Tuesday, 29 May 2012

Will JKIA's T4 fast Track Direct flights to US?

An artist's impression of the 
land side of terminal 4 
THE COMPLETION OF Terminal 4, at the Jomo Kenya international Airport in Kenya could fast-track Kenya Airways entry into the US. Security features at the new terminal address security concerns of the US government, we can report.

The security features include separation of arriving and departing passengers. In the two-storey Terminal 4, arrivals will use the second floor while departures will use the first floor. 

The separation will be enforced by use of bold signage directing arriving, departing and transiting passengers to their respective floors to ensure all passengers get to their destination on time, says a KAA internal document.

This security measure could fast track negotiations for Kenya Airways to fly to the US. In April, the new America ambassador to Kenya, Scot Gration, told the local press that the separation of passengers in this manner was a one of the conditions that hold the authority for KQ to fly direct to US.

The Kenya Airport Authority’s handbook 2011-2012, says that the separation will involve building an additional floor in all four termini at the airport so that arriving passengers will be using their own floor separate from departing passengers. It will also include the construction of an airside corridor separating arriving and departing passengers.

Built by a Chinese Construction company CATIC, the US$72.3 million  terminal will increase the parking space from 200,000M2 with 23 stands to 300,000Maccommodating 37 stands meaning  it will accommodate more aircraft.
It will  also add another  23,500M2 of floor space  which will ease congestion at the Airport. Currently the airport, initially designed to serve some 2.5 million passengers,  handles  more than 6 million passengers a year.The new terminal will handle one-way peak hour traffic of 1,500 passengers..
 The terminal slated to serve international departures and arrivals only will be fully operational by Mid-Next year. It is now more than 50 per cent complete, sources close to the project say.
An artist's impression of the cargo Village 

An extended apron from terminal 4 to cargo village will increase its capacity   load eight wide-bodied aircraft simultaneously. Currently the cargo village can load only three such aircraft. JKIA is the cargo hub of Africa handling some 30 million tons of Cargo a year.

The terminal is designed to pamper the international traveler. It will have such facilities as an ATM lobby and Forex bureaux, a bookstore, beauty services, a Spa, Airline lounges and meeting rooms for businessmen.
International fast food brands such as Kentucky Fried Chicken (KFC) and McDonald’s among others will be available in addition to Chinese, Indian and African specialty food outlets. This variety will ensure that as an international airport one will be able to get the quality of food found anywhere in the world while still giving the option for Kenyan flavor.

Other conveniences on offer to the travelling public and discerning Kenyans will include high end specialty shops and luxury brands such us Gucci, Yves Saint Laurent, Louis Vuitton and Burberry as part of a wider product offering.

The duty free area on the second floor of the termini will be concessioned to a master concessionaire to manage it. Consessionairing is a widely used system by most successful international airports in Europe, Asia, America and South Africa. It has also been successfully replicated by Kenyan shopping malls.

The master concessionaire will ensure that duty free retail outlets add value to both customers and contribute to KAA’s bottom line.

 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, and 46 other international and domestic airlines that fly to more than 100 destinations. It is the natural aviation hub of Africa.

Thursday, 24 May 2012

East Africa set to become Africa’s manufacturing hub

 EAST AFRICA is on the path to becoming an energy secure region. And here we are talking about the energy mix including both fossil fuels and renewable sources of energy. Energy security is defined as physical availability, reliability and affordability of energy sources.
East Africa qualifies in all respects.  Picture this: Oil and natural gas finds are being updated almost weekly and reports of investment in exploitation of renewable sources energy have become regular in the region. In short, all sources of energy are available in one region. That is an energy secure region. And such a region soon becomes a manufacturing hub due to low cost of energy and its reliability.

An oil rig in Action
At the rate at which oil and Gas finds in the region are being are being announced, the region could soon stand neck to neck with the giants in the world.  According to the wire service Reuters, the US Geological Survey estimates that 253 trillion cubic feet of natural gas lie off Kenya, Tanzania and Mozambique compared to 186 trillion cubic feet for Nigeria, Africa's biggest energy producer. Both Tanzania and Mozambique are blazing the trail in natural gas exploration in the region. So far in excess of 100 trillion cubic feet has been found in the two countries.

Although oil discoveries are not anywhere near- the giants in West Africa.  Estimates show that east Africa could hold an estimated 6 billion barrels of oil compared to 60 billion in Nigeria. However, this is work in progress and estimates could change with new finds. For instance, in Kenya, the latest country to discover oil, the available quantity has been updated twice in a month from 20 metres of net pay load to 100 Metres at depths of 1500 Metres.  The explorer, Tullow oil Plc. says they expect to drill up to depths of 2700 Metres. More oil could be found, says the company in a statement.

 Uganda also has one billion barrels proven reserves but its potential is estimated at between 2.5 billion barrels and 6.0 billion barrels. Uganda proposes to produce some 150,000 barrels a day in the near future.
Apart from Oil and natural gas, east Africa is also exploring other sources of electric energy. Kenya is the leader in this respect. The country is estimated to have the potential got generate some 3000MW of wind power, of which an estimated 500MW will come on stream by 2016. It is also estimated to hold 7000MW of geothermal energy although some sources indicate that the potential is higher. So far, the country generates 205 MW of geothermal power –the highest in Africa but still too low considering its potential.

Consequently, there is a flurry of activity in geothermal exploitation. The local power generator; Kengen plans to generate 5000Mwof geothermal power by 2030. This works to an estimated 280MW every year over the next 18 years.  Each 280MW units is said to cost US$1 billion. That is neat pile of cash. Already a 280 Mw Unit at Ol-Karia IV is under construction.

In addition, the government owned Geothermal Development Corporation, GDC, plans to invest US$750 million to develop a 1600MW steam fields at Silali in Menengai in the Rift Valley. The fields will be developed in three phases. Phase one will generate 400MW at a costs of US$150 million. The funds were mobilised from Africa development Bank in the form of loans and grants. Some $124.5 Million is a loan while the balance some $25 million is a grant. The steam fields, to be completed in 2016, will be concessioned to independent Power producers to generate power from. This will make it even cheaper for power generators to invest in generating capacity. The result is power that is at least 50 per cent cheaper than it coasts now.

 Energy, together with transport, is some of the factors that contribute to the high cost of doing business in the region.  The region depends on the unreliable hydropower. This makes it vulnerable to shortages of electricity especially during drought.  To ensure continuity the region relies on expensive Thermal power to keep the economy running. The result is expensive products and stagnant manufacturing units.

Economics theory teaches that, low cost of production attracts investment into a location. East Africa is set to cut the cost of energy and transport, given the amount of investment into both.  Investment in oil and gas exploration is bearing results while infrastructure development is growing apace in the region.

In next five to ten years, say experts, the energy mix is expected to be fully operational generating both huge revenues and cheap power. Both Geothermal and Wind power cost an estimated US$0.07 per Kilowatt hour.
Experts say that the region has all the ingredients of manufacturing hub. These include; cheap and reliable energy, well -educated populations, a pool of skilled man power and a diversified economy including a vibrant manufacturing sector.

Given that all these factors are in place, say experts, the region will witness increased activity in the manufacturing as local manufacturers expand their capacity to meet the demand s of a prosperous population. Foreign manufacturers are also expected to come into the region in order to cut coats and also to penetrate the African Market from east Africa.

Apart from cheap power and smooth roads, the region is planning to create one Free Ttrade Area boasting of a population of more than 500 million people by July 2013.This is a US$1n trillion economy and growing. This it will achieve by marrying all three trading blocs into one. The three are; East African Common Market, COMESA bloc and SADC bloc.

Thursday, 17 May 2012

Time for Africa to ditch the West?

By all estimates, the economic engine for a majority of African countries has already warmed up and is headed for the runway ready for take-off. Africa is ready to move from frontier economy to an emerging market status or even better.  

However, before it gets into the runway, Africa must shed off some unnecessary baggage. This means a closer look at trading and development partners and a closer scrutiny of the continent’s political leaders, say credible researches. The question is; who shall be her partners in this take-off stage? Since the continent cannot wait to take-off, it has to trash or limit its association with laggards who slow it down to a bare minimum. Among the laggards, analysts say, is the West including the eurozone. And a  number of recent analyses on African economies stop short of telling Africa to dump the West.

The west, defined to include Western Europe, North America and Japan are going through economic and financial turmoil of their own. The crisis in the Eurozone is a sovereign debt crisis meaning that countries are unable to re-finance their government debt without the assistance of third parties. This has forced many governments to result into austerity measures, that is, cutting back on public expenditure with the resultant contraction in employment and domestic consumption. The crisis may take a long time to end and during this period, Eurozone will be an unreliable development and trading partner.

Not that it was a reliable one anyway. Even before the crisis, the West was the mill in Africa’s development until China and India burst into the scene. The West kept on introducing new excuses to avoid honoring its commitment to Africa. The debt crisis, that burst into the scene recently may have been long in the making, hence the excuses to delay disbursing funds. Consequently, most countries in Africa shifted the attention to emerging economies.

This means that Africa must move fast to diversify and deepen trade and economic links with the South - China, India and Brazil, the so called BRICS countries. A report by the global accounting firm Ernest Young www.ey.com, points Africa in this direction.

The report, Africa attractiveness 2011 -whose theme is the optimistic “it is time for Africa” -  says that that a majority of investors in North America and Europe are pessimistic about Africa. Only 38 per cent of respondents in North America and 45 per cent in Europe see any prospect for Africa soon. In sharp contrast, 86 per cent of investors in Africa say there has been improvement.

This position is supported by 74 per cent of respondents in the Emerging Markets and 66 per cent in Asia. In an Opinion piece in the same report, the CEO of Siemens Africa Region, Dirk Hoke, says “there is a perception gap On Africa.” A condition blamed on negative reporting by the media in the North.  Overall, Africa attractiveness 2011 says that Africa is on an upward trajectory economically, politically and socially. Not surprisingly fund managers in the emerging economies are reportedly mobiliising private funds to invest in Africa. An estimated US$2 billion, say reports is already in the hands of these managers seeking for investment avenues in Africa.  

The shift may not cost Africa much in terms of trade or development aid. Even before the Eurozone crisis, its significance as Africa’s trading and development partner was shrinking. In the last decade, financial aid to Africa has declined to just about $41 per capita compared to domestic revenue collection which has hit $441 per capita. Any shortfall will be mitigated by mobilisation of domestic sources or by FDI.

In fact, Africa is shifting away from Aid to investment following the discovery of oil, natural gas and other minerals in areas previously thought unviable. For instance, Tanzania is the largest recipient of donor funding in East Africa. However, the discovery of large quantities of LNG is expected to attract more FDI into the sector and reduce donor dependency.

In terms of trade, intra-Africa trade is growing and in some instance has surpassed trade with the West. For instance, according to a statistical abstract published by the central bank of Kenya, in 2011 intra-Africa trade exceeded trade with the West. Africa imported 48 per cent of Kenyan exports while the West absorbed 24 per cent. In fact, Uganda absorbed more Kenya exports ($904 Million) than UK and the US combined who absorbed US$860 million in 2011.

According to the UN economic commission for Africa, intra-Africa trade rose to 11 per cent in 2010 from Nine per cent of her total trade in 2006. The Commission, quoting WTO says that intra-regional trade in other parts of the world is 65 per cent. Though not stated in so many words, the report is urging Africa to target the same level of trade.

The development of intra-regional infrastructure, especially roads, is geared towards achieving this goal. Africa development Bank, the regional development finance bank, has led in this paradigm shift. It is quick to finance intra-regional infrastructure developments. 

The UN Economic Commission for Africa, UNECA, www.uneca.org, in its Economic Report on Africa, 2012, is upbeat about Africa’s prospects. It attributes Africa’s Economic and political revival to decades of good house -keeping. The report, whose theme is unleashing Africa’s potential as a pole of global growth says that improved economic and political governance, reduction in armed conflicts, increasing foreign capital and improvements in the business climate—as well as rising commodity prices,” underpin Africa’s economic revival.

The report is no idle chest thumping; Africa has posted a robust 5.6 per cent growth between 2002 and 2008 being second only to Asia. In the last decade, 10 of the 15 fastest growing economies were in Africa. Further African economies have proven resilient, almost shrugging off financial crises that left the North badly bruised.

The Commission calls on African countries to vigorously pursue economic diversification and structural reforms to be able to weather external shocks from the euro debt crisis. Further, it calls on Africa diversify their export destinations, expand economic partnerships and deepen intra-Africa trade and investment. Intra-Africa investment is growing, other reports say.

In the long haul, concludes the report, Africa must invest in infrastructure and human capital in order to grow faster and become a global growth pole by unleashing its productive potential. This theme is the mantra of African development Bank

Tuesday, 15 May 2012

Uganda is Kenya’s top export Market in the world

  UGANDA IS kENYA'S top export market in the world, we can report. The country absorbs more Kenyan exports than Britain and the US combined. While Uganda absorbed US$904 Million worth of Kenyan exports, the UK-US duo absorbed only $862million in 2011.

This development shows that contrary to initial fears, intra-east Africa Common market trade is growing significantly. An analysis of trade data reveals a marked growth in trade within the region. Even weak countries like Burundi also export to her partners in the region.

A report published by the Central Bank of Kenya shows that , Uganda is the world’s leading export destination for Kenyan exports, way ahead of Britain, the second leading export market for Kenya.   While Uganda consumed US$904 million worth of Kenyan exports in 2011, Britain consumed US$557 million worth.

Tanzania came in third ahead of Netherlands and the US. Tanzania, having absorbed US$496 million worth of Kenyan exports is the second largest market in the East Africa common market bloc.  In east Africa Rwanda is the third largest market although lawless Somalia absorbed some US$ 198 million worth Kenyan goods. Rwanda absorbed US$161 million.

Generally Africa absorbed US$2947million worth of Kenyan exports in 2011. East African common market absorbed an estimated 60 per cent or US$1.7 billion.

On the other hand, a report by the East Africa common market, EAC, shows that Kenya is the leading export destination for manufactured exports by her neighbours.  The EAC publication, dubbed facts and figures 2011, shows that Kenya absorbed more than US$500 million worth of exports from Tanzania and Uganda combined in 2010. Uganda exported US$284.4 million worth to Kenya while Tanzania exported some US$210.5 million worth in the same years.

Trade data for 2011 is not readily available on exports volumes by the two countries last year. However, extrapolation by the author, based on recent growth rates, estimates Tanzania exports to have reached $230million last year. Uganda’s exports on the other hand are estimated to have hit the US$300 million mark.

The EAC report shows that Ugandan exports to Kenya rose 481 percent between 2002 and 2011. She exported a paltry US$59 million worth in 2002 which rose to US$ 284.4 million in 2011. On the other hand Tanzania's exports rose by 554 per cent over the same period from US39 million to US$210 million in 2010 going by the official data.

Both documents show that intra-EAC trade has been rising since 2002 dealing a death blow to fears that some weaker countries will be swamped in. Analysts say that although intra-EAC trade is in favour of Kenya, there are encouraging signs that all partners are gaining from integration.  

The data shows that both Tanzania and Uganda, once considered underdogs in the regional export market, have registered huge growth in export to Kenya. Kenya, the regional economic powerhouse, it was initially feared, would force the closure of the manufacturing sector in Tanzania and Uganda.

This fear was the cause of resistance to lower taxes by Tanzania. But with the initial fears overcome, trade between the five member countries is picking up. Ugandan and Tanzania are now the leading destinations for Kenyan manufactured exports. Kenya in turn, is nudging the manufacturing sector in Kenya and Uganda to grow by consuming some of her goods.

This means that, although their export base is small, both Tanzanian and Ugandan manufacturing sectors have a high potential market in Kenya. Kenya is a high consumption market that the manufacturing sectors in the common market should seriously target in order to grow.

The east African countries began their integration process way back in the 1990s. They began the process began in 1995 with East African co-operation thereby opening trade and economic co-operation between the neighbouring countries. The co-operation was deepened to a Customs union in 2005 resulting in further expansion of trade and economic integration. In 2010 it was deepened into a common market with freedom of movement of goods, Capital and Labour.

Though some aspects of the common market are still contentious, the regions integration is forging ahead with cross-border investments growing.

The reports indicate that Kenya’s export to Africa have also been growing US$141.4 million in 2002 to US$518 in 2011. This is an encouraging situation especially as Africa faces a declining demand for her traditional exports to Eurozone, which is going through a sovereign debt crisis.  The rise in intra-Africa trade, says the Economic report for Africa 2012, will cushion the exporting countries from the negative effects of the chaos in Eurozone.