Wednesday, 18 December 2013

EAst Africa Infrastructure: Shifting Gears

Design plan of JKIA Green Field  In Nairobi, Kenya
IT IS THAT TIME of the year when we take stock of the past year. We review how much progress we made in economic development in east Africa. The region has enjoyed robust economic growth for much of the last decade which robustness has spilled into the current decade. Rather, bottlenecks defined by the robustness of the last decade are being removed in this one. Chief among all bottlenecks was infrastructure -roads, railway lines, hydro dams, geothermal wells, sea ports and airports.

There is a reason to focus on infrastructure:  Fossil fuels have been discovered in the top three of the five east common market countries. Consequently demand for infrastructure to service this new economic factor has shot up. Some mega projects, which just a few years ago would have been quietly dismissed as pipe dreams are becoming reality.

 Tanzania is so far the leader in discovery of fossil fuel with confirmed 40trillion Cubic feet (TCF) of natural gas. She is targeting 200TCF by 2017 and probably more, later. Tanzania has also exploited some of the gas reserves found in Songo songo in the early 2000s to power cars and generate electricity at home. The other two neighbours Kenya and Uganda are yet to exploit their discoveries.  But even before fossil fuels were found, the region had already identified physical infrastructure as a bottleneck.

 Here is what is going on: Lapsset US $23 billion, Konza Techno city $7 billion, Mombasa _Kampala – SG Railway line Kigali $13.5 billion, Kigamboni city $6.7 billion.  Bagamoyo Port $11 billion, Three Hydro dams in Uganda $ 4.2billion. Total $65.4 billion. That is the total bill for the mega projects.

Karuma Dam Uganda to generate 600MW
The transport sector has a high concentration of mega projects .These include; the US$23 billion Lapsset Corridor, the US$13.5 billion Mombasa-Kampala- Kigali SG railway line and the US$11 billion Bagamoyo Port.  Both the SGR and Lapsset corridor are at the implementation stage.  The first three berths of the 32 berth Lamu Port, ( Lapsset Corridor)  in Kenya is under construction, and so is the high speed Railway line starting from Mombasa, Kenya. As for the proposed Bagamoyo port in Tanzania, funds have been procured. Construction is yet to begin. The mega port will have a capacity of 20 million TEUs a year, perhaps the largest capacity in Africa.

 On a lower scale is the air transport, where the region is also investing heavily. Many projects in this sub-sector are being implemented with some nearing completion.  These include the US$450 million upgrading of Jomo Kenyatta International airport in Kenya. This phase which also includes the construction of Unit 4 of terminal one will end by January 2014.

The second phase which involves of a US$650 million green field terminal   was launched two weeks ago.  Completion of these phases by 2017 will make JKIA in Nairobi the largest airport in Africa with a capacity of serving 20 million passengers a year. Another airport in this  category is the US$650 million Bugesera international Airport in Kigali, Rwanda. The contract is at the negotiation stage.

Also on the cards is the US$ 163 million expansion of Julius Nyerere International airport in Dar-es-salaam. The project is expected to raise capacity of JNIA to 6.0 million passengers a year from the current 1.2 million. The contract has already been signed.

On Sea Ports, the expansion of Mombasa port going on. The port has already been dredged and widened into a mega Port. Berth 19 with a capacity of 200 thousand TEUs  a year is operational while the phase two of the container terminal is  due for completion sometimes in 2014. It is running ahead of schedule. This phase will raise the Port’s capacity to 2.1 Million TEUs a year.

 On roads, the US$ 140 million Kigamboni Bridge in Tanzania, will have the greatest impact. The bridge over the Indian Ocean will link the Dar-Es-salaam city with its Kigamboni  suburb. Kigamboni is lasted for a US$6.7billion Resort City, which will make Dar-Es-salaam the tourist hub in Tanzania.

In energy sector , Uganda leads the pack with a slew of hydro project worth US$4.2 billion. The projects include Karuma Hydro-project with a capacity of 600MW, Ayago Hydro dam also with a capacity of 600MW and Isimba dam with a capacity of 188MW. All projects will cost a whopping US$4.2 billion.  On the completion of the projects in seven years’ time, Uganda will emerge as the giant hydro power producer in the east African common Market bloc.  Her current capacity is 700MW which will rise to 2100MW by 2020. The projects are in construction stage.
Kigamboni Bridge Dar, Tanzania
 In Kenya Lake Turkana wind power project is the largest wind power project in Africa. It will generate some 300MW for Kenya’s national grid. This is 40 per cent of Kenya’s e current electricity output standing at 1250 MW. The US$763 million project is the largest private sector investment in the country’s history. It is funded by both Debt and equity.
Kenya’s electricity generation sector is an investment hotspot.  The country plans to increase its power generating capacity by 17000MW by the year 2030 when it will transit to an emerging economy status. The capacity currently is less than1500MW hence the mad rush to hit targets in just 17 years.  The bulk of this power will come from clean and renewable sources such wind, geothermal and solar sources.

 According to experts in the energy sector, on average, it costs US$2.5 million to produce a MW of electricity. This means that to produce 17,000MW will cost a massive US$42.5 billion for an average investment of US$2.5 billion a year.  In terms of the amount of investment needed, electricity

 For her part, Tanzania’s known potential is estimated at 10GW of which 3.5 GW is hydro. There is some Geothermal whose potential is yet to be determined. However, Tanzania’s power potential keeps changing due to on-going discovery of LNG and Coal. This means that Tanzanian capacity will keep on expanding as more Natural Gas and Coal are discovered. In fact some sources indicate that the future of Tanzania’s energy potential lies with coal and LNG

Wednesday, 11 December 2013

EA Central Corridor: Time to invest is now

Dar-Es salaam Port:Where the central 
Corridor beings and Ends
THE PURPORTED rivalry between Tanzania and Kenya on matters of infrastructure development is hot hair, say experts. The time to invest in the central corridor is now. And Tanzania need not feel guilty of seeking investment partners on the corridor.  There is nothing new in Tanzania entering into joint investment projects. She has done the Arusha-Namanga-Athi-river road with Kenya and is also doing the –Voi-Taveta-Holili – Moshi road jointly with Kenya. Therefore the notion that Tanzania is investing on this corridor to spite Kenya is dumb, say experts in Nairobi.

A substantial stretch of the Central corridor traverses Tanzania. Therefore it is in the country’s interest to connect unlinked regions for trade and development.  It is also in the country’s interest and those of her neighbours to extend the central corridor to her neighbours since by definition, the corridor ends and starts at the Dar-Es-salaam Port.

Mombasa Rd in Nairobi: Part of Northern Corridor
A report released in April 2013 by the Africa Development Bank shows that the central corridor is scantly used due to the fact that much of it is not paved.  Consequently, average annual daily traffic on large sections of this corridor is less than 1000 vehicles only 40 per cent of the corridor boasts of an AADT of more than 1000 vehicles. The implication is that investment is needed on this corridor to make it a viable route.

 And now that peace is returning to Burundi and DR Congo, time to invest is now, experts say. It is in this spirit that Tanzania, Burundi and Congo agreed to jointly develop road, rail, and air and water transportation infrastructure on the central corridor. Reports indicate that Tanzania engineered this move to counter the Northern Corridor’s purported “Coalition of the willing.”

 Experts in Nairobi describe this as “hullabaloo over nothing.” The transport infrastructure in question forms what is called the Central corridor. The central Corridor is, by definition all land transport infrastructure- rail and Road that begins and or terminates at the Dar-Es-salaam city in Tanzania.  It links Burundi, Rwanda , D R Congo and Uganda.

The Northern Corridor on the other hand, is by definition all land transport infrastructure originating or terminating at the Port of Mombasa in Kenya.  It also links Uganda, Rwanda, Burundi and D R Congo.  It is an alternative route to the central corridor. Given its relative efficiencies, the northern corridor is the busiest and most competitive route in east Africa, says State of East African Infrastructure a publication of Africa Development Bank
 However, for all practical purposes the central corridor is the more appropriate route for Burundi and parts of D R Congo.  For Burundi, it is 400 Kilometres shorter than the Northern Corridor.

Ndogo Kundu Road Designed  to ease transport at Mombasa Port.
What of Bagamoyo  and Dar -Es- salaam
Tanzania is a large country, measuring nearly a million square kilometres; she needs as much physical infrastructure as possible to open up the country.  She needs no permission from anyone to develop her internal infrastructure, say analysts in Nairobi.

 If the Central corridor were efficient, it is ideal for Burundi and D R Congo. However, it is inefficient forcing traders to use the relatively efficient Northern corridor. According to the African development Bank report mentioned earlier, imports to Burundi through Dar-Es Salaam take 33 days to reach their destination.  They take 29 days to travel through the Port of Mombasa. Of the 33 days, clearing through the Port of Dar-es-Salaam takes 25 days, it takes 21 days to clear through the Mombasa Port.  That is why there is need for investment in support infrastructure to ease congestion at the Dar Port.

That is why, Uganda, Rwanda and Kenya agreed to build a standard Gauge Railway line on the northern corridor to ease the cost of transport of imports and exports in order to support faster development in their countries. Construction was launched three weeks ago. The Railway will cut cost of freight by 60 per cent and reduce travel time to two days from Mombasa to Kampala and three days to Kigali. Such speeds will not escape notice of businessmen in Burundi, and D R Congo.

Before then, they agreed on removal of Non-tariff barriers that has improved efficiency at the Mombasa Port by 300 per cent. Imports to Kampala through the Mombasa Port now take 5 days to reach their destination by road down from 15. To Kigali, imports now take 8 days down from 22 days a few months back. The implication here is; to Bujumbura,   imports could take less than 10 days compared to 33 through Dar-Es Salaam.

And while still at efficiency of the transport infrastructure, Tanzania has opted to build a large port at Bagamoyo. This is a sensible move for Dar-es- Salaam port suffers structural limitations. The port is billed the largest in Africa, with a capacity to hold 20 million TEUs a year compared to Dar-es-salaam whose capacity is 800,000 containers a year. New roads and railroads will connect to existing road and railroad networks, and these will also undergo upgrades.

The port construction project will include the building of a new 34-kilometre road joining Bagamoyo to Mlandizi and 65 kilometres of railway connecting Bagamoyo to the Tanzania-Zambia Railway (TAZARA) and Central Railway.  Improving the transport infrastructure on the central corridor will go a long way to eliminate bottlenecks to the Bagamoyo Port.

Monday, 2 December 2013

Ground Breaking for JKIA Greenfield Terminal is finally here

AFTER SEVERAL postponements, Kenya’s President, Uhuru Kenyatta will preside over the ground breaking ceremony for Nairobi’s green field terminal at JKIA, to day, December 3rd .

 The US$ 653 million terminal has been has been on the balance for a while due to financial considerations. The terminal will be developed on a design, build, finance, operate and transfer (DBFOT) basis. It will not get any guarantees from the Kenya government. Consequently, financiers were slow footed in taking the risk. The terminal will be guaranteed entirely by the strength of the balance sheet of Kenya Airports Authority, the agency that owns airports in Kenya.

However, the authority will now foot 15 per cent of the costs.The agency increased the airport tax to $40 for departing passengers since last year. By now,it has accumulated a tidy sum that it is using to begin construction work at the terminal, said Engineer Joseph Kamau, the Cabinet Secretary in charge of transport.

All necessary inputs are in place: Two Chinese firms, Anhui Construction Engineering Group and state-owned China National Aero-Technology International Engineering Corporation will build the terminal jointly with Pascall and Watson Architects. The supervising consultant is also in place.

 The ground breaking will pave for the construction, which will start soon thereafter. The work will last 30 months, meaning terminal shall be completed by mid-2016. Engineer Kamau indicated that three consortia have made competitive bids to finance the project and that soon one of them will be identified and contracted.

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