Fasten your seat belts, folks, the East African Century is already upon us

Monday March 4 2019

Transsion’s assembly factory in Addis Ababa

Transsion’s assembly factory in Addis Ababa, which supplies the region with Tecno mobile handsets. Kenyan companies are likely to benefit most from an open and modernising Ethiopia. PHOTO | COURTESY 

By CHARLES ONYANGO-OBBO
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China’s One Belt One Road, Kenya Airways and Ethiopian Airlines, a string of ports and local multinationals are already transforming the continent in ways undreamed of just a decade ago.

The past three parts of this series looked at the forces tearing at the East African Community as it approaches its 20th birthday, and were focused on keeping it together and building bridges over troubled water.

Which raises the question, what will the next 20 years look like for the EAC? Going by current trends, it is likely to be a dynamic two decades.

But there we have to take bets. For better or worse, it is going to be a totally different animal.

That future was one of the things on the mind of Joshua Oigara, group CEO and managing director of KCB, the closest thing to a pan-East African bank, when I met him a fortnight ago in Nairobi.

Mr Oigara’s self-effacing demeanour belies big ideas, and his view of the great possibilities in the region.

“If it does a few things right, Uganda can feed China,” he told me. Phew!

KCB is the only bank that operates in all the six member countries of the East African Community.

He says one reason for this is that the bank has been able to “work through and manage the contradictions that situations in EAC countries present,” an approach he says those who want to win in the region need to master.

“People would be surprised by the projects we have funded in the region: Hotels, mines, schools, hospitals, housing, agriculture,” he says.

Institutions like KCB that work regionally give credibility to the East African project, but money, says Oigara, is the easy bit, and it is not the magic bullet. The magic bullet is logistics and infrastructure.

“You can have a free market, yes, but it will come to nothing if you can’t move goods and services at all, or at speeds and costs that are competitive,” he says.

One Belt One Road

It’s one reason he thinks China’s One Belt One Road (OBOR) Initiative could be a game changer, and deserves greater attention.

The OBOR involves infrastructure development and investments in countries in Europe, Asia and Africa.

“Belt” refers to the overland routes for road and rail transportation, called "the Silk Road Economic Belt"; whereas "road" refers to the sea routes, or the 21st Century Maritime Silk Road.

“Potentially, in the years ahead, China will be able to get goods to any part of Africa in a week,” Oigara says, and the OBOR could achieve in more dramatic fashion what the African Continental Free Trade Area is seeking to do.

What does China know that the rest of us have not yet cottoned on to? A part of the puzzle lies in East Africa, and the other in the Indian Ocean — where the region has its own “silk roads.”

Africa already has the largest working-age population in the world, and it is expected to hit 1.1 billion in 2034 — larger than China and India’s.

The world workplace is becoming African, and in Africa it’s getting ever more East African.

The Eastern Africa region (defined by the UN as 20 nations all the way from Djibouti and South Sudan to Mozambique) is the biggest by population at 457 million people currently, compared with West Africa at 402 million, while Middle Africa, anchored by DR Congo and Cameroon, has 178 million people.

Southern Africa (comprising South Africa, Namibia, Botswana, Lesotho, Swaziland) has 66 million people, a population ranked fifth in Africa and one that is projected to decline in the coming decades.



Africa population in millions. SOURCE | INED

Africa population in millions. SOURCE | INED

The region is in the middle of a baby boom, with kids born after 2000 who have never known a life without fast speed Internet entering adulthood in 2019.

The median age in the EAC is 18 (Uganda is lowest at 15). On the other hand, the median age in Southern Africa is 25.7.

Taking the case of Kenya alone, in the next five years, 10 million new consumers in the country will be turning 18.

This has major implications for the economy at large, but also the social makeup of the EAC: If 60 per cent of Kenyans were born after 1999 (when EAC II was established), it means the majority do not even know that we once operated as a federation, or where the squabbles between Kenya and Tanzania started.

Eastern Africa is also one of the fastest-growing economies in the world. Today, Eastern Africa is a consumer market of 457 million. This will grow to 587 by 2030, and 800 million consumers by 2050.

The global population growth will be driven by a population explosion in East Africa (we shall still be having four babies per family for most of this century!) In 2100, five countries in Africa will be among the world's top 10 most populous nations.

Nigeria will rank 3rd, with a population of 793 million; DR Congo will be 5th with 379 million; Tanzania will be 8th with 303 million; Ethiopia 9th with 250 million; and Uganda 10th with 213 million. Kenya will be in the next batch at 16th, with 142 million.

This means that, over the next few decades, outside Africa and Asia, the US will be the only country in the top 10 in population – and market size.

From Asia, the honours will belong to India, China, Pakistan and Indonesia.

Critically, in Africa, only Nigeria will be outside the greater East African region, with DRC, Tanzania, Ethiopia and Uganda in the top 10 club.

Strategic hotbed

So, while by 2100 the world will be African, home to more than one in three people, Africa itself will largely be East African.

The northern half of the Indian Ocean, flanked westwards by Asia and eastwards by Africa, will have the world’s largest economies and most of its population.

And the Indian Ocean, which already accounts for half of the world’s container traffic, will be by far the most decisive trading waterway in the world.

China's one belt, one road. SOURCES | XINHUA |

China's one belt, one road. SOURCES | XINHUA | FORBES | FT | SPIEGEL

By 2050 already, if you live outside the red circle, in reality, you will already have less geopolitical clout in the world.

Like all things that offer power and riches, this Indian Ocean Grand Zone needs an organising principle. China’s answer for an organising principle is the “One Belt, One Road Initiative.”

This is one of the long-term reasons for what has been described as a “military base race” in the Horn.

The US, and more recently China, have military bases in Djibouti not too far from each other, as do France, Italy and Japan. Saudi Arabia too is establishing a naval base in Djibouti.

The United Arab Emirates has just built a military base in Assab, Eritrea. Last year, Turkey signed a deal with Sudan to rebuild the old Ottoman-era port of Suakin on the Red Sea, which will include military facilities.

Turkey has a military base in the Jaziira coastal area of Mogadishu, its largest overseas military installation.

Not to be left behind, the UAE has a military training centre in the Somalia capital Mogadishu, and got itself embroiled in a controversial move for control of the Berbera port in the breakaway territory of Somaliland.

African logistics hub

But the race is not just for military bases. There is another track where nations are competing to be the regional, and in general, African logistics hub. For now, Djibouti has a leg up.

In the EAC, Kenya and Tanzania continue to bulk up their Mombasa and Dar ports. The most ambitious initiative is the Bagamoyo port, 72 kilometres north of Dar es Salaam, with the $10 billion undertaking partly funded by the Sultanate of Oman’s sovereign wealth fund and China’s Exim Bank.

With a special economic zone, optimistic projections see Bagamoyo being as busy as Rotterdam, and becoming Africa’s biggest container port in the next 10 years.

Tanzania is also working on the Mwambani Port and Railway Corridor (Mwaporc) to be built from Tanga.

When Uganda’s 1,445 kilometre-long oil pipeline arrives in Tanga, sometime between 2022 and 2025, Tanzania will have an embarrassment of port riches.

Kenya is still hoping to kick-start its on-off-on again Lamu Port-South Sudan-Ethiopia-Transport Corridor (Lapsset), a once highly billed 1,720km infrastructure and economic corridor – and that is just in the first phase.

Farther south, Mozambique is planning the giant new $3 billion Chongoene port project.

This means that between 2025 and 2040, the East African coast line will be littered with the most foreign military bases in the world, but also possibly the busiest chain of ports outside China.

Over the next three decades, the East African hinterland will also be buttressed by developments that will shape its economy and its integration.

In addition to the above, a few more stand out: On January 27, Ethiopia formally opened a second terminal at Addis Ababa Bole International Airport, doubling its capacity to 22 million annual passengers, making it one of the biggest in Africa.

A few days earlier, travel consultancy ForwardKeys had reported that Addis Ababa had overtaken Dubai, one of the world’s busiest airports, as the leading feeder of long-haul passengers to Africa.

Ethiopian Airlines is the most profitable airline in Africa by a mile, and flies to more destinations on the continent than any other continental rival.

It is small wonder then that Ethiopia’s Prime Minister Abiy Ahmed, whose reformist zeal is partly credited for the country’s change in fortunes, was buoyed enough at the opening of the new terminal at Bole to call on its management to “aim for a bigger facility with a capacity to accommodate at least 100 million passengers.”

It speaks volumes that he could envision an Ethiopia, and region, where at just one airport, 100 million people pass through, which would place it in the top five at today’s numbers.

How airlines remade Africa

But it also underlies the far-reaching role that East African airlines, especially Ethiopian Airlines and Kenya Airways, and in the past few years RwandAir, have had in fashioning modern Africa.

At the close of the 20th century, and in the first 10 years of the 21st, Kenya Airways hopped almost everywhere to Southern and West Africa.

In West Africa, it was often referred to as “the matatu in the air,” because it was the most reliable way to get between capitals in the region.

If you look at a flight map of Kenya Airways and Ethiopian Airlines routes, they carve out a prosperity corridor, touching down in the richest and most happening places on the continent.

Before China came along with its One Belt One Road, one could say that KQ and ET had already built an “African Silk Road.”

In moving thousands of business people across the continent, they have enabled the spread of popular African culture, including Nigerian films from Nollywood and Naija music; fashion; innovation hubs; and that common look of retail shops (so-called stalls) in Africa arranged like the ones in Dubai, brought in by the African traders they have flown to and from the Gulf.

Perhaps no vehicles have contributed to post-Cold War homogenisation of Africa than the airlines, with KQ and ET taking the biscuit.

Now the race has been joined, with Tanzania trying to breathe life into Air Tanzania, and Uganda investing in new aeroplanes to revive its defunct Uganda Airlines.

Collectively, they could result in a definitive consolidation eastwards of the “African hub,” and glue the region’s economies closer to themselves, and with the rest of the continent.

Farther inland, after the Commonwealth Heads of Government Meeting in Kigali, and the opening of its new Bugesera International Airport in 2020, alongside its massive urban investments, Rwanda will be close to becoming the “African Singapore,” on the mainland at least.

It will anchor the explosion of smart cities, as nearly 60 per cent of the regional population move to live in urban areas, and Lagos, Kinshasa and Dar es Salaam rise to become the three largest cities in the world by the close of the century.

End of EAC and the rest

Furthermore, with most of Africa living on the east side, and with the majority of the fastest-growing economies being found there, by 2030, we shall see the myriad economic groupings collapsing into probably two.

On the west side, from Morocco, through the Maghreb and Sahel, to West Africa and downwards via Angola into South Africa, we will have an expanded Economic Community of West African States, possibly with a new name. In any event, the Southern African Development Community will have been swallowed up by 2050.

On the east side, the EAC will be thriving, but not under its present name. It will have either merged, or been swept away by the Common Market for Eastern and Southern Africa – running from Egypt (possibly Libya too) to Mozambique – even earlier than SADC.

In any event, the EAC will disperse out of its present headquarters in Arusha, with its functions strewn around Kigali in Rwanda, Machakos or Kisumu in Kenya, and Jinja and Tororo in Uganda by 2030.

Somali capital and networks

The politics of the region will also have changed to reflect the architecture of the states.

Recently, Ethiopia announced it would do something Uganda has been world famous for – it will allow refugees to work.

In Uganda, which has what some consider the most enlightened refugee policy in the world, they also have the flexibility to go out and create businesses.

In an East Africa that today has nearly 60 per cent of the world’s UN peacekeepers, and most of the refugees on the continent, it could herald the next new stage of African citizenship.

Even if South Sudan, Somalia, and Burundi don’t settle and begin reconstruction in the next 10 years, it is likely that their citizens who are refugees in Uganda, Kenya and Ethiopia could, in less than 20 years, cease to be refugees and become instead East African “residents,” with the ability to vote in local elections.

The other development has been the rise of what one could describe as “Somali capital,” which has been consolidated by a vast global distribution network established by its widely scattered diaspora, and which has eased doing global business for East Africans.

Somali money (regional and global) is very likely to become the most important and fastest growing “African capital,” and the fluid that lubricates the East African economy.

Together with the new citizenship forms, they could impact their homelands in several ways that help them to economic recovery. It also means the question of whether Somalia, for example, becomes part of the EAC, will have been made moot by hard economic facts on the ground.

South Sudan and Somalia do not have to be conventional states to survive anymore; they could get by being half-native, half-regional.

Taken together with the policy change on refugees by Ethiopia, the Abiy reforms, and the burying of the hatchet with Eritrea, then become only the tip of emerging policies that will prove game-changers.

Kenya gets Ethiopia lift

Consider what is happening at Ethiopia’s border with Kenya. Abiy, himself an Oromo, has pursued a sometimes controversial pacification of the Oromo, who have long opposed the regime in Addis Ababa and brought it to its knees in early 2018. The Oromia Regional State covers nearly all of Ethiopia’s border with Kenya.

In the past one year, Kenya has reaped a boom from its Ethiopia-facing investments of the past decade.

The construction of the Mombasa-Nairobi-Addis Ababa road has brought Mombasa back into play big as a key port for Ethiopia.

The 845km stretch from Mombasa to the border town of Moyale is complete, and the Ethiopian section is expected to be done before the end of 2019.

It is projected, conservatively, that trade between Kenya and Ethiopia could jump fivefold from $35 million to $175 million by the end of 2019.

But it is the reforms in the banking and telecommunication sectors that could send Nairobi to cloud nine.

There is a continuing emergence and growth of pan-African multinationals, or national and regional companies that invest and trade continentally.

The majority originate in countries in the four corners of Africa – in the north in Egypt, in the west in Nigeria (especially Dangote Cement); in the south, South Africa with the most, and in the east in Kenya.

Kenyan companies are likely to benefit most from an open and modernising Ethiopia.

Kenyan telco behemoth Safaricom, KCB and Bidco, a regional multinational consumer goods company that operates and distributes in 16 African countries, are at Addis Ababa’s door waiting.

An Ethiopian entry would give them access to a market that, with 110 million people, is just shy of the EAC’s 150 million.

While it will mean more money in the bank for them, the EAC-shape-shifting effect will come from having richer multinationals favouring both an expansion and deepening of market integration.

It would bring us closer to a situation where there are companies that are numerous enough, and also rich enough, to buy and install pro-regional trade presidents in state houses, and fill the back benches of parliament.

If you are 70, this is an East Africa you may never see. If you are a centennial — born after 2000 – not only will you witness it in your lifetime, but probably also well before you get married at 35. It’s that close too.

Part 1 - Invisible hand that drives East Africa integration: As the East African Community prepares to mark the 20th year since its revival, in the series, we assess the things that hold the bloc together that could also break it

Part 2 - War drums in EAC, or a game of chess?: We look at whether Rwanda and Uganda, or Burundi and Rwanda could go to war; how Uganda’s oil pipeline through Tanzania is about everything else but oil...

Part 3 - Terror breeds solidarity: How the fight against Shabaab has energised East Africa: One day, in the years ahead, when East Africa celebrates its coming of age, it will thank two most unlikely sources for helping it find its mojo – the Somali terror group Al Shabaab, and the deadly conflicts in the region.

Charles Onyango-Obbo is publisher of Africapedia.com and explainer Roguechiefs.com. [email protected]

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