EAC member states are investing heavily in infrastructure projects, from roads and rail to ports and energy, in order to reduce the cost of doing business.
East African Community member states are investing heavily in infrastructure projects, from roads and rail to ports and energy, in order to enhance connectivity and reduce the cost of doing business.
This is best illustrated by major ongoing infrastructure projects such as the standard gauge railway from Mombasa to Kigali, the Lamu Port-South Sudan- Ethiopia Transport (Lapsset) corridor and the Ethiopia-Kenya heavy electricity transmission line.
According to several studies, poor infrastructure increases cost of goods by up to 60 per cent for landlocked countries, thereby reducing the competitiveness of their exports. It is a totally different story with better infrastructure.
For example, the Namanga One-Stop Border Post, to be commissioned soon, is expected to improve efficiency in Customs procedures while a second bridge over the Nile in Jinja will add critical capacity to the Northern Transport Corridor that links Uganda, Rwanda, Burundi and eastern Democratic Republic of Congo with Kenya.
According to Uganda’s Works and Transport Minister Abraham Byandala, the 525-metre bridge will cost $120 million and is expected to be completed in 2016.
Equally important in the infrastructure strategy is energy. EAC states have suffered from electricity outages owing to over-reliance on hydropower. This led them to use thermal plants running on diesel and heavy fuel oil. However, the region is now working on other sources of electricity such as natural gas, coal, solar and wind.
Business Monitor International values plants being built in or planned for the region at over $17 billion with a capacity of over 7 Gigawatts. To fund these, East Africa has turned to public-private partnerships. Kenya, for example, enacted the Public Private Partnerships Act in 2013.
“Financing infrastructure in East Africa will remain a challenge that can only be met by inclusion of the private sector through various forms of PPPs,” PwC Kenya’s capital projects and infrastructure deals leader Tibor Almassy said
Mr Almassy added that there is a huge demand for capital to be injected into East African infrastructure but governments must ensure conditions that offer a reasonable return on investments.
Rwanda launched a $400 million Eurobond in April 2013 while Kenya issued one worth $2 billion mid last year for infrastructure projects.
Mid this year, the World Bank approved a $100 million grant to Burundi for 31.5MW Jiji and 16.5 MW Mulembwe hydropower projects as well as an 80km transmission line. The cost of the project, which will almost double Burundi’s generation capacity, is $270.4 million. Only four per cent of Burundi’s 10 million people have access to electricity.
As far as transport facilities are concerned, Kenya is building a new $654 million terminal at Jomo Kenyatta International Airport to raise annual passenger handling capacity to 20 million from the current 6.5 million.
Rwanda is almost done with the expansion of Kigali International Airport at a cost of $17.8 million to handle 1.5 million passengers per year, from the current 600,000.
In August 2013, Kenya commissioned berth 19 to ease congestion at the Mombasa port and raise capacity to about 200,000 twenty-foot equivalent units (teu).
Two months earlier, Kenya, Uganda and Rwanda had formed the Tripartite Initiative for Fast Tracking the East African Integration, commonly known the “Coalition of the Willing” with an initial focus on joint infrastructure projects. Included in its scope was elimination of non-tariff barriers on Northern Transport Corridor as a vital trade link between Kenya and landlocked Uganda, Rwanda and South Sudan.
By May, when the CoW summit was held in Kamplala, the clearance time for cargo destined for Kampala from the Mombasa port had dropped to four days from 18 days, and six days from 21 days for cargo destined for Kigali.
The cost of clearing a container destined for Kampala had meanwhile fallen from $3,375 to $1,731 while for Kigali this cost had fallen from $4,990 to $3,387.
Kenya is building a second container terminal at Kilindini harbour. Construction of the 609km standard gauge railway from Mombasa to Nairobi, at $3.6 billion, has also started. The SGR line is expected to cut freight shipping costs from the current $0.2 per tonne-kilometre to about $0.083 per tonne-km.
Lapsset corridor, estimated to cost $25 billion, is one of East Africa’s most ambitious projects. It will encompass building of a new port at Lamu linked to the hinterland by a corridor of crude oil pipeline and refined products pipeline, roads, a railway, resort cities and airports.
The planned Bagamoyo port, some 60 kilometres north of Dar es Salaam, is part of Tanzania’s efforts to be a transport hub to challenge the dominance of Mombasa port in Kenya. China Merchants Holdings International will start construction of the $10 billion Bagamoyo port and special economic zone in July 2015.