Wednesday, 29 February 2012

The road that opens a $950million volume of trade

The  Addis-Mombasa -Nairobi Road Map
KENYA AND ETHIOPIAN governments deserve to be fried on a rock in Chalbi desert. You see, for decades, the two neighbouring countries have been isolated due to lack of a reliable road link. The cost of doing business was exorbitant hence there was little or no business between the countries. However, now that they have seen the light, they should be forgiven and supported.

The two governments have jointly secured a UD$360 million loan from the African Development Bank, AfDB, for the Construction of a 320KM road linking the two countries. This is the third phase of a series of projects to upgrade to Bitumen standard sections of the 1003 KM road linking Ethiopia to Kenya’s port city of Mombasa.

The road, expected to be completed in 2017, will pave the way to a US$1bn million a year market. Trade between Kenya and Ethiopia, neighbouring countries without road link, is pretty low.  Data available shows that the volume of trade between the two countries stood at US$61.5 million in 2009. This was a “significant” growth from US$51 million three years earlier. The construction of the road is expected to double Ethiopia’s Exports to the COMESA block from US$522 million in 2009 to $900million by 2017.  The value of Kenya’s exports to the same bloc is expected to rise by a similar margin, that is, by $500m over the same period, says the bank’s Evaluation Report.

The volume of trade has been slow due to lack of a reliable road link between the two countries. Now, with the construction of the last 320 KM stretch, trade between the two countries is expected to pick up tempo from 2017 onwards when this section will be completed.

 The second cause for optimism is Ethiopia’s population size. Its population was estimated at 85 million in 2010. Coupled with an economic growth rate in the upwards of 10 percent, it is a mouthwatering market for Kenyan manufacturers who are expected to export $200m worth by 2015.

On the other hand, the Kenyan economy is the largest in East Africa Common Market bloc. It is the largest market for the goods produced in its neighbouring countries. It is, therefore, a potential destination for Ethiopian exports.

Apart from opening up the markets, the link is expected to lower the cost of doing business for Ethiopia. A landlocked country, this road will link Ethiopia with the Kenyan Port of Mombasa. It will shave off some 10 hours of travel time between Nairobi and Addis Ababa, the Ethiopian Capital. It will also cut down the cost of running vehicles between the two countries from US$0.40 per kilometre to US$0.34 by 2016

The completion of the Mombasa-Nairobi- Addis Ababa road will increase the quantity of Ethiopian Freight using the Mombasa Port to two million tons in 2016 and to 2.5 million tons in 2018.  This road also links Ethiopia to Lamu Port whose construction begins in March 2012. This is killing two birds with one stone for Ethiopia for the Mombasa-Nairobi-Addis Ababa road connects the Lamu -Southern Sudan-Ethiopia Transport Corridor (LAPSSET) at Isiolo in Kenya.

At the micro-level, the road will open a large segment of previously marginalized areas in both countries to land to exploitation. Inter-country highways attract spur economic activity in the towns along its route. The MombasaBujumbura highway has, for instance, spurred huge economic activity in towns along its path, some of which operate for 24 hours serving the needs of the travelers. This result fits very well with AfDB’s goal of reducing poverty through the growth of small-scale businesses and integration of Africa.

Recently, the President of the Bank, Dr. Donald Kaberuka lamented that lack of inter-country cooperation, rather than funding, was often the main barrier to the development of critical regional infrastructure projects in Africa. This, he said, had a negative impact on the growth of the intra-African trade.
This is the same reason why Kenya and Ethiopia remained separated by wasteland for decades.

 Ethiopia will receive 41 percent of the funds (US$148 million) to build a 198KM section between Hawassa and Ageremariam. Kenya will receive the balance (US$212million) to build the 122KM Turbi-Moyale section says the AfDB on its website,
Although the debt was applied for jointly, each country will still service its debt to AfDB.

Friday, 24 February 2012

Authority awards $640 M contract for Green Field Airport terminal

A Kenya Airways plane : The airline's hub is JKIA

THE KENYA AIRPORTS AUTHORITY , KAA, has awarded a $640million contract for the development of a green field terminal at Jomo Kenyatta international Airport, Nairobi. The terminal will be developed on a design, built .finance, operate and Transfer basis.

At the same time, the authority has entered into negotiations with a consortium of foreign banks for a concessional financing deal for the project. The financing deal is meant to “protect KAA’s interests.” This means that contractor cannot just accept any interest rate from his financiers, but will have to negotiate a financing deal acceptable to KAA. Alternative he will have to accept the financing negotiated by KAA.

Details of who was awarded the contract and the financing deal are still confidential as they have not been signed yet. Nor have the necessary governmental approvals been received by the time of publishing this piece..

The Greenfield terminal to be developed in two phases will expand JKIA’s capacity by 12 million passengers to more than 20 million passengers a year in Phase I. It will have a parking capacity, including “remote parking” for 60 aircraft bringing the total number of available parking slots over hundred aircraft.  

The Greenfield terminal will have a floor area of 172, 000 sq. m. It will be the premier hub terminal in Africa equipped for efficient connectivity for transiting passengers. 

A green field terminal is a terminal where the contractor has a free hand to design the terminal as he deems fit. The contractor is not confined by previous engineering designs. That is why it is awarded on a DBFOT basis.

It will have 50 international and 10 domestic check-in positions; 32 contact and 8 remote gates; an apron with 45 stands and linking taxiways and a Railway terminal. This terminal together with the expanded facilities in the other four-terminals will raise the airport’s packing capacity to more than100 parking bays
The terminal complements a five- year plan that began in 2007 to expand the capacity of the airport from 2.5 million people a year to 6 million to date. The previous expansion plan which incorporates the construction of terminal 4 increased the size by creating a parking for 37 aircraft up from 20 previously. This phase cost a whopping US$200 million.

The new terminal, once complete will make Jomo Kenyatta International Airport, JKIA, the aviation hub of East and central Africa.  In fact owing to its geographical location, Nairobi is the natural aviation hub of Africa. Already the airport is the busiest cargo hub in Africa, handling some 30 Million tones of cargo a year. The cargo is mainly Horticulture and floriculture products from Kenya and the East Africa region.

 Nairobi has become the financial, manufacturing, medical, educational and diplomatic hub in the east and central Africa region. These factors put lots of pressure on the Airport to also modernize and become the aviation hub of Africa.

JKIA is also home base for Kenya Airways, one of the most successful airlines in Africa. The airline operates to 53 destinations, 42 of which are within Africa. There are other 36 international and domestic airlines that operate from JKIA.

Kenya Airways, a listed company in the three securities exchanges in East Africa, has announced plans to raise an additional $262 million through a rights issue. The issue is slated to open in or around June this year. The money will be used to finance its fleet expansion programme over the next ten years. By 2030, the airline plans to have built its fleet to 107 aircraft from the current 37. Already it has placed an order for 9 Boeing 777 dream liners.  

Given such an expansion plan by its natural airline, JKIA would need to expand its facilities to accommodate her. Passenger traffic at JKIA is projected to grown at an average 12 per cent for the next twenty years. It is expected that by 2016, when the green field terminal is expected to be completed, the airport will be handling more than 15 million passengers. To be developed on a PPP basis, the new terminal has an internal rate of return of 16 per cent, a feasibility study established.

The green field project has a phase II. This will be constructed after the second runway which will connect the green field terminal Phase I. Phase II will expand capacity by the same proportions as Phase I. This will raise the size of JKIA to more than 600,000M2

The Airport will be connected to the city by a high speed Commuter railway Line. The linking Railway line will be constructed by Kenya railways Corporation.
The philosophy behind the construction of transport infrastructure such as Airports has shifted from one of building a mere exit –entry points to one of developing an important cog in the economic wheel of a country, says engineer Stephen Gichuki, the Authority’s chief executive. JKIA directly contributes about 10.9 per cent of the GDP, says the authority’s handbook for 2011/2012. However, if its facilitation of growth in other sectors including agriculture, and tourism in all its variants is taken account of, this estimate is conservative.
 For instance, the growth of the airport and its efficiency in cargo handling has led to the growth of horticulture and floriculture industry in Kenya and the entire region. Horticulture is the leading export earner in Kenya and also a significant forex earner in Tanzania, Rwanda and Uganda. JKIA’s efficient systems have enable exports of farm fresh produce to Europe from Kenya and the neighbouring countries.
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Wednesday, 15 February 2012

Kenya turns to geothermal and wind power in a big way

A Geothermal Plant
 KENYA IS FAST WEANING itself of dependence from hydro-generated electricity to other sources of renewable energy such as wind and geothermal. The shift, which has been in the making for a long time has picked up pace and, in a decade or so, hydro will be an insignificant source of electric generation.

Currently, hydro is the leading source generating a 766.88MW which forms 65 per cent of the KenGen’s installed capacity. KenGen is the power generating utility. Kenya’s generating capacity of 1400MW serves only 14 per cent of the Population. And the power is expensive.

However, the power generating company has firmly shifted its guns and is now targeting renewable sources of energy. It is now focused on developing geothermal and wind power as alternatives sources. 

A wind Power
In its current development programme which ends in 2016, the company will increase its power generating capacity by an additional 1832 MW by 2016.  Of these, Hydro will generate an additional only 53MW while wind power will generate an additional 56.8 MW, geothermal will generate an additional 732MW over the same period. Coal will produce some 600MW while an LNG project to produce 300MW is being studied. Also being studied is another wind farm based in Marsabit County in Northern Kenya that potentially can generate 150MW.

In short, by 2016 Kengen’s 3000MW generating capacity will be dominated by geothermal at 882MW; Hydro at 820 MW; coal 600MW; wind 62 MW. If the Lake Turkana wind farm is added to the grid, Kenya’s wind power capacity will approach 400MW.

Geothermal energy is the natural heat stored within the earth’s crust. The energy is manifested on the earth’s surface in the form of fumaroles, hot springs and hot and altered grounds. To extract this energy, wells are drilled to tap steam and water at high temperatures (250-350°C) and pressures (600-1200 PSI) at depths of 1-3 km. For electricity generation, the steam is piped to a turbine, which rotates a generator to produce electrical energy.

Kenya is the leader in geothermal power generation in Africa having built its first geothermal power in early 1980s. It now generates some 150MW from two geothermal plants. The first plant was the Olkaria I Power Station which was also the first in Africa. The 45 MW plant was commissioned in three phases and has three units each generating 15MW. The first unit was commissioned in June 1981, the second and third units in November 1982 and March 1985.

Olkaria II Power Station, Africa’s largest Geothermal Power Station to date was built in the year 2000 and generates 70MW. It is the second geothermal plant owned and operated by KenGen. The second phase of Olkaria II was commissioned in 2010 injecting an extra 35 MW of power making a total of 150MW of power generated by geothermal means.

Hydro, is becoming an insignificant source because the rivers are not expanding. In fact, the source is unreliable as it relies heavily on rain-fed water to fill the dams. During drought, the water levels shrink forcing the country to revert to expensive thermal power. Such limitations would become a stumbling bloc to economic progress.

So in came geothermal power to the rescue. Although this quantity of geothermal power generated so far makes Kenya the leader in Africa, it is just a drop in the ocean. Kenya’s geothermal potential is estimated at 7000MW, KenGen is preparing to exploit 5000MW of these by 2030. This works to a total of 278MW a year.
Going by the current KenGen’s development plan for the next four years, the goal is achievable. Of the six plants currently under construction, two generating 280MW will be commissioned in 2013, one, eburru, generating 2.5 Mw was commissioned last year and the other three, generating 452.5MW will be commissioned in 2016.
Sources indicate that constructing a 280 MW unit costs US$ 1billion (Kshs 84 billion). To develop 5000 MW will require 18 units which means that KenGen will need quite a neat pile of cash to construction the 18 units. However, with the rapid growth of the Kenyan economy, especially with the growth of Greenfield cities, demand for power will grow.   Further the company is also generating some carbon credit from it clean power developments. It is said to be gunning for at least $13 million annually.

On wind farms KenGen has apparently borrowed a leaf from it competitor in this respect, the Lake Turkana Wind Power project which hope to generate 300MW into the national grid starting next year. Already KenGen has a wind farm in Ngong near Nairobi which generate some 6.8 MW, it is planning to install farm of a similar capacity by April 2013.
In addition, the firm expects to commission another 50MW wind farm in Isiolo to support the growth of the resort city in that town. Further North, KenGen is carrying feasibility studies for a further 150MW wind generated power in Marsabit County.

Kenya Electricity Generating Company Limited, KenGen, is the leading electric power generation company in Kenya, producing about 80 percent of electricity consumed in the country. The company utilises various sources to generate electricity ranging from hydro, geothermal, thermal and wind. Hydro is the leading source, with an installed capacity of 766.88MW, which is 64.9 per cent of the company’s installed capacity. It is the leader in the liberalised electric energy sub-sector in the Eastern Africa Region. 
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Wednesday, 8 February 2012

Kenya rearing to launch an ICT City

An artist's  impression of the the ultra Modern CBD at night
 Welcome to Africa's Silicon Savannah

KENYA IS REARING TO roll-out a technology city. The city, arguably the first of its kind in Africa, will be located just 60Km South west of Nairobi, at Konza in Machakos country. Dubbed the silicon Savannah of Africa, Konza ICT City is a green field project that will be home of Africa's Computerisation drive–something similar to Silicon Valley in the US.

This is why it is called the Silicon Savannah. It will enable Kenya to compete neck on neck with global giants in BPO, KPO and ITOs including India and China.  On the African continent, Kenya will compete with South Africa and Egypt.  Being the first in the East Africa commom Market bloc, the city is likely to be the regional Computerisation hub.

So far, the project is progressing well. The government has already bought 2000 hectares to build the city and lay out plans are in plans are in place. A public youth training institute, the national youth service, is on the ground developing basic infrastructure such as roads, water boreholes and such similar infrastructure.  The government is now head hunting for a master planner to oversee the renting of facilities in the city.

 Konza Technology city is a flagship project of vision 2030, Kenya’s blue print for long term development. The Kenya Vision 2030 aims to transform Kenya into a newly industrialising, middle-income country providing a high quality of life to all its citizens by 2030 in a clean and secure environment.

An Artist's impression of the BPO/KPO Park
The vision is anchored on three pillars: economic, Political and Social. The three pillars are in turn anchored on the foundations of macroeconomic stability; infrastructural development; Science, Technology and Innovation (STI); among others.

This is how Konza Technology City fits in. The US$10 billion city comprise of a Central Business District, and BPO Park, a university, other schools; and a financial district. Other social amenities include a recreation facilities, shopping Malls, Restaurants and Hospitals. The city will also boast of housing estates of various densities. At the end of the phased development 20 years down the road, Konza City will host some 200,000 people

The ICT Park is allocated 1.4 million square Meters of land reflecting the importance the government attaches to technology development. It will be flanked by a Science Park 226,000M2. The Central Business District which shall comprise of mixed use commercial blocs including Shopping malls and Restaurants is allocated 669,000M2 of land. The city is expected to contain 37,000 homes for its 300,000 citizens. Zoned in four clusters ranging from very high density to low density dwellings the residential zone’s area is 3.6 million M2.

The technology university is allocated 51,000M2 while schools, and other social amenities including recreational areas, play grounds and worship areas take  some 920 ha within the residential areas.

The government will lease the land to investors at subsidized prices in order to keep the capital outlay low. In addition the government will also build a 50 KM high speed Railway Line linking Konza City to the International airport at Nairobi. This means that the rest of infrastructure in the city will be developed by the private sector through a string of financial models including PPP and leasehold.

The City to be developed in two phases up to 2032,will when fully operational, generate US$5.4 billion in revenue, says an Economic assessment of the city seen by this publication. However, the report still indicates that these figures are conservative.  The implication is that the city could generate more revenue than states now. It is expected that by the end of the first phase in 2015, the city will be generating $244 million a year from ICT related activities only, and employ some 8000 people.  The first phase will cost a whopping US$3 billion.

The second phase will build on the success of the second phase which will cost the Lion’s share will include the Financial district and the final phase of public utilities such as Hotels, Schools, Recreational areas .

 For an ICT city, Konza is the ideal site.  It is adjacent to all communications infrastructure that a city needs.  It is adjacent to the main route for long-distance fibre-optic cables between Nairobi and Mombasa making it an ideal placed for high speed, high bandwidth communications.

Within the development itself, a state-of-the-art access network will comprise four exchanges, linked by dual redundant fibre-optic networks, distributing outwards via star-configuration fibre-optic cables. This network will offer a complete modern telecommunications package of high-speed internet, telephony and video services.

Kenya has a rapidly developing mobile telephone market with healthy competition and major investment by the major service providers. By involving the service providers in the development process, they can expand their coverage to suit the needs of the Technology City.
 Apart from ICT infrastructure, Konza is adjacent to the main Mombasa Nairobi Highway and also the main Mombasa Kampala railway line. It is a mere 50 minutes or less from JKI Airport in Nairobi. The Airport is also being expanded to accommodate increasing passenger numbers.
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Wednesday, 1 February 2012

Kenya to begin construction of the gateway to Africa

The Lamu- Juba railway Line
THE GOVERNMENT OF Kenya will in February 2012 conduct a ground breaking ceremony to mark the beginning of the construction of the Lamu port. The project is not just a port but series of infrastructure projects in which the Lamu port situated on Indian Ocean is a key component.

The Lamu corridor is a transport and infrastructure project in Kenya that when complete will be the country's second transport corridor. Kenya's other transport corridor is the Mombasa port and Mombasa - Uganda transport corridor that passes through Nairobi and much of the Northern Rift. Since it will link Kenya to South Sudan and Ethiopia, the project is known as the Lamu Port and Lamu Southern Sudan-Ethiopia Transport Corridor (LAPSSET)

 Other projects in the series include a high speed railway line Linking South Sudan and Ethiopia to the Indian Ocean Port, a road network linking the same destinations, an oil refinery, oil pipeline, three airports and three Resort cities. The entire development will cost a whopping US$23 billion.

The port itself will cost an estimated US$3.5 billion. Located at on 1000 acres of land at Manda Bay within Lamu, the Port will comprise of 32 berths three of which will be financed by the Kenya government. The other 29 will be built on PPP basis. So far China and Japan are said to be keen on the constructing the port.

The project is thus a complete transport corridor linking Kenya’s second Port on the India Ocean to the hinterland including Ethiopia and South Sudan. Sections of the Infrastructure network will be funded by South Sudan and Ethiopia n governments but the bulk of the cost will fall on Kenya.

The Proposed gateway to Africa
A part from opening up remote northern Kenya for economic exploitation, the corridor is envisaged to eventually be the gateway to Africa as more extensions to D.R Congo and other landlocked parts of Central Africa are added.

A1720 KM Railway line from Lamu to Juba in South Sudan will be constructed at a cost of US$8.1 billion according to Kenya railways Corporation, www.

The line is seen as the beginning of the Equatorial Land Bridge linking the Port of Lamu on the Indian Ocean to the East to the Port of Doula in Cameroon on the Atlantic Ocean to the West. Such a link, it is envisaged, will cut freight travel time by at least two to three weeks and increase shipping lines’ turn-around times and hence their revenue.

The bulk of the entire cost of the Lamu-Transport corridor will fall on Kenya. At the peak of the project, between 2013 and 2018 sources say, it is expected that the Kenyan government will be spending about 6 percent of the country's Gross Domestic Product or 16per cent of its annual budget on the project. The project is in turn expected to generate an additional three percent increase in Kenya's GDP by 2020.

 However, both Sudan and Ethiopian will also foot part of the costs.  South Sudan for instance will build and own the 1700KM oil Pipeline linking its Oil wells with the Port of Lamu. This will cost an estimated US$4 billion.

Kenya and Ethiopia have jointly already secured a UD$360 million loan from the African Development Bank, AfD, for the Construction of a 320KM road linking the two countries. Ethiopia will receive 41 per cent of the funds to build a 198KM section between Hawassa and Ageremariam. Kenya will receive the balance to build the 122KM Turbi-Moyale section says the AfDB on its website,

The proposed oil refinery in Lamu with a refining capacity of 120,000 barrels a day will cost $ 2.5 billion. Other projects include the construction of three green field resort cities in Lamu Isiolo and Lake Turkana. Of the three Isiolo is way ahead. The local authority has already approved the allocation of 2,500Ha of land for the project while the construction of the US$12 million Isiolo international airport is on-going.  According to the Chief Economist in the Ministry of Tourism which is driving this project, the Resort city will cost US$210 million and will be developed on PPP basis.
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