East Africa Economic Report

Joshua Oigara: CEO KCB Group This is the year of Mergers and Acquisitions in the financial and telecoms sectors in Kenya. According to the scheme of things, these marriages must be consummated by the end of this year.   Finance and Telecoms are the vibrant sectors of the Kenyan economy. The mergers will produce titans, especially in the financial sector, dwarfing their competitors. In the financial sector, Kenya’s largest bank by assets, Kenya Commercial Bank will acquire a 100 percent stake in the National Bank of Kenya in a share swap. Another group, the NIC group will merge with the Commercial Bank of Africa, also, in another share swap, creating the third-largest banking group with more than 100 branches in the country and the East Africa region. These acquisitions will place 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...

The three potential Routes to evacuate  Ugandan crude oil The French Oil major, Total Oil SPA's foray into East Africa's crude oil industry has run into a huge storm. In what looks like a bad Omen,   Total has stopped all activities to do with East Africa Crude Oil Pipeline. This follows a double blow to Total SPA which owns 33 percent stake at Hoima Oil Wells in Uganda. The firm was to buy a 22 percent stake from its partner Tullow for $900 million. However, the deal has collapsed following a disagreement with the government over Capital gains tax. The death of the buy-out deal left the construction of 1450KM   East Africa Crude Oil Pipeline, EACOP, from Hoima to Tanga Port in Tanzania, which was connected to the sale, in a limbo. That Total Oil SPA has abandoned the project, putting its implementation in doubt is a Bad Omen for the French Oil major.   Total had gunned for a majority stake at Uganda’s crude oil Wells through a buy-out of 22 perc...

The trucks that evacuated Crude by  Road to Mombasa Kenya has just exported its first 200,000 Barrels of Crude oil from its Lokichar basin. The export will earn Kenya some US$12 million. This is a minuscule amount compared to Kenya’s GDP. However, it is significant in that, it demonstrates the advantages of decisive action compared to indecision: Resolute action has positive results at a cheaper rate while procrastination delays action and blocks the benefits accruing from firm decision making. The export,  billed "   Pilot oil export" has thrust Kenya into the oil exporters club, seven years after the first barrel was discovered in the Lokichar Basin, in Turkana county. Kenya’s crude is said to be among the best in the world, at par with the Brent Crude C1. Sold at $60 a barrel, it was a windfall of sorts for the country, since officials in the Ministry of Energy and the developer, Tullow Oil, say it was viable at US$56 a barrel. On the other han...

Kenya leapfrogs Iceland. Next target? Kenya is now the world’s eighth-largest geothermal producer.   It has leapfrogged Iceland. Kenya’s electricity generating company, KenGen, last month added another 79 Mw from its Olkaria V unit 1, bringing the total Geothermal generating capacity to 769 MW ahead of Iceland’s 710 MW. Kengen will also launch the balance of its 165.4 Mw Olkaria capacity at the end of this month, further widening the gap with Iceland. It also narrows the gap between Kenya and Italy, the “birthplace” of geothermal energy technology. KenGen plans to add another 1,745 Megawatts from geothermal by 2025. Coupled with generation from other producers, this will raise its geothermal generating capacity more than 2357 Mw, bringing Kenya, near neck to neck with the US. The United States is the current leader in geothermal generation with a capacity of 3,591 MW, says energy siren. www.energysiren.co.ke . Before then, there are three other giants to leapfrog. These...

Karuma Hydro Dam  in Uganda: More energy generation needed According to the Africa Development Bank’s Africa Economic Outlook 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. Of this amount, 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.   Africa is under increased pressure to invest in infrastructure in order to remove the inefficiencies that could stall the recently launched continent-wide free trade area. AfCFTA billed the largest free trade area in the world holds the key to Africa’s...

Ethiopian: The only profitable airline in Africa  Africa must eliminate import taxes and Prioritize of Air transport to actualize the Continental Free Trade Area, AfCFTA, born just slightly over a month ago.  Both decisions, say, experts, can result in rapid growth in intra-Africa trade.   Intra-Africa trade is hardly 15 percent of total trade in Africa. This means that dependence on taxes from the Intra-Africa trade to support fragile budgets is not significant. And with the US$1 billion compensation fund set by Afrexim Bank, the decision can be made immediately.   According to the UN Economic Commission for Africa,   UNECA, removal of import duties will increase intra-Africa trade by 52.3 percent, and double it if non-tariff barriers are removed. In other words, removing import taxes will raise intra-Africa trade to 23 percent in the short run. In the same breath, UNECA says that removal of nontariff barriers will double intra-Africa trade...

The stock of raw nuts:  Market boycott hurting Tanzania  Satan must be the inventor of that distribution system called free markets and its relatives, viz:  production, demand, price, and inflation!  The market is an unmitigated autocrat. Look, the animal, whatever its size and location, behaves in the same way; deciding who gets how much of what, who produces how much of what, who sells what to who, and how much of it.   This clan has no respect for anyone however powerful. Even governments dance to its dictates. Don’t be fooled. Those sweet-sounding documents going by the name policy are just responses to market dictates. No one dares to challenge this animal unless they are suicidal.   The market calls our desire for things, the demand which, it tells us, is unlimited.   Therefore to ration our demand, it introduced another relative called price – the money you pay to buy something.   Basically, the price is meant to ensure not ev...