombasa Grain Terminal Ltd, and Kapa Oil Refinery, that had expressed interest in the tender.</p>
<p dir="ltr">Portside appealed the High Court's decision, and the Court of Appeal overturned the ruling, giving the project a clean bill of health. The appellate court argued that the procurement was not discriminatory and that KPA's actions aligned with public interest and national security considerations. Dissatisfied with this outcome, Omtatah and the Dock Workers Union escalated the case to the Supreme Court.</p>
<p dir="ltr">In its June 30, 2025, ruling, the Supreme Court overturned the Court of Appeal's decision, reinstating the High Court's nullification of the license. The bench, which included Justices Mohammed Ibrahim, Smokin Wanjala, Njoki Ndungu, and Isaac Lenaola, emphasized that KPA failed to meet the constitutional threshold for public procurement. The court highlighted that the SPPP was misused, as KPA did not provide evidence of exceptional circumstances that made competitive bidding impossible, impractical, or uneconomical.</p>
<p dir="ltr">The judges noted that the KPA's master plan did not originally include a second grain handling facility at the proposed location, and Portside's proposal to use its own resources did not justify deviating from competitive procurement processes. The court also criticized the KPA board's involvement in the procurement decision, stating that such responsibilities fall under the authority of KPA management.</p>
<p dir="ltr">The ruling has significant implications for public procurement in Kenya, reinforcing the need for transparency, fairness, and adherence to constitutional principles. It also serves as a reminder that public interest and national security cannot be used as blanket justifications for bypassing established procurement laws.</p>
<p dir="ltr">The Supreme Court's decision has elicited varied reactions from stakeholders. Senator Omtatah hailed the ruling as a victory for the rule of law, arguing that it protects public resources from being monopolized by politically connected firms. He emphasized that the decision ensures compliance with the KPA master plan and prevents discriminatory procurement practices that favor specific companies.</p>
<p dir="ltr">The Dock Workers Union, which initially co-filed the appeal, had withdrawn from the case in September 2024, citing potential job creation benefits from the project. However, Omtatah continued the legal challenge, arguing that public interest cannot be served by violating constitutional procurement standards.</p>
<p dir="ltr">Representatives of Portside Freight Terminals, including director Yusuf Abubakar, expressed disappointment with the ruling. Abubakar had previously argued that the project would generate significant revenue for KPA, estimating over Sh1 billion annually, and enhance national food security by reducing the monopoly in grain handling. He warned that delays caused by the legal battle could lead to higher food costs and economic losses for the port.</p>
<p dir="ltr">The ruling has also intensified scrutiny of the Joho family's business dealings at the Mombasa port. Portside Freight Terminals and related firms, such as Autoports Freight Terminal Ltd, have faced allegations of receiving preferential treatment due to their political connections. Previous controversies, including a 2018 deal with Kenya Railways Corporation for SGR cargo transport and disputes over port tariffs, have fueled perceptions of favoritism.</p>
<p dir="ltr">The nullification of the grain facility deal adds to the ongoing legal and political battles involving the Joho family and KPA. In recent years, firms linked to Hassan Joho have been embroiled in disputes over port operations, including a lawsuit against KPA and Bulkstream Ltd for allegedly interfering with a railway line serving Portside's berth. Additionally, a separate case involving a Sh9 billion land deal for the Talanta Sports Stadium in Nairobi has further spotlighted the family's business interests.</p>
<p dir="ltr">The Supreme Court's ruling may prompt KPA to revisit its procurement processes and align them with the 2018-2047 master plan, which prioritizes competitive bidding for major projects. It could also encourage other firms to pursue similar projects through transparent processes, potentially increasing competition in the grain handling sector.</p>
<p dir="ltr">As Kenya prepares to host the Africa Cup of Nations in 2027, efficient port operations remain critical for economic growth and regional trade. The outcome of this case underscores the judiciary's role in safeguarding public resources and ensuring that procurement decisions serve the broader public interest.</p>
<p dir="ltr">For now, the Sh5.8 billion grain facility project remains on hold, pending any further legal or administrative developments. The Supreme Court's decision marks a pivotal moment in Kenya's efforts to uphold accountability and transparency in public procurement, setting a precedent for future cases involving politically sensitive projects.</p>
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