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 neighboiuring 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 per cent, it is a mouth watering 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 link 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 toms 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 waste land for decades.

 Ethiopia will receive 41 per centof 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, www.AfDB.org
Although the debt was employed jointly, each country will stil service its debt to AfDB.

1 comment:

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