Juba and Addis: Why the coffee smells so strong in the north

Saturday June 29 2013

At one point in the mid-1990s, it seemed that the Democratic Republic of Congo would settle down, and with its vast mineral wealth — estimated to be $24 trillion, more than the GDP of Europe and the US combined — would determine the shape of the wider East African regional economy 

That, however, was not to be and the investment in a more traditional East African Community of Kenya, Tanzania, and Uganda gathered steam.

But the late 1990s were very different from the 1970s, when the first EAC folded. By the mid-1990s, Kenya was home to more than 500,000 Ethiopian, Somali and Sudanese refugees, and there were more than 150,000 Sudanese refugees in Uganda.

Moreover, the war between the Sudan People’s Liberation Army and the Khartoum government was raging furiously. The SPLA leadership had set up regional political headquarters in Nairobi.

Uganda had been drawn into providing the SPLA with active military support. In retaliation, Khartoum adopted and armed the anti-Kampala rebel group, the brutal Lord’s Resistance Army (LRA).

The rebellion in northern Uganda, and the war that brought President Yoweri Museveni to power at the head of a victorious army in 1986, had produced several thousand refugees, some of whom had been relocated to camps in Ethiopia.


Kenya’s president then, Daniel arap Moi, was going to retire in 2002 after a new political deal with the opposition limited his continued stay in office. To his credit, Mr Moi understood as well as some of the best geopolitical strategists in the region, that the security of East Africa and its economic future lay in a regional solution to the war in Sudan, and a negotiated settlement of the Somalia crisis.

It took a while to come together, but the Somalia and Sudan peace talks eventually began in Nairobi in 2001.

Indeed, the Intergovernmental Authority on Development (Igad) was created in 1996 to supersede the Intergovernmental Authority on Drought and Development (Igadd) which was founded in 1986. The membership of Igad — Djibouti, Eritrea, Ethiopia, Kenya, Somalia, Sudan and Uganda — drew in two of the countries that were working on reviving the EAC. Only Tanzania was out of it.

Geopolitical forces

In many ways, there was an understanding that the EAC of three would only be shortlived, given the regional realities. In addition to these geopolitical forces, with East African countries, especially Kenya, plagued by food crises, Tanzania rushing to expand agriculture as its population became the largest in East Africa, and Uganda’s economy that had seen double-digit growth beginning to be hobbled by power shortages, the Nile and what lay north of it were becoming even more important than before.

Kenya’s case in particular was, and remains, particularly striking. While it was being battered by food shortages, the underlying problem that it was contending with was water stress.

The Lake Victoria basin in Kenya covers only 8.5 per cent of the total area of the country, but it contains over 50 per cent of its national freshwater resources. Thus, while Lake Victoria, and therefore the River Nile, do not figure as big in Kenya’s political and security conversations as in Uganda’s and Ethiopia’s, the lake’s continued productivity is a greater existential issue for Nairobi.

Security, energy and water combined to create a northern magnetic pull on the region and, two years ago, it started getting several new impetuses.

First, South Sudan became Africa’s newest independent state on July 9, 2011. Then last year, Kenya announced it had found oil in Turkana (and this April Tullow and its partner Africa Oil said that Turkana’s oil could be “commercially viable”).

Production is to start in six or seven years, according to International Monetary Fund projections, but profitability will be largely hinged on Kenya’s ability to realise the $25 billion Lamu Port and Lamu-Southern Sudan-Ethiopia Transport corridor (Lapsset) mega-infrastructure project that was launched by former president Mwai Kibaki, the late Ethiopian prime minister Meles Zenawi, and South Sudan president Salva Kiir in March 2012.

The project envisages a standard gauge railway line linking Juba and Addis Ababa to the Lamu port, capable of handling trains with speeds of up to 160kph. By 2030, the railway line is expected to handle 30 daily trains to Juba and 52 to Addis Ababa.

New roads will link Lamu to Addis and Juba, and there will also be an oil pipeline for the transportation of crude oil from Juba to Lamu, where an oil refinery with a capacity to refine 120,000 barrels of oil a day will be constructed.

To power all this, Kenya signed a deal with Ethiopia to supply electricity.

The conflict

Apart from cultural and political ties, South Sudan’s oil is a key element in this northern push. Oil accounts for 98 per cent of South Sudan’s exports, and the conflict with Khartoum over how much Juba should pay to export its oil via pipelines passing through Sudan forced Kiir’s government to look for alternatives.

But South Sudan’s greatest asset is not oil; it is something that will come into play in the next 15 years – land. About 80 per cent of South Sudan’s 644,000 square-kilometre land area is considered arable, making it the potential bread basket of the region. Contrast this with Kenya, which is 582,000 square kilometres, but only 14 to 18 per cent of that.

Against this background, it is small wonder that South Sudan quickly found accommodation the East African fold, and is likely to be admitted into the EAC in the next three years.

Uganda’s oil fortunes, too, are increasingly seen as tied to Lapsset. Just three weeks ago, Uganda’s State Minister of Energy (Minerals) Peter Lokeris said that the country was in negotiations with South Sudan to construct an oil pipeline from the Albertine Basin, where Uganda discovered 1 billion barrels of oil, to Juba, and from there hitch onto the Lapsset infrastructure to deliver the product to the Indian Ocean for export.

At that point, it looked like an idea that still had a long way to travel. But, in a surprise announcement at a meeting at State House in Entebbe on June 25, President Yoweri Museveni, Kenya’s President Uhuru Kenyatta and Rwanda’s Paul Kagame issued a communique full of ambitious regional infrastructure projects, among them, the extension of Lapsset to Uganda, and eventually to Rwanda.

Massive potential

Then there is Ethiopia. It has a 60-year-old mutual defence pact with Kenya, as well a long border. Next to the DRC’s massive potential, Ethiopia possesses the region’s biggest hydropower reserves — at least 45,000 Megawatts — and is positioning itself to become a leading exporter of electricity, in a region suffering a critical deficit of power.

A 500KV transmission line connecting the Kenyan and Ethiopian grids is expected to be completed by the end of 2016 at a cost of up to $1.26 billion. It would make Kenya, which has the region’s largest industrial base, the largest buyer of Ethiopian power, at an eventual 400MW.

Biggest carrier

Ethiopia’s other strategic advantage is its vibrant aviation industry. Ethiopian Airlines is the second biggest carrier in Africa, handling 4.6 million passengers a year, after South African Airways, which handles 8 million passengers. Kenya Airways comes third, at 3 million.

Ethiopia’s geographical position in the latitudinal middle of the continent, like that of Kenya, is a strategic advantage — any city in Africa is within an eight-hour flight of Addis.

But a potential disrupter to all these well laid plans lies not far away in Djibouti, which with Uganda, Burundi and Kenya, is the other East African nation to send troops to the African Union peacekeeping force in Somalia, Amisom.

Djibouti, rarely in the news, is quietly carrying out major reforms in its ports. Last month, it was in talks with India, China, Brazil, Russia and Arab investors to finance infrastructure projects worth $5.9 billion, and, according to the country’s ports authority, commitments for “close to 57 per cent” of the project costs have been received.

The bulk of the investment will go into building five new modern ports in the next four years – which would best anything Kenya and Tanzania can throw up.

The Horn of Africa nation’s main port primarily serves its landlocked neighbour Ethiopia, which accounts for about 70 per cent of the traffic, but began handling landlocked South Sudan’s trade after it became independent.

Djibouti’s container port handled 705,000 containers in 2011, compared with Mombasa’s 800,000 containers — no mean feat considering its size and neighbourhood.

This year, it is projected to cross the 1 million container mark and become the third busiest port in Africa after Durban in South Africa and Tangier in Morocco.

The Djibouti port is managed by DP World, the Dubai-based international terminal operator, which has a 20-year agreement to manage and invest in the port, as Kenya drags its feet on port privatisation and modernisation.

This has made Djibouti much more efficient and competitive, and the main components are in place to deliver new port capacity.

Perhaps aware of this, President Kenyatta recently called various institutions handling the port of Mombasa and read them the riot act.

Strategic port

The Djibouti story recently became more intriguing; even far-away Rwanda is seeking deeper ties with the country.

In March this year Rwanda was given a 20-hectare plot in the highly strategic Port of Djibouti Free Zones.

The Rwandan ambassador to Addis Ababa and Djibouti, Joseph Nsengimana, signed the acquisition with Ilyas Moussa Dawaleh, Djibouti’s Minister for the Economy, Finance, Industry and Planning. It was a long triple jump for Rwanda, and when Rwanda jumps that far, you know it has smelt some very strong coffee.

Our score on the likelihood of the Northern Formation happening in the next 10 years: 6/10. That is higher than the Congo/Central Africa Outcome, which we scored 4/10.

twitter: @chris_mungai & @cobbo3