tag:blogger.com,1999:blog-48787857662093592572024-03-17T20:03:06.587-07:00East Africa Economic ReportThe authoritative source for Economics, Financial and investment Reports on the East African Common Market block.
Email:mwakyendo@gmail.com East Africa Economics Reporthttp://www.blogger.com/profile/06336638272766088431noreply@blogger.comBlogger282125tag:blogger.com,1999:blog-4878785766209359257.post-87475022692114054342023-10-10T05:22:00.002-07:002023-12-24T01:29:47.133-08:00 Meet East Africa's financial behemoths<div class="separator" style="clear: both; text-align: center;"><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhtTSDrYzMlgQrkDJcDUuzQmYTlhUwFabUx7SjexJ8QLAtmgMS8DfSurZoQwl137EoJFGJ2-bc24v5cTLEHb2Pfc3pw7qEcawDhEjg9Z-mvvljMeImrfsKkNg91u9WHkckG0IiHyW01QHqAKjyYJuZx8RM2o8nds3kPyj4IOpzFi80aBgidit2D3pgYpfE/s680/2020-12-28.jpg" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="510" data-original-width="680" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhtTSDrYzMlgQrkDJcDUuzQmYTlhUwFabUx7SjexJ8QLAtmgMS8DfSurZoQwl137EoJFGJ2-bc24v5cTLEHb2Pfc3pw7qEcawDhEjg9Z-mvvljMeImrfsKkNg91u9WHkckG0IiHyW01QHqAKjyYJuZx8RM2o8nds3kPyj4IOpzFi80aBgidit2D3pgYpfE/s320/2020-12-28.jpg" width="320" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><b><span style="font-size: x-small;">EGHL Headquarters</span></b></td></tr></tbody></table><br /></div><div> Four years after a spree of Mergers and Acquisitions, the two leading Kenyan banks dominate the financial market in the East Africa Common Market region. The two, KCB Group and Equity Holdings Group Plc boast a whopping capital base worth KES 3.42 trillion( US$ 23.5 billion).</div><div><br /></div><div> KCB claims the top perch with a capital base of 1.86 trillion(US$12.75 billion) as at the end of June 2023 while Equity boasts 1.56 trillion($10.7 billion) at the current rates, over the same period.</div><div><br /></div><div> So dominant are the two that they dwarf their local competitors. For instance, NCBA Group which ranks third among the first-tier banks in Kenya, at a capital base of KES 660 billion, is less than half the wealth of the Equity Group and just about a third of KCB group’s wealth.
So large is their wealth that they stand neck on neck with the GDP of some smaller countries in the region. </div><div><br /></div><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: left;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhfzUkN83ScwOogKufTe1YPtkt-3rAFm7VIxX_OSryTgc_W4iZ_iqWLDNOsQpgaAOFkI4xrFxuDDlENn4gxytJPxn0h3j1F5BCU8gEO4Zye04ROUKKefQDGXbXGSTX6RItMVwDQ9npP4lt6O0VeUskI46kCUCS3PMOfS04vuzCvW8bva7b_p8E-JJTxNUE/s800/KCB-HQ-Upperhill-Nairobi-Kenya.jpg" style="clear: left; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="565" data-original-width="800" height="226" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhfzUkN83ScwOogKufTe1YPtkt-3rAFm7VIxX_OSryTgc_W4iZ_iqWLDNOsQpgaAOFkI4xrFxuDDlENn4gxytJPxn0h3j1F5BCU8gEO4Zye04ROUKKefQDGXbXGSTX6RItMVwDQ9npP4lt6O0VeUskI46kCUCS3PMOfS04vuzCvW8bva7b_p8E-JJTxNUE/s320/KCB-HQ-Upperhill-Nairobi-Kenya.jpg" width="320" /></a></td></tr><tr><td class="tr-caption" style="text-align: left;"><span style="font-family: arial; font-size: x-small;"><b>KCB Group Headquarters</b></span></td></tr></tbody></table><div>For instance, KCB Group's capital base could hit the US$13 billion mark at the end of this year which will be nearly 87 percent of Rwanda’s GDP projected at $14 billion this year. Equity Holdings Group too is not far behind. Its wealth could cross the US$12,5 billion mark this year, pushing its way to nearly 80 percent of Rwanda's GDP.</div><div><br /></div><div> The other banks in the top tier in Kenya are NCBA Group (KES 660 billion), Co-op Bank Group ( 597 billion), DTB Bank (579 billion and I$M Bank group (503 billion). These are at par with the top banks in Tanzania namely CRDB ($4.66 bn) and NMB ($4.166bn).</div><div><br /></div><div> These acquisitions have placed the Kenyan financial market firmly in the hands of indigenous banks. Local banks have swiftly shunted local branches of Multinational Banks, such as Barclays Bank and Standard Chartered Bank to the lower ranks of dominance in the local and regional financial markets. These are now the fifth and sixth largest banks in Kenya, having ceded their leadership perch to four locally incorporated banks. </div><div><br /></div><div> In 2019 when the marriages were consummated, the KCB group boasted of total assets estimated at $8.6 billion after absorbing the National Bank of Kenya. Equity Bank Group’s capital base then stood at US$6.38 billion.
The Kenyan banks are present in more than five countries apiece including the mineral-rich Democratic Republic Of Congo. </div><div><br /></div><div>Equity has acquired a controlling stake in two major banks namely Banque Commerciale Du Congo, BCDC which was worth $700 million in 2019. Earlier in 2015 it ProCredit Bank. KCB too bought a bank in DRC last year.</div><div><br /></div><div> The fast growth in the financial market is not confined to Kenyan behemoths. The sector is growing equally fast in Tanzania where the top two banks have doubled their assets in four years. The largest Tanzanian bank, CRDB, has seen its wealth double in four years from $2.52 billion to @ 4.663 billion last year. Its closest competitor, NMB Bank has also posted a similar growth trajectory from $2.36 billion in 2019 to $4.166 in 2022.
</div>East Africa Economics Reporthttp://www.blogger.com/profile/06336638272766088431noreply@blogger.com0tag:blogger.com,1999:blog-4878785766209359257.post-3632064064052318072023-08-14T07:26:00.000-07:002023-08-14T07:26:40.047-07:00 Why the High cost of living?<p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEhwZnadgSgv4rCjTMO0tAtMtHu5NkwCaGQv8ULUWapQoekBH_F_YxRo8h_BLOsdY9u_2VJ6Z-4lV3H987OATgDMJBVQaTzQo9EeEBG5jilH0a1E7DOyOuC_hacB4ddVhgzLyZ3Yimn1FJJOnRMeB9ufSJSdXnZZH0XpYqUQ1oLydg6UDYysii5M9RHtQkA" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img alt="" data-original-height="675" data-original-width="1200" height="180" src="https://blogger.googleusercontent.com/img/a/AVvXsEhwZnadgSgv4rCjTMO0tAtMtHu5NkwCaGQv8ULUWapQoekBH_F_YxRo8h_BLOsdY9u_2VJ6Z-4lV3H987OATgDMJBVQaTzQo9EeEBG5jilH0a1E7DOyOuC_hacB4ddVhgzLyZ3Yimn1FJJOnRMeB9ufSJSdXnZZH0XpYqUQ1oLydg6UDYysii5M9RHtQkA" width="320" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-family: arial; font-size: x-small;"><b>This is not how to lower cost of living</b></span></td></tr></tbody></table><span style="font-size: 12pt;">There is a
justifiable outcry over the high cost of living, not just in Kenya, but
globally. Everywhere the shoe is pinching.</span><span style="font-size: 12pt;">
</span><span style="font-size: 12pt;">Have our feet grown bigger or has the shoe tightened? Whatever the case,
the shoe is pinching.</span></p>
<p class="MsoNormal"><span style="font-size: 12.0pt; line-height: 107%; mso-bidi-font-size: 11.0pt;">When did it begin to pinch and why? Let’s begin with when? A little recent history is a good starting
point: Back in 2020, a nasty epidemic hit the world. It was vicious, spreading
fast, and claiming lives faster than wars. It was the COVID-19 epidemic. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size: 12.0pt; line-height: 107%; mso-bidi-font-size: 11.0pt;"> To check its spread
and protect their people, countries instituted lockdowns that lasted for
months. The world economy was devastated! Lockdowns meant joblessness, no money, and
no tax revenue for governments.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size: 12.0pt; line-height: 107%; mso-bidi-font-size: 11.0pt;">Towards the end of 2020, the lockdowns were lifted worldwide leading
to massive supply chain bottlenecks because of excess demand for goods and
inputs. And, before the world handled
that shock successfully, Russia invaded Ukraine in a war that still rages on.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size: 12.0pt; line-height: 107%; mso-bidi-font-size: 11.0pt;">These shocks reduced the supply of goods and services while
demand was still robust leading to price increases. One more shock happened in the US when the
government raised interest rates to contain raging inflation. That made the US dollar,
attractive to investors and a lot of them liquidated their assets elsewhere to
buy dollar-dominated assets. The US dollar strengthened by 8 percent,
weakening other currencies. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size: 12.0pt; line-height: 107%; mso-bidi-font-size: 11.0pt;">The so-called emerging and developing economies were ravaged! Picture this; your currency weakens amid high
commodity prices, especially of energy
and food. That is a recipe for high imported inflation. Coupled with domestic
shocks such as failed rains, inflation ran amok- the shoe got tighter with no
cobbler around to loosen it.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size: 12.0pt; line-height: 107%; mso-bidi-font-size: 11.0pt;">The Kenyan currency, the shilling, is suffering the ravages
of these shocks and has so far lost 15 percent of its value against the green
buck. That is to say, in addition to the high market prices, in terms of the US
dollar we have to pay 15 shillings more to buy the dollar so that, if the price
of a barrel of oil is $80, we shall buy it at KEs 12,000. Previously, when the
shilling exchanged at 100 to the dollar, we bought that barrel at 8000
shillings.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size: 12.0pt; line-height: 107%; mso-bidi-font-size: 11.0pt;">Now exporters are happy because they earn more shillings for
their exports- tea, coffee, horticultural produce, and other manufactured goods.
However, importers are crying because they have to dig deeper into their pockets to
import rice, Wheat, fuels, and other imports.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size: 12.0pt; line-height: 107%; mso-bidi-font-size: 11.0pt;">Consumers too-you, me, and other guys, are digging deeper into
our pockets to buy our daily supplies of these goods. The shoe is getting tighter. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size: 12.0pt; line-height: 107%; mso-bidi-font-size: 11.0pt;">So what to do? The dismal Science, economics, dictates-
please note: it dictates, it does not request- we must tighten our belts. We
must either produce more of these goods at home or reduce our consumption of
them. Since we cannot produce Machinery and food overnight, in the short term,
we must pay a high price or cut consumption. In the medium to longer term, we
must produce these goods at home. There simply is no shortcut!<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size: 12.0pt; line-height: 107%; mso-bidi-font-size: 11.0pt;">Which leads me to the next question? How about the
government, does it have to tighten its belt too? Theoretically, it can. In
practice, however, it is a different ball game.
We have donated some of our responsibilities to governments. Among these
is our security, defense, health, education, development projects, and external
relations, including borrowing, and
creating jobs. All these burdens cost
money. So short of abandoning some of the responsibilities with the attendant
risks, governments cannot cut their cloth according to their size.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size: 12.0pt; line-height: 107%; mso-bidi-font-size: 11.0pt;">In the Holy Book, the Bible, at 1 Samuel 8:10 onwards, the
Prophet Samuel warned the Israelites of the cost of human kings. They will have
the right to demand taxes among other rights. This is why governments raid our
pockets in terms of taxes and other statutory deductions from our incomes in
order to function. So, we are just fulfilling our part of that prophecy when we
pay taxes. While it is painful, taxes are the price we pay for installing
governments and donating some of our responsibilities to them.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size: 12.0pt; line-height: 107%; mso-bidi-font-size: 11.0pt;"> It has, for instance,
to pay public debt including external debts.
Kenya’s debt repayment per year is estimated at $1.67 billion. Half of
that goes to service Chinese debt and the other half to other lenders including the IMF, World Bank, and Africa Development
Bank among other debtors. Since the government does not make any money outside
tax, we have to pay taxes- grudgingly of course <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size: 12.0pt; line-height: 107%; mso-bidi-font-size: 11.0pt;">Oh! There is one more reason why the cost of living is high.
We have developed and our population has grown and is still growing. Large populations mean larger demand and
higher prices of everything. While it is fashionable to compare our current
situation with the past, the comparisons are lopsided. For instance, we keep
praising Kibaki's frugality. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size: 12.0pt; line-height: 107%; mso-bidi-font-size: 11.0pt;">True our debt was low during that era and so was our GDP. GDP
was US$50 billion by the time the late President Kibaki left office in 2013. By
2022, when President Uhuru left office, it was US$107 billion- double the
Kibaki era size. How did it get there?
Investment and growth meaning Development. With a larger wealth, our
consumption behavior has shifted. Our basket contains more goods and services
than when Kibaki left office. That shift in our consumption habits pushes
prices of certain goods up because the standard of living of a large segment of
Kenyans has risen. A high standard of living means higher prices due to
increased demand for goods and services.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size: 12.0pt; line-height: 107%; mso-bidi-font-size: 11.0pt;">Given these” gloomy” facts, one may ask, when will things
turn around so that the burden is eased. The gloomy answer is when the economy
creates more taxpayers so that the burden is spread around. Economies create more taxpayers when they
grow and growth is driven by consumption. Consumption in turn is driven by employment
of the people that need jobs. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size: 12.0pt; line-height: 107%; mso-bidi-font-size: 11.0pt;">Job creation is a product of investment in the productive
sectors. This is not easy because
governments do not possess magic wands they can wave around and create jobs. It
takes money and time. It does not matter whether job creation was a major plank of a government’s economic policy. It will still take investment and time. If the government is a major investor, means
more taxes or more debts. Which of the two evils do you choose since each is
painful?<o:p></o:p></span></p>
<p class="MsoNormal"><b><span style="font-size: 12.0pt; line-height: 107%; mso-bidi-font-size: 11.0pt;"> </span></b></p>East Africa Economics Reporthttp://www.blogger.com/profile/06336638272766088431noreply@blogger.com0tag:blogger.com,1999:blog-4878785766209359257.post-60080462851293295932023-07-21T05:18:00.006-07:002023-07-31T00:16:48.737-07:00 Kenya's SGR Loan: The Former Controller and Auditor General Lied <p><b>By The Conversation</b></p>
<p class="MsoNormal">In December 2018, a leaked letter from the Kenyan
auditor-general’s office sparked a rumor that Kenya had staked its bustling
Mombasa Port as collateral for the Chinese-financed Standard Gauge Railway. Our
new research shows why the collateral rumour is wrong.<o:p></o:p></p>
<p class="MsoNormal">The former auditor-general, Edward Ouko, was completing the
2017/18 audit of the national ports authority. He warned that the port authority’s
assets – of which Mombasa Port is the most valuable – risked being taken over
by China Eximbank if Kenya defaulted on the US$3.6 billion railway loans.<o:p></o:p></p>
<p class="MsoNormal">The profitable Mombasa Port is East Africa’s main
international trade gateway. Launched in 2017, the railway was intended to
seamlessly link the port to Kenya’s capital, Nairobi, and landlocked countries
beyond.<o:p></o:p></p>
<p class="MsoNormal">The Kenyan fears mirrored another tale widely circulated
earlier in 2018. In that story, China was said to have “seized” Hambantota Port
in Sri Lanka when the island nation had trouble repaying Chinese loans. This
“debt trap diplomacy” allegation was later shown to be a myth, but not before
it sparked fears about other large Chinese projects.<o:p></o:p></p>
<p class="MsoNormal">The Chinese and Kenyan governments both denied that Mombasa
Port was collateral but offered no explanation. Perplexed by the leaked letter,
our team of scholars and practitioners of international commercial law and
project finance spent months collecting primary documents and mapping the
project’s contractual structure.<o:p></o:p></p>
<p class="MsoNormal">To our surprise, we found that the collateral rumour stemmed
from a seemingly tiny but critical misreading by the auditor-general. The chief
auditor mistakenly labelled the ports authority as a borrower, responsible for
repaying the Chinese railway loans. He charged that by waiving sovereign
immunity, Kenya’s government had “expressly guaranteed” that the ports
authority’s assets could be used to repay the Chinese loan. The auditor-general
was mistaken in both charges.<o:p></o:p></p>
<p class="MsoNormal">For the auditor-general, and many others, the debate over
the railway and Mombasa Port was complicated by technical terms and practices.
These are used routinely in the law and business of international project
finance but are unfamiliar outside this arena, they say.<o:p></o:p></p>
<p class="MsoNormal">One of our most important findings is that the government’s
chief auditor was mistaken to call Kenya Ports Authority a borrower. If the
ports authority was a borrower, it would mean that it had co-signed the Chinese
loans and was equally responsible for repayment. But the ports authority is not
in any sense a borrower.<o:p></o:p></p>
<p class="MsoNormal">Clause 17.5 of the four party agreement quoted by the
auditor-general in its report spelled out the relationships: “Each of the
Borrower, Kenya Rail Company and Kenya Port Authority agrees…”<o:p></o:p></p>
<p class="MsoNormal">Our legal expert immediately noted that this refers to three
entities: Kenya’s treasury (the borrower), the rail company and the port
authority.<o:p></o:p></p>
<p class="MsoNormal">The auditor-general, missed this distinction by wrongly
paraphrasing the clause as referring to two entities: “each of the borrowers,
in this case Kenya Railways Corporation and Kenya Ports Authority…”<o:p></o:p></p>
<p class="MsoNormal">The auditor-general then pointed to Clause 17.5 to say that
the ports authority was a borrower and therefore its assets were at risk. The
auditor accused the ports authority of failing to disclose this during the
audit. The auditor-general was operating from incorrect assumptions that
influenced its opinion on the ports authority’s responsibilities.<o:p></o:p></p>
<p class="MsoNormal">The Treasury, Kenya Ports Authority and Kenya Railways
Corporation all signed “waivers of sovereign immunity”. This is because all
three were parties to various contracts in the overall package. Under
international law, sovereign states and entities they control have sovereign
immunity. This means they are generally immune from lawsuits and cannot be
compelled to appear before a foreign court or arbitration venue, or to enforce
a judgement rendered outside their borders. Yet few international banks will
offer a loan if there is no possibility of arbitration should a dispute occur and
no legal path to recover their money should the borrower default.<o:p></o:p></p>
<p class="MsoNormal">A published cache of loan contracts signed by Cameroon with
banks and export credit agencies from Austria, India, Germany, Spain, Turkey,
and the UK shows that all required these clauses. As one American lawyer noted,
leaving out a sovereign immunity waiver in an international commercial loan
contract would be professional malpractice.<o:p></o:p></p>
<p class="MsoNormal">However, there is quite a large gulf between a general
sovereign immunity waiver and specifying a particular asset like a port as
collateral<o:p></o:p></p>
<p class="MsoNormal">This study’s findings put paid to similar rumours that
borrowing governments have pledged strategic assets like land or ports in
exchange for Chinese finance. These involve Zambia (Kenneth Kaunda Airport),
Uganda (Entebbe Airport) and Montenegro (Port of Bar).<o:p></o:p></p>
<p class="MsoNormal">The debt trap diplomacy fear that borrowers’ strategic
assets are directly (and deliberately) at risk from Chinese banks continues to
fail the test of evidence.<o:p></o:p></p>
<p class="MsoNormal">Deborah Brautigam and Bernard L. Schwartz Professor of International
Political Economy, Johns Hopkins University<o:p></o:p></p>East Africa Economics Reporthttp://www.blogger.com/profile/06336638272766088431noreply@blogger.com0tag:blogger.com,1999:blog-4878785766209359257.post-2224192248065264962023-07-06T11:55:00.004-07:002023-07-06T12:02:18.936-07:00 The Media, "Chinese debt trap diplomacy" , and Zombie ideas<p></p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgfCsa4vdqX4uEsPaHmB2iUdv4TpdwSKPwF2qWqqXH-7oq2k3fSxwuB8flOQ1IkcNUbFlRnxaS-40tfBJalt0TkfVms4iZbClFV9jWGOZTD100Gce9NQ8So2OuGs85w94fXkXruGwxGoC56DpL-yf2c5YfR9ElPEsP_Nj9x4s3LyvjSHEt4LHXs82_4PlY/s630/SGR-WAGONS.jpg" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="350" data-original-width="630" height="178" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgfCsa4vdqX4uEsPaHmB2iUdv4TpdwSKPwF2qWqqXH-7oq2k3fSxwuB8flOQ1IkcNUbFlRnxaS-40tfBJalt0TkfVms4iZbClFV9jWGOZTD100Gce9NQ8So2OuGs85w94fXkXruGwxGoC56DpL-yf2c5YfR9ElPEsP_Nj9x4s3LyvjSHEt4LHXs82_4PlY/s320/SGR-WAGONS.jpg" width="320" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-family: arial;"><b>The new Railway hardware: Project <br />inundated with graft claims</b></span></td></tr></tbody></table><span style="font-family: times;"> The Media in Africa is increasingly becoming the purveyor of falsehoods. It sees graft in every development project in Africa even without an iota of evidence. Take for instance the Supreme Court of Kenya, SOCK, ruling two weeks ago that acquitted
the Kenya Railways Corporation, KRC, of any wrongdoing in the procurement of
the contract to construct the Standard Gauge Railway, SGR.<br /></span><p></p><p class="MsoNormal"><span style="font-family: times;"><o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: times;"> The Court ruled that
the Corporation was implementing a directive of the Executive, which by Law, is
allowed to initiate development projects in Kenya. The Corporation did not initiate the project,
and therefore, could be guilty of contravening either the procurement law or
the Constitution of Kenya. This is another Landmark ruling by the SCOK. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: times;">The Court found that the implementing agency, the Kenya
Railways Corporation, was enforcing instructions by the Executive since the acquisition
of the contract was a Government- to -Government deal. G-to-G deals are lawful
in Kenya, the court ruled.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: times;">The Railway line, Kenya’s largest infrastructure project since
independence, had generated a lot of heat with allegations of graft flying left,
right and Centre. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: times;">The grievance was that the project contractor was single-sourced<br />, without any international competitive bidding as required by Law. This
is the basis on which the Lower Courts, both the High Court and the Court of
Appeal, found the contract contravened the Law and the Constitution.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: times;">This matter is now settled. The executing agency, Kenya
Railways Corporation, did not initiate the project but the Executive did. The
executive ruled the Court, acted within the Law in negotiating the project
with the Chinese Government.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: times;"> However, the ruling is not the gist of this piece. The negative spin on the ruling in the Media is our focus. “<b>Get on the gravy train,”</b>
asserted the <b>Weekly Review</b>, a
publication of the Nation Media Group, in bold Print. It went to claim that the
ruling “<b>plays into the hands of deal
Makers.”</b><o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: times;">The ruling raises an issue regarding the theory and practice of procurement Law. Does it apply in all instances or are there instances where
the Law can legally be discarded? International Competitive bidding is required
to ensure that the country gets value for money. However, this requirement
applies only where there are other equally competent bidders for the project. What if there are no competitors for a
project? In terms of the Railway line, China is a far more competitive builder
of High-speed Railroads compared to countries in the West. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: times;">However, this truth does stop the Media's negative spin. A good example is the rumor coming out
of the Office of Controller and Auditor General that the country had mortgaged
Kenya Ports Authority’s assets to get the SGR loan.</span></p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: left;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiko9nTx8GqGRrynEiifGrmJnOLnYLG5U6LPOylbynZGPodWm3Yedc4mdlNln3YDd5Zk82QT5pm5Yog-BlDE03_5K_wApKDYc86vsd29Kb4hTwzJcZDoi_vH4IN5QXaJt5nJVz2G2TF_MiZZTl7Bl9PZR90Zd90tyEOUBJXP0JF5imwULb4ofdXg_7eijg/s940/-K-E%20expressway.jpg" style="clear: left; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="530" data-original-width="940" height="180" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiko9nTx8GqGRrynEiifGrmJnOLnYLG5U6LPOylbynZGPodWm3Yedc4mdlNln3YDd5Zk82QT5pm5Yog-BlDE03_5K_wApKDYc86vsd29Kb4hTwzJcZDoi_vH4IN5QXaJt5nJVz2G2TF_MiZZTl7Bl9PZR90Zd90tyEOUBJXP0JF5imwULb4ofdXg_7eijg/s320/-K-E%20expressway.jpg" width="320" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><b><span style="font-family: arial;">Kampala -Entebe Expressway. <br />Also faced claims of graft</span></b></td></tr></tbody></table><p></p>
<p class="MsoNormal"><span style="font-family: times;">Granted. The government did not make the contents of the
contract public. It, therefore, bore some of the blame for its bashing. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: times;">The idea that a government can mortgage a national asset is
a zombie idea. Government debt is concrete that is why new governments
inherit debt from their predecessors. It
is thus surprising that a zombie idea keeps coasting around. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: times;">Back to our point. In
reality, KPA was not a signatory of the loan between the government of Kenya
and China’s Exim Bank. Neither was KRC. The borrower of the loan is the Kenya
Government. However, a commercial take-or-pay contract between KPA and KRC was attached to the loan contract. The
contract between KPA and KRC required the former, being the only supplier to
KRC, to transport 40 percent of its freight through the SGR. In case of failure
to supply the target quantity, KPA was to pay KRC for the revenue shortfall.
The purpose of this contract was to raise the bankability of the SGR project.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: times;"> Despite being a dead
idea, the Media in Kenya, Uganda, and Zambia went to town with it, bashing the governments for pledging strategic assets in
exchange for Chinese finance. Zambia allegedly pledged assets of the Zambia
Broadcasting Corporation in exchange for a loan to upgrade Kenneth Kaunda
Airport, while Uganda allegedly gave away Entebbe Airport. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: times;">This nonsense narrative is hinged on an equally dead “China
Debt trap diplomacy” narrative coined in the West in a bid to scare Africa from
collaborating with China. China has proven a reliable development partner in
Africa who are efficient executors. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: times;">If the “debt trap diplomacy” does not scare, the
vilification targets government officials with allegations of corruption, of
receiving kickbacks for approving Chinese-funded projects. However, China is not the only government to enter into G-to-G deals in Africa, in Kenya in
particular. There were projects given to Engineering firms in the West that flopped. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: times;">In Kenya, three G-to-G projects with Western Governments were aborted.
Among these is the expansion of the Mombasa Highway to a toll road on a PPP
basis. The contract was given to Betchel
Engineering of the US in 2016. After years of inactivity, Betchel walked out of the
project.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: times;"> Vinci Highways SA, which won the contract to build the
$1.6 billion Rironi- Nakuru- Mau summit highway project in Kenya on PPP terms in 2018 also aborted. For years, Vinci held on to the project but made no headway.
The contract was terminated this year. Other firms whose contracts were stillborn include; CMC Di Ravenna, of Italy, and Grupo Isolux Corsan, of Spain, both of which went bankrupt during the tenancy of their contracts.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: times;">The collapse of these contracts debunks the myth of deal-making and corruption. That two of the three firms ended up bankrupt points to
the real reason why the Chinese firms succeed in Africa. They have access to
finance which Western engineering firms do not have. Therefore, the availability
of funds, rather than graft, is the Achilles heel for Civil Engineering firms
in the West. </span><o:p></o:p></p>East Africa Economics Reporthttp://www.blogger.com/profile/06336638272766088431noreply@blogger.com0tag:blogger.com,1999:blog-4878785766209359257.post-67161187806619519912023-06-27T00:06:00.005-07:002023-06-27T03:11:46.774-07:00 Supreme Court Spooks land grabbers in Kenya<span style="font-family: arial; font-size: x-small;"><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhwLsO2HaP3lybrlanYJW8Z1oncHihJGi2pQCzq1D3Ol7uj0TsEGFzif1twyn4X4YG4H0_pCBrRCbCPP1ZxmOCOeM-YLUVTjtyqv6iv0bKDfBgIUARf2FGASOoPycnSS2zR8Nn05HXJFlzwmI2Cu_c2EYGmeYUKsRCV1Ivgwf3KCg2jut07Thp_IHmJlo4/s626/south%20end%20mall.jpg" imageanchor="1" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="463" data-original-width="626" height="237" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhwLsO2HaP3lybrlanYJW8Z1oncHihJGi2pQCzq1D3Ol7uj0TsEGFzif1twyn4X4YG4H0_pCBrRCbCPP1ZxmOCOeM-YLUVTjtyqv6iv0bKDfBgIUARf2FGASOoPycnSS2zR8Nn05HXJFlzwmI2Cu_c2EYGmeYUKsRCV1Ivgwf3KCg2jut07Thp_IHmJlo4/s320/south%20end%20mall.jpg" width="320" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-size: x-small;"><b>When the bulldozers came calling Southend <br />Mall in Nairobi</b></span></td></tr></tbody></table>On April 21, 2023, the Supreme Court of Kenya made a landmark ruling on land grabbing in the country. It ruled, “The doctrine of bona fide purchase for value does not apply where the root of the title to land is challenged.” That short sentence shattered an investor’s dream to own a prime beach property as its root was challenged. An 18 million shilling investment for a 1.2-acre beach plot evaporated. <br /><br />The ruling by the SCOK is now the law. Moreover, it has spooked land fraudsters. Previously, all a buyer needed was a title Deed to the land to claim legal ownership. Now the root of the title must be clean for the title deed to be valid. This ruling means that the responsibility to carry out due diligence in the purchase of land lies with the buyer. <br /><br />Shoddy research could bring the buyer to tears. Not only the investor but also financial institutions that could accept titles to such land as security for loans. They will be holding a useless piece of paper. Buyers will have to dig deeper into the history of the ownership of the land before they purchase it <br /><br />In respect to the land in question, the process of transferring it from a public utility land to private ownership was unprocedural and therefore illegal, the Court found. Anything unprocedural is fraudulent, corrupt, and illegal. It cannot be transferred to anyone else because the seller has nothing to transfer. Yet, that is what happened in this case where the original grabber, the late President Moi, sold it to a third party who in turn sold it to Dina Management, who lost the case against the Mombasa country that reclaimed the plot as a public asset. <br /><br /> Three things stand out from this ruling; <br /><br />i) Buyers are required to conduct a full investigation into the title to ensure that there is a good root to ensure that the legal and equitable interest in the property is valid.<br /><br /><br />ii) Where the procedure of initial acquisition of title is deemed unprocedural or unlawful, subsequent transfers of the title are invalid since no legal equitable interest is deemed to have passed. <br /><br />iii) The doctrine of bona fide purchase for value does not apply where the root of the title to land is challenged. <br /><br />The ruling stirs a hornets’ nest for chunks of public and even private land have been excised fraudulently and sold to third parties. Public land includes; Roads reserves, Schools, Public offices, Riparian reserves, Forest reserves, and similar public goods. Some parcels were excised by powerful individuals and sold off to developers, who in turn, <br />have developed them. It remains to be seen how things pan out here. <br /><br />As a precedent, the ruling opens investors in Land Parcels, whose Tittle Deeds were dubiously acquired to possible losses. Some may be forced to surrender the land to initial owners or where the land has been developed, to purchase it from them. <br /><br />In the past, some buildings on public reserves have been demolished without a clear legal pronouncement. This ruling, apart from legalizing such demolitions, now opens more parcels in prime areas, to demolition. <br /><br />The ruling gives teeth to several agencies in the land and building sector to enforce the law. Previously, orders to demolish by the National Construction Authority were frustrated because developers brandished Title Deeds. Now many will have to think twice when ordered to cease construction. <br /><br />County Governments too have been empowered to claim public lands from grabbers. In some counties, developers, willfully and knowingly extended their plots to include road reserves hindering the development of such utilities as stormwater drainage apart from making motoring in some estates, a nightmare. There are signs that Counties are flexing their muscles in this respect. We have witnessed instances where developers have to pull down structures on public utility reserves. The SCOK ruling could turn the trickles into floods. <br /><br />Buyers and developers are not the only potential losers in this ruling. Even Financial institutions that accept such Tittle Deeds as security for loans potentially hold the short end of the stick. Of course, the financial institutions could ask for alternative security and vary the loan contract. However, they have also been enjoined in this ruling in terms of doing due diligence to ensure that the papers they accept as security for their loans are worth the ink they are written on. They must ask for the history of the title Deed to ensure that its root is clean. <br /></span><br /> East Africa Economics Reporthttp://www.blogger.com/profile/06336638272766088431noreply@blogger.com0tag:blogger.com,1999:blog-4878785766209359257.post-90371570164331331302022-03-20T10:54:00.001-07:002022-03-20T10:54:51.371-07:00Africa Needs More transport infrastructure- UNECA<p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEghFR3QxgrdrHubqp3PPse0pNAn9n6aRvzzIskY5qlxez2B6ECXL1Gna9EEEyi5cHLiJk7AmpLxG9q7K77T0Oxor7vY_pD4xVj4R0qnUmNiyjIqk7w8gG5qodzqV37LN1VtTuxtpwzQhtLCFbF1e7yz8ApWDWqYbxbhP6ICABitXzRw9GLxBawYihcH=s300" imageanchor="1" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="217" data-original-width="300" height="217" src="https://blogger.googleusercontent.com/img/a/AVvXsEghFR3QxgrdrHubqp3PPse0pNAn9n6aRvzzIskY5qlxez2B6ECXL1Gna9EEEyi5cHLiJk7AmpLxG9q7K77T0Oxor7vY_pD4xVj4R0qnUmNiyjIqk7w8gG5qodzqV37LN1VtTuxtpwzQhtLCFbF1e7yz8ApWDWqYbxbhP6ICABitXzRw9GLxBawYihcH" width="300" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-family: arial;"><b>Quality Roads: 60,00Km deficit</b></span></td></tr></tbody></table>The UN Economic Commission for Africa, UNECA, has just published a report on the effect of AfCFTA, on the transport sector. It says
that the FTA will nearly double intra-Africa trade by 2030. This will raise
demand for transport services by nearly 50 percent by 2030 resulting in new
demand for transport equipment- Trucks, Wagons, Airplanes, and Marine
Vessels. In turn, the increased
equipment will put pressure on the existing transport infrastructure- roads,
Railroads, Airports, and Sea Ports. This demand spiral will cost US$571 billion
to meet, says the report.</p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal"> The report quantifies
gaps in the sector that could stymie the FTA’s effect and the cost of
meeting the new demand for transport infrastructure and equipment. Transport
equipment will cost $411 billion while infrastructure will cost US$160 billion
says the report. The bulk of the costs will fall on the private sector, that
is, Truckers who will cough up S$345.5 billion for the more than two million
trucks needed to truck an additional 40 percent increase in intra-Africa trade.
<o:p></o:p></p>
<p class="MsoNormal">The public sector will pick up the balance, that is, US$62
billion to buy additional Rail wagons, Marine Vessels, and Aircraft. If we load the US$160 billion for infrastructure,
the public sector will pick up an estimated $222 billion.<o:p></o:p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: left;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEjLgCFTKDF4fWiTWqQlrFgHn2xmm8ZdrQJIbeuvlpFeXlYcuOyxC8qT_GOmPw7HqO1wHyKVdSt6nOudxRzLswGxb96bFBweDekqLHSpKYraSJ1JGkf5RM3yljgrkeRdMr4U0ZMAfKfqpPtIs4R0of1zvsxqBVFIgFtL7YB6c68-_Xf01kPylVsJjbWR=s600" imageanchor="1" style="clear: left; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="400" data-original-width="600" height="213" src="https://blogger.googleusercontent.com/img/a/AVvXsEjLgCFTKDF4fWiTWqQlrFgHn2xmm8ZdrQJIbeuvlpFeXlYcuOyxC8qT_GOmPw7HqO1wHyKVdSt6nOudxRzLswGxb96bFBweDekqLHSpKYraSJ1JGkf5RM3yljgrkeRdMr4U0ZMAfKfqpPtIs4R0of1zvsxqBVFIgFtL7YB6c68-_Xf01kPylVsJjbWR=s320" width="320" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><b><span style="font-family: arial;">Railroads: 25000KM deficit</span></b></td></tr></tbody></table></p>
<p class="MsoNormal">UNECA’s estimates on the cost of infrastructure are in tandem
with an earlier estimate by the Africa Development Bank, AfDB, which in 2018, estimated that Africa needs to invest some
US$35-47 billion a year on transport infrastructure for seven years, between
2018 and 2025 to meet the infrastructure deficit. <o:p></o:p></p>
<p class="MsoNormal"> Apart from
quantifying the transport equipment needed, the report also quantifies the length
of transport infrastructure deficit, effectively debunking the thesis that
Africa is investing in excess capacity. Instead, it exposes the gaps which it terms
opportunities.<o:p></o:p></p>
<p class="MsoNormal">Born in 2021, the Africa Continental Free trade Area,
AfCFTA, theoretically creates a large market of 54 countries with a total
population of 1.3 billion people with a total GDP in excess of $3.8 trillion
and an annual consumption expenditure in excess of $4 trillion. The FTA is
expected to increase intra-Africa trade by 40 percent in the medium term.<o:p></o:p></p>
<p class="MsoNormal">The Paper, <b>Implications
of AfCFTA on demand for transport Infrastructure and Services, </b>shows that
the FTA will increase demand for transport services by roughly 50 percent by
2045. The transport sector will be the second-largest beneficiary bagging 26 percent of
the real gains. It will also form 40 percent of new services production in
Africa, says the report. Every industry in the sector will register a three-digit
expansion, it demonstrates.<o:p></o:p></p>
<p class="MsoNormal">The paper says that the business services sector will be
the largest real gainer of trans-Africa trade, bagging 43 percent. However, the
study focused on the transport sector.<o:p></o:p></p>
<p class="MsoNormal">Demand for transport services will rise between 100 to 255
percent depending on the mode of transport, the report demonstrates. Road
transport, which already dominates intra-Africa trade, will rise by 100 percent
from 201 million tons to 403 million tons by 2030. Other industries such as Rail transport will
rise 227 percent while air transport will rise 100 percent to 4.5 million tons.<o:p></o:p></p>
<p class="MsoNormal">The growth in demand for transport services will trigger an
explosion in demand for transport equipment-Trucks, Aircraft, Wagons, and
Marine vessels. This will include; 2
million bulk Cargo and Container trucks, 118,220 bulk and Container Wagons, 254
new Aircraft, and 141bulk cargo and container freight Vessels by 2030, costing
a tidy $411 billion.<o:p></o:p></p>
<p class="MsoNormal">This new demand, states the report, will put a lot of
pressure on the existing infrastructure creating the need to build new
infrastructure and upgrade the existing ones. This will cost an additional $160
billion, bringing the entire AfCFTA related cost to $571billion.<o:p></o:p></p>
<p class="MsoNormal">There are 2.8 million Kilometres of roads in Africa, of
which 445,018 Kilometres are linked to cross-border trade says the paper. Of
these, there are 61,450 KM that will require upgrades to accommodate heavier
traffic. These are classified as
critical roads. The trans- Africa highways program has 57,300km of these
spread over 10 sections in the continent under its armpit. If build, these
roads will reduce the length of critical roads to 20,031km.<o:p></o:p></p>
<p class="MsoNormal">On rail transport, UNECA projects that by 2030, the quantity
of freight transported by rail will rise 520 percent from 0.76 million tons to
39 million tons. Trans-Africa rail freight will grow from the current 0.3
percent to 6.8 percent, also piling pressure on Rail infrastructure and
hardware. As of now, Africa boasts 80,607 KM, which is insufficient. There
are 26,500KM of rail on the drawing board and if implemented that will raise
the total length of railways to slightly over 100,000 KM. <o:p></o:p></p>
<p class="MsoNormal">There is still the nagging question; where’s the money? The
public sector will need US$262 billion to build transport infrastructure and
equipment, especially Marine Vessels, Rail Wagons, and Aircraft. In 2018, AfDB suggested
that Africa could borrow from the international financial market which is awash
with sovereign funds in the order of US$100 trillion. It called on African governments to craft
bankable infrastructure programs to attract the private sector. This was in
recognition of the fact that public sector funding is insufficient to finance
the needs. <b>See also</b> <a href="http://eaers.blogspot.com/2019/08/africa-needs-to-invest-12trn-to-fast.html">http://eaers.blogspot.com/2019/08/africa-needs-to-invest-12trn-to-fast.html</a>.
We will still need more debt.<o:p></o:p></p>
<p class="MsoNormal">Three years ago, this publication argued that AfCFTA is a
lifeline for struggling African Airlines. <b>See
</b><a href="http://eaers.blogspot.com/2019/07/afcfta-african-airlines-hanging-fruit.html">http://eaers.blogspot.com/2019/07/afcfta-african-airlines-hanging-fruit.html</a>.
Now, UNECA’s new research says the whole transport sector, regardless of the
Mode, is among the largest gainers from the FTA. <o:p></o:p></p>
<p class="MsoNormal">However, Infrastructure
projects, take a long time to build, say three to five years, even when fast-tracked. This is on the assumption that the funds are already sourced and
secured. If the funds are yet to be sourced, dependence on air transport could
stretch into the long run. This will provide the needed lifeline for African
Airlines reeling from low demand and under-capitalization. <o:p></o:p></p>
<p class="MsoNormal">By 2019, Africa airfreighted 2.3 million tons which is expected
to double by 2030 to 4.5 million tons. Therefore, to transport freight
efficiently, Air transport will a better option in the short to medium term
because its infrastructure is already in place. <o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>East Africa Economics Reporthttp://www.blogger.com/profile/06336638272766088431noreply@blogger.com0tag:blogger.com,1999:blog-4878785766209359257.post-73335318062184607842022-02-18T09:21:00.005-08:002022-02-18T09:21:44.631-08:00 Decommissioning " fiction analysts" In East Africa<p> The Tanzania Railways Corporation is inching towards commissioning
the Standard Gauge Railways in the near future. At the same time, it will decommission
a lot of “fiction analysts and Writers” as the reality of the line hits home. In
fact, the process has already begun.</p><p style="text-align: left;"><span style="text-align: center;"> </span><b style="font-family: arial; text-align: center;">Analysis of Hardware for each of the three lines</b></p><table border="1" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; margin-left: 8.75pt; mso-border-alt: solid windowtext .5pt; mso-padding-alt: 0in 5.4pt 0in 5.4pt; mso-yfti-tbllook: 1184;">
<tbody><tr style="height: 8.1pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="border: solid windowtext 1.0pt; height: 8.1pt; mso-border-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 63.55pt;" valign="top" width="86">
<p class="MsoNormal" style="line-height: 107%; margin-bottom: 8.0pt;">Corporation<o:p></o:p></p>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; height: 8.1pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 65.95pt;" valign="top" width="90">
<p class="MsoNormal" style="line-height: 107%; margin-bottom: 8.0pt;">Locomotives<o:p></o:p></p>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; height: 8.1pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 48.6pt;" valign="top" width="65">
<p class="MsoNormal" style="line-height: 107%; margin-bottom: 8.0pt;">Coaches<o:p></o:p></p>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; height: 8.1pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 48.6pt;" valign="top" width="65">
<p class="MsoNormal" style="line-height: 107%; margin-bottom: 8.0pt;">wagons<o:p></o:p></p>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; height: 8.1pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 48.6pt;" valign="top" width="65">
<p class="MsoNormal" style="line-height: 107%; margin-bottom: 8.0pt;">Total<o:p></o:p></p>
</td>
</tr>
<tr style="height: 7.7pt; mso-yfti-irow: 1;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 7.7pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 63.55pt;" valign="top" width="86">
<p class="MsoNormal" style="line-height: 107%; margin-bottom: 8.0pt;"><span style="color: #00b050;">ERC<o:p></o:p></span></p>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 7.7pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 65.95pt;" valign="top" width="90">
<p class="MsoNormal" style="line-height: 107%; margin-bottom: 8.0pt;"><span style="color: #00b050;">41<o:p></o:p></span></p>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 7.7pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 48.6pt;" valign="top" width="65">
<p class="MsoNormal" style="line-height: 107%; margin-bottom: 8.0pt;"><span style="color: #00b050;"> </span></p>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 7.7pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 48.6pt;" valign="top" width="65">
<p class="MsoNormal" style="line-height: 107%; margin-bottom: 8.0pt;"><span style="color: #00b050;">1130<o:p></o:p></span></p>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 7.7pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 48.6pt;" valign="top" width="65">
<p class="MsoNormal" style="line-height: 107%; margin-bottom: 8.0pt;"><span style="color: #00b050;">1171<o:p></o:p></span></p>
</td>
</tr>
<tr style="height: 8.1pt; mso-yfti-irow: 2;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 8.1pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 63.55pt;" valign="top" width="86">
<p class="MsoNormal" style="line-height: 107%; margin-bottom: 8.0pt;"><span style="color: #d34817; mso-themecolor: accent1;">KRC<o:p></o:p></span></p>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 8.1pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 65.95pt;" valign="top" width="90">
<p class="MsoNormal" style="line-height: 107%; margin-bottom: 8.0pt;"><span style="color: #d34817; mso-themecolor: accent1;">57<o:p></o:p></span></p>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 8.1pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 48.6pt;" valign="top" width="65">
<p class="MsoNormal" style="line-height: 107%; margin-bottom: 8.0pt;"><span style="color: #d34817; mso-themecolor: accent1;">40<o:p></o:p></span></p>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 8.1pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 48.6pt;" valign="top" width="65">
<p class="MsoNormal" style="line-height: 107%; margin-bottom: 8.0pt;"><span style="color: #d34817; mso-themecolor: accent1;">1620<o:p></o:p></span></p>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 8.1pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 48.6pt;" valign="top" width="65">
<p class="MsoNormal" style="line-height: 107%; margin-bottom: 8.0pt;"><span style="color: #d34817; mso-themecolor: accent1;">1717<o:p></o:p></span></p>
</td>
</tr>
<tr style="height: 10.3pt; mso-yfti-irow: 3; mso-yfti-lastrow: yes;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 10.3pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 63.55pt;" valign="top" width="86">
<p class="MsoNormal" style="line-height: 107%; margin-bottom: 8.0pt;"><span style="color: #c00000;">TRC<o:p></o:p></span></p>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 10.3pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 65.95pt;" valign="top" width="90">
<p class="MsoNormal" style="line-height: 107%; margin-bottom: 8.0pt;"><span style="color: #c00000;">17<o:p></o:p></span></p>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 10.3pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 48.6pt;" valign="top" width="65">
<p class="MsoNormal" style="line-height: 107%; margin-bottom: 8.0pt;"><span style="color: #c00000;">80<o:p></o:p></span></p>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 10.3pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 48.6pt;" valign="top" width="65">
<p class="MsoNormal" style="line-height: 107%; margin-bottom: 8.0pt;"><span style="color: #c00000;">1420<o:p></o:p></span></p>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 10.3pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 48.6pt;" valign="top" width="65">
<p class="MsoNormal" style="line-height: 107%; margin-bottom: 8.0pt;"><span style="color: #c00000;">1517<o:p></o:p></span></p>
</td>
</tr>
</tbody></table><p class="MsoNormal">The three top largest and most robust economies in East Africa
will each have a Standard Gauge Railway line. There will be no room for fiction
anymore. The narrative will shift to “what is,” from “what should be.” We will be ticking the boxes on each line and
comparing them. Two of the boxes can be checked already, the costs and quality of
the lines, and the cost and quantity of rolling stock and facilities.<o:p></o:p></p>
<p class="MsoNormal">Tanzania has yet to put the hardware on the rail. So we save
her the third box –efficiency of operations and impact of the line on the
economy. I must confess; I am afraid
that I am being sucked into the fictitious narrative because it is not clear
when the Tanzanian line will begin running. Several previous deadlines have
come and gone with no trains on the track. That is why, I am confining myself
to what is known- the facts- that are already in the public domain.<o:p></o:p></p>
<p class="MsoNormal">The first phase of the Tanzanian SGR, the 300Km Dar-es-salaam- Morogoro section cost some US$1.215 billion or $4.02 million per
kilometer. It is AREMA standard, an acronym for American Railways Maintenance
Standard. The Ethio-Djibouti line cost $3.4 billion or $3.92 million per
kilometer. Some sections cost more but let’s work with US$3.92 million. It is the Chinese Class Two standard, CS2. The Kenyan SGR cost $3.89 million per
kilometer for a total cost of $2.66 billion. It is a Chinese Class One standard. <o:p></o:p></p>
<p class="MsoNormal">The classes are differentiated by the density of the line. Class
one weighs 60kg per meter while the other two classes weigh 50 kg per meter.
Therefore, the Kenya line is superior to the other two regardless of aesthetics
such as electric engines.<o:p></o:p></p>
<p class="MsoNormal">The Kenyan contract was an EPC contract to CRBC for both the
construction of the Railway line, its ancillary facilities, and equipment and
installations including the Locos, and rolling stock. In fact, there were two contracts won by the
same company at separate times. The first contract for the construction of a
standard Gauge Railway between Mombasa and Nairobi was signed on July 11, 2012, and the second contract was signed three months later in October 2012.The second
contract worth US$1.144 billion was for the supply and installation of
facilities, Locomotives, and rolling stock, documents in our possession show.
The entire project costs $3.84billion.<o:p></o:p></p>
<p class="MsoNormal"> <span style="font-family: arial; font-size: x-small;"><b>Comparison of cost per Kilometer </b></span></p><p class="MsoNormal"><o:p></o:p></p>
<table border="1" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; mso-border-alt: solid windowtext .5pt; mso-padding-alt: 0in 5.4pt 0in 5.4pt; mso-yfti-tbllook: 1184;">
<tbody><tr>
<td style="border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 94.25pt;" valign="top" width="126">
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">Corporation<o:p></o:p></p>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 94.5pt;" valign="top" width="126">
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"> $m /KM<o:p></o:p></p>
</td>
</tr>
<tr style="height: 14.35pt; mso-yfti-irow: 1;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 14.35pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 94.25pt;" valign="top" width="126">
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="color: #00b050;">ERC<o:p></o:p></span></p>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 14.35pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 94.5pt;" valign="top" width="126">
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="color: #00b050;">3.92<o:p></o:p></span></p>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid windowtext 1.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 94.25pt;" valign="top" width="126">
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="color: #d34817; mso-themecolor: accent1;">KRC<o:p></o:p></span></p>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 94.5pt;" valign="top" width="126">
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="color: #d34817; mso-themecolor: accent1;">3.89<o:p></o:p></span></p>
</td>
</tr>
<tr style="height: 13.9pt; mso-yfti-irow: 3; mso-yfti-lastrow: yes;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 13.9pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 94.25pt;" valign="top" width="126">
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="color: #c00000;">TRC<o:p></o:p></span></p>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 13.9pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 94.5pt;" valign="top" width="126">
<p class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;"><span style="color: #c00000;">4.05<o:p></o:p></span></p>
</td>
</tr>
</tbody></table><p class="MsoNormal">The Tanzanian Central Corridor is a design and build contract. That is why she is contracting other companies for Engines and
rolling stock. These new contracts will raise the SGR cost by an estimated $400
million to more than $1.615 billion for the Dra-es salaam –Morogoro section.<o:p></o:p></p>
<p class="MsoNormal">For US$400 million, Tanzania will buy 17 Locomotives, 80
passenger coaches, and 1,420 wagons, a total of 1,517 units. On the other hand, for US$1.144 billion Kenya
bought 57 locomotives, 40 passenger coaches, 1620 wagons, and 2 cranes, a total of 1,719 units. Ethio-Djibouti for its part bought 1,171 units at a price we could
not establish.<o:p></o:p></p>
<p class="MsoNormal">Tanzania, we can predict, will be shopping for locos sometime
in the future, as the 17 ordered from a South Korean manufacturer are
insufficient for a 2,000km long line. <o:p></o:p></p>
<p class="MsoNormal">The phased investment in the project by Tanzania makes
economic sense. They start by “feeling the stones” before taking the plunge- a
realistic economic approach if you ask me. It is a reflection of concerns that the line
could take a long to build demand for its services. The Central Corridor is not a
popular route among importers in East and Central Africa. The Northern Corridor-
which traverses Kenya- is the popular route even by road. <o:p></o:p></p>
<p class="MsoNormal">This means that the Central Corridor’s business will be
subdued for a while as conditions within her potential market crystalize. Alternatively, Tanzania will have yank away
business from the Mombasa Port in Kenya. There are serious concerns regarding
this approach. <o:p></o:p></p>
<p class="MsoNormal">Among them is the size of investments required to make it
feasible. The Kenyan Port is three times larger than Dar-es-salaam Port. Further,
transit time between Kenya’s Port of Mombasa and Uganda, the largest import
destination for the Kenyan Port, is just 24 hours by SGR or slightly over 1,250
Km. Even with the SGR and MGR combined travel time will not exceed 36 hours.
The trip by road takes roughly five days. <o:p></o:p></p>
<p class="MsoNormal">On the other hand, the distance between Dar-Es-Salaam Port
and Mwanza Port on the shores of Lake
Victoria is 1280Km. Between Mwanza and Port
Bell in Uganda is 320 Km of water. This means that a single train of merchandise destined
for Uganda will have to be offloaded from the train at Mwanza and loaded onto
Ferries. A single train carries 216 TEUs
while a single Ferry carries 44 TEUs. To transport a single train of Ugandan
Merchandise will thus require an additional investment in five ferries.<o:p></o:p></p>
<p class="MsoNormal">An official Uganda report assesses that this trip will take
three days adding a rider –“and that is being optimistic.” The report, therefore, concluded that the “Central Corridor a low-priority route for Uganda.”<o:p></o:p></p>
<p class="MsoNormal">Therefore, phased investment in rolling stock would ensure
that Tanzania Railways Corporation is not stuck with idle capacity. <o:p></o:p></p>
<p class="MsoNormal">We digress. We were talking about the cost of the Railway
line and the point we were driving home is; the cost of rolling stock and Locos
should be divorced from the cost of building the line. Without the rolling
stock and installations, the Kenyan line cost $2.66 billion to build which
works to $3.89 million per kilometer. The Ethio-Djibouti line cost $3.92
million per kilometer while the Tanzanian line cost $4.02 million without the
rolling stock. Both Kenya and Ethiopia-Djibouti opted to acquire nearly all the
rolling stock they needed at once. Tanzania opted for a phased acquisition. <o:p></o:p></p>
<p class="MsoNormal">Critics of the Kenyan line, ignore the fact that the trains
running on the line also cost money. They behave as if the facilities, rolling
stock, and locos do not exist. <o:p></o:p></p>
<br /><div class="separator" style="clear: both; text-align: center;"><br /></div><br />East Africa Economics Reporthttp://www.blogger.com/profile/06336638272766088431noreply@blogger.com0tag:blogger.com,1999:blog-4878785766209359257.post-878984038511883932022-01-17T08:16:00.004-08:002022-01-17T08:20:13.451-08:00Why Tanzanians are elated<p></p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: left;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEiSRx95cQkGlXyk9VJ27TT4-CjHUtjKJTfCPifws33zrWHnoyi_wK0248gUs4kksrE6Jsvv1Vgkeyw8gvzFSDmePflTtT1RmpB44W7GXcNhC0cBstYFqVmOW6bcwSpMsFctMdsXIArcYL6nXFgaIZ9LAH3QA1CgvZwnUdFCiK-YBUVCB42_PFbT9kxB=s480" style="clear: left; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="442" data-original-width="480" height="295" src="https://blogger.googleusercontent.com/img/a/AVvXsEiSRx95cQkGlXyk9VJ27TT4-CjHUtjKJTfCPifws33zrWHnoyi_wK0248gUs4kksrE6Jsvv1Vgkeyw8gvzFSDmePflTtT1RmpB44W7GXcNhC0cBstYFqVmOW6bcwSpMsFctMdsXIArcYL6nXFgaIZ9LAH3QA1CgvZwnUdFCiK-YBUVCB42_PFbT9kxB=w303-h295" width="303" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-family: arial;"><b><span style="font-size: x-small;">T</span>a</b><b>nzania's President Suluhu Hassan:<br /> her charm offensive paying off</b></span><br /><br /></td></tr></tbody></table>Tanzanians are elated that for the first time, the country
posted a trade surplus with Kenya. According to media reports, the country
posted a US$90.15 million surplus against Kenya in the period January to
September 2021. Tanzania exported US$ 396.8 million worth to Kenya compared to
Kenya’s exports worth $305.3 million, reported <b>The Citizen</b> newspaper.<p></p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal">This publication has not independently verified the data
from the unnamed official source. However, we have no reason to doubt it
because the December edition of <b>Leading
Economic Indicators</b>, published by the National Statistics Office in Kenya,
shows that Kenya’s exports to Tanzania rose 252 percent over the same period. <o:p></o:p></p>
<p class="MsoNormal">Further, the <b>Statistical
Bulletin</b> published by the Central of Kenya shows that for the first time in
years, Tanzania’s exports to Kenya breached the US$30 million mark for four
consecutive months to June 2021. Thus
the report is probably accurate giving reason to cheer.<o:p></o:p></p>
<p class="MsoNormal">The growth in trade between East Africa’s top two economies signifies
improved trade relations between the two countries, said the media report. <o:p></o:p></p>
<p class="MsoNormal">We agree. Since May 2021, the new President, Samia Suluhu
Hassan, has been on a charm offensive among her neighbors targeting improved
economic ties. The trade data shows marked growth since March 2021 leading to
the conclusion that her charm offensive is paying off handsomely, not just for
Tanzania but her neighbor too. <o:p></o:p></p>
<p class="MsoNormal">A review of trade data since 2017 reveals a pattern of a ceiling of sorts to trade between the two countries. Kenya, it appears, set a
ceiling of just under $300 million a year for Tanzanian imports. This works to
an average of US$25 million a month with occasional breaches. For instance, in June and July 2019,
Tanzania’s exports breached the $30 million mark before shrinking to the
“normal range” of under $20 million.<o:p></o:p></p>
<p class="MsoNormal">Kenyan exports also faced a similar ceiling, generally under
US$27 million a month, with occasional breaches past $30 million. These occasional breaches are evidence that
the trade potential between the two countries is high if you keep politicians
out of the way.<o:p></o:p></p>
<p class="MsoNormal">This is what politicians on the Tanzanian side have done-
stepped aside- allowing trade to find its level. The ceilings have been breached! The 2021 trade data reveals a growth
trajectory on both sides. Kenya’s exports to Tanzania more than doubled, even
as Tanzania exports posted a large growth. <o:p></o:p></p>
<p class="MsoNormal">The Data shows that Kenya’s exports to Tanzania in the first
ten months of last year rose 252 percent from US$22.7 million in January to $58.6
million in October, breaching the US$40 million mark for the first time. Tanzania’s
trade grew 102 percent year on year, according to media reports.<o:p></o:p></p>
<p class="MsoNormal">I particularly do not like using data for the year 2020. It
was a bad year. Covid-19 control protocols disrupted economic activity. It is
thus a bad year to assess policy successes or failures. According to media
reports, Tanzania’s exports to Kenya in the nine months of 2020 stood at $190
million doubling to $390 million over a
similar period in 2021. Trade with Kenya
in the previous years hovered around the same level, that is,$190 million. Therefore,
the sharp rise in 2021 is significant.<o:p></o:p></p>
<p class="MsoNormal">Due to this surge, Tanzania has pushed past Britain as the
second-largest destination for Kenyan Exports. Uganda is ill the leading market
consuming an average of US$57 million a month. Could Uganda cede the top perch
to Tanzania?<o:p></o:p></p>
<p class="MsoNormal">It is possible. After all, Kenya’s exports to Tanzania hit $58
million a month in October. Is Tanzania
Kenya’s fastest-growing export market?
It seems. What is not certain is
if the current surplus in favor of Tanzania is sustainable. <o:p></o:p></p>
<p class="MsoNormal">Tanzania’s external trade in Africa is characterized by
surges and retreats. For instance,
Tanzania’s exports to Ugandan and Burundi rose suddenly, nay exploded, between
June 2020 and July 2021 and then just collapsed. The <b>East Africa Trade Report</b>,
published by TradeMark East Africa reported a surge in mineral exports from
Uganda and Burundi since June 2020. At
the same time, Tanzania's gold exports to these countries surged with Uganda
Importing $1.09 billion worth of Gold from Tanzania.<o:p></o:p></p>
<table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEg2M8iP-X1yhgWpHzoCbLAmSS2ozJ3lz66ZiJVMQSoNOe4A123vgW_zU1ZHfjThsVQmYZigDfwZzsOWKq2bc7yY-93wdBSOQVmrJi7IlKWDGY8dfSEXYiT6wtzoiXGEnm6qEUOEo7lBQsw-QS-e9fB1ep4hVUr2nRcr7FPT3rFSd2_rqzBEqmVWBnAu=s307" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="215" data-original-width="307" height="215" src="https://blogger.googleusercontent.com/img/a/AVvXsEg2M8iP-X1yhgWpHzoCbLAmSS2ozJ3lz66ZiJVMQSoNOe4A123vgW_zU1ZHfjThsVQmYZigDfwZzsOWKq2bc7yY-93wdBSOQVmrJi7IlKWDGY8dfSEXYiT6wtzoiXGEnm6qEUOEo7lBQsw-QS-e9fB1ep4hVUr2nRcr7FPT3rFSd2_rqzBEqmVWBnAu" width="307" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-family: arial;"><b>Tanzanian gold export in EA <br />collapsed as fast as it began</b></span></td></tr></tbody></table><p class="MsoNormal">The TMEA report shows that Burundi’s extra-EAC trade exploded
from minus 7 percent in May 2020 to an
astonishing 804 percent in July before declining to 52 percent in September
2020. Over the same period, Uganda’s Extra-EAC trade rose from minus 54 percent
in May 2020 to 15 percent in June and then to 31 percent in July, then 16
percent in October. In June 2021, Uganda imposed taxes on Gold Imports
resulting in the collapse of the gold trade.<o:p></o:p></p>
<p class="MsoNormal"> Dissecting the data
to establish the potential for consistency is important for it weeds out noisy exports.
Noisy exports are seasonal surges that collapse in the future. For instance, Kenya
is currently dealing with food insecurity due to poor rains in 2020. Her
imports of food commodities from Tanzania have thus surged. The risk here is,
once the situation improves in Kenya, demand for Tanzanian imports could decline.
<o:p></o:p></p>
<p class="MsoNormal"> Regardless of the nature
of the imports and their future risks, however, the surge in cross-border trade
between Kenya and Tanzania points to a greater benefit. It increases the
quantity of goods and services available in the region and expands the market
for local produce. That is the major
goal of trade.<o:p></o:p></p>
<p class="MsoNormal"></p>That is why Kenya must resolve frequent spats with Uganda quickly. Kenya, the giant economy in East Africa
should also be looking past these two countries to expand her export
destinations into D R Congo, Ethiopia, and other parts of Africa. <o:p></o:p><p></p>
<p class="MsoNormal">There are underlying fears that a persistent trade deficit by
one country against another is exporting local jobs. In East Africa, regional
trade is sabotaged by politics and economic nationalism. However, if allowed to
find its level, trade is likely to increase employment in both countries as
trade satisfies unmet demand. This means that the importer does not produce
enough to meet domestic demand. Imports, therefore, do not displace domestic
producers but supplement them.</p><o:p></o:p><p></p>East Africa Economics Reporthttp://www.blogger.com/profile/06336638272766088431noreply@blogger.com0tag:blogger.com,1999:blog-4878785766209359257.post-51117428387242911092022-01-06T03:56:00.007-08:002023-07-01T00:30:52.103-07:00Can China takeover sovereign assets? Has it?<p></p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEiicLf9qQwcIQ5KGpYVYTnixwVAPYpaU8G-jhItrHiu0mBPVmuwGLS58ttGtOmTRBCsgh-SkS54zXyhduJmXhFrDP7EunTyovk2XQ8MF78bIFzE4zs7JvlbFEvfSyUZrAqhUlrdTz3CwKubcyTaDIUSva0J-nxBRIuXIPQMizC6K8_zMyrlTGqj-yDC=s602" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="569" data-original-width="602" height="302" src="https://blogger.googleusercontent.com/img/a/AVvXsEiicLf9qQwcIQ5KGpYVYTnixwVAPYpaU8G-jhItrHiu0mBPVmuwGLS58ttGtOmTRBCsgh-SkS54zXyhduJmXhFrDP7EunTyovk2XQ8MF78bIFzE4zs7JvlbFEvfSyUZrAqhUlrdTz3CwKubcyTaDIUSva0J-nxBRIuXIPQMizC6K8_zMyrlTGqj-yDC=w320-h302" width="320" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-family: arial;"><b>Debt trap Meme: Trading in fear</b></span></td></tr></tbody></table>The idea that a sovereign country can lose its asset to
another over unpaid debts is simply a Zombie idea. Zombie ideas are lies
couched in economic jargon. They are believable but are false hypotheses.<p></p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal">Following the failure of similar ideas as “the trickle-down
effect,” “High wages kill Job creation,” and “efficient market” hypotheses, “Debt
trap diplomacy” is the fad. <o:p></o:p></p>
<p class="MsoNormal">However, beneath the veneer is the fear of China’s emergence
as an economic powerhouse that challenges the West’s dominance. In just about
40 years, China’s GDP has grown from $245 billion in 1976 to $16 trillion in
2021, second only to the US whose GDP is estimated at $22 trillion in 2021. It has drawn some 800 million people out of
poverty and into the middle class over the same period.<o:p></o:p></p>
<p class="MsoNormal">China has leapfrogged entire Western Europe and Japan in
45 years. In the process, disrupting the West’s dominance over the world’s
resources and markets. This is the source of anti-Chinese vitriol.<o:p></o:p></p>
<p class="MsoNormal">How did this happen? After the fall of the Berlin Wall, the
West rested on its laurels assuming that everyone will adopt the liberal
economic model championed by Prof. Milton Friedman. They marketed the “Market
efficiency” thesis as the best vehicle for prosperity through the disastrous Structural
Adjustment Programmes, SAPs. <o:p></o:p></p>
<p class="MsoNormal">China rejected the model despite pressure from the Bretton
Woods institutions. It adopted its own form of Market socialism with
outstanding results. It beats the West in several measures. China’s
manufacturing sector is now the largest in the world standing at 27 percent of
the GDP. In the US, the manufacturing sector contributes just 10.3 percent of
GDP. In real terms, China’s manufacturing sector contributes US$4.32 trillion to
the GDP compared to $2.27 trillion in the US.<o:p></o:p></p>
<p class="MsoNormal"> In Engineering, China
is also way ahead of the West, having advanced from manufacturing under license
a few years ago to owning inventions in heavy industry such as trains and
Locomotives. It has just tested its fastest train in the world, the Maglev, an
electric train that cruises at 431 KPH. In the last 12 years, China has built
the largest network of high-speed railways, some 39,700Km, claiming the global
Lion’s share (67%) of the high-speed railway network.<o:p></o:p></p>
<p class="MsoNormal"> Cheap Chinese
electronic gadgets including Mobile Phones and IT technology dominate the
world. It was the first to deploy 5G broadband. China is also the leading
manufacturer of Semiconductors and APIs. <o:p></o:p></p>
<p class="MsoNormal">China’s entry into Africa as the top development partner was
a second jolt to the West, which is still recovering from the financial
meltdown of 2008, and incessant wars in the Middle East. The vitriol is thus
the West’s attempt to at least contain if not stop Chinese expansion. Will it
work? <o:p></o:p></p>
<p class="MsoNormal">It does not appear to be working. Africa particularly is
still trooping to China with project proposals to get funding. Hence the threat of re-colonization through
debt-trap diplomacy. “China is deliberately saddling Africa with heavy debts,”
so goes the thesis, “with a view to recolonizing it in the future.”<o:p></o:p></p>
<p class="MsoNormal">Is Africa falling prey to Chinese” brutal lending Practices?” In his book, <b>Confessions of an Economic Hitman, </b>John Perkins says that saddling
the developing world with unpayable debts<b>
</b>is the West’s playbook<b>.</b> HEMs forced
the developing world to accept projects with exaggerated outcomes and inflated
costs in order to funnel money out of the World Bank to large corporations in
the US through “tied aid,” says the book.<o:p></o:p></p>
<p class="MsoNormal">China on the other hand finances projects initiated by the
borrower. In other words, African governments identify, evaluate, and select the
projects they present for financing. African governments, therefore, have a good
grasp of the need for, the benefits of the project, and the risks. That is why
China now controls 42 percent of EPC projects in Africa.<o:p></o:p></p>
<p class="MsoNormal"> The Projects proposed
by HEMs never produced the proposed outcomes because they were never meant to.
Therefore, the developing world could not generate sufficient funds to pay off
the loans. Is China doing the same? John Perkins disagrees.<o:p></o:p></p>
<p class="MsoNormal">So why is this thesis still coasting around? Appetitive
elites in Africa latch on the narrative for political and financial gain. Corruption
allegations and the perceived Chinese threat sell fast in Africa. Devoid of any marketable political ideology,
Opposition parties latch on to “political scandals” in a bid to gain power.<o:p></o:p></p>
<p class="MsoNormal"> In Kenya for
instance, before China became a major development partner, the opposition told
us of the huge theft of proceeds of a Sovereign bond issued in 2014. It never
provided any evidence to back its claims. Then they turned on the rising debt.
Now China has become the next red herring with tales spun about China’s threat
to Africa’s independence. <o:p></o:p></p>
<p class="MsoNormal">Public Offices have been drawn into misinformation
campaigns. For instance, the story of China taking over the Mombasa Port in
Kenya in case of default was allegedly “leaked by the controller and Auditor
General’s (CAG) office” in the run-up to the 2017 election. The auditor had
earlier succumbed to opposition pressure to travel to the US to investigate how
Kenya’s funds from a Eurobond sale ended up at the Federal Reserve.<o:p></o:p></p>
<p class="MsoNormal">Any public Servant, the CAG included, should know how. The
Central Bank of Kenya, CBK, holds accounts with its counterparts in the world,
among them the Federal Reserve in New York.
The Central Bank is also the Custodian of all foreign exchange in
Kenya. Therefore, it buys all forex in
Kenya shillings. In this case, CBK simply bought the proceeds from the
government of Kenya’s agent, JP Morgan. JP Morgan was the lead bank in the
Eurobond sale.<o:p></o:p></p>
<p class="MsoNormal">In Uganda recently, newspaper headlines read “Uganda hands
over Entebbe airport to the Chinese over unpaid debt.” Really? That China lent Uganda some US$200 million to
expand and upgrade its international Airport at Entebbe back in 2015 is not in
doubt. The loan came with a seven-year grace period that ends in April 2022.<o:p></o:p></p>
<p class="MsoNormal">Along the way, “some bureaucrats” got uncomfortable with some
clauses in the loan agreement and raised the alarm. They sought to renegotiate
those clauses but China’s Exim Bank declined.<o:p></o:p></p>
<p class="MsoNormal">However, there is no evidence that the Exim-Bank of China hinted
at taking over the Airport at all. The story was inept. The grace period is
not yet over, so loan servicing is yet to begin. Uganda for its part is not in
default. China simply refused to renegotiate the deal meaning Uganda had to
abide by the terms of the agreement, and when the loan falls due, pay. <o:p></o:p></p>
<p class="MsoNormal">This takes us back to the question; Can China take over the
international Airport in Entebbe or any national asset anywhere over an unpaid
debt? <span style="line-height: 107%; mso-bidi-font-size: 16.0pt;">Are there any
precedents? Has China taken over any national asset anywhere over unpaid debts?
<o:p></o:p></span></p>
<p class="MsoNormal"><span style="line-height: 107%; mso-bidi-font-size: 16.0pt;">Many
a critic refer to Hambantota Port in Sri Lanka. The story of a Chinese company
acquiring this Port in a debt swap is false. The government of Sri Lanka sold a
70% stake in the port to the China Merchants Port Holdings Company Limited (CM
Port) in a 99-year lease for $1.12 billion. The port itself cost US$390
million to build. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="line-height: 107%; mso-bidi-font-size: 16.0pt;">The
concession earned Sri Lanka badly needed forex to pay off debts that were
unrelated to the Port, says Umesh Moramudali, a Sri Lankan Economist in an
article in the Diplomat magazine.</span><span style="font-size: 8pt; line-height: 107%; mso-bidi-font-size: 11.0pt;"> </span><a href="https://thediplomat.com/2020/01/the-hambantota-port-deal-myths-and-realities/"><span style="line-height: 107%; mso-bidi-font-size: 16.0pt;">https://thediplomat.com/2020/01/the-hambantota-port-deal-myths-and-realities/</span></a><span style="line-height: 107%; mso-bidi-font-size: 16.0pt;"> <o:p></o:p></span></p>
<p class="MsoNormal"><span style="line-height: 107%; mso-bidi-font-size: 16.0pt;">Can
a country take over the assets of another sovereign state over unpaid debts? Experts
reject this thesis saying China’s chance of effecting such a feat is slim. The
potential political backlash from such an action is scary, say experts.
Further, such action would be a breach of a country’s sovereignty, a
declaration of war. Does China have the nerve and military muscle to enforce
debt collection? Well….<o:p></o:p></span></p>East Africa Economics Reporthttp://www.blogger.com/profile/06336638272766088431noreply@blogger.com0tag:blogger.com,1999:blog-4878785766209359257.post-81195651208048348452021-12-28T12:23:00.004-08:002021-12-29T00:09:28.524-08:00Africa should lead in green Industrialization<p></p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEhOhMyX-05ULUFbGvMJ4sna96rKeJxrbdIodC8vkDZe6dgtas2xBvEALYoisGw0GxXD13SdtvU_rHJt4pI1EH8rnF1n2wVJUUzbDPI_eQR33LlVFJTEsANFo6q0euyKFcpr5EAs-6aMfyhvWwoIate8JIxR_o7sGNteLnYIx3EcqTuyo5DHAhvJ0FpO=s113" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="85" data-original-width="113" height="301" src="https://blogger.googleusercontent.com/img/a/AVvXsEhOhMyX-05ULUFbGvMJ4sna96rKeJxrbdIodC8vkDZe6dgtas2xBvEALYoisGw0GxXD13SdtvU_rHJt4pI1EH8rnF1n2wVJUUzbDPI_eQR33LlVFJTEsANFo6q0euyKFcpr5EAs-6aMfyhvWwoIate8JIxR_o7sGNteLnYIx3EcqTuyo5DHAhvJ0FpO=w400-h301" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-family: arial;"><b>A Lithium-ion Battery</b></span></td></tr></tbody></table>AFRICA should leverage its abundant mineral and green energy wealth to lead in the fourth industrial revolution, experts say. And in this respect, the Democratic Republic of Congo should be the nerve center, they add. <div>The country is rich in mineral wealth and water. It is thus, suitable for the production of cathode precursor materials for Lithium-Ion
batteries, a study has established. The government has accepted a proposal to set up a Special Economic Zone for
this purpose, we can report.<p></p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal">Lithium-ion batteries power everything from your Mobile
phone to Airplane batteries. Now that the world is shifting to clean energy to
power cars, Lithium-Ion is also powering electric vehicles, EVs. The Democratic
Republic of Congo produces 70 percent of the world's cobalt, the basic Mineral in
Lithium-ion batteries. <o:p></o:p></p>
<p class="MsoNormal">Cathode precursor materials are the intermediate material
between cobalt and finished cathode material. Currently, precursor materials
are produced in China from the cobalt imported from D R Congo. Poland produces cathode
materials and cells, and Germany the final pack assembly. <o:p></o:p></p>
<p class="MsoNormal">Now D R Congo plans to upgrade its role from mining to
processing to increase its stake in the BEV industry. This beneficiation could
increase the country’s export earnings by US$54 billion a year, says Vera
Songwe, the United Nations Economic Commission for Africa's<br /> head. “If the DRC captures 20 percent of the market
share for battery production, it will add around US$54 billion to its income
and raise its GDP tremendously,” she said.<o:p></o:p></p>
<p class="MsoNormal">The odds are DR Congo’s favor according to a new study. The study,
by BloombergNEF, shows that building a 10,000 metric-ton battery precursor plant
in the DRC would cost $39 million. A similar plant in the US, China, and Poland
would cost an estimated US$ 120 million, $112 million, and $65 million,
respectively. This is due to its “relatively
cheap access to land and low engineering, procurement and construction, or EPC cost compared to the U.S., Poland, and China,” said Kwasi Ampofo, lead author of
the report.<o:p></o:p></p>
<p class="MsoNormal">Nothing stops D R Congo from expanding its role in Battery
Electric manufacturing. It can carry out the processes performed in Poland and
Germany. In fact, the creation of a Special Economic Zone could end up onshoring
all the BEV manufacturing in D R Congo in particular, and Africa in general,
with DRC as the nerve center. <o:p></o:p></p>
<p class="MsoNormal">Proximity to the raw materials and its reliance on
hydroelectric power plants would lower the environmental footprint. In fact, says
the report, it will lower emissions associated with Lithium-ion battery
production by 30 percent.<o:p></o:p></p>
<p class="MsoNormal"> The battery precursor
segment is worth US$271 billion. However, the combined battery cell production
and cell assembly segments of the battery minerals global value chain are worth
a mouthwatering US$1.4 trillion.<o:p></o:p></p>
<p class="MsoNormal">DRC’S President Felix Tshisekedi hinted at the intention to
go big by urging his African counterparts to prioritize joint investments aimed
at increasing Africa’s share of the BEV and renewable energy value chain.<o:p></o:p></p>
<p class="MsoNormal">Experts at the forum echoed the President, urging Africa to
exploit AfCTA, the continental Free Trade area, to onshore other processes and
increase their share in the BEV market. The
DRC can receive other upstream mineral inputs needed for lithium-ion batteries
– such as manganese from, say, South Africa and Madagascar, copper from Zambia,
graphite from Mozambique and Tanzania, phosphate from Morocco, and lithium from
Zimbabwe, to name but a few,” say experts.<o:p></o:p></p>
<p class="MsoNormal">The battery and electric vehicles (BEV) value chain will be
worth US$ 8.8 trillion in 2025, rising US$46 trillion by 2050, says the
BloombergNEF report titled “<b><i>The Cost of Producing Battery Precursors in
the DRC.”<o:p></o:p></i></b></p>
<p class="MsoNormal">The market for BEV manufacturing is wide-open, say experts.
Although there are notable leading electric-vehicle and cell manufacturers
today, the sheer scale of growth expected in the long-term throws open the
doors for competition and dominance of the new value chain. African countries
could play a major role in the lithium-ion battery supply chain by taking
advantage of their abundant natural resources and onshoring more of the value
chain.<o:p></o:p></p>
<p class="MsoNormal">Africa is not sitting on its laurels, Markus Thill, the vice president of the African
Association of Automotive Manufacturers (AAAM), announced at the forum that,
“AAAM is working with AfCFTA Secretariat to produce at least 5 million vehicles
in Africa for Africa by 2025.”Thill is also the President of Bosch Africa.<o:p></o:p></p>
<p class="MsoNormal"></p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: left;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEiGEhqA75kpfQbRjaAP9PbGyW7V9EUk-1jyeq-xZJjD4L6mYIbFJCyRZXaEHJWN52vOt3qSbUCspoHjEuXgRCsb2LnhwmelLXwxPANckmt2hs3E2M1_ySRiis6Qaka8Yuk9ssmY5my0KHOP5nAxp7z1zqBEpfTr36tBolmVYB6TvAPJT5Ad50DPpa6A=s966" style="clear: left; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="504" data-original-width="966" height="167" src="https://blogger.googleusercontent.com/img/a/AVvXsEiGEhqA75kpfQbRjaAP9PbGyW7V9EUk-1jyeq-xZJjD4L6mYIbFJCyRZXaEHJWN52vOt3qSbUCspoHjEuXgRCsb2LnhwmelLXwxPANckmt2hs3E2M1_ySRiis6Qaka8Yuk9ssmY5my0KHOP5nAxp7z1zqBEpfTr36tBolmVYB6TvAPJT5Ad50DPpa6A=s320" width="320" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-family: arial; font-size: x-small;"><b>Capital Costs compared:<br /> Congo beats hands down</b></span></td></tr></tbody></table>James Frith, head of energy storage at BNEF spelled the
necessary conditions for attracting investment in battery component or cell
manufacturing as; the supply of key raw materials, or local demand for batteries. Africa
has raw materials, green energy sources, a growing population, and rising
demand for vehicles. It should leverage
this advantage to onshore BEV production, said the experts. <o:p></o:p><p></p>
<p class="MsoNormal">However, the continent must move swiftly. “We are only at
the beginning of the path to achieving net-zero emissions globally. Emerging
economies in Africa can gain significant long-term economic value by quickly
setting up projects that support the low-carbon transition with transparent
governance frameworks,” stated Ashish Sethia, global head of commodities at
BNEF.<o:p></o:p></p><br /></div>East Africa Economics Reporthttp://www.blogger.com/profile/06336638272766088431noreply@blogger.com0tag:blogger.com,1999:blog-4878785766209359257.post-23473476345909832142021-12-20T10:29:00.007-08:002022-09-23T10:39:29.717-07:00Has the SGR benefited anyone?<p> </p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEg_9pQnXqOH311I4WGmn_hZHpeX8EMbsz7bGdacsxL2SRcd-sxFjoBYFkfREhU47e_sYNYF65XL-2PmK17iVsTIkZoMt0llKbkowM7qBvRqUhtE-IWEkGStLzMKdUOcc1kbhrEDvE0ErKDlN6ippRWjpLTd6C55HmENy4tQsqNSpU6fDJSIQRLmAFiI=s595" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="300" data-original-width="595" height="161" src="https://blogger.googleusercontent.com/img/a/AVvXsEg_9pQnXqOH311I4WGmn_hZHpeX8EMbsz7bGdacsxL2SRcd-sxFjoBYFkfREhU47e_sYNYF65XL-2PmK17iVsTIkZoMt0llKbkowM7qBvRqUhtE-IWEkGStLzMKdUOcc1kbhrEDvE0ErKDlN6ippRWjpLTd6C55HmENy4tQsqNSpU6fDJSIQRLmAFiI=s320" width="320" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-family: arial; font-size: x-small;"><b>A wind power project: Increases power supply<br /> and lower cost of electricity</b></span></td></tr></tbody></table>Economists and Engineers, at the conception of a project,
begin with a theory of the potential benefits the project will engender to the
project area. The benefits at that point are purely anecdotal but are feasible.
They then move on to study the area’s characteristics, economic and physical,
determine the size of the project service area, the population, and economic
activities.<p></p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal">The Project’s financial costs and pricing of the service come at the tail end of the
study. For instance, at conception, a piped water project is justified on the
strength of the economic, health, nutrition, and welfare benefits. <o:p></o:p>A road project is justified on ease of access to markets, faster travel time, and increased economic activity in the project area. All-weather roads generate more economic activity due to ease of access. </p><p class="MsoNormal">These activities are assigned monetary values which are compared to the financial cost of building the project. If these benefits exceed the construction costs then, the project is developed.</p>
<p class="MsoNormal">That process is called the Cost-Benefit analysis. CBA is the evaluation of all potential
benefits of a project compared to its costs. The costs here include the
opportunity cost of the resources invested in a foregone project.<o:p></o:p></p>
<p class="MsoNormal">If the benefits exceed the costs, then the project is good
to go. It is worth noting that the benefits are not only direct gains from the project per se. Public projects are mainly enablers that improve productivity in other sectors. Among the benefits of
a piped water project in a rural area, for example, is improved hygiene, improved nutrition,
improved health, and poverty reduction as the people are expected to use the
water to irrigate kitchen gardens whose surplus they sell.<o:p></o:p></p>
<br />
<p class="MsoNormal"></p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: left;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEgHQ38dAkQHxU0ldRL6HTKhmB4EmqSRTSZO2zTOkTsO-F4tDq7hmsmkJ0l3-A7ttAVwO_Nhn8gCBEtA32-EBQ4eLYLvXAT4DMqT6gQmdPbYy-Azie2bCES1184kGtRssfQ8-9E5Bv7YpZzkBx1EKMxwUF6zaZfxuWnIizFKcx-VmbYZE-uiNHYMqa0m=s316" style="clear: left; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="159" data-original-width="316" height="159" src="https://blogger.googleusercontent.com/img/a/AVvXsEgHQ38dAkQHxU0ldRL6HTKhmB4EmqSRTSZO2zTOkTsO-F4tDq7hmsmkJ0l3-A7ttAVwO_Nhn8gCBEtA32-EBQ4eLYLvXAT4DMqT6gQmdPbYy-Azie2bCES1184kGtRssfQ8-9E5Bv7YpZzkBx1EKMxwUF6zaZfxuWnIizFKcx-VmbYZE-uiNHYMqa0m" width="316" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-family: arial; font-size: x-small;"><b>Phonebooth: Anyone remember queuing to make a call?</b></span></td></tr></tbody></table> The benefits of the project once implemented can also be viewed
as the losses potential users suffer without the project. We must note that we pay for good infrastructure whether we have them or not. Few of us can
remember when we used to queue for hours on telephone booths to make a call.
Few too can remember when we used to have rolling power rationing and
persistent power outages. <o:p></o:p><p></p>
<p class="MsoNormal">Travelers from Northern Kenya could take days to travel to
Nairobi, now it is just a seven-hour journey. <o:p></o:p></p>
<p class="MsoNormal">Long-time users of Thika road in Nairobi can attest to the
difference the superhighway has made in their lives and the value of their
property. <o:p></o:p></p>
<p class="MsoNormal">Infrastructure levels the playing field for economic
actors-yes even that passenger in a PSV. That is why they are enablers, things
that exist to improve the efficiency and profitability of other economic
players. Although they are business activities, they do not necessarily exist
to make a profit but to enable others to make profits.<o:p></o:p></p>
<p class="MsoNormal">The first benefit of an infrastructure project is, therefore,
leveling the playing field for other players. Rural electrification enables the
rural folk to industrialize, an all-weather road links farmers to the markets,
cutting their losses. <o:p></o:p></p>
<p class="MsoNormal">On this score alone, investment in infrastructure
projects- Rails, roads, power generation stations, etc. improve our lives whether they make a profit or not. Economists call the valuation of loss and
benefits of a project Cost-Benefit analysis. It calculates and sums up all
potential benefits of a project against financial costs. They also test the potential
losses without the project. If the benefits exceed the losses, then the project
is viable. <o:p></o:p></p>
<p class="MsoNormal">Among the economic benefits are savings in time spent
performing a given economic activity such as drawing water or traveling on bad
roads. These are assigned a monetary value depending on the per capita income
of the project area. Time has a higher value in urban areas than in rural areas
but keeps rising as the areas develop. <o:p></o:p></p>
<p class="MsoNormal">To illustrate, we use the Standard Gauge Railway in Kenya.
Its services are paid for but have yet to return a financial profit. For this reason, many commentators dismiss
it as a white elephant. <o:p></o:p></p>
<p class="MsoNormal">However, was financial profit the primary goal of investing in it? Does the project engender economic benefits way beyond the financial
costs? The passenger train travels between Mombasa and Nairobi in five hours.
Official data shows that between January
and June this year, it ferried 765,000 passengers, an average of 127,500
passengers a month or 4250 passengers a day.
Each passenger saves 5 hours on the trip. Therefore, a single journey
adds 5</p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEjAn_Pxhmvf4EkDjIkUjv5oqWKkAgryPXbmhO6Ekg1gyExHzlOc088fxnjh9ZDX2OUAjPlTU3z9zmlnJuuDaqyotbBBNn_wc7QM0-m5ZJkbN89Aq-ZJUTXpfb_5ueF9qVlF5a6YWMIDtBmSM8ThiA5bGI-i0Yog2cI8x7doYqftm8aLjuVBVFdZD1HA=s1083" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="584" data-original-width="1083" height="173" src="https://blogger.googleusercontent.com/img/a/AVvXsEjAn_Pxhmvf4EkDjIkUjv5oqWKkAgryPXbmhO6Ekg1gyExHzlOc088fxnjh9ZDX2OUAjPlTU3z9zmlnJuuDaqyotbBBNn_wc7QM0-m5ZJkbN89Aq-ZJUTXpfb_5ueF9qVlF5a6YWMIDtBmSM8ThiA5bGI-i0Yog2cI8x7doYqftm8aLjuVBVFdZD1HA=s320" width="320" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-family: arial; font-size: x-small;"><b>A Double stack train: Saves $1.7 million per trip</b></span></td></tr></tbody></table>hours to a traveler’s time to engage in other productive activities.<o:p></o:p><p></p>
<p class="MsoNormal"> For all passengers, this adds to 21,250 man-hours that can be used productively. A year has 8760
hours. If we divide 21,250 hours by 8,760 we get 2 years and 4 months of man-hours saved in a single day. Extended to a month, the train saves the country
77 man-years of travel time that is used productively.<o:p></o:p></p>
<p class="MsoNormal"> Experts value an hour
of travel savings at shs1,461 ($14.61) per hour per passenger. By shaving 5
hours off the journey to Mombasa from Nairobi, the SGR saves each passenger the
equivalent of Kshs 7305 ($73.5). The 4250 passengers shipped to and from
Mombasa save the equivalent of Kshs31 million ($310,000) a day!<o:p></o:p></p>
<p class="MsoNormal">The freight train travels between Mombasa and Nairobi in
eight hours, down from 15 to 24 hours by train and 24 to 96 hours by truck. By
truck, there is ship-to-shore at the Port in Mombasa. By train, it is ship-to-train
and on to the Nairobi ICD. <o:p></o:p></p>
<p class="MsoNormal"> A double-stack train
carries 216 TEUs, meaning 216 businessmen- manufacturers and traders are saved
88 hours apiece. That is a total of 19008 hours of travel time saved by a
single train. A single train saves the country’s business community a total of
2 years and two months of travel time. The ten trains that ply the route per
day save the country the equivalent of 20 years and 11 months in a single day!
<o:p></o:p></p>
<p class="MsoNormal">Experts value the time savings to an importer by train in
Africa at $0.02 per Kilometer/ ton. A Twenty-foot Equivalent Unit carries 21.6
tons. Traveling a distance of 500 KM creates savings amounting to Kshs 821,600
($8,216) per TEU. Now, multiply that 216 times and we get ksh177 million ($1.77
million) in the equivalent value of time savings in a single day!<o:p></o:p></p>
<p class="MsoNormal"> Extended to a year,
the SGR generates time savings worth US$114 million. These savings also
translate into further savings in terms of; bank overdrafts, storage costs, and,
ordering lead-time for the business community.<o:p></o:p></p>
<p class="MsoNormal">Other users, especially motorists and their passengers along
the same road also gain. The trains remove 177 heavy vehicles on the Northern
Corridor. That eases traffic on the roads and raises cruising speeds, thus saving
on travel time, fuel wastage, and frequent repairs owing to bad roads. This should
be added to the benefits of the SGR to say nothing of the costs of repairing
the road.<o:p></o:p></p>
<p class="MsoNormal">Please note we have just been calculating the benefits
accruing to others. Not the direct benefits such as employment, skilling, and
other consumables.<o:p></o:p></p>East Africa Economics Reporthttp://www.blogger.com/profile/06336638272766088431noreply@blogger.com0tag:blogger.com,1999:blog-4878785766209359257.post-89033703645163044832021-12-12T06:04:00.003-08:002023-07-01T00:39:52.989-07:00 The West treads a path beaten by China<table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEgyJCHULSfhwMdz7g4Jawoa_GyMPiFwa6gxTwLyiLc_ssQSYsX0ibQwnfWfYkOIBavVThbvgUvUJlM1OufOKtdhFI8i6GNZ7v61l8qLaKxZI-VeJMamw2YViQt-zXiB6fPfSq3ErRMo_CHqEf9aDZ9yNKVl4cfBUPjMa8Ri7VrdKtFvGa5iVvFwR3-5=s270" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;" target="_blank"><img border="0" data-original-height="187" data-original-width="270" height="187" src="https://blogger.googleusercontent.com/img/a/AVvXsEgyJCHULSfhwMdz7g4Jawoa_GyMPiFwa6gxTwLyiLc_ssQSYsX0ibQwnfWfYkOIBavVThbvgUvUJlM1OufOKtdhFI8i6GNZ7v61l8qLaKxZI-VeJMamw2YViQt-zXiB6fPfSq3ErRMo_CHqEf9aDZ9yNKVl4cfBUPjMa8Ri7VrdKtFvGa5iVvFwR3-5" width="270" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-family: arial; font-size: x-small;"><b>Kenya's SGR build by China: Africa <br />could do with a trans- Africa Railroad.</b></span></td></tr></tbody></table><p>The West has woken up
to the reality that investment in infrastructure development is simply not for
the private sector. The returns from such investments are way outside the
private sector’s definition of returns.
For the private sector, returns are purely financial- profits and
dividends.</p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal">However, returns from infrastructure are both financial and
economic. The financial returns count for little as economic returns outweigh
the financial returns. Infrastructures are enablers of economic activity as
they provide goods and services that raise the productivity - and profitability-of other sectors. That
is why governments invest in infrastructure to catalyze robust economic growth.
<o:p></o:p></p>
<p class="MsoNormal">In the last month, the west has launched a total of US$1.5
trillion plans to invest in infrastructure. These are; the US$ 1.2 trillion
Infrastructure Act in the US, and the $340 billion Global Gateway initiative
launched last week by the European Commission. <o:p></o:p></p>
<p class="MsoNormal">The seven-year-<b> </b>$340
billion global plan targets to invest in infrastructure, digital, and climate
projects as a better alternative to China's Belt and Road Initiative report
Reuters.<o:p></o:p></p>
<p class="MsoNormal">Although roundly demonized, China’s BRI has produced
infrastructure in Africa and Asia, jolting the West out of inertia. Though still demonizing BRI, the assertion
that GGI is a “better alternative” is an admission that the Chinese BRI is a
good program. <o:p></o:p></p>
<p class="MsoNormal"> China’s BRI is demonized
as oppressive, opaque, and “a debt trap” for the developing world, especially
Africa. Reuters quoted an official as saying; “Unlike China, the EU would
ensure local communities benefited from the infrastructure projects under
Global Gateway.” Skeptics, this writer among the number, are yet to be
convinced that the West is a better creditor. In fact, even critics in the West
caution that GGI could fail just like the Build Act in the US if its <i>raison de’
etre</i> is to counter BRI.<o:p></o:p></p>
<p class="MsoNormal">Will Africa gain from these initiatives including the Trump
era Build Act? The Act, the US counter
to BRI, authorized the US private sector to invest US$60 billion in
infrastructure in Africa. It even
created a government agency, the International Development Finance Corporation,
IDFC to de-risk corporate America’s entry into Africa by buying a stake in the
projects of interest to US engineering firms. It came a cropper. See also <a href="http://eaers.blogspot.com/2018/10/usa-hastens-pace-for-african-market.html">http://eaers.blogspot.com/2018/10/usa-hastens-pace-for-african-market.html</a><o:p></o:p></p>
<p class="MsoNormal">The failure to take off is a pointer that the US private
sector has no stomach for high capital outlay projects anywhere, not even at
home. The Chinese on the other hand are churning out project after project at
home and elsewhere accumulating critical expertise in the process. The lack of
experience in working in Africa gives China an advantage over the West.<o:p></o:p></p>
<p class="MsoNormal"></p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEj7uZpoJW96gPK_aCDEz0NgIxU64KQIXZGTfQF9HgTDQ-mvd9S5nFwlP_SdHQI5H5viCnVo-goxHdgX8yj321crzKvurhhgsL4C4UPHnRI0MUe2CWjZQE1lWHShG6ExLDQs4Z2OWzVB5NKwCttLAclkoDqxJ2D9LNTHLJPcrbWNbiy_izqYuO_2EPtY=s219" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="123" data-original-width="219" height="123" src="https://blogger.googleusercontent.com/img/a/AVvXsEj7uZpoJW96gPK_aCDEz0NgIxU64KQIXZGTfQF9HgTDQ-mvd9S5nFwlP_SdHQI5H5viCnVo-goxHdgX8yj321crzKvurhhgsL4C4UPHnRI0MUe2CWjZQE1lWHShG6ExLDQs4Z2OWzVB5NKwCttLAclkoDqxJ2D9LNTHLJPcrbWNbiy_izqYuO_2EPtY" width="219" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-family: arial; font-size: x-small;"><b>A Solar farm: <br />Africa needs more of these</b></span></td></tr></tbody></table>As a measure of the shift of engineering power, the Chinese
control 42 percent of all EPC contracts to date. This does not lock other
players out, as there is another 58 percent of EPCs crying for takers. A 2018 report
by the African Development Bank estimated that the continent must invest an
estimated US$170 billion a year in infrastructure for seven years to 2025.
Given the available resources, there was a financing gap estimated at US$105
billion a year, said the report.<o:p></o:p><p></p>
<p class="MsoNormal"> Three years to 2025,
there is no significant dent in this gap. The implication here is there are plenty
of opportunities in the infrastructure sector in Africa. The question is how
much of an impact the European Global Gateway initiative will have on Africa’s
infrastructure sector. <o:p></o:p></p>
<p class="MsoNormal">The GGI, if it comes into effect, will provide some
competition for China in the debt market. In Europe, as in China, governments
invest in infrastructure, so there will be no paradigm shift unlike in the US. Africa
will thus be spoilt for choice, and this is a form of leverage that could force
China to modify its lending terms to Africa, assuming that they don’t favor
Africa, that is. <o:p></o:p></p>
<p class="MsoNormal">However, as the proverb says, proof of the pudding is in the
eating. Once the first contract is signed and the shovel put on the ground, we
shall have something to compare. For now, it is all marketing hype.<o:p></o:p></p>
<p class="MsoNormal">There is a lesson to learn from the hoisting of public
investment in infrastructure, especially in the US. Although the US$1.2
trillion bill is a domestic infrastructure plan with no impact in the
developing world, It is proof that large capital outlay projects are out of
bounds for the private sector. <o:p></o:p></p>
<p class="MsoNormal">This debunks Milton Friedman's “efficient market thesis.” Milton
advocated for free markets and limited government. His thesis was the theory
behind the “Privatization craze” of the 1980s promoted by the Bretton Woods
institutions. It advocated for brutal capitalism. In the process, stripping economies
of resilience, replacing it with efficiency.</p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal"></p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: left;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEhF8VL8VLaRfM6o4Il4QrTU-3z6dRwjrzL96w-i1AqcwKw6BViUlC3KHucM-9q9N23IwQ-C85ooI3TOOfDvDg7RLBZErT-1IZlYSKewnvDDKV_qJOd67fOlXSvA9-OKIceRgB4wGpxOxu_Fa7fbicGd0pHbr8ZP3KhxKH0DxoFGLxwseBD41NCECWSU=s300" style="clear: left; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="225" data-original-width="300" height="225" src="https://blogger.googleusercontent.com/img/a/AVvXsEhF8VL8VLaRfM6o4Il4QrTU-3z6dRwjrzL96w-i1AqcwKw6BViUlC3KHucM-9q9N23IwQ-C85ooI3TOOfDvDg7RLBZErT-1IZlYSKewnvDDKV_qJOd67fOlXSvA9-OKIceRgB4wGpxOxu_Fa7fbicGd0pHbr8ZP3KhxKH0DxoFGLxwseBD41NCECWSU" width="300" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-family: arial; font-size: x-small;"><b>T</b></span><span style="font-family: arial; font-size: x-small;"><b>he Nairobi Expressway:<br /> Under construction by the Chinese<br /></b></span></td></tr></tbody></table>In the US, that theory resulted in 173,000 miles of poor
roads and 45,000 rotting bridges as Federal government investment in
infrastructure declined to a trickle. Incidentally,
the US became the leading economy because of massive investment in
infrastructure in 1933, 1950, and 1970 before the Miltonian theory took the
world by storm. <o:p></o:p><p></p>
<p class="MsoNormal">China rejected the 1980s fad of liberal Economics and
charted its own path- a mixture of economic philosophies- that resulted in its
rapid growth since 1978. China has grown to the second-largest economy in the
world, in less than 50 years, pulling some 800 million people out of poverty
and into the middle class. A key plank of China’s progress was massive government
investment in infrastructure. </p><p class="MsoNormal">Infrastructure projects are good at creating local direct
and indirect jobs. That is how China’s investment infrastructure and cities
distributed wealth and catalyzed robust economic growth. GGI is likely to achieve
similar results. So the argument that it
will benefit local communities better is a just a story. Whatever the marketing
pitch, Africa can still make hay while the sun shines.</p><p class="MsoNormal"><o:p></o:p></p>
<span style="font-size: 11pt; line-height: 107%;"><span style="font-family: times;">Since donor-funded projects are tied to
contracting firms from the donor country, European Civil engineering firms will
gain. Some have delivered stillborn projects in Kenya due to financial
difficulties at home. This is not surprising, as Europe is yet to recover fully from the
ravages of the 2008 financial market collapse that restrained public spending.
The consequence of that was a lack of jobs for civil engineering firms and the
concomitant financial distress. That GGI will tag along the private sector is a
clear indicator that it is a lifeline for their engineering firms.</span></span><div><span style="font-size: 11pt; line-height: 107%;"><span style="font-family: times;"> Africa is
the only large market for infrastructure projects for them hence the need to mobilize resources to enter the market and create jobs for their redundant firm.<div class="separator" style="clear: both; text-align: center;"><br /></div><br /></span></span></div>East Africa Economics Reporthttp://www.blogger.com/profile/06336638272766088431noreply@blogger.com0tag:blogger.com,1999:blog-4878785766209359257.post-4351784120935921402021-12-03T10:33:00.002-08:002023-07-01T00:51:45.362-07:00 Has China’s “infrastructure Diplomacy” in Africa won?<table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhWHd81WQKr9ke_1ayuxHJCEQtrruvMKGnMD_giP_C9td4OQDCSBrns7hQVSmbkYxvULyEaoL9hMPpzgfo2r51gkECQ0bBRRvH1FMFScUtEKxS00hVhB2W_dRaaV9G-mueNCVuEiT6OvtA/s640/electric-power-273648_640.jpg" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="426" data-original-width="640" height="213" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhWHd81WQKr9ke_1ayuxHJCEQtrruvMKGnMD_giP_C9td4OQDCSBrns7hQVSmbkYxvULyEaoL9hMPpzgfo2r51gkECQ0bBRRvH1FMFScUtEKxS00hVhB2W_dRaaV9G-mueNCVuEiT6OvtA/s320/electric-power-273648_640.jpg" width="320" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-family: arial; font-size: x-small;"><b><span>T</span>he Loiyagalan-Suswa High voltage transmission line: <br />Salvaged by Chinese </b></span></td></tr></tbody></table><p><span style="font-family: times;"><span style="font-family: times;"></span>The delivery of stillborn construction projects in Kenya by CMC
Di Ravenna, Grupo Isolux Corsan, and Bechtel Engineering raises the question;
why? Why are Western Civil Engineering
companies failing in East Africa? Why Is China succeeding?</span></p><p class="MsoNormal"><span style="font-family: times;"><o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: times;">We eschew the propaganda and focus on Economics and attitude
toward Africa for these are the elephant in the house. Chinese and Western infrastructure investment
Models differ. Even their attitude towards Africa is far apart. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: times;">In Chinese and Western European models, the public, through
the government invests in infrastructure. The US on the other hand, allows the
private sector, state governments, and the federal government to invest in
infrastructure. This diffusion of responsibility is the reason why the US is
suffering a severe case of rotting infrastructure.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: times;">Although the Chinese and European Models are similar, how
much we invest in Infrastructure year-on-year matters. Here, China is the
leader in infrastructure investment and is slated to remain at the pole
position until 2040, spending 5.1 percent of its GDP on infrastructure.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: times;">The Chinese believe that Investment in infrastructure is a
catalyst for robust economic growth- and they are right. Their economy has
posted a robust growth rate in the last 40 years commensurate with large
investments in infrastructure. Her GDP doubled every eight years catapulting
her to the second-largest economy in the world after the US. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: times;">Europe’s investment in infrastructure, on the other hand, peaked
around the 1980s. New infrastructure takes some time -say 10 to 20 years- to
deteriorate to the level of replacement or expansion. This means that to keep
civil engineering firms at work, new infrastructure development must be continuous.
The peak in Europe meant 10 to 20 years of redundancy for the firms.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: times;">Redundancy, coupled with the West’s condescending attitude
towards Africa, spelled doom for them. The
West deemed Africa to be an “aid destination,” “a useless Continent,” said the
Economist in 1995. This narrative blinded them to the growing demand for infrastructure
in Africa and the business opportunities therein. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: times;">China saw a business opportunity in Africa’s infrastructure
sector and grabbed it- lending, building, and completing infrastructure projects
on time and on budget. For the last decade or so, China was the only investor
in Africa’s infrastructure market. Their
Civil Engineering firms did roaring business while their Western counterparts
were idle, yawning and teetering on bankruptcy.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: times;"></span></p><div class="separator" style="clear: both; text-align: center;"></div><span style="font-family: times;"><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: left;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj6m3_6LPyxj70wH30_sIxyghtGQ3HKJpu8IX889C1QQhEEC585q1kFXJLXjCGzKzeKsDArjeWsjcAfGretIOnM19yxgWS_yJAAqyPkWJJSbWCL6Kk_PdUxi0EnZAhureL9AcajPEEuF7c/s700/A+file+image+of+the+Nairobi+Southern+By-pass.webp" style="clear: left; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="350" data-original-width="700" height="160" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj6m3_6LPyxj70wH30_sIxyghtGQ3HKJpu8IX889C1QQhEEC585q1kFXJLXjCGzKzeKsDArjeWsjcAfGretIOnM19yxgWS_yJAAqyPkWJJSbWCL6Kk_PdUxi0EnZAhureL9AcajPEEuF7c/s320/A+file+image+of+the+Nairobi+Southern+By-pass.webp" width="320" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-family: arial;"><b>Southern bypass Nairobi: <br />Also salvaged by the Chinese</b></span> </td></tr></tbody></table> Initially, China was
salvaging infrastructure projects rejected by Western financiers, such as the
Tanzania- Zambia Railway (TAZARA). In Kenya, China salvaged the 29 KM southern
bypass in Nairobi reducing the travel time on this stretch by two-and-a-half
hours. The Chinese work ethic and quality of work won them more business. Now
China controls 42 percent of all EPCs in Africa. <o:p></o:p></span><p></p>
<p class="MsoNormal"><span style="font-family: times;">The emergence of China as an investor in Africa gave birth
to the “Chinese Infrastructure diplomacy,” phenomenon, which was a game-changer.
There was a new bull snorting in the pen- and it was serious! <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: times;"></span><span style="font-family: times;">The West, after years of spreading anti-Chinese propaganda,
has finally adopted the phrase “if you can’t beat them, join them.” This month
alone, America’s “build back better” got a huge boost when the US Congress
voted for a $1.2 trillion infrastructure bill. Then Europe launched its $340
billion seven-year “Global Gateway Initiative” to finance infrastructure at
home and abroad.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: times;"> This is an admission
that their Civil Engineering firms cannot compete in Africa without their
governments taking the lead. The US
Initiative will only benefit domestic firms for it is a purely domestic-focused
law. As for taking a shot at the African market, GGI for such firms as, CMC Di
Ravenna, and Grupo Isolux Corsan, is too little too late for their credibility is zero. While the first two went bust
during the tenancy of the contracts in Kenya, Bechtel simply walked out. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: times;">A report by Kenya’s Parliamentary Budget Office, PBO, gave a
hint regarding Bechtel’s departure from the Kenyan project. It was a breach of
contract! Bechtel’s contract was for the construction of the US$3 billion,
six-lane Nairobi- Mombasa Expressway on a PPP contract. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: times;">Instead, it turned into consultancy, evaluating the project
and coming up with a lower price tag of $1.8 billion. It even recommended a
change of the financing plan from a toll road to a toll-free- road, advising the
government to borrow the funds and contract Bechtel to execute. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: times;">The only potential beneficiary of Europe’s new $340 billion
“Global Gateway initiative” launched by the European Union, this week, is the
French firm, Vinci Highways SA. Vinci is successful in PPP projects across the
world.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: times;"></span></p><div class="separator" style="clear: both; text-align: center;"></div><span style="font-family: times;"> Vinci, which won the contract
to build the $1.6 billion Rironi- Nakuru- Mau summit highway project in Kenya
on PPP terms, is quite adept at crafting alliances that pool talents and
resources. In Kenya, it tagged along Meridian Infrastructure Fund, Vinci
Concessions SAS, and Sogea-Satim Kenya as partners bidding under the Rift Valley
Highway consortium. Meridian is a fund of CDC group of the British Government
that invests in hard infrastructure in Africa, the Caribbean, and the
Pacific. <o:p></o:p></span><p></p>
<p class="MsoNormal"><span style="font-family: times;">According to the profile in its webpage, <a href="https://www.vinci-concessions.com/">https://www.vinci-concessions.com</a> Vinci has, together with local partners, a
portfolio of some 4000km of roads on PPP terms in West Europe, East Europe,
Canada, and the US. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: times;">Its stake in a large portfolio of the projects hardly
exceeds 50 percent. Her partners in the projects, who are largely local Civil
Engineering firms and investment funds, control the rest. <o:p></o:p></span></p>
<table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhtOi9Okz6M3SPfR7bCoNjAlWqYpIKkDgAakzwCgbOsEkx0T3eVmNfdXmb8s4vIGGJZMDaD4Iy7U45ZN-1THAgA0BUMdINRNiO2ELWT49LyFa9Bu53JMUOhYYswnk7TL7RzYcFXP5XgEFw/s500/16a79e6e5907863bf9dd563998295a61.webp" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="330" data-original-width="500" height="211" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhtOi9Okz6M3SPfR7bCoNjAlWqYpIKkDgAakzwCgbOsEkx0T3eVmNfdXmb8s4vIGGJZMDaD4Iy7U45ZN-1THAgA0BUMdINRNiO2ELWT49LyFa9Bu53JMUOhYYswnk7TL7RzYcFXP5XgEFw/s320/16a79e6e5907863bf9dd563998295a61.webp" width="320" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-family: arial;"><b>Kenya's SGR: funded and built by Chinese</b></span></td></tr></tbody></table><p class="MsoNormal"><span style="font-family: times;"></span><span style="font-family: times;">Although there still is room for these firms to compete in
Africa, their success market will largely depend on their attitude. If the West
continues to dictate to Africa what projects it needs, GGI will fail. If on the
other hand, they accept African projects proposals as presented</span><span style="font-family: times;">, they could win
some.</span></p><p></p>
<p class="MsoNormal"><span style="font-family: times;">There is one area it could make a dent in “Chinese
infrastructure diplomacy” though: It could offer competition for business that
would force China to review its lending terms to Africa. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: times;">Price will be key here. If European firms continue to be
pricey, the Chinese will outcompete them and shut them out permanently. Does China really jerk up prices for its
projects in Africa? Evidence to support this theory is hard to come by.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: times;">A comparative analysis of the cost of building the Standard
Gauge Railway in Africa debunks the myth of expensive Chinese contracts. It does
not reveal any significant cost variation between the West and the East. The
Chinese build SGRs in Kenya and Ethiopia cost between US$3.89 and $4.57 million
per kilometer respectively.</span></p><p class="MsoNormal"><span style="font-family: times;"> This is the same range in the Tanzanian project contracted
to Yapi Merkezi, and Mota-Engill, a Turkish-Portuguese consortium. The
300-kilometer section between Dar es Salaam and Morogoro cost $4.2 million per
kilometer without locos and rolling stock, while the 442 KM Morogoro -
Matukupora section will cost $4.59 million a kilometer. We hasten to add that
the other lines are a lower standard compared to the Northern Corridor, SGR in
Kenya.<o:p></o:p></span></p>
<span style="font-size: 11pt; line-height: 107%;"><span style="font-family: times;">Well then, has Chinese Infrastructure diplomacy
won?. It remains to be seen whether the West will eventually dent Chinese
investment in Africa’s infrastructure construction sector</span></span>East Africa Economics Reporthttp://www.blogger.com/profile/06336638272766088431noreply@blogger.com0tag:blogger.com,1999:blog-4878785766209359257.post-20351920589876754942021-10-27T07:27:00.006-07:002022-01-09T23:33:13.828-08:00Why did Tanzania export gold via Uganda and Burundi in 2020?<div class="separator"><p class="MsoNormal" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;">According to the Bank of Tanzania, the country earned US$2.9
billion from gold exports last year. This, the bank says, was a 32 percent increase
over the $2.2 billion earned the previous year.
According to <b>Tanzania invest</b>,
the major destinations for Tanzania’s gold exports are South Africa,
Switzerland, and India. However, multiple reports indicate that Tanzania used her
neighbors, Burundi and Uganda, to export her gold last year. The reports do not
explain the shift of destinations to the Middle East via her neighbors. It does
not explain the sudden change in consumer behavior in Uganda and Burundi, two
countries teetering on poverty, from basic goods to luxuries such as gold.</p></div><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal">Neither do they explain why Tanzania could not export her
gold directly to the market This leaves some hanging questions such as; Did
the closure of Airports and Seaports shut the doors to Tanzania’s exports? Was
she magnanimous to her neighbors in dire straits? or was she afraid, afraid of
what? What was the effect of her indifference to the COVID-19 pandemic on her
gold exports?<o:p></o:p></p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: left;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgIR3hvv73IWcP5hWLqUQVf5s2ypoJn0x42Pi0J7M4jy95LMe4rEiuuuh14e3H-oc9mMhU7h2gQK3pGi4sM8TYsmINybIWyHuaNxNinDDG5XktUcsgj-MVa1nD1aYF3CFDpT3DGdqQEbMc/s304/Screenshot+2021-10-27+170815.png" style="clear: left; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="212" data-original-width="304" height="139" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgIR3hvv73IWcP5hWLqUQVf5s2ypoJn0x42Pi0J7M4jy95LMe4rEiuuuh14e3H-oc9mMhU7h2gQK3pGi4sM8TYsmINybIWyHuaNxNinDDG5XktUcsgj-MVa1nD1aYF3CFDpT3DGdqQEbMc/w200-h139/Screenshot+2021-10-27+170815.png" width="200" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-family: arial; font-size: x-small;"><b>Gold Exports declined to<br /> Zero in July 2021</b></span></td></tr></tbody></table><p></p>
<p class="MsoNormal">Uganda and Burundi’s gold re-exports increased significantly
between May last year, and sometimes this year. According to the <b>Economic Performance Report </b>published
by<b> Uganda’s Ministry of Finance and
Planning,</b> between September 2020 and June 2021, Uganda imported Gold worth
$1.095 billion from Tanzania and exported gold worth $1.8 billion over the same
period. It is not clear how much gold Tanzania exported to Burundi.<o:p></o:p></p>
<p class="MsoNormal"> It is also not clear
how much gold Tanzania had exported to Uganda before the dates published in the
EPR. However, the <b>East Africa Trade
Report</b>, published by TradeMark East Africa last year, shows that Extra-EAC
trade in Burundi and Uganda began rising in June 2020. Extra-EAC trade refers
to exports to the rest of the world. These
sudden rises, says TMEA, were in “correlation to increase in mineral exports.”<o:p></o:p></p>
<p class="MsoNormal">The TMEA report shows that Burundi’s extra-EAC trade was
minus 7 percent in May 2020. It then
rose to 67 percent in June, and to an astonishing 804 percent in July before
declining to 52 percent in September 2020. Over the same period, Uganda’s
Extra-EAC trade rose from minus 54 percent in May 2020 to 15 percent in June
and then to 31 percent in July, then 16 percent in October.<o:p></o:p></p>
<p class="MsoNormal">From these reports, it seems, the $2.9 billion Tanzania earned
from gold last year was exported to Burundi and Uganda. It is worthy of note that trade in gold in
Uganda declined to zero from July this year when the government imposed taxes on
gold exports. Imports of gold from Tanzania also stopped. <o:p></o:p></p>
<p class="MsoNormal">Uganda’s aggressive COVID-19 control measures severely
hurt her economy, we can report. According to the African Economic Outlook
(AEO) 2021, Uganda’s economy shrunk to negative territory, posting a minus 0.5
growth. <o:p></o:p></p>
<p class="MsoNormal">Yet, the country’s recorded exports of gold, $1.8 billion are
nearly six percent of the country’s GDP. That these massive exports had no effect
on the domestic economy suggests that the country was just a transit route for
gold produced elsewhere. This theory is lent credence by the fact that Uganda
imposed a 5-10 percent tax on gold exports. <o:p></o:p></p>
<p class="MsoNormal">Soon thereafter, the business collapsed pushing Tanzania to
the second slot of leading import sources after Kenya. Earlier this year,
Tanzania had dethroned Kenya from the top perch. Since May 2021, however, Kenya
has reclaimed its position as the leading source of Ugandan imports in EAC, and
also, the leading destination for her exports.<o:p></o:p></p>
<p class="MsoNormal">The recession in Uganda cost the productive sectors dearly due to the collapse of domestic
demand. The informal traders, says the <b>East
Africa trade</b> report, lost US$43 million as their businesses shrunk to just
$1 million from the previous $44 million a year. <o:p></o:p></p>
<p class="MsoNormal">Consequently, domestic demand receded leading to deflation. In January
this year, deflation hit minus 6 percent, then turned north. It is still in the
negative territory.<o:p></o:p></p>
<p class="MsoNormal">Deflation is the situation of persistent price declines for a
long time. It is a situation of declining domestic demand amid an increased
supply. Therefore, producers dump their produce to jerk up demand.<o:p></o:p></p>
<p class="MsoNormal">The depressed domestic demand in Uganda, coupled with a weak
currency was perhaps, the cause of frequent trade spats with Kenya, her leading
African market. Since December 2019,
Kenya has banned imports of Ugandan agricultural produce, such as Sugar, Maize,
milk, and poultry products. <o:p></o:p></p>
<p class="MsoNormal">Although Kenya cited quality and health concerns, it seems,
the real reason was to protect Kenyan produce from dumped Uganda produce. <o:p></o:p></p>
<p class="MsoNormal">The reasoning is simple: Uganda’s domestic market was depressed.
Consequently, producers reduced prices to jerk up demand. This made them
cheaper compared to similar goods produced in Kenya. If Cheap Ugandan goods
crossed the border into Kenya, they could elbow similar Kenyan produce out of
the domestic market or force the producers to sell at a loss. That is politically and economically
unacceptable. <o:p></o:p></p>East Africa Economics Reporthttp://www.blogger.com/profile/06336638272766088431noreply@blogger.com0tag:blogger.com,1999:blog-4878785766209359257.post-34140242804837318092021-10-08T10:08:00.004-07:002021-10-08T10:18:11.180-07:00The West is out to kill Africa’s development agenda<table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh6ttmDDHy44cvP9AY1TUtQpBgythqXFYY_Jmwm_I2P0Qdi7TJSbAILn4NOmJDzwaooG-ddSCvCfvpsFH5KJ4oaDkIrrjfwXn-Xsll1Rsob2ILzNM2Up2md2qbgx7aP60btsGnn_dKJOi4/s960/Equitroia.webp" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto; text-align: center;"><img border="0" data-original-height="720" data-original-width="960" height="150" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh6ttmDDHy44cvP9AY1TUtQpBgythqXFYY_Jmwm_I2P0Qdi7TJSbAILn4NOmJDzwaooG-ddSCvCfvpsFH5KJ4oaDkIrrjfwXn-Xsll1Rsob2ILzNM2Up2md2qbgx7aP60btsGnn_dKJOi4/w200-h150/Equitroia.webp" width="200" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-family: arial; font-size: x-small;"><b>The Equatorial Land Bridge. <br />Will cut Travel time between East <br />and West Africa to two days</b></span></td></tr></tbody></table><p> According to the
Africa Development Bank’s <b>Africa Economic Outlook</b> for 2018, Africa needs
to invest a total of US$1.2 trillion over the next seven years on productive
and profitable infrastructure projects.
This works to an average spend of US$170 billion a year at the top end.</p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal">Of this, the
continent, through budgetary allocations and donor support, can manage $65
billion a year, leaving a yawning gap of US$105 billion or a total of $735
billion over the seven-year period. The AEO breaks down the sectoral needs as
follows in order of priority: US$ 35-50 billion on energy, $35-47 billion on
transport, and $55-66 billion on water and sanitation<o:p></o:p></p>
<p class="MsoNormal">That is Africa’s
development agenda: Building US$1.7 trillion worth of infrastructure in the
next seven years. The question is how to fund the large gap. To its credit, AfDB has created a vehicle,
Africa50, to help craft projects to be funded by the private sector, but that
does not stop Africa from seeking finance elsewhere. So far, projects in green
energy have gained traction. The logistics sector and health sectors are not
attractive for obvious reasons. <o:p></o:p></p>
<p class="MsoNormal">The reality is stark.
We must choose either development or underdevelopment; to bequeath future
generations of Africans prosperity or poverty.<o:p></o:p></p>
<table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: left;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhB6LpulSjNSYopUgjKJwD8EFUse57uhBctW9-V7Sy_J5Tz9PawMA_Uk8_cHsqU_x0EfrP2K0_MoBuOGzpwxa-W_prx1pgsnEMOOXD97UNpJK_4Y-vZCMd9ZlbbW5NaDFghD-n3BCEkhrY/s276/Train.jpg" style="clear: left; margin-bottom: 1em; margin-left: auto; margin-right: auto; text-align: center;"><img border="0" data-original-height="182" data-original-width="276" height="132" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhB6LpulSjNSYopUgjKJwD8EFUse57uhBctW9-V7Sy_J5Tz9PawMA_Uk8_cHsqU_x0EfrP2K0_MoBuOGzpwxa-W_prx1pgsnEMOOXD97UNpJK_4Y-vZCMd9ZlbbW5NaDFghD-n3BCEkhrY/w200-h132/Train.jpg" width="200" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-family: arial; font-size: x-small;"><b>Fast and high capacity trains <br />lower delivery time and costs</b></span></td></tr></tbody></table><p class="MsoNormal"> If we choose underdevelopment, the future
generation will never forgive us for our selfishness, because they shall have
to pay higher prices to invest in the same infrastructure to prosper. The need
for the same infrastructure will not go away because we choose not to see it.</p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal">If on the other hand, we choose development, we must pay for it and if we cannot afford it, we borrow
from somewhere. That is the stark reality.
<o:p></o:p></p>
<p class="MsoNormal">This brings me to
the anti-Chinese debt rhetoric swirling around. The rhetoric demonizes Chinese loans to Africa
as detrimental to the continent. They are “predatory, expensive--- unnecessary?”
Some critics even suggest that China imposes the debt on Africa in pursuit of the Belt and Road Initiative.</p><p class="MsoNormal"> If the Chinese loans are so benign, one may ask, who
is the beneficent creditor and why has Africa not gone there? </p><p class="MsoNormal">Africa’s demand for
investments funds in infrastructure- Seaports, Railroads, Roads, Airports,
electricity plants, you name them- far exceeds its capacity. That means she has to borrow from somewhere. </p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgAcqlqDD2CnZAwF6tyRA__as-O7c8zlks_yldTly-Pc4gNPlsM06yw8HrvOYqs4y2r5IHcNqOAvUaIqs9YFWWZo-D2w8WcjUEesKNL488YvjRwhu5vneprYLycfKrI9or9kDRrSr59qps/s512/unnamed.jpg" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto; text-align: center;"><img border="0" data-original-height="256" data-original-width="512" height="106" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgAcqlqDD2CnZAwF6tyRA__as-O7c8zlks_yldTly-Pc4gNPlsM06yw8HrvOYqs4y2r5IHcNqOAvUaIqs9YFWWZo-D2w8WcjUEesKNL488YvjRwhu5vneprYLycfKrI9or9kDRrSr59qps/w200-h106/unnamed.jpg" width="200" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-family: arial; font-size: x-small;"><b>A Solar Power Farm: Green energy <br />is cheap and Climate-friendly</b></span></td></tr></tbody></table><p class="MsoNormal">Available data shows that
in Africa, apart from the Governments, there are three other key infrastructure
financiers. These are- in alphabetical order- Africa Development Bank, China,
and Japan. The irony is China’s funding is vexatious, even in Africa. Why is China
being singled out for demonization?</p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal">There is a growing
body of evidence showing that the anti-Chinese sentiment is engineered in the
West, especially the US in the advancement of its economic war with China. The West, which is losing its grip on Africa
due to the entry of the dragon, is afraid that Africa, which sustains prosperity in
the West, could also grow rich and assertive and thus drive the West into
poverty. <b>Go to</b> h<a href="https://www.youtube.com/watch?v=d7KEp9wuFSE">ttps://www.youtube.com/watch?v=d7KEp9wuFShE</a>.</p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal">It is, therefore, necessary to suppress Africa’s development agenda, by all means, particularly
propaganda. The growth of China into the second-largest economy in the world is
a threat to the West in two ways: Firsts introduces competition for African raw
materials bidding up prices; and two, investment in infrastructure makes
manufacturing in Africa competitive. Both are a threat to prosperity in the West. The war against China is thus an existential
one for the West, especially the US.<o:p></o:p></p>
<p class="MsoNormal">Infrastructure
development, experts say, is a catalyst to economic growth, which in turn eliminates
poverty and dependence. China itself is a living example of the socio-economic
benefits of investing in infrastructure. <o:p></o:p></p>
<p class="MsoNormal">Apart from job
creation, logistics infrastructure eases access to both domestic and
international markets. Increased power generation lowers the cost of energy and
thus the cost of doing business. These two are a recipe for rapid
industrialization. China’s investments could, it is feared, drive Africa to
economic prosperity and independence. That is the elephant in the room! <o:p></o:p></p>
<p class="MsoNormal">The West learned this
bitter lesson in China itself. In the 1980s, in a bid to weaken labor Unions,
lower wages, and raise profits, Conglomerates in the West set up shop in China.
Unwittingly, they also transferred know-how to China. The Chinese quickly
learned and improved on the knowledge, industrialized, and dominated the export
market. Africans are not dumb, they can quickly learn to exploit their own
assets for their benefit.<o:p></o:p></p>
<p class="MsoNormal">If in doubt,
consider this: China is way ahead of the West in high speed, railroads,
boasting 37,900km of high-speed railway, built in the last 12 years. That is more than 67 percent of the world's
total. Today China is exporting IT technology to the developed West. A large
proportion of Computer and Phone Chips is made in China. This dominance has the
West behaving stupidly, such as Donald Trump asking China to stop being
innovative. <b><i>Go to</i></b> <a href="https://www.youtube.com/watch?v=Iaw4n9IZDdc&t=537s"><b>https://www.youtube.com/watch?v=Iaw4n9IZDdc&t=537s</b></a>. This is the root of the toxic anti-Chinese
rhetoric. <o:p></o:p></p>
<p class="MsoNormal">In Africa, China is
investing in transformative infrastructure that the West rejected as either too
expensive or unnecessary in Africa. Three examples suffice; one, the Tanzania–Zambia Railway
(TAZARA) built by China in the early 1970s. Sources say that Tanzania and
Zambia approached China as the last resort as the West had rejected the project.<o:p></o:p></p>
<p class="MsoNormal"> In Kenya, China financed the Southern By-pass
in Nairobi after the World Bank pulled out in 2010, effectively killing it. The
World Bank also attempted to kill the 310 MW Lake Turkana Windpower Project in
Kenya. It also tried to kill the Bujjagali hydro project in Uganda in 2006. In
all instances, the projects were said to be too large for the host country.</p><p class="MsoNormal">Apart from
finance, Chinese Engineering and Construction firms have elbowed the West out
of business in Africa. So diffuse is the presence of Chinese contractors that
the other large financier in Africa, AfDB, is often swamped. A large proportion of AfDB
funded projects in Africa are built by Chinese contractors. Among these is the
Thika Superhighway, the Namanga-Athi River road, and the outer ring road in Kenya. Popular opinion has it that the
projects are Chinese funded Since Chinese contractors built them. So why are
Chinese Engineering firms popular in Africa? Is it graft, as the propaganda has
it?</p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal"></p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: left;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj5NBgngs2GCbBVS3wVxrhKbGBjqPl-NFRa2u8N_We_axIHBmU4LNhs-GVplS5euocRmeoM4a7x-wMtU1fdZNPYoChJFDrSccSxNF833J7AtqAlDVZbx7Acpx2uItl4ZW9wp2We_u1uq-U/s800/Image-4-Lamu-Port-Project.jpeg" style="clear: left; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="600" data-original-width="800" height="150" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj5NBgngs2GCbBVS3wVxrhKbGBjqPl-NFRa2u8N_We_axIHBmU4LNhs-GVplS5euocRmeoM4a7x-wMtU1fdZNPYoChJFDrSccSxNF833J7AtqAlDVZbx7Acpx2uItl4ZW9wp2We_u1uq-U/w180-h150/Image-4-Lamu-Port-Project.jpeg" width="180" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-family: arial; font-size: x-small;"><b> Lamu Port: Africa lags in <br />Seaport development</b></span></td></tr></tbody></table> Explaining the popularity of Chinese
contractors in Africa, Gyude Moore, a former Public Works minister in Liberia cites
two factors; stiff competition among Chinese contractors and efficient
execution. He cites an $80 million road project in Liberia funded by the
African Development Bank. Seventeen Chinese firms bid. There was only one bid from the West.
The Chinese bid ranged between $62- $75 million while the Western firm bid for
$86 million. He asked his audience to
figure out the winner. Go to <a href="https://www.youtube.com/watch?v=belm4kDAHgM"><b>https://www.youtube.com/watch?v=belm4kDAHgM</b></a><o:p></o:p><p></p>
<p class="MsoNormal"> This competition is also a major factor
in the efficiency of Chinese firms in project execution. They complete their
projects within budget and in most instances, ahead of schedule. Kenya’s SGR
from Mombasa to Nairobi was completed 18 months ahead of schedule and so was
TAZARA. The idea is to qualify
themselves for the next contract by completing the first efficiently. Vimal
Shah, the Chairman of BIDCO Africa based in Kenya, in an interview with <i>Bloomberg New</i>s bluntly told the West
that it is no match to the Chinese in project execution. He accused the West of wasting its 50-60 year head start in
Africa. The West saw Africa as an aid destination while China saw business
opportunities in Africa and pursued them<b>. Go to</b> <a href="https://www.youtube.com/watch?app=desktop&v=SYeT25sYBoI">https://www.youtube.com/watch?app=desktop&v=SYeT25sYBoI</a><o:p></o:p></p>
<p class="MsoNormal">This is the source
of all the anti-Chinese bile in the US and the West; abid to stall China’s influence. In Africa, the idea
is to kill its development agenda. Will Africa be scared into abandoning it? Should it? Figure it out for yourself,
apologies to James Hadley Chase!</p><o:p></o:p><p></p>East Africa Economics Reporthttp://www.blogger.com/profile/06336638272766088431noreply@blogger.com0tag:blogger.com,1999:blog-4878785766209359257.post-45551167238072134372021-09-23T01:36:00.005-07:002022-02-05T21:13:23.623-08:00Why Kenya's real GDP was larger than the nomial GDP<p></p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjCY6b6DsnPwdcTVE1MT3L9h3SfbjMUIcv3igrLU7RAlQb9i6U_xeEvCSd4Vu698JRk14V87Ly3klnJ6xIuz2_nuFQ3Aoiy-vsWxuqCu-L0jgzL4LIIqqw5Ve-HDkCbEZqPgSWW5_NwhjU/" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img alt="" data-original-height="269" data-original-width="481" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjCY6b6DsnPwdcTVE1MT3L9h3SfbjMUIcv3igrLU7RAlQb9i6U_xeEvCSd4Vu698JRk14V87Ly3klnJ6xIuz2_nuFQ3Aoiy-vsWxuqCu-L0jgzL4LIIqqw5Ve-HDkCbEZqPgSWW5_NwhjU/s16000/image.png" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Source: CBK Data</td></tr></tbody></table>The Rebase of Kenya’s GDP accounting year to 2016 from 2009 has revealed a strange phenomenon: Kenya's real GDP was for six years, larger than the nominal GDP. Nominal GDP, which is the sum of a nation’s wealth at current market prices, is always larger than real GDP. To get the real GDP, Economists deflate the nominal GDP by the consumer price index.<p></p><p><br />That the Kenyan case was the reverse, statisticians explain, suggests that the method and system of data collection were inaccurate. They ignored or missed out on the expansion of the economy. Real GDP overshot the nominal GDP after the sixth rebase from 2001 to 2009. At that point, real GDP was 164 percent higher than nominal GDP. Nominal GDP was estimated at KES3.3 trillion(US$33 billion) while real GDP rose to KES 5.3 trillion($53billion). </p><p class="MsoNormal">According to the Central Bank of Kenya's historical GDP data, real GDP was consistently higher than nominal GDP between 2009 and 2017 when they coincided at KES7.6 trillion (US$76 billion). Since then, Nominal GDP has sprinted ahead of the real GDP which now stands at KES 8.715 trillion(US$79.1 billion) in current dollars. The nominal GDP on the other hand is estimated at KES 10.8 trillion ($97.7 billion).</p><p class="MsoNormal">Kenya’s real GDP has grown more than 854 percent between 2001 and 2020, says the Central Bank’s historical GDP data, which reflects the recent rebasing of the GDP accounting base year from 2009 to 2016. </p><p>According to the National Statistics Office which two weeks ago rebased the GDP accounting year to 2016 from 2009, Kenya’s nominal GDP at the end of last year was estimated at KES 10.7 trillion, equivalent to US$97 billion. This was KES 500 billion ($4.55 billion) larger than previously estimated. </p><p>This is despite the economy contracting to a negative 0.3 percent
last year due to COVID-19 disruptions.</p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal">Although real GDP
lugged behind nominal GDP for the period 2001-2008, it surged past nominal GDP
in 2009 when the accounting period was rebased to 2009. <span style="mso-spacerun: yes;"> </span></p>
<p class="MsoNormal">So why was real GDP running ahead of nominal GDP between
2009 and 2016? Data Capture! The report on the rebase says that the seventh
rebase was based on the 2008 System of National Accounting (SNA) guidance.<span style="mso-spacerun: yes;"> </span>The previous Rebases were based on outdated
Frameworks, says the report. <span style="mso-spacerun: yes;"> </span><o:p></o:p></p>
<p class="MsoNormal">Consequently, they did not capture the whole structure of
the Kenyan economy resulting in obvious underestimation. <span style="mso-spacerun: yes;"> For instance, b</span>etween 2001 and 2008 real GDP’s growth rate
was sluggish, growing by 33 percent in 8 years from KES1.02 trillion in 2001 to KES1.4 trillion in 2008. After the sixth rebase to 2009, real GDP rose 395 percent to KES 5.3 trillion. Real GDP in 2008 was estimated at 42 percent of nominal GDP suggesting that that year experienced ridiculously high inflation rates.<o:p></o:p></p>
<p class="MsoNormal">The old framework placed a larger weight on the Agricultural
sector whose contribution to GDP was estimated at 32.5 percent. However, the
new data found that agriculture’s contribution had shrunk to 20 percent. It is
not that agriculture’s output shrunk. Far from that, the sector’s contribution
shrunk because other sectors have increased their contribution to the larger
GDP. The transport sector's contribution has risen to 10.3
percent up from 8 percent, wholesale and trade 8.3 percent from7.3percent real estate 9.3
percent from7.2 percent, among others.<o:p></o:p></p>
<p class="MsoNormal">Due to the sudden surge in real GDP after the sixth Rebase
in 2009, it is not easy to develop a historical trend in the expansion of real
GDP.<span style="mso-spacerun: yes;"> </span>Between 2009 and 2020 real GDP has
expanded 67 percent while nominal GDP doubled every seven years, between 2001 and
2020. The initial sluggish growth up to 2008 coupled with the sudden surge in
2009 is evidence that the statistical methods used to estimate national
accounts were inaccurate. <o:p></o:p></p>
<p class="MsoNormal">The new base year coincided with the release of the Economic Survey 2021 revealed the devastation of the COVID-19 pandemic in the dollar value of the GDP in Kenya. Real GDP in US dollar
terms is valued at US$79.1 billion. This is explained by the 10 percent depreciation
of the shilling against the US dollar to KES 110 to the green buck down from
KES100 in 2019. The weak Kenya shilling has shaved off a whole $8.04 billion)
in US dollar value of our national wealth.<span style="mso-spacerun: yes;">
</span>The trend is the same with the nominal GDP whose shilling value is KES
10.8 trillion (US$97.704 billion). <o:p></o:p></p>
<p class="MsoNormal">The economic disruption caused by the pandemic resulted in
declines in forex flow as international trade ground to a halt for much of last
year, affecting Kenya’s earnings from Tourism and other exports. However, this global problem is expected to ease once the pandemic is controlled allowing the world economy to fully open and the forex flows resume.<o:p></o:p></p>East Africa Economics Reporthttp://www.blogger.com/profile/06336638272766088431noreply@blogger.com0tag:blogger.com,1999:blog-4878785766209359257.post-54459803559305358602021-09-10T11:32:00.003-07:002021-11-08T02:53:22.197-08:00Can US$550M build a 934KM railroad?<table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: left;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjRi0FDDSNxmwOuKiYCK4fVs7VeIluXTg8pSyvHP9KOEaYE5TJRvxrWwxM1jODuVx0nRptgThFOf7lCX_qZMFEWAbVQNqyeDjASD8wE-Xn49dnpQDKaPWMKNQDozWVLoertndFGVY28AUA/s591/Lunatic+Express.jpg" style="clear: left; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="386" data-original-width="591" height="209" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjRi0FDDSNxmwOuKiYCK4fVs7VeIluXTg8pSyvHP9KOEaYE5TJRvxrWwxM1jODuVx0nRptgThFOf7lCX_qZMFEWAbVQNqyeDjASD8wE-Xn49dnpQDKaPWMKNQDozWVLoertndFGVY28AUA/s320/Lunatic+Express.jpg" width="320" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-family: arial; font-size: x-small;"><b>The Lunatic Express 1.0</b></span></td></tr></tbody></table><p> According to Jimmy Wanjigi, an aspiring Presidential
candidate in Kenya, Yes. However. research shows, this is a pipe dream. Some
high-speed railway lines cost more than US$26 million a kilometer. Several factors come into play when it comes
to constructing High-speed railway lines.</p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal">Among these is safety. High-speed trains are just that –high-speed doing speeds ranging from 80Km per hour for freight trains to 360 KPH for
passenger trains. In our case, the trains can do a top speed of 120 KPH for passenger
trains. Such speeds mean that the trains have to be separated from other
transport modes such as road transport. They also have to be separated from
other users of the land such as wildlife and livestock for the safety of the trains
and their cargo and others. Timely transit times also require such separation. <o:p></o:p></p>
<p class="MsoNormal">The Ethio-Djibouti Line, the first SGR line in Africa, whose design speed is 160KM cannot do such as speed because it is a level crossing. This resulted in frequent collisions with animals. To minimize accidents, the train does 50KM an hour. </p><p class="MsoNormal">Since land is scarce for such separation high-speed trains
run on elevated rails. Elevating Railways
lines and even roads is expensive which is why the suggestion that a 934 KM long railway line can cost $550 million is a joke.<o:p></o:p></p>
<p class="MsoNormal">The assertion that such a line could cost a tenth of the
real price is the stuff falsehoods are made of. I chose to listen to the
interview anyway. <o:p></o:p></p>
<p class="MsoNormal"><b>Jimi Wanjigi unveiled</b>,
screamed the catchline. I listened up to the part about the SGR. If I got him
right, the original private-sector goal was just to lay the line, according to
customer needs, then lease it to transporters who were to buy the own rolling
stock- the Magadi Soda style. The Magadi soda mining company bought some
sections of the <b>Lunatic express 1.0</b>
to ensure efficient delivery of their exports to the Port of Mombasa.<o:p></o:p></p>
<p class="MsoNormal"></p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right; margin-left: 1em; text-align: right;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjELyiQ5FAfGgiF5F-4SEYPyFiQZ4wnLWaaB0wxqe-FMuhmMe1w20ouknF7VQVMmDeG7LFgqJNti0F_ALsJCJVHUKWPGfDr9Kb1vJ4l8vwuCE33oLp-TOgA1j0GH_C7rBbQv_pR4YYLKl4/s276/Train.jpg" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="182" data-original-width="276" height="182" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjELyiQ5FAfGgiF5F-4SEYPyFiQZ4wnLWaaB0wxqe-FMuhmMe1w20ouknF7VQVMmDeG7LFgqJNti0F_ALsJCJVHUKWPGfDr9Kb1vJ4l8vwuCE33oLp-TOgA1j0GH_C7rBbQv_pR4YYLKl4/s0/Train.jpg" width="276" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><b><span style="font-size: x-small;">Lunatic Express 2.0 on stilts</span></b></td></tr></tbody></table>Apart from harping on the cost- $589,000 per kilometer, he was mean
on details.<o:p></o:p><p></p>
<p class="MsoNormal"> That sparked off further
research on transport infrastructure costs. We start with roads. The 420 KM Kibwezi- Kitui road cost, on average,
$438 036 per Kilometre; the 504 Kilometre Isiolo- Moyale Road cost $837,334 per
kilometer, while the 11 Kilometre Dogo Kundu bypass at Mombasa cost $10M per
kilometer. The 8.9 Kilometre Dogo Kundu phase two will cost $14 Million per
kilometer lane. Here, there are two bridges measuring 2Km across the Indian Ocean.<o:p></o:p></p>
<p class="MsoNormal">According to Engineers, topography and terrain determine the
cost of an engineering project. This is reflected in the cost per kilometer of
the three roads referred to above. Relatively flat and gently sloping lands
with fewer bridges and no elevations, such as the Kibwezi-Kitui terrain are
relatively cheap. Rocky terrains such as parts of the Isiolo –Moyale road cost
more. Bridges, Engineers say, form 30 percent of any road or rail construction
project. This is reflected on the Dogo Kundu by-pass which has elevations, “a
Berlin Wall,” interchanges, service roads, and link roads. What’s more, the
Dogo Kundu bypass is four-lane, meaning there is four times more road than the
distance.<o:p></o:p></p>
<p class="MsoNormal">The distance from Mombasa to Malaba is 934 Km by road. It is
unlikely to be shorter by Rail. If a Railroad covering the entire distance can
cost US$550 million, the average cost per kilometer will be $589,000. which is
nearly what a class B road costs per kilometer. <o:p></o:p></p>
<p class="MsoNormal">Now let's turn to the cost of an SGR Railway line per
kilometer in east Africa. Consider this; Kenya’s SGR cost US$4.43 million per
kilometer while Ethiopia spent $5 million, Eritrea $ 5.05 and Tanzania's
central Corridor will cost $4.05 million for the same length. It is worth
noting that the cost of the Tanzanian line excludes the cost of rolling stock
which will cost another $230 million. That will raise the cost to at least $4.40
million per kilometre.<o:p></o:p></p>
<p class="MsoNormal">So was Wanjigi, talking about a Railway line? Evidence
suggests that it was not a railway line- at least not a
Greenfield Standard Gauge Railway. It was perhaps a rehabilitation of the
Lunatic express 1.0. <o:p></o:p></p>
<p class="MsoNormal">In his Interview, Jimmy Wanjigi says he walked out of the project
due to differences in policy with the new government. Probably this is true because the initial plan was brutally capitalistic- placing national assets into the hands of the private sector is not wise. Even the World Bank-supported Privatization
program of the 1980s and 1990s is experiencing clawbacks from governments unhappy with the level of
service from the privatized assets.<o:p></o:p></p>
<p class="MsoNormal">It was not demonstrated that their proposed
project was anywhere close to what we have. The public project was an EPC
project incorporating construction, locos, and rolling stock.</p><o:p></o:p><p></p>East Africa Economics Reporthttp://www.blogger.com/profile/06336638272766088431noreply@blogger.com0tag:blogger.com,1999:blog-4878785766209359257.post-79154727448654635132021-08-16T13:18:00.003-07:002021-11-08T02:55:50.584-08:00Is East Africa investing excess capacity, white elephants?<p></p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgHkn-4WnhQm2DcqQ-oWiMz-TAItdqCN2XpYq0kJDvD-rf2REUNNgCNFNfwH-Au0iu5PV33kVIs21eDn8TqavmlXnF_z1xNK9LjtTK0gyfsTrjrGg0UfkOej-IcWRzAuNTN_0oSDBhkBvQ/s600/Rail-contruction-600x400.jpg" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="400" data-original-width="600" height="231" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgHkn-4WnhQm2DcqQ-oWiMz-TAItdqCN2XpYq0kJDvD-rf2REUNNgCNFNfwH-Au0iu5PV33kVIs21eDn8TqavmlXnF_z1xNK9LjtTK0gyfsTrjrGg0UfkOej-IcWRzAuNTN_0oSDBhkBvQ/w320-h231/Rail-contruction-600x400.jpg" width="320" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-family: arial; font-size: x-small;"><b> A Railway Line under construction in East Africa</b></span></td></tr></tbody></table> East Africa is
racing to improve its socio-economic infrastructure- Roads, Sea Ports, Railway
lines, Power generation plants, Telecommunications, you name it. This effort has generated a lot of negative
comments.<p></p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal">A common thread is
emerging that suggests that the investments are unnecessary, burdening the
current and future generations of East Africans with debts. The thread suggests
that the region is investing in an excess capacity that will become “White
Elephants.” <o:p></o:p></p>
<p class="MsoNormal">The flipside of this thread of thought is that the current state of infrastructure,
especially Seaports and Railroads is sufficient. <o:p></o:p></p>
<p class="MsoNormal">This line of thought
is not new. We have heard it before in relation to investments in the electricity
generation sector. The governments, despite opposition, implemented the projects that are now
operational - delivering on the expected outcomes. They are anything but white
elephants.<o:p></o:p></p>
<p class="MsoNormal"> Apparently, the critics have yet to learn from their past errors. It is our view that they again have missed the point<o:p></o:p></p>
<p class="MsoNormal"> Criticism of the development trajectory suggests that East Africa is already at its optimal level of development or will
never grow at all. This is hogwash. East Africa is nowhere near optimum
development level neither is it static. In fact, going by the Pareto theory,
which seems to be the basis for this thread of thought, East Africa is still at
the Pareto improvement curve where gains by one entity do not lead to loss
by the competing entity. <o:p></o:p></p>
<p class="MsoNormal">East Africa is the
fastest-growing region in the continent, posting rates above 5 percent for
more than a decade. This is robust economic growth by any standards. In fact, two of the three largest economies in the region have entered the Lower
middle-income status. Kenya crossed that line in 2012 while Tanzania crossed
last year. <o:p></o:p></p>
<p class="MsoNormal">This robust
growth is testimony that the region is yet to approach, let alone reach,
Pareto Optimality. Consequently, as the region’s economy grows, demand for
logistics, among other services, will grow in tandem. <o:p></o:p></p>
<p class="MsoNormal">Robust economic
growth has a bad habit of expanding the consumption base translating into a
larger demand for goods and services - such things as travel, communications,
electricity, and similar fancy things in addition to the basic needs. That is
what economists call effective demand. Increased demand calls for an increased
supply of goods and services and distribution networks.<o:p></o:p></p>
<p class="MsoNormal">Put simply, there is
a positive correlation between sustained robust growth and heightened
investment in infrastructure. They feed on each other; growth creates demand
for infrastructure and infrastructure creates the environment for further
growth. To maintain its growth trajectory, East Africa must invest in enabling infrastructure.<o:p></o:p></p>
<p class="MsoNormal">In Economics theory,
there is an animal called the “multiplier effect.” It goes something like this: government investment has larger than the expected outcomes. This is a proven economic fact: A new road
for instance, in addition to connecting two destinations, cuts travel time and
cost, and triggers economic activity along the road and between the
destinations. Motorists on the road spend less on spare parts and fuel
translating into better foreign trade balances. These must be factored in, in evaluating a project’s usefulness. </p><p class="MsoNormal">This is to say that infrastructure projects do not necessarily make profits in the commercial sense, and if they do, it is years down the road. However, they create a host of other benefits that fit the definition of economic benefits. Among these benefits is enabling the private sector to make profits in the commercial sense.</p><p class="MsoNormal"> A recent review by the African Development Bank of the Nairobi -Addis Abeba highway, reported that certain parts of Northern Kenya can now buy fresh bread and Fresh milk made in Nairobi, several hundred kilometres away. It also quoted market women praising the road for eliminating their losses. Now, said the women they sell fresh fruits and vegetables from other parts of Kenya because the trip takes just a few hours down from a few days previously.<o:p></o:p></p>
<p class="MsoNormal">To be sure, the
projects are pricey and debts due to funds borrowed to build them are piling. Both
Kenya and Ethiopia’s debt to GDP ratios are above 60 percent. Tanzania tried to
suppress hers to about 40 percent, but new investment in Pricey infrastructure
will need more borrowed money. There are two choices here: incur debt to
finance development projects or avoid debt and stymie economic growth. In any
case, the projects being long-term projects with a lifespan longer than 50
years will outlive the debts incurred to put them up. This means that their
importance in our economic future will grow with time. <o:p></o:p></p>
<p class="MsoNormal">The second reason why critics miss the point is the driver
of the intense investment in Seaports and high-speed Railways. The rush to
build mega Ports in East Africa is in response to the growing size of freighters.
Most ships are Post-Panamax vessels with a carrying capacity of 6,000 TEUs and
over. These monsters need deep seas with depths of more than 15 meters. That is
why Ports are dredging to increase depths to nearly 18 meters and expand their
berths to accommodate larger ships to remain in business. It is a battle for survival by East African
Seaports!<o:p></o:p></p>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: left; margin-right: 1em; text-align: left;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgIu7BmVtMJBIoC0AbJ_pcTXFppCmWGYYrHALiZWjHqLAZCVVMGOoiYWPX2tcqJeOhFvRPb4eJVQMXk2BkSkb2cagRX4KFi0RuDtP2iBEhnvqHtAjh0yyauIxz4zWhvWzxV8xbDtXArixc/s960/Equitroia.webp" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="720" data-original-width="960" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgIu7BmVtMJBIoC0AbJ_pcTXFppCmWGYYrHALiZWjHqLAZCVVMGOoiYWPX2tcqJeOhFvRPb4eJVQMXk2BkSkb2cagRX4KFi0RuDtP2iBEhnvqHtAjh0yyauIxz4zWhvWzxV8xbDtXArixc/s320/Equitroia.webp" width="320" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><b><span style="font-family: arial; font-size: x-small;">The Equatorial Bridge: From Lamu to Douala</span></b></td></tr></tbody></table><p class="MsoNormal">Modern Sea Ports need modern supporting <o:p></o:p>infrastructure such
as high-speed Railroads and wider and fast highways. That is why the developments are simultaneous.
However, while high-speed railways and faster highways reduce delivery time, they
do not change the physical distances. The variable here is speed. Distance
remains constant. This means that some Ports will remain low priority Ports for
some destinations, other things being equal.</p>
<p class="MsoNormal">Let start with the Size of the countries in the region. Ethiopia and Tanzania are the largest countries. Tanzania is larger than Kenya,
Uganda and Rwanda combined. Similarly, Ethiopia’s landmass is equal to 61
percent the size of the East African Common market combined. It goes without saying that the two giants in
East Africa needs more logistics infrastructure especially ports than say Kenya, Uganda, and Rwanda. <o:p></o:p></p>
<p class="MsoNormal">Those ports, however many, will not compete with each other out
of business if they are equally efficient. Take the port of Mtwara in Southern Tanzania
for example. That Port is only a priority trade route for Southern Tanzania, Zambia, Malawi, South
East DRC, and probably Zimbabwe. It is a low priority Port for Tanzanians in
Mwanza to the North. So is the Bagamoyo Port. It is a high-priority port in areas
served by the Central Corridor. If anything, Bagamoyo could be a threat to
Dar-es-salaam Port, also in Tanzania. It cannot rival Mombasa or even the Lamu port which is proposed to be the overland link between the Indian Ocean and the Atlantic Ocean at the Port of Douala in Cameroon.</p>
<table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjcj_qKVKLuVvpzTaAKvc1GHoovmp4AHcrRwA09lYNbdqPMHOn6Ib_3lLvpS-uv-7ec-Uu5zTWnbjylE4fmtINFQsKEi-J40e_IPLM65rfGTKlDT8i2McqHcAjev_hEMqASu0qwsKKqdhY/s276/Train.jpg" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="182" data-original-width="276" height="182" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjcj_qKVKLuVvpzTaAKvc1GHoovmp4AHcrRwA09lYNbdqPMHOn6Ib_3lLvpS-uv-7ec-Uu5zTWnbjylE4fmtINFQsKEi-J40e_IPLM65rfGTKlDT8i2McqHcAjev_hEMqASu0qwsKKqdhY/s0/Train.jpg" width="276" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><b><span style="font-family: arial; font-size: x-small;">Kenya's High-speed train in action</span></b></td></tr></tbody></table><p class="MsoNormal">Ethiopia, given its size, needs more than one trade route. For instance, the port of Berbera in Somaliland can only serve as a trade route for eastern Ethiopia. It will not be a priority for other regions because of distances. The Port of Dolareh in Djibouti is a more efficient trade route for Addis Ababa and central Ethiopia while the North of Ethiopia is best served through Eritrea and <br />South Ethiopia through Lamu Port in Kenya. </p><p class="MsoNormal">On Railways, the Central Corridor cannot be a priority route
for Uganda because the 380 KM distance across Lake Victoria, between the Port
of Mwanza in Tanzania and Port Bell in Uganda, is a bottleneck for Uganda’s
trade. That leaves the Northern Corridor as the priority route for Uganda. <o:p></o:p></p>
<p class="MsoNormal"></p><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: justify;"><span style="text-align: left;">The rush to modernize ports in East Africa is therefore not
a zero-sum situation. It is in fact, a no-zero sum situation with all players
gaining in terms of development for the growth of ports will require the
development of roads, and Railroads to transport freight to and from the
hinterlands.</span></div></div><p></p><p class="MsoNormal"><o:p></o:p></p>East Africa Economics Reporthttp://www.blogger.com/profile/06336638272766088431noreply@blogger.com0tag:blogger.com,1999:blog-4878785766209359257.post-24318559284067839662021-08-02T10:24:00.006-07:002021-08-11T11:30:09.326-07:00 How America's Predatory Capitalism imporverished the LDCs<p></p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjI7CeXAWR-HRhhyEHxC_3jRw0vtEyiIA31bg3pfzRPZz5gL0wiPO7vgZYcXq3V4qi3xcYniFhKq_PUUJH4h3SdLgS9BIVMZh32MWZWj6VKzxqeCNN98L6UZBckiwBEexnukJigBguWHfA/s800/evurexmrqbwpuhkvqx600d9e4e1a2b4.webp" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="500" data-original-width="800" height="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjI7CeXAWR-HRhhyEHxC_3jRw0vtEyiIA31bg3pfzRPZz5gL0wiPO7vgZYcXq3V4qi3xcYniFhKq_PUUJH4h3SdLgS9BIVMZh32MWZWj6VKzxqeCNN98L6UZBckiwBEexnukJigBguWHfA/s320/evurexmrqbwpuhkvqx600d9e4e1a2b4.webp" width="320" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-family: arial; font-size: x-small;"><b>Nairobi-Mombasa Expressway. Just a prototype</b></span></td></tr></tbody></table>The passage of the US Marshal Plan in 1947 paved the way for the spread of American "Predatory Capitalism."
<p class="MsoNormal">The plan helped in the resuscitation of war-ravaged Europe and also opened the European market for American goods. Larger markets demanded more resources,
particularly crude oil, which was available elsewhere. At this point, there was a congruency of interests between profits and power.<o:p></o:p></p>
<p class="MsoNormal">Both the MegaCorps and the government were wary of the Soviet Union's control of the resources. Therefore, the desire to control resources became intertwined with the desire to dominate the world and control the spread of communism. Coming so soon after World War II, America had no stomach for conflagrations. But still, the industrial complex needed raw materials to produce goods and sell to the world. A subtle way had to be found. The search for a subtle and cheap way of controlling the world and its resources gave birth to an unholy alliance between the American Megacorps, the big
banks, and the government. </p><p class="MsoNormal">“Consultancies”
whose job was to lead in the exercise were born. These were privately-owned companies linked to the US National Security Agency, NSA. They in turn created Economic
Hitmen whose job was craft control mechanisms. Their weapon of choice was to plunge the target country into deep debt through loans from the World Bank. <o:p></o:p></p>
<p class="MsoNormal"> In the book <i>Confessions of an Economic Hitman, EHM</i>, by
John Perkins, explains the mechanisms.<b> Go
to https://www.youtube.com/watch?v=xQPZnyD0fgY</b></p><p class="MsoNormal">This is how it worked. “Experts” in the "correct" consultancy firms,
identified a country in the newly independent developing world with resources
the US needed or a strategically important country to the US cold war era
needs. They then identified and proposed a
critically needed development project, say a Sea Port, a huge electricity plant
or any fancied mega-project then build fancy economic models with exaggerated
benefits. They tabled the proposal before the target country’s government whose
political elite also, controlled a large chunk of the economy.</p><p class="MsoNormal"><o:p></o:p></p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: left;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgHOyP7vCcE3h9jFtBlfv7fllt8tr36x8pMilNC6W_z1GXbsx2xuSIS8C-0TSILiisHF3whjTZLyvrh0-DqoCMrEUvpuNBWIYYnAF6QJHi23EupZtk0U8eLJPKODbAhAYLnyC4-u0uyDLY/s1320/Southern-Bypass.jpg" style="clear: left; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="743" data-original-width="1320" height="180" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgHOyP7vCcE3h9jFtBlfv7fllt8tr36x8pMilNC6W_z1GXbsx2xuSIS8C-0TSILiisHF3whjTZLyvrh0-DqoCMrEUvpuNBWIYYnAF6QJHi23EupZtk0U8eLJPKODbAhAYLnyC4-u0uyDLY/w311-h180/Southern-Bypass.jpg" width="311" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-family: arial; font-size: x-small;"><b>Southern Bypass Nairobi. Operational</b></span></td></tr></tbody></table><p></p>
<p class="MsoNormal"> Once approved, the
“consultant” then proposed to the government that they could also arrange a
World Bank loan on the condition that “American Engineering firms build the
project.” The Engineering firms, in turn, insisted
on being paid directly by the World Bank rather than the client country. Thus, "the
money never left the US, said Perkins,
It was just moved from the World Bank to another bank in the US. The
developing world “never got a penny,
just the debt.”<o:p></o:p></p>
<p class="MsoNormal">The loans were deliberately so large that the country in
question will default sometime in the future. On default, the “corporatocracy”
swooped in demanding concessions such as access to resources, military bases,
Votes at the UN, and similar concessions.<o:p></o:p></p>
<p class="MsoNormal">The political elite in the developing world was sucked in the vice. They were allowed or even guided into siphoning
money from the projects by overpricing supplies. If they were reluctant to rob their country, subtle threats were floated. The frightened
Presidents simply played along, according to John Perkins, a confessed
“economic hitman,” The discussion, he says, went something like this “On my left hand, I
have money for you, your family and friends. On the right, I have a gun.” </p><p class="MsoNormal">The Hitman's modus operandi included payoffs, fraudulent financial reports, Coup d’états, and assassinations. It
thrived on instilling fear, fear of communism, fear of coups or murders. They funneled money from the World Bank and the US
government through USAID to line pockets of the corporate sector, thereby cheating the
developing world of trillions of dollars as the projects never produced the projected outcomes. </p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal">Some Presidents played hardball, according to John Perkins-,and paid with their lives.<b> Listen to </b><a href="https://www.youtube.com/watch?v=aLc3ehhPIKA"><b>https://www.youtube.com/watch?v=aLc3ehhPIKA</b></a>. He names two Latin American Presidents who
were killed in a span of three months in air crashes. The Ecuadorian and Panama
Leaders died in air crashes in 1981.
President Jaime Roldos Aguilera of Ecuador died on May 25, 1981 when his
plane “fell to the earth,” reported New York Times. His Panama counterpart,
Brig. Gen. Omar Torrijos Herrera died in a similar crash three months later on
August 2, 1981, reported the same Newspaper. Investigations later suggested
that the planes “were blown up in the air,” said Perkins. <o:p></o:p></p>
<p class="MsoNormal">The Ecuadorian President, Aguilera was killed for demanding
that the big oil companies, many of them from the US, pay a fair share of their profits to Ecuadorians or he will nationalize them, while the Panama strongman,
Brig. Gen. Herrera was killed for transferring the Panama Canal to Panamanians
from the US. He describes the two men as “men of integrity who refused to play
the US game.”<o:p></o:p></p>
<p class="MsoNormal"></p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEidkH8aDqpJWWgkm0Mn9XoYB2fZl0USzOlE_C25yT5nApq0o0jouhLn6YMCtwPWRniKZnbWNcZkaiS9DHfPmGgapXVFJRA-kiY0kfW0rdHtoZH6k7wPlNELW9-Am5mfgKl2q_kKobC0T-U/s524/Outer-Ring-V.webp" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="314" data-original-width="524" height="192" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEidkH8aDqpJWWgkm0Mn9XoYB2fZl0USzOlE_C25yT5nApq0o0jouhLn6YMCtwPWRniKZnbWNcZkaiS9DHfPmGgapXVFJRA-kiY0kfW0rdHtoZH6k7wPlNELW9-Am5mfgKl2q_kKobC0T-U/s320/Outer-Ring-V.webp" width="320" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><b><span style="font-family: arial; font-size: x-small;">Outer ring Road Nairobi. Operational</span></b></td></tr></tbody></table>The Congolese President Patrice Lumumba, said Jenkins, was
overthrown and killed for the same reasons. <div><o:p></o:p>The result; debt, poverty, poor governance, climate change, as the West worked to dominate the world, exploiting its resources to the exclusion of others. The developing world, including Africa, was saddled with mountains of debt and nothing to show for it. They spend large chunks of their national wealth to service the debt and were thus subjugated.<p></p>
<p class="MsoNormal">Although government-supported economic hitmen ended with the
collapse of the Soviet Union and the end of the cold war, it morphed into other
euphemisms in the US Corporate sector where they perpetuate the same zombie ideas. These include; low wages, weak labor unions, intimidation about
communists take over, tax breaks, and small government. We are talking about predatory capitalism
that controls the world. Zombie ideas are
perpetrated by Think-Tanks and lobby groups whose goal is to protect corporate
greed. and control politicians and governments. <b>Also, read</b> <a href="https://eaers.blogspot.com/2020/10/time-to-retool-capitalism.html">https://eaers.blogspot.com/2020/10/time-to-retool-capitalism.html</a><o:p></o:p></p>
<p class="MsoNormal">The death of the Soviet Union paved the way for the growth of China as an economic powerhouse as the US focused on wars in the middle-East. China, also seeking access to similar resources, chose a different path.- that of funding development projects in the developing world, particularly Africa. It built roads, railroads, and other infrastructure at a rate alarming to the West. This gave birth to the anti-china rhetoric in Africa. China is accused of being a “predatory
capitalist” dishing out large loans to Africa which threatens Africa’s
sovereignty. But the West's lethargy in financing real development in Africa paved way for the Chinese. The other day, I stumbled on a Chinese newspaper article on the
Tazara – the Tanzania-Zambia Railway build in the 1970s. <b>Go to</b> <a href="https://www.chinadaily.com.cn/a/202106/22/WS60d198f4a31024ad0bacab4e.html"><b>https://www.chinadaily.com.cn/a/202106/22/WS60d198f4a31024ad0bacab4e.html</b></a><b><u><o:p></o:p></u></b></p>
<p class="MsoNormal">The gist of the piece is that the West rejected requests by
Tanzania and Zambia to finance the Railway line<b>. </b>In desperation, the two nations approached China for support. The
Chinese built the 1806.5 KM kilometer Railway line between Zambia and Tanzania
despite her own economic hardships. The project was completed 18 months ahead
of schedule. </p><p class="MsoNormal">This piece is in tandem with a view by the former British Prime Minister, Tony Blair. <o:p></o:p>In 2006, Tony Blair correctly diagnosed the cause of China’s growing popularity in Africa. “When Africa approaches China for finance to build a road, he said, the Chinese are there the next day with a shovel. The West, on the other hand, saddles African officials with heaps of paperwork that takes two years to read,” he concluded. President George Walker Bush, who was in the same forum disagreed. </p><p class="MsoNormal">Such denials opened the door wide for the Chinese to enter Africa. The Chinese, for all their frailties, are efficient in project implementation. Contrary to the experience with the Western Engineering Firms, delays and cost overruns do not exist in the Chinese lexicon</p>
<p class="MsoNormal"> Kenya’s experience with Chinese-funded projects is a testimony to this fact. All Chinese funded and build projects are completed on time and on budget. The SGR for instance was completed on time and on budget. Efficiency is one of the selling points of the Chinese in Africa. <o:p></o:p></p>
<p class="MsoNormal">The corporate sector in the West on the other hand is
lethargic and expensive, says a former Liberian Minister for Transport. That is why they are losing business in Africa. This, coupled with the West's condescending attitude towards Africans drove Africa to China, he adds.<o:p></o:p></p>
<p class="MsoNormal">For comparison purposes, the American engineering and construction firm, Bechtel, is yet to start work on the
Mombasa superhighway in Kenya- three years since it won the contract. The last time we heard of them, they said they have
“suspended the project due to corruption.” </p><p class="MsoNormal"> Analysts say the narrative about Chinese “predatory capitalism” is simply a zombie idea to scare Africa from slipping from changing partners. “The West is using scare tactics to maintain its grip on Africa,” say knowledgeable sources. John Perkins agrees, saying the Chinese “cannot manage predatory capitalism.” Predatory capitalism is backed by violence and the Chinese do not appear keen on military activities in Africa.</p></div>East Africa Economics Reporthttp://www.blogger.com/profile/06336638272766088431noreply@blogger.com0tag:blogger.com,1999:blog-4878785766209359257.post-22529482788472951252021-07-07T11:48:00.002-07:002021-07-07T11:50:48.011-07:00Tanzania's New President: A breath of fresh air<p></p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhT18SSmvDIXWldKvT6W1beG-sqEhW5YIknQXiNfYc7FlTWt85B_YO0XQUU0FgRPNGc2eTwybEJmu6T_1exggj7QWM5ESM0xIkCl7fkVSABI8a5vUSac1icVph147DwRnTEsS5EN8JEO-Y/s480/Samia-Suluhu-Hassan.jpg" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="442" data-original-width="480" height="295" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhT18SSmvDIXWldKvT6W1beG-sqEhW5YIknQXiNfYc7FlTWt85B_YO0XQUU0FgRPNGc2eTwybEJmu6T_1exggj7QWM5ESM0xIkCl7fkVSABI8a5vUSac1icVph147DwRnTEsS5EN8JEO-Y/w320-h295/Samia-Suluhu-Hassan.jpg" width="320" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-family: arial;"><b>Samia Suluhu Hassan: Tanzania's President</b></span></td></tr></tbody></table>Tanzania’s new president, Samia Suluhu Hassan, celebrated her 100 days in office last week. And this Publication, faithful to
our tradition of not rushing to comment on issues welcomes her to the hot
seat.<p></p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal"> Her middle
name in Kiswahili means a solution. So has she
been the solution or the problem? Will she be the solution?<o:p></o:p></p>
<p class="MsoNormal"><span style="mso-spacerun: yes;"> </span>The seat she occupies
is very hot. She inherits a country that was a pariah in many critical ways
owing to her predecessor’s abrasive and isolationist management style.<span style="mso-spacerun: yes;"> </span></p><p class="MsoNormal"><span style="mso-spacerun: yes;"></span>Her predecessor, John Magufuli, “the
bulldozer.” had little respect for Science and due process. It was his way or
the highway and that cost him his life. He rattled everyone from Civil
Servants, Politicians, to investors to his neighbors.</p><p class="MsoNormal"> I must confess that
this publication was no fun of him. We are the only publication that branded
him “Tanzania’s major risk factor.” <b style="mso-bidi-font-weight: normal;">Please
Read</b> <span style="mso-spacerun: yes;"> </span><a href="http://eaers.blogspot.com/2017/02/president-magufuli-is-tanzanias-major.html">http://eaers.blogspot.com/2017/02/president-magufuli-is-tanzanias-major.html</a>.
<o:p></o:p></p>
<p class="MsoNormal">He never disappointed. In fact, he went beyond our fears,
endangering the whole country. <span style="mso-spacerun: yes;"> </span>He
crossed swords with investors and changed laws to a point of scaring investors
away.<span style="mso-spacerun: yes;"> </span><b style="mso-bidi-font-weight: normal;">Also see</b> <a href="http://eaers.blogspot.com/2018/11/tanzania-prey-turned-predator.html">http://eaers.blogspot.com/2018/11/tanzania-prey-turned-predator.html</a>.<o:p></o:p></p>
<p class="MsoNormal"><span style="mso-spacerun: yes;"> </span>He even rattled
Tanzania’s largest market for primary products in Africa, Kenya. He yanked a proposed
crude Oil Pipeline between Kenya and Uganda and diverted it to Tanzania’s Tanga
Port. He sought to sabotage the Northern Corridor Standard Gauge Railway from
Mombasa to Kigali to the Central Corridor that traverses Tanzania. Also, Read <a href="http://eaers.blogspot.com/2020/12/how-zombie-ideas-sabotaged-sgr-project.html">http://eaers.blogspot.com/2020/12/how-zombie-ideas-sabotaged-sgr-project.html</a>.
<o:p></o:p></p>
<p class="MsoNormal">Branded “Remarkably Trumpian” by the US publication<b style="mso-bidi-font-weight: normal;">, the Daily Beast, </b>Magufuli had no
qualms rejecting science and due process if they conflicted with his fantasy.
In the end, he led a country that was; ravaged by Covid-19, a
devastated economy, and was isolated at home and abroad. That is the country
Samia Suluhu inherited and will lead.<o:p></o:p></p>
<p class="MsoNormal">She has executed herself well and has her priorities
right. Immediately she assumed office, she set out on a charm offensive in a bid
to repair relations soured by her predecessor. She met with her peers in the neighborhood
including Uganda and Kenya and the Bretton woods institutions, the IMF and
World Bank. <o:p></o:p></p>
<p class="MsoNormal">In all the meetings, she cut business and economic deals. Among these was signing the agreements for the start of EACOP, the 1443 Kilometer oil
Pipeline from Hoima oilfields in Uganda to the Port of Tanga in Tanzania. She
also extracted a deal to supply Kenya with LNG by a Pipeline from Dar-es-Salaam
to Mombasa in Kenya. Within the month, she and her Ugandan counterpart, Yoweri
Museveni, signed the HGA with EACOP, setting the stage for its construction.
This publication has reservations about the project going by the name East
Africa Crude oil Pipeline (EACOP) and its Kenya counterpart, Lokichar - Lamu
Crude Oil Pipeline (LLCOP). <span style="mso-spacerun: yes;"> </span><b style="mso-bidi-font-weight: normal;">See also</b> <a href="http://eaers.blogspot.com/2021/01/east-africas-crude-oil-pipelines-in.html">http://eaers.blogspot.com/2021/01/east-africas-crude-oil-pipelines-in.html</a>
Our reservations are strongly anchored on the shift in consumer taste towards
clean energy and the declining crude oil prices.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p>The talks with the Bretton woods institutions opened the
purse strings for financial support, bagging US$1.5 billion in loans from them.
Not a bad result for one month’s work if you ask me. Her announcement that talks about the
construction of Bagamoyo Port, with the Chinese investors, are set to re-open set everyone sitting up to
take note. Samia (the solution) Hassan is thus a breath of fresh air coming
after her predecessor.</p><p></p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal">While the oppressive laws promulgated under Magufuli to
protect his incompetence are still in place, she seems less keen to enforce
them, making pronouncements that appear to suggest they are on their way out. <o:p></o:p></p>
<p class="MsoNormal">We sense a changed Political and economic environment in
Tanzania, a welcome move and hope the Solution, remains just that, the
solution. <o:p></o:p></p>
<p class="MsoNormal">Tanzania is well-endowed with resources. All it needs is
proper exploitation for the sleeping giant to awaken. We must hasten to add;
Proper exploitation of resources is not akin to robbing investors. <o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>East Africa Economics Reporthttp://www.blogger.com/profile/06336638272766088431noreply@blogger.com0tag:blogger.com,1999:blog-4878785766209359257.post-438621753217345882021-05-10T02:15:00.003-07:002022-02-10T05:10:26.925-08:00Of Zombie ideas, Misinformation, and “White elephants”<p><span style="font-family: times;"></span></p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: left; margin-right: 1em; text-align: left;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgafzj9bs04-imcoMlljPWKLkpdMAewIdrqCfvwHGqAczfF5jYP25Be0tVcipVO0SvYyrOiqnz5JAjR8uVbrFFxAmxwa0whkV1xbWM1jsyH7Qfr1JKetLkI-V_evVZ9sHQ6QhAc_yp_wJM/s800/Image-4-Lamu-Port-Project.jpeg" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="600" data-original-width="800" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgafzj9bs04-imcoMlljPWKLkpdMAewIdrqCfvwHGqAczfF5jYP25Be0tVcipVO0SvYyrOiqnz5JAjR8uVbrFFxAmxwa0whkV1xbWM1jsyH7Qfr1JKetLkI-V_evVZ9sHQ6QhAc_yp_wJM/s320/Image-4-Lamu-Port-Project.jpeg" width="320" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-family: arial;"><b>Lamu Port: Kenya's Brand new Port</b></span></td></tr></tbody></table><span style="font-family: times;">Reading</span> the
persistent criticism of Kenya’s development path, one could be forgiven for
thinking that Kenyans elected a government of corrupt fools. The country has developed some mega
infrastructure projects in the last 20 years. A large number of them are
complete and operational. A large number of others are still under construction.<p></p>
<p class="MsoNormal"><span style="mso-bidi-font-weight: bold;">Yet “outcry” about
the projects persists. The cacophony of noise is confusing: the cost is
bloated, the implementation is slow; it is not the right standard; its build on
expensive Chinese loans by expensive Chinese contractors. On completion, the issues
turn to the viability of the projects. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="mso-bidi-font-weight: bold;">The protestors
embrace conspiracy theories and propagate falsehoods clothed in inept
comparisons – comparing Apples with Oranges-so to speak. They ignore the simple
economics truth that, price is determined by factors that vary from product to
product. They also ignore facts on the ground. Consequently, the protests can
be termed mere rumormongering. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="mso-bidi-font-weight: bold;"><span style="mso-spacerun: yes;"> </span>For instance, critics could not understand how
an 11-Kilometer dual carriage road cost US$1.1 billion nor could they
understand why a 467 Kilometer cost US$2.7 billion while a 705-kilometer SGR in
Ethiopia cost $3.5 billion.<span style="mso-spacerun: yes;"> </span>They did not
find out. <span style="mso-spacerun: yes;"> </span>If they did, they would found
the following structural and design differences on the standard Gauge Railways.
<o:p></o:p></span></p>
<p class="MsoNormal"><span style="mso-bidi-font-weight: bold;">The Kenyan line is
elevated -in some instances up to 43 meters high- because of the rugged terrain
on which it is built. It has 29 Kilometers of bridges and has no level
crossings. The 705 KM Addis- Djibouti line is built on relatively flat
terrain with few bridges. <span style="mso-spacerun: yes;"> </span>We say nothing
of the Tanzanian line, which is still under construction. <span style="mso-spacerun: yes;"> </span>Both the Kenyan and Ethiopian lines are
operational. <span style="mso-spacerun: yes;"> </span>Engineers tell us that Bridges
comprise 30 percent of the cost of a road and railway project.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="mso-bidi-font-weight: bold;">Two, the Kenyan line
is Chinese Class one standard with an axle load capacity of 35 tons while the Ethiopian
line is Chinese class two standard. It has an axle load capacity of 20 tons.
Further, while the Kenyan Line can carry double-stack containers, the Ethiopian
line carries a single stack.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="mso-bidi-font-weight: bold;">Three, while
Ethiopia has an electric train, Kenya has diesel- propelled engines because
Kenya did not have the spare electricity capacity to power a railway line.
Kenya has since built sufficient electricity generation capacity to power
railway locomotives. While in Ethiopia electricity only feeds the line, in
Kenya the plan is to provide electricity to the line and the adjoining areas.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="mso-bidi-font-weight: bold;">Four the Kenyan line
has more railway stations along the line than the Ethiopian Line. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="mso-bidi-font-weight: bold;">The same inept
comparisons are also evident in the soon -to -come live Lamu Port which, critics
have branded a “potential white elephant.”<span style="mso-spacerun: yes;">
</span>Why is this? Because they say, Ethiopia has lost interest in Kenya’s
Port. This is ignorant.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="mso-bidi-font-weight: bold;">Granted. Ethiopia is
eyeing three other ports along the Red Sea coast.<span style="mso-spacerun: yes;"> </span>These include Berbera Port in Somaliland,
Djibouti Port in Djibouti, and Assab Port in Eritrea. <span style="mso-spacerun: yes;"> </span>Why is Ethiopia eyeing all these options?<span style="mso-spacerun: yes;"> </span>Here are alternative facts: <o:p></o:p></span></p>
<p class="MsoNormal"><span style="mso-bidi-font-weight: bold;">Ethiopia is a large landlocked country in Africa measuring 1.1 million square Kilometers.<span style="mso-spacerun: yes;"> </span>That is 61 percent of the landmass of the
East African common market block, - Kenya, Tanzania, Uganda, and Rwanda
combined.<span style="mso-spacerun: yes;"> </span>For a country this large, fronted by neighbors with access to the sea, developing several trade routes is
a rational choice. <span style="mso-spacerun: yes;"> </span>Each seaport saves on travel time and costs to specific regions in Ethiopia. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="mso-bidi-font-weight: bold;">Further, Ethiopia is
the fastest growing economy in the region, raising its demand for logistic
services. Currently, Ethiopian freight congests the Port of Djibouti, its major
trade route. In an attempt to decongest Djibouti Port, Ethiopia and Djibouti
constructed the problematic Addis-Djibouti Standard Gauge Railway line, which
has not solved the problem owing to operational bottlenecks.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="mso-bidi-font-weight: bold;"><span style="mso-spacerun: yes;"> </span>Further, the ports along the Red Sea coast are
small: Djibouti has a capacity of 350,000TEUs a year, Berbera Port in
Somaliland will have a capacity of 500,000 TEUs a year, and the Donaleh Port in
Eritrea is equally small with roughly 400,000TEUs capacity. <o:p></o:p></span></p>
<p class="MsoNormal"></p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh6pqiW4k6eMCuTYwbEuASRqh5rcFRiqpmvt4hovBKp0Vr2GgW3l78lawfrxVBUTJ7yLF8LysEXtAlTE3ArqovYhU7hN5k9oIH-YrDbtiBgLKp9CF_PIo7dlUp989ZbnbnxYDSdhv6Rf54/s960/Equitroia.webp" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="720" data-original-width="960" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh6pqiW4k6eMCuTYwbEuASRqh5rcFRiqpmvt4hovBKp0Vr2GgW3l78lawfrxVBUTJ7yLF8LysEXtAlTE3ArqovYhU7hN5k9oIH-YrDbtiBgLKp9CF_PIo7dlUp989ZbnbnxYDSdhv6Rf54/s320/Equitroia.webp" width="320" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><b><span style="font-family: arial;">Not confined to East African hinterlan</span></b><span style="font-family: arial;"><b>d</b></span></td></tr></tbody></table><span style="mso-bidi-font-weight: bold;">The Kenya Port of
Lamu on the other hand has a large capacity. By October this year, the first
three berths will have a capacity of 1.2 million TEUs, which is larger than the
other three ports combined. It is designed to handle 24 Million TEUs, at its
full capacity, way beyond any of the Ports in the Red Sea coast. Being a deep sea
Port, it can harbor Post-Panamax Ships. <o:p></o:p></span><p></p>
<p class="MsoNormal"><span style="mso-bidi-font-weight: bold;"><span style="mso-spacerun: yes;"> </span>Lamu Port, to the South of Ethiopia targets
trade to and from “the industrial Zones in Adama and Hawassa in Ethiopia which
specialize in “Textiles, Motor Vehicle assembly, and Food processing,” it also
suitable as a transshipment port for Ethiopian cargo destined for the three
smaller Ports.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="mso-bidi-font-weight: bold;">A few more facts
about the Lamu Port are in order here.<span style="mso-spacerun: yes;">
</span>Contrary to the popular view that the Lamu Port corridor was conceived in
2012, it was, in fact, conceived back in the 1970s when Mwai Kibaki was the Finance
Minister.<span style="mso-spacerun: yes;"> </span>It was revived in 2012 when
Kibaki was the President of Kenya.<span style="mso-spacerun: yes;"> </span>In
the 1970s, it was conceived to open up two-thirds of Kenya’s landmass for economic
exploitation. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="mso-bidi-font-weight: bold;">Kenya’s robust
economic growth was, and still is, driven by a third of the country’s landmass-
the area around the Kenya- Uganda Railway.<span style="mso-spacerun: yes;">
</span>Opening up the Lapsset Corridor, experts then argued, would shift
Kenya’s growth trajectory upwards by adding more resources. That argument is
still valid today. Experts say that the high cost of developing a Greenfield
project for a young nation discouraged its development in the 1970s. It thus was
shelved.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="mso-bidi-font-weight: bold;">So is Lamu Port a potential
white elephant? <span style="mso-spacerun: yes;"> </span>We reject this thesis. The
Ports on the Red Sea coast are not a threat to Kenyan Ports. In fact, the Lamu
Port is complementary to the other ports in the region.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="mso-bidi-font-weight: bold;"><span style="mso-spacerun: yes;"> </span>The Port hinterland reaches beyond East
African region to the Port of Douala in Cameroon on the Atlantic coast. As the
Great equatorial bridge. That is why the African Union has adopted the Lapsset
project as a pan African project to raise its profile and attract financing for
the remaining 29 berths. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="mso-bidi-font-weight: bold;">Finally,
infrastructure projects are designed to engender more benefits than financial
profits. For instance, a new road may not have any financial return, but it
eases transport, lowers transport costs, reduces air pollution as a result of
faster movement of vehicles, improves the health of the people neighboring the
road, opens up business opportunities along the road. These benefits accrue to
the private sector. This is also true of Ports and Railroads.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="mso-bidi-font-weight: bold;">To sum up, the ideas
we read regarding Chinese loans to African countries smacks of hypocrisy. Any
debtor is no friend. A debtor is just a debtor and will take something from you
in return. The myth that some debtors are friendly and humane is a sham. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="mso-bidi-font-weight: bold;">These ideas are
common in the West especially in the US where Republicans embrace Zombie ideas-false
economic hypotheses- that support corporate greed. Among these empty theses is
the small government thesis; the efficient market thesis, the trickle-down
thesis and the low -wages -create jobs thesis. These are hot hair theses whose
empirical evidence is hard to find. <span style="mso-spacerun: yes;"> </span>Instead, </span>evidence of their failure in form of; rotting
physical and social infrastructure, growing income inequality, and social
tensions abound. </p><p></p><p class="MsoNormal"><span style="mso-bidi-font-weight: bold;">The same ills will bedevil Africa if Zombie ideas flourish.
They will bequeath poverty on the future generations!<o:p></o:p></span></p>East Africa Economics Reporthttp://www.blogger.com/profile/06336638272766088431noreply@blogger.com0tag:blogger.com,1999:blog-4878785766209359257.post-20551109983843532042021-04-19T10:42:00.006-07:002021-09-07T01:53:05.585-07:00Just how large is Kenya’s GDP in 2021?<p></p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhAp2IyeudOvHw7fJ7xvdGta0qRukVmmgtJSj3bVa11KBJNL-zZqy0liw7EPS9ej36Ohw7eQQ5MJOH4sU_QxfPjyJ2DtaTe22AgJ8UNG1UxrN3vsyF6qY_X24Xh7tUwbPbSLkqW_af-vbs/s295/A+Geo+power+palnt.jpg" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="171" data-original-width="295" height="171" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhAp2IyeudOvHw7fJ7xvdGta0qRukVmmgtJSj3bVa11KBJNL-zZqy0liw7EPS9ej36Ohw7eQQ5MJOH4sU_QxfPjyJ2DtaTe22AgJ8UNG1UxrN3vsyF6qY_X24Xh7tUwbPbSLkqW_af-vbs/w295-h171/A+Geo+power+palnt.jpg" width="295" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-family: arial;"><b>Geothermal is now the lead <br />electricity Source in Kenya<br /></b></span></td></tr></tbody></table> <span style="font-size: 12pt;">You may say $101 billion according to recent estimates by
Bretton woods institutions and Africa Development Bank. You won’t be wrong. You
could also be wrong. These institutions calculate their estimates based on the country’s
recorded GDP figures. And those figures depend on the base year which could
be.. well, outdated.</span><p></p>
<p class="MsoNormal"><span style="font-size: 12pt; line-height: 107%; mso-bidi-font-size: 11.0pt;">Here’s why: There is an animal Economists- and I believe
Statisticians too- call rebasing the accounting base year which captures the
true size of the economy. <span style="mso-spacerun: yes;"> </span>Rebasing is
updating the base year to a new year so that the accounting of GDP is updated.
Rebasing, therefore, means selecting a new base year.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size: 12pt; line-height: 107%; mso-bidi-font-size: 11.0pt;"><span style="mso-spacerun: yes;"> </span>You see, the economy is
not static. It is dynamic. It therefore grows and expands over a period of
time. The expansion includes new economic activities that were initially
insignificant, but have become significant contributors. It also includes new
developments that did not exist previously. It also includes new Technological
advances that improve efficiency in the production of goods and services.<span style="mso-spacerun: yes;"> </span>All these expand the basket of goods
available in a country.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size: 12pt; line-height: 107%; mso-bidi-font-size: 11.0pt;"><span style="mso-spacerun: yes;"> </span>For these reasons,
countries rebase their accounting base year to account for all these changes. A
base year is a date when things were relatively stable. The World Bank
recommends rebasing this date every five years but many countries take longer.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size: 12pt; line-height: 107%; mso-bidi-font-size: 11.0pt;">In Kenya, the new accounting period was announced in 2014, updating
the base year to 2009 from 2001. Consequently, the GDP expanded to US$55
billion, that is, $11 billion larger than the size captured using the old base
year.<span style="mso-spacerun: yes;"> </span></span></p><p class="MsoNormal"><span style="font-size: 12pt; line-height: 107%;">Also, Read </span><a href="http://eaers.blogspot.com/2014/10/kenya-is-officially-middle-income.html">http://eaers.blogspot.com/2014/10/</a><a href="http://eaers.blogspot.com/2014/10/kenya-is-officially-middle-income.html">Kenya-is-officially-middle-income.html</a>.</p><p class="MsoNormal">Kenya entered the low middle- income class with a
per capita GDP of around $1,240 due to the update, Kenya also became the Ninth
largest economy in Sub-Saharan Africa. Last year, Bloomberg, the US-based
economic and financial data outlet reported that Kenya was the third-largest
economy in the region, after Nigeria and South Africa, having leapfrogged six other countries.</p><p class="MsoNormal"><o:p></o:p></p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: left;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBmYorCo71YfWfKNR6e1Uzyr4qHCB9Alz1sibMpSxaew2a40_N1scckY9s6P5SoGy63GfwWWZkUHNhq-tG3MkL2G2dHI8zoo3CFqcaOtv7qALWnw8OSTZrvcytLkwpHS28Uxl2NQta2MA/s276/Train.jpg" style="clear: left; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="182" data-original-width="276" height="182" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBmYorCo71YfWfKNR6e1Uzyr4qHCB9Alz1sibMpSxaew2a40_N1scckY9s6P5SoGy63GfwWWZkUHNhq-tG3MkL2G2dHI8zoo3CFqcaOtv7qALWnw8OSTZrvcytLkwpHS28Uxl2NQta2MA/w268-h182/Train.jpg" width="268" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-family: arial;"><b>SGR: This did not exist in 2010</b></span></td></tr></tbody></table><p></p>
<p class="MsoNormal">This leads to the thematic question: Just how Large is
Kenya’s GDP? The last base year, 2009, is now outdated as it is more than 10 years
old. We need to rebase the economy to a more recent year.<span style="mso-spacerun: yes;"> </span>We think 2018 is a stable year.<span style="mso-spacerun: yes;"> </span><o:p></o:p></p>
<p class="MsoNormal"></p><span style="font-size: 12pt; line-height: 107%; mso-bidi-font-size: 11.0pt;">Kenya’s GDP based on the 2009 base year is currently estimated at
$101 billion, almost double the 2014 figure. Given the massive developments in
the country’s financial and infrastructure sectors over the past 10 years, the nominal
GDP must be larger than $101 billion perhaps $120 -$125 billion as at end of 2020.
That means that Kenya’s GDP per capita is larger than $2,045, perhaps heading
towards $3,000 in nominal terms.<o:p></o:p></span><p></p>
<p class="MsoNormal"><span style="font-size: 12pt; line-height: 107%; mso-bidi-font-size: 11.0pt;"><span style="mso-spacerun: yes;"> </span>Here are some facts:
In 2010, a year after the update, electricity generation was 1,471 MW dominated by
hydro and thermal sources. Geothermal was still lower than 300MW. There were 15MW
of wind power and solar was restricted to households.<span style="mso-spacerun: yes;"> </span>Since then green energy sources have grown in
importance and contribute a large chunk of power to the national grid.
Geothermal at 1,125 MW has leapfrogged Hydro to be the baseload source. A baseload source is the source of electricity generation that must be at the system at all times. Wind Power has jumped to 336 MW, Solar has entered the scene generating
50MW to the National Grid. </span></p><p class="MsoNormal"><span style="font-size: 12pt; line-height: 107%; mso-bidi-font-size: 11.0pt;"><span style="mso-spacerun: yes;"> </span>Kenya is now
the world’s fifth-largest generator of geothermal energy and an exporter of
geothermal technology. The national power generating capacity has almost
doubled to 2,651 MW while peak demand hovers around 1,900 MW. For the first
time in its history, Kenya can claim to be electric power secure.<o:p></o:p></span></p>
<p class="MsoNormal">In the transport sector, paved roads increased from 11,183
KM in 2010 to 17,600KM in 2019 and still counting. We have 600KM of high speed
Standard Gauge Railway operational. This did not even exist in 2014. The
Mombasa Port has seen its container handling capacity rise from 440,000 TEUs to
1.5 Million TEUs. Its freight handling capacity has risen to 34 million tons a
year in 2019 from 14 million tons in 2014.<o:p></o:p></p>
<p class="MsoNormal"></p><span style="mso-spacerun: yes;"> </span>In the financial
sector, mergers have created behemoths with a total capital base of US$20
billion. KCB Groups' capital base is larger than the largest banks in Tanzania
and Uganda combined. All these developments and others we have not enumerated
have expanded the wealth of the country significantly. <o:p></o:p><p></p>
<p class="MsoNormal">Also, Read <a href="http://eaers.blogspot.com/2019/09/mergers-to-create-regional-behemoths.html">http://eaers.blogspot.com/2019/09/mergers-to-create-regional-behemoths.html</a><o:p></o:p></p>
<p class="MsoNormal">Rebasing the accounting year could produce astounding
results. No. we shall not beat the top two. We shall be a larger number three. The
last time this publication attempted this back in 2014, we missed the figure by a significant
US$2 billion. We hope we are again $2 billion dollars short but we could miss it
by a larger figure. The results would nonetheless be astounding. <o:p></o:p></p>
<p class="MsoNormal">Also, Read <a href="http://eaers.blogspot.com/2014/01/kenya-enters-middle-income-class.html">http://eaers.blogspot.com/2014/01/kenya-enters-middle-income-class.html</a><o:p></o:p></p>
<p class="MsoNormal">If rebased, GDP per capita will definitely rise past $2500. The debt to GDP
ratio will significantly shrink perhaps to 50 percent of GDP, or slightly up
or down.<span style="mso-spacerun: yes;"> </span>Kenya would improve its debt
risk ratings from a distress risk to something better. <o:p></o:p></p>
<p class="MsoNormal">From the anti-debt warriors’ standpoint, debt per capita will
shrink further compared to income per capita. This could be a cause to worry
for the ADWs for it could pull the carpet from under their feet.<o:p></o:p></p>
<p class="MsoNormal">Even then, It is time for the government to act and rebase our economy!<o:p></o:p></p>East Africa Economics Reporthttp://www.blogger.com/profile/06336638272766088431noreply@blogger.com1tag:blogger.com,1999:blog-4878785766209359257.post-49613222783550574412021-04-11T12:59:00.006-07:002021-04-12T03:54:27.794-07:00Kenyan anti-debt squad "rattle" IMF <p></p><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: justify;"><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiQKfLEGvP7RSnlbNwprd772kANMuVdvGCdK1NlBluYpibkBOrBrUPqkrNxmGaXc1zqvAuRu2243OoZD7lkIVPqisRe1IMGjG5YFGY34up2SXBJrGT08cXxeiNChfX5nSge0_tMcVGMhwU/s275/SB2.jpg" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="183" data-original-width="275" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiQKfLEGvP7RSnlbNwprd772kANMuVdvGCdK1NlBluYpibkBOrBrUPqkrNxmGaXc1zqvAuRu2243OoZD7lkIVPqisRe1IMGjG5YFGY34up2SXBJrGT08cXxeiNChfX5nSge0_tMcVGMhwU/s0/SB2.jpg" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-family: arial;"><b>The Southern Bypass in Nairobi.<br /> Completed in 2015</b></span></td></tr></tbody></table><span style="font-family: "Times New Roman", serif; font-size: 14pt; text-align: left;">Kenyan anti-debt warriors
rattled the IMF last week with their protest over a US$2.35 billion loan to the </span><span style="font-family: "Times New Roman", serif; font-size: 14pt; text-align: left;">country. The three-year program, to be released in tranches, will cushion the
country as it grapples with the crisis induced by COVID-19. These include
reduction of debt vulnerabilities, that is, to ensure Kenya does not default on
previous loans among others.</span></div></div><p></p>
<p class="MsoNormal"><span style="font-family: "Times New Roman",serif; font-size: 14pt; line-height: 107%; mso-bidi-font-size: 11.0pt;">The pandemic and its effects
are a global reality and containment measures resulted in a self-inflicted
economic pain, not just in Kenya, but globally. Some sectors such as air travel
ground to a halt, the hospitality and entertainment industry simply collapsed,
while others cut down operations. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Times New Roman",serif; font-size: 14pt; line-height: 107%; mso-bidi-font-size: 11.0pt;">All measures resulted in
a huge threat to employment with retrenchments and furloughs. Air travel may
never recover to its pre-pandemic levels due to the growing adoption of digital
conferencing.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Times New Roman",serif; font-size: 14pt; line-height: 107%; mso-bidi-font-size: 11.0pt;">In effect, the economic
downturn is no fault of our own. Tax revenues declined at a time when demand
for government support rose sharply. The resulting financial gap forced
governments to borrow and borrow some more. The health pandemic spawned an
economic pandemic.<o:p></o:p></span></p>
<table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: left;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiKjeavgv2olbr4aGZI508rwjfeHf0tul-J5DODK9-cynfwToWD-Ah5skn6VlviCzyEVF5gahVS__SQOpTIXwLsj6mijL1hiNQpLygxDOHJOeJfba3QjNW8QVn4sfXj4xtVJiAbilOImyw/s1500/Thika+super+highway.jpg" style="clear: left; margin-bottom: 1em; margin-left: auto; margin-right: auto; text-align: center;"><img border="0" data-original-height="1000" data-original-width="1500" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiKjeavgv2olbr4aGZI508rwjfeHf0tul-J5DODK9-cynfwToWD-Ah5skn6VlviCzyEVF5gahVS__SQOpTIXwLsj6mijL1hiNQpLygxDOHJOeJfba3QjNW8QVn4sfXj4xtVJiAbilOImyw/s320/Thika+super+highway.jpg" width="320" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-family: arial;"><b>Outer ring Road Nairobi.<br /> This is where the loans go</b></span></td></tr></tbody></table><p class="MsoNormal"><span style="font-family: "Times New Roman",serif; font-size: 14pt; line-height: 107%; mso-bidi-font-size: 11.0pt;">This the reality anti-debt
warriors refuse to acknowledge. This is not surprising as they have always
protested debt escalation. Even when Kenya’s national debt was $1.92 billion
dollars, there were similar, though subtle protests. And, they always take
the cheap emotional stunt of assigning per capita debt commitment in Kenya.
They never say anything about the benefits of the loans, assigning a per capita
gain for each Kenyan. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Times New Roman",serif; font-size: 14pt; line-height: 107%; mso-bidi-font-size: 11.0pt;">The government is guilty
of ineptitude in this case for it never provides any persuasive case for the
debt to counter conspiracy theorists. It thus emboldened them to confront the
IMF.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Times New Roman",serif; font-size: 14pt; line-height: 107%; mso-bidi-font-size: 11.0pt;">A few facts are necessary
here. Kenya rebased its GDP accounting in 2012. At that time, GDP rose from
US$41 billion to $50 billion. Kenya became the ninth-largest economy in Sub-
Saharan Africa then. She entered the low middle-income status in 2014 with a
GDP per capita of $1,083. By the end of last year, the GDP had almost doubled
to US$101 billion, according to World Bank analysts. This means that on
average, the GDP has been growing at a rate of US$6 billion a year over the
last eight years. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Times New Roman",serif; font-size: 14pt; line-height: 107%; mso-bidi-font-size: 11.0pt;">We take the risk of declaring
that the GDP is larger than currently estimated and should be rebased from 2009
to a more recent year say, 2017. This would capture new economic developments not
captured in 2009. The rebase would not capture changing consumer tastes and preferences, it would probably assuage
fears by anti-debt warriors that we are living beyond our means. Again here, I
point an accusing finger at the government for being slow to update the
economic status of the country.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Times New Roman",serif; font-size: 14pt; line-height: 107%; mso-bidi-font-size: 11.0pt;"><span style="mso-spacerun: yes;"> </span>In 2012, public debt was a paltry $1.92 billion
for a GDP then estimated at $41 billion. Today, public debt has risen to US$67 billion
giving a per capita debt commitment of $1,425. For the sake of objectivity, GDP
per capita on the other hand rose to $2,045 in 2019. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Times New Roman",serif; font-size: 14pt; line-height: 107%; mso-bidi-font-size: 11.0pt;">According to Bloomberg,
Kenya is now the third-largest economy in Sub-Saharan Africa after Nigeria and
South Africa. It has leapfrogged six other economies in eight years! The point
here is the country has expanded in terms of the creation of wealth.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Times New Roman",serif; font-size: 14pt; line-height: 107%; mso-bidi-font-size: 11.0pt;">Is there a correlation,
one may ask, between debt and economic growth? <span style="mso-spacerun: yes;"> </span>Perhaps there is; Kenya and Ethiopia, the two
largest economies in the East Africa region are also the most indebted with debt to
GDP ratio of above 50 percent. Kenya is the largest economy in eastern Africa
and among the fastest-growing economies in the region. East Africa region is
the fastest-growing region in Africa. Both Ethiopia and Kenya drive the
regional growth for they control 57 percent of the regional GDP. So is there a
positive correlation between growth in debt and economic growth? The Mandarins
in the public sector should answer. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Times New Roman",serif; font-size: 14pt; line-height: 107%; mso-bidi-font-size: 11.0pt;">Credible agencies have
attributed rapid economic growth in east Africa to investments in mega-infrastructure
projects- new Roads, Railroads, power lines, power generation projects,
Seaports and related infrastructure, etc. These infrastructures have enabled the growth of productive sectors by lowering the cost of doing business- cutting
travel time, ensuring a </span><span style="font-family: "Times New Roman", serif; font-size: 14pt;">reliable supply of energy, etc.</span><span style="font-family: "Times New Roman", serif; font-size: 14pt; mso-spacerun: yes;"> </span><span style="font-family: "Times New Roman", serif; font-size: 14pt;">In addition, the projects create jobs for
thousands of jobless people who, in turn, consume domestic goods and services. Much
of the debt was sunk into these projects.</span></p><p></p>
<p class="MsoNormal"><span style="font-family: "Times New Roman",serif; font-size: 14pt; line-height: 107%; mso-bidi-font-size: 11.0pt;">When confronted with these
facts, the keyboard warriors deflect them with complaints of “rampant
corruption in the government.” We are not denying that there is pilferage of
public funds. There is. However, that the anti-debt warriors reject the
progress made, the gains made, discredits their angst. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Times New Roman",serif; font-size: 14pt; line-height: 107%; mso-bidi-font-size: 11.0pt;">Complaints of corruption
are common in any new development project in east Africa. What is lacking is
the evidence. The anti-debt warriors always refer to reports of pilferage by
the Controller and Audit General, the government funds watchdog. In some cases,
however, even the auditors have proven less than honest. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Times New Roman",serif; font-size: 14pt; line-height: 107%; mso-bidi-font-size: 11.0pt;">In other instances,
corruption is a smokescreen for political goals, business rivalry, and
vendetta. When the truth finally emerges, no one apologizes.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Times New Roman",serif; font-size: 14pt; line-height: 107%; mso-bidi-font-size: 11.0pt;"><span style="mso-spacerun: yes;"> </span>A senior official in a multilateral agency
recently told me that corruption is difficult in the development of
infrastructure. “The product must be seen,” he argued. If that is the case,
then the argument by “conspiracy theorists” falls on its face.<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Times New Roman",serif; font-size: 14pt; line-height: 107%; mso-bidi-font-size: 11.0pt;">Debt is painful, and
citizens have a right to express their concern over growing public debt. The
government is also duty-bound to defend its borrowing in terms that make sense to
the public.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Times New Roman",serif; font-size: 14pt; line-height: 107%; mso-bidi-font-size: 11.0pt;">The IMF did a good job
responding to the protestors that without the new debt, the government will
have to cut operations, sack some employees, default on previous loans, and/or
raise taxes.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family: "Times New Roman",serif; font-size: 14pt; line-height: 107%; mso-bidi-font-size: 11.0pt;">The Anti-debt warriors
have something in common with the Republican Party in the US. They all reject a
large government even when it is inevitable. The GOP which thrives on “Zombie ideas”
and lately, outright lies and conspiracy theories refused to vote for a $1.9
trillion relief package to jump-start the US economy ravaged by COVID-19, they
are also refusing to vote in the $2.25 trillion infrastructure bill. Yet the US is
in dire need of bridges, roads, broadband, and energy infrastructure.<o:p></o:p></span></p>East Africa Economics Reporthttp://www.blogger.com/profile/06336638272766088431noreply@blogger.com0tag:blogger.com,1999:blog-4878785766209359257.post-69683008754589598832021-02-24T00:32:00.001-08:002021-07-18T10:59:52.334-07:00A Cheer for East Africa’s investment strategy<table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhj79xFyRPCFJ-uOEMosKPXSDIIk-1lIV4FPj4_4jKjHQqabTrDUeSN0KXNBQfYMFwaZzrxSmQnehJ9lPi8Y9LGis55FwLfrVI1ej-O5MEx6HNKVKwCy9kg44ieJpkAN0grgc5o0L9z3MI/s743/thika-road.png" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="652" data-original-width="743" height="176" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhj79xFyRPCFJ-uOEMosKPXSDIIk-1lIV4FPj4_4jKjHQqabTrDUeSN0KXNBQfYMFwaZzrxSmQnehJ9lPi8Y9LGis55FwLfrVI1ej-O5MEx6HNKVKwCy9kg44ieJpkAN0grgc5o0L9z3MI/w200-h176/thika-road.png" width="200" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-family: arial;"><b>A new Highway</b></span></td></tr></tbody></table><p> A Review of a number of reports published here gives a cause to cheer East Africa’s investment strategy. The region has focused heavily on developing
transport and energy infrastructure to create an enabling environment for
future economic growth. By 2018, billions
of US dollars had been sunk into infrastructure - Roads, Railways, Airports, Seaports,
and electricity generation.</p><p class="MsoNormal"><o:p></o:p></p>
<p class="MsoNormal">Consequently, the stock of roads has increased to hundreds
of thousands of Kilometers from tens of thousands in the 1990s; paved roads
have risen from a few thousands to tens of thousands of Kilometers. We are
seeing expressways, elevated roads, and interchanges. <o:p></o:p></p>
<p class="MsoNormal">Power generation capacity has expanded as has the sources
and for the first time, some countries are self-sufficient in green power
capacity. Power is being generated from wind, Solar, and Geothermal sources in
addition to the traditional Hydro sources.<o:p></o:p></p>
<p class="MsoNormal">As the stock of enabling infrastructure is increasing, East
Africa is expanding its domestic markets for domestic goods and Imports, and opening
up opportunities for investment by both domestic and foreign investors. The
business climate is easing as more Non-tariff Barriers are eliminated. <o:p></o:p></p>
<p class="MsoNormal">One of the leading non-tariff barriers is; land transport.
The stock of roads is increasing to ease market access Distances from
all-weather roads is declining as more paved roads are commissioned. In Kenya for
instance, the paved roads network has risen from 4000KM in 2000 to 17,650 KM in
2019 giving an average ratio of one kilometer of paved road for every 33KM<sup>2</sup>,
In Tanzania, the stock of paved roads has risen to 9951 KM giving a ratio of 1 Kilometer
per 100KM<sup>2. </sup>Ethiopia is the star player<sup> </sup>in East Africa with
121,000 KM of paved roads giving a ratio of one Kilometer of paved road for
every 10KM<sup>2. IN </sup>Uganda, the ratio is one kilometer for 34Km<sup>2</sup><o:p></o:p></p>
<p class="MsoNormal">In addition to roads, there is massive investment in energy
projects. In 2017, five mega-projects worth $10.7 billion were under
construction. Ethiopia led the pack with two hydro projects worth $6.9 billion.
Uganda came in second with Karuma hydro dam that cost $1.6 billion. Tanzania
came third with Mtwara Gas project worth US$1.3 billion. <o:p></o:p></p>
<p class="MsoNormal">Kenya did not have a mega hydro project. Kenya, the largest
economy in the region has already hit the 2.7GW level with a peak demand
estimated at 1.9GW. That is why it is now working to connect the Northern
Corridor Standard Gauge Railway to electricity. Experts say that the line
will require 1000MW to run the trains.<o:p></o:p></p>
<p class="MsoNormal">While Ethiopia is the runaway leader in Hydro sources, with
a potential of 45GW, Kenya is the leader in Africa on geothermal power. Already
geothermal power has displaced Hydro as the base power. Kenya’s potential is
estimated at 10GW of geothermal power energy. She so far is just
scratching the surface, generating 1140 MW from geothermal.<o:p></o:p></p>
<p class="MsoNormal">Kenya has already leap-frogged Ethiopia in wind power
generation with the entry of 310MW Lake Turkana Wind Power into the national
grid. Ethiopia's capacity stands at 176 MW while Kenya is 336 MW.<o:p></o:p></p>
<p class="MsoNormal"></p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: left;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh0zvTVmf6Mfz1gl2g_5MFWvsQd_qisnZyE6VIZFYYwW0R4E6LP3x19N07Ixbku2HuR4lxYnSKggrcqHM8A2vQLCt0fCbc5P526JbBVLwHY0H777VlFuEdrmqtdu2gRKKCsD0PctAEKjbw/s952/SGR-MOMBASA-BRIDGE.jpg" style="clear: left; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="449" data-original-width="952" height="94" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh0zvTVmf6Mfz1gl2g_5MFWvsQd_qisnZyE6VIZFYYwW0R4E6LP3x19N07Ixbku2HuR4lxYnSKggrcqHM8A2vQLCt0fCbc5P526JbBVLwHY0H777VlFuEdrmqtdu2gRKKCsD0PctAEKjbw/w200-h94/SGR-MOMBASA-BRIDGE.jpg" width="200" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-family: arial;"><b>An N SGR Line </b></span></td></tr></tbody></table>Further, the region has pioneered Africa in high-speed Railway
development. This far, the region boasts of more than 1600Km of Standard Gauge
Railway. Some 1300km of these are operational in Ethiopia and Kenya. Tanzania
is likely to join the club anytime this year when the Dar es salaam-Morogoro
line is complete. Of the three, only the Kenya line, which is part of The Northern Corridor network, is operating according to design standards.<span style="mso-spacerun: yes;"> </span>The Ethio-Djibouti line has significant
energy and security issues that have forced it to operate below par.<o:p></o:p><p></p>
<p class="MsoNormal">The obsession with infrastructure development is not an
accident. <span style="mso-spacerun: yes;"> </span>Poor infrastructure shaves off
4 to 5 percent of GDP. Therefore investing in infrastructure is a catalyst for
economic growth.<span style="mso-spacerun: yes;"> </span>East Africa is
determined to eliminate this loss and turn it to prosperity for the region. The
result is robust economic growth for two decades. Growth was stymied by
Corona Virus last year and is likely to be stifled by uncertainties
regarding the pandemic. However, the conditions for a rapid turnaround are in
place if the virus does not extend for too long. <o:p></o:p></p>
<p class="MsoNormal"><span style="mso-spacerun: yes;"> </span>In addition, in
support of the theory that reliable infrastructure enhances a country's productivity, makes firms more competitive, and attracts investment and trade, GDP per capita
has grown fourfold in the past two decades. Both Kenya and Tanzania are already
Low Middle-income countries with a per capita GDP above $1087. <span style="mso-spacerun: yes;"> </span>Kenya became a middle-income country back in
2014. Her per capita GDP was approaching $2000 before the pandemic that has set
it back. Tanzania joined the Low Middle-income club last year but could also be
slowed down by the pandemic.<span style="mso-spacerun: yes;"> </span>Ethiopia is
not far away, and it could enter the club in the not too distant future.</p><o:p></o:p><p></p>
<p class="MsoNormal">This expansion in the stock of enabling infrastructure has
not come without a cost. The national debt has risen to more than 60 percent of GDP
in both Kenya and Ethiopia, the most aggressive investors in infrastructure
leading to fears of a “debt pandemic.”<span style="mso-spacerun: yes;"> </span><o:p></o:p></p>
<p class="MsoNormal">Although Tanzania is in the rank of aggressive investors, it
claims its debt to GDP ratio is less than 50 percent. This figure, however,
must be taken with a pinch of salt because Tanzania is not generous with data-
not even data on the COVID-19 pandemic. Its large investments in Infrastructure
belie this position. <span style="mso-spacerun: yes;"> </span>The Standard Gauge
Railway has already cost an estimated $3.2 billion part of which is a commercial
debt. <span style="mso-spacerun: yes;"> </span>This cost excludes the
Locomotives and the rolling stock. It is also investing $3.5 billion on a hydro
project on River Rufiji.<o:p></o:p></p>
<p class="MsoNormal">Commercial debt, which is easily accessible, is a great cause for concern
since it is expensive to restructure if it is ever restructured. <o:p></o:p></p>
<p class="MsoNormal">However, there is a growing body of evidence that debt sunk
into enabling infrastructure leads to rapid economic growth enabling debt
payment. The pay-off is worth the risk, evidence suggests. The great focus on
the risk of Debt, evidence suggests, is the quality of the investment: Does it
satisfy a felt national need? Does it produce the desire results, among them
enabling economic activity? If the answers are positive, then debt the
resulting benefits are worth the risk else we shall bequeath poverty on future
generations.<o:p></o:p></p>East Africa Economics Reporthttp://www.blogger.com/profile/06336638272766088431noreply@blogger.com0tag:blogger.com,1999:blog-4878785766209359257.post-3225090925144390052021-02-10T11:18:00.005-08:002021-02-11T00:44:04.774-08:00COVID-19 in Tanzania: Magufuli has lost it<p></p><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right;"><tbody><tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjVFSZJY-CO9GjWS2nBJNFCxo3jclJKP3msSEk19bGhvln9ZTcErCAydCa1-BTmp02qZWe6AAPobxV4CTuMxCQkpeNvxOZdoP-B_3Fh6nNccq5_iTgGE-gv3u8cZLR7sQUDYRLl45-Fdxg/s287/magu.jpg" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" data-original-height="176" data-original-width="287" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjVFSZJY-CO9GjWS2nBJNFCxo3jclJKP3msSEk19bGhvln9ZTcErCAydCa1-BTmp02qZWe6AAPobxV4CTuMxCQkpeNvxOZdoP-B_3Fh6nNccq5_iTgGE-gv3u8cZLR7sQUDYRLl45-Fdxg/s0/magu.jpg" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;"><span style="font-family: arial;"><b>Magufuli: "RemarkablyTrumpian"</b></span></td></tr></tbody></table>These are headlines from Tanzania in the first week of
February: “<b>Zanzibar VP Seif Hamad
says in hospital after Covid-19
diagnosis,</b><b><span style="font-size: 20pt; line-height: 107%; mso-bidi-font-size: 11.0pt; mso-bidi-font-style: italic;"> </span>Tanzania embarks on steam therapy to fight coronavirus,</b><b><span style="font-size: 18pt; line-height: 107%; mso-bidi-font-size: 11.0pt; mso-bidi-font-style: italic;"> </span>Tanzanians urged to
use traditional medicine for Covid-19,” </b>and they debunk the myth of a Corona free-
Lockdown- free- mask –free Utopia<b>.</b><p></p>
<p class="MsoNormal"><span style="mso-bidi-font-style: italic; mso-bidi-font-weight: bold;"><br />Instead, these are signals to a country deep in trouble and desperate
for a false solution. The last two headlines are an inadvertent admission that Coronavirus is real in Tanzania. <span style="mso-spacerun: yes;"> </span>It is ravaging
the country, anecdotal evidence suggests. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="mso-bidi-font-style: italic; mso-bidi-font-weight: bold;">This reality is a slap in the face for President Magufuli who downplayed the virus and its control protocols. He must now confront the
consequences of his miscalculation. President Magufuli, described by the US
publication, <b>The Daily Beast,</b> as “remarkably Trumpian,” downplayed the
pandemic citing economic reasons. Now he is opposing the vaccines to cover the economic consequences of his choice. <span style="mso-spacerun: yes;"> </span>Last
year, he faced political circumstances similar to his soul brother, former
President Trump of the US. The pandemic struck during an election year, they
both were running on a good economic performance platform and were unwilling to
impose measures that hurt the economy. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="mso-bidi-font-style: italic; mso-bidi-font-weight: bold;">According to a US scholar quoted by the Daily Beast, Magufuli </span><a href="https://www.theguardian.com/global-development/2020/may/19/tanzanias-president-shrugs-off-covid-19-risk-after-sending-fruit-for-tests"><span style="font-size: 12pt; line-height: 107%; mso-bidi-font-size: 11.0pt;">openly and
incredibly was concerned</span></a><span style="mso-bidi-font-style: italic; mso-bidi-font-weight: bold;"> about the effects pandemic control measures
might have on Tanzania’s economy. He “planned to run on… a sunshine,
two-chickens-in-every-pot platform. A raging pandemic would upset that
message.” <o:p></o:p></span></p>
<p class="MsoNormal"><span style="mso-bidi-font-style: italic; mso-bidi-font-weight: bold;">This is why he clang to and exploited every positive economic news in
the country to advance his narrative. In July Last year, when the World Bank
officially certified Tanzania as a middle-income country, his government
bragged that the status came five years ahead of time. This was a lie. In 2014,
when Tanzania rebased its GDP accounting to 2007, it was projected that
Tanzania would reach the Lower Middle-income status in 2020.</span> <span style="mso-spacerun: yes;"> </span>Also, Read <a href="http://eaers.blogspot.com/2020/09/did-tanzania-enter-middle-income-level.html"><span style="mso-bidi-font-style: italic; mso-bidi-font-weight: bold;">http://eaers.blogspot.com/2020/09/did-tanzania-enter-middle-income-level.html</span></a><span style="mso-bidi-font-style: italic; mso-bidi-font-weight: bold;">.<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></p>
<p class="MsoNormal"><span style="mso-bidi-font-style: italic; mso-bidi-font-weight: bold;">Tanzania did not impose any COVID-19 control measures. However, the
world- including her neighbors- did. Her economy suffered nevertheless.<span style="mso-spacerun: yes;"> </span>Tourism in Tanzania, for instance, as in all
other parts of the world, was hit hard. Tourism incidentally is Tanzania’s
leading Forex earner. In 2019, it earned US$2 billion. The pandemic shaved this
amount off in 2020. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="mso-bidi-font-style: italic; mso-bidi-font-weight: bold;">Mid last year, Tanzania released container loads of gold -held at the
Port of Dar-es-salaam for more than three years- for export. Reports indicate
that gold was the leading export earner last year at $2.5 billion due to price
increases. Other exports shrunk due to low demand. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="mso-bidi-font-style: italic; mso-bidi-font-weight: bold;">At about the same time, the country began showing signs of forex
distress. It began with a crackdown on Forex Bureaus leading to the closure of many
of them. Importers also complained of delays in the settlement of foreign debts.
Foreign exchange accounts of businesses were closed and the value converted
into Tanzania Shillings without their consent.<span style="mso-spacerun: yes;">
</span>These are indications of forex shortages.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="mso-bidi-font-style: italic; mso-bidi-font-weight: bold;">Available data shows that Tanzania Foreign Exchange reserves stood at
US$5 billion in 2018, an equivalent of six months import cover. <span style="mso-spacerun: yes;"> </span>However, the pandemic shut down economic
activity drying forex inflows. In addition, Tanzania’s attitude towards COVID-19
locked her out soft loans from multilateral lenders for COVID-19 relief while
it is still servicing old debts.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="mso-bidi-font-style: italic; mso-bidi-font-weight: bold;">Her Forex reserves stock is depleted, anecdotal evidence suggests. To
cover this up, the country has extended its conspiracy theories to include
opposition to the COVID-19 vaccine. She does not have the money to import
vaccines given that she does not qualify for multilateral support since she has
locked herself out. The calls to embrace homemade therapies are shooting in the
dark, say, experts, a sort of gamble that something might work. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="mso-bidi-font-style: italic; mso-bidi-font-weight: bold;"><span style="mso-spacerun: yes;"> </span>This leads to the question:
which way forward? <span style="mso-spacerun: yes;"> </span>COVID-is real in the
country. Deaths due to “severe Pneumonia” which according to analysts, is a euphemism for CPVI deaths, are increasing. Tanzania watchers cite a Radio station,
which used to devote 10 minutes daily to death and funeral announcements which has expanded the slot to 50 minutes. <span style="mso-spacerun: yes;"> </span>Worse
still, the more contagious South African, variant, which is reportedly more contagious
and resistant to the available therapies, has been found in European travelers
returning from Tanzania.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="mso-bidi-font-style: italic; mso-bidi-font-weight: bold;">The pandemic is spreading amidst a deluded government, how are its
neighbors to respond? First, the country is a threat to the gains made so far
in controlling the pandemic in the region. In Tanzania, COVID-19 is a public
health crisis that can spread elsewhere. Fear of the pandemic will force
Tanzanians to leave the country to the neighboring countries, taking it with
them and thus spreading it further.<span style="mso-spacerun: yes;"> </span>The
region is already reeling under the weight of the pandemic and can ill afford
an extra burden. <span style="mso-spacerun: yes;"> </span><o:p></o:p></span></p>
<p class="MsoNormal"><span style="mso-bidi-font-style: italic; mso-bidi-font-weight: bold;"> Second, the vaccine flow is limited due to excess global demand. It is
therefore no remedy for the pandemic in the short run.<span style="mso-spacerun: yes;"> </span>Economic turnaround will be impossible in the
light of this uncertainty. To ensure a measure of economic recovery, the
pandemic’s control measures must be enforced. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="mso-bidi-font-style: italic; mso-bidi-font-weight: bold;">Nevertheless, control measures will be in vain if your neighbor does
not play ball.<span style="mso-spacerun: yes;"> </span>Consequently, for the
good of their own countries, Tanzania’s neighbors must treat her as a national
security threat worse than terrorism and clamp down on her.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="mso-bidi-font-style: italic; mso-bidi-font-weight: bold;">Magufuli’s delusion will embolden conspiracy theorists in other countries,
making enforcement of COVID-19 protocols difficult.<span style="mso-spacerun: yes;"> </span>His soulmate, Donald Trump, was voted out by
Americans and, in his delusion, almost brought a coup d’état in the US that
resulted in a clampdown on him. Africa needs to clamp down on Magufuli!<o:p></o:p></span></p>East Africa Economics Reporthttp://www.blogger.com/profile/06336638272766088431noreply@blogger.com0