East Africa stands to make about $2.6 billion annually from Kenya’s northern transport corridor, new sea ports and other mega infrastructure facilities upon completion, global consulting firm Frost & Sullivan has said.

The firm said oil and gas finds will become catalysts for investment in trade logistics facilities. Industries that will benefit from infrastructure developments include hydrocarbons, mining, agriculture and retail sector.

The Lamu Port Southern Sudan-Ethiopia Transport (Lapsset) corridor, comprising a crude oil export pipeline, a refined products pipeline, railways and roads linked to Uganda, Ethiopia and South Sudan, will open a new corridor in Kenya that will contribute to reducing the cost of transport.

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The Lamu and Bagamoyo ports are being built to expand the region’s capacity to handle goods. Bagamoyo port alone will have the capacity to handle 20 million twenty-foot equivalent unit (teu) per year.

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“Global and local logistics service providers will need to develop flexible end-to-end solutions to service construction and exploration work prompted by new discoveries,” Frost & Sullivan’s research analyst Siphesihle Hlela said.

The public sector is investing heavily in major projects such as the $3.8 billion Mombasa-Nairobi standard gauge railway (SGR), which aims to connect Kenya, Uganda, Rwanda and South Sudan.

The SGR is expected to raise Kenya’s gross domestic product by 1.5 per cent while enabling landlocked countries to export coffee, tea, agricultural goods and minerals. SGR will also handle imports.

READ: Uganda and Kenya in race to connect Juba to SGR

Mr Hlela said there is a race among global logistics providers to secure market share either through green investments or partnerships with local companies.

“These projects indicate a unique opportunity for global and local firms to partner and participate as a way to close the gaps in supply chain,’’ he said.

Transport costs in East Africa can account for up to 30 to 50 per cent of export value and up to 75 per cent for landlocked countries.

Delays add additional costs of $400 to $500 per trip for freight forwarders crossing borders.

READ: Tanzania losing billions through poor transport systems - AfDB

Bureaucracy impedes logistics with non-tariff barriers (NTBs) such as Customs clearance, multiple weighbridges and checks along main routes like the Mombasa-Kampala-Kigali highway, leading to unexpected delays.

The Single Customs Territory regime introduced in 2014 has reduced the cost of doing business as it now takes three days to move cargo between Mombasa and Kampala, down from 18 days. Goods moving between Mombasa and Kigali take six days, from 18 days previously.

Hub of trade

Frost and Sullivan senior economic consultant Craig Parker said Kenya is ideally placed as the hub for trade and business interests with sufficient infrastructure development driving intra-regional trade in East Africa.

“Kenya is set to become the fastest growing hub for regional trade. The level of development in the country is evident in all urban areas. The country will secure significant foreign direct investment in the next five years,” he said.

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The route between Mombasa and Nairobi has received particular attention in upgrades. This has led to the average cost of transporting a 40-foot container from Mombasa to Nairobi falling from $1,200 in 2012 to $1,050 in 2014.

An estimated $55.6 billion in investment in infrastructure development for Kenya is planned as of 2015, the majority of which will focus on telecommunications and power generation infrastructure.

Major road projects that are currently under way will alleviate the severe bottlenecks and traffic congestion. An estimated $5.14 billion has been dedicated to road projects in Kenya.