East Africa Economic Report

EUROPEAN Contractors are eyeing the US$535 million Dar-es-salaam- Chalinze toll road in Tanzania, we have learnt. In an internet posting, a Belgium based trading company Group DML, www.dml.com is shopping for a partner for a joint venture with an unnamed European contractor to develop the project on a 3P basis. Chalinze Junction: To the right is A14 leading to Tanga    The company is proposing to invest in equity together with its partners. The Tanzania government, says the firm, will be a minority shareholder in the project. DML estimates that if the partners raise $150 million, they can raise the rest of the money from bank debt. They propose to use cash flows from the project as collateral. The 100 Km long Dar-Chalinze toll road is a section of the Arterial Morogoro road. This is a very busy section of the A7 highway that carries traffic to central and southern Tanzania and the neigbouring countries such as Zambia, Rwanda, Burundi, Congo, and Malawi where Dar...

Activity at the NSE, Kenya THE NAIROBI SECURITIES EXCHANGE led five other African bourses to top the charts as world top performing securities exchanges, we can report. the best performing Analysts, among them, investing in Africa, www.investinginafrica.net  show that by the year ending November 30 th , 2012, African boasted of the six best performing bourses in terms of dollar dominated index. The six are; Nairobi Stock exchange, Nigeria stock exchange, Zimbabwe industrials, Uganda securities exchange, BVRM, and Ghana stock Exchanges in that order. The Nairobi securities exchange topped the pack posting 46.3 per cent return in dollar terms. Nairobi is capitalized at US$1.2 billion. The Nigeria Stock Exchange, capitalized at US$5.5 billion was second posting a 42 per cent return as at the end of November. The investing in Africa report is backed by reports from the bourses themselves. The Nigeria Stock Exchange shows that Market capitalization grew by 12...

The commuter train service:a 30 year concession ALTHOUGH PESSIMISTS DOUBT the survival of the Nairobi commuter rail service, an analysis of business variables tells the opposite story -the project is viable and sustainable.  In fact, it could turn out a money spinner. The operation of the service will be in the private sector’s hands for an estimated 30 years concession.  Sentiment and necessity favour rail transport which is clean in terms of pollution, transports many people and is relatively safe and affordable. Commuter Rail service world-wide are geared to ease traffic jams in cities by persuading motorists to leave their cars at home and ride the train. They are thus designed to be faster-reliable –safer and affordable alternative to cars. Therefore passenger car traffic on the competing roads is critical inputs in assessing the viability of a commuter rail service. Studies show that the proposed commuter rail routes are on heavily trafficked roads in t...

The Nairobi elevated road:facing intense criticism  A MONTH BACK, we ran an article questioning the viability of the elevated road over Nairobi's uhuru Highway. http://eaers.blogspot.com/2012/10/is-nairobis-double-decker-road.html  We have come across an article providing compelling aesthestic reasons for discarding the project. The article proposes that the funds be used to expand the Southern by-pass to 8 lanes. The article initially written as a letter to the PS ministry of Roads and public works, first appeared on a blog on urban planning in Nairobi from where we lifted it. I would like to state my strong disapproval of the planned elevated highway over Uhuru Highway. On the face of it, the elevated highway might look like a very good thing to build. Unfortunately the environmental and social impact assessment study carried out for NUTRIP did not include in the team or consult, architects and town planners. If the study team had included them, they would have t...

TANZANIA, EAST AFRICA'S second largest economy,  has turne d to geothermal power to meet the increasing demand for power in the country.  Power shortages are  a mill on the country economic progress. The country will drill its first geothermal power wells in Mbeya next year. Ol Karia wells: Africa's leading geothermal wells The country has the potential to generate some 650 MW of geothermal power.  However, it will start with 200 MW implemented in two phases. The first phase will produce 100 MW or 12.5 per cent of the country’s power output by 2016. The second phase, which starts in 2015, will load another 100 MW to the national grid by 2018. It costs an estimated US$2 00 million to develop a 100 MW geothermal plant at current prices. Therefore to develop the first 200 MW will cost an estimated US$400 million. This means that for Tanzania to develop its full potential it will require more than US$1.2 billion. Already she has applied for a total of...

An oil pipeline: Critical infrastructure in oil marketing T HE FLURRY OF discoveries of hydrocarbons in the eastern Africa coast has changed the game for explorers. It is no longer a juniors market. The countries are no longer pleading with explorers to explore for hydrocarbons in the territory. The existence of viable quantities is a confirmed fact and therefore the rules of engagement are changing.                                                                      The discoveries have spawned demand for infrastructure that does not exist in the region. Yet the infrastructure is a necessary component in oil marketing.  We are talking abo...

Railway Lines substitutes roads transport CHINA IS FIRMLY ESTABLISHED as a leading development partner for Africa. This development has jolted development partners in the West who are adopting China’s no frills business model, so popular with Africa.  This competition is opening up the purse strings as never before. Development aid is flowing to Africa in fast and furious manner.  This is a good thing. It is also risky and dangerous.    The danger is; as China takes the front seat in development of Africa, others, especially the West,”will want to catch up.” Herein lies the danger: in a bid to catch some financiers may drop their guard, funding any project that comes their way.  It also some professional excited about availability of funds, could easily come up with grandiose projects. That Africa needs huge investment in solid infrastructure is not in doubt. The continent needs roads, railway lines, sea ports to open up itself for trade and d...

The container terminal at the Mombasa Port  THE EXPANSION of the Mombasa port into a mega port will begin in December 2012, we have reliably learnt. The expansion brings to a close the Port’s US$ 320 million development project that began last year.   The project is funded by the Kenya government jointly with the Japanese International Co-operation Agency,JICA.  The first phase of the development project included the dredging of the port to a depth of 15 Metres. It also widened the Likoni Channel from 250 Meters to more than 300 meters, while the turning basin was widened to 600 meters.  This phase cost US$62 million and was completed in 18 months. Its completion enabled the Port to receive the largest sea freighters in the market. The second phase which involves construction of three berths with a straight-line quay of 900 meters, reclamation of 100 hectares of land, second container terminal with a capacity of one million TEUs, reclamation of ...

The elevated uhuru Highway  THE GOVERNMENT OF KENYA plans to construct a 12Km over-pass over Uhuru Highway at a cost of US$200m. The World Bank funded project, will also include building by-passes in Kisumu city and Meru town.  The two by passes will cost an estimated US$60 million. Therefore the entire project will cost US$260 million of which the Kenya government must raise 20 per cent or US$52 million. Other components of the project include construction of an additional Lane from Nairobi West lands suburb to Rironi in Kiambu County.  It will also include service roads. The project is variously justified as a solution to congestion on the Northern corridor and as a panacea to slow movement of traffic between JKIA and its customers to the West of Nairobi.  And critics have raised the red flag wondering if the road is necessary now or in the next 15 to 20 years.  The critics have a point as there are other on-going transport infrastructur...

Impression of proposed Tatu City THE KENYAN HOUSING MARKET IS booming. And it will remain vibrant until 2030 when supply equal demand official estimates show. Consequently, the sector appears to shrug off economic shocks such high interest rates. Demand for credit by the sector is up while consumption of Cement, another measure of the health of the sector, is also up.  According to the central Bank of Kenya, credit to the sector in the year to June 2012, rose by US$385 million, second only to trade. And more is yet to come, say developers. What drives the growth? Several factors combined.  Among these is the policy shift and legal reforms in the housing sector; high unmet and growing demand, economic growth in Kenya, the growth of the middle class, increased investment by Kenyans in the diaspora, construction of major roads in the country and foreign investment in the property market.  Years of neglect and cirrhotic economic growth during the Moi era (19...

An aerial view of Bujagali THE CONTROVERSIAL Bujagali hydropower station in Uganda has been commissioned and is now on the grid. It loads an additional 250 MW on the national grid effectively doubling the power generation capacity in the country.  This development is a sigh of relief for Ugandans in several ways:  it eliminates expensive thermal power; It releases some US$9.5 million in electricity subsidies to the exchequer;  it eliminates load shedding and brightens prospects for economic growth.  For Ugandan President, Yoweri Museveni, who launched the dam, it was a vindication that tenacity pays. He had the last laugh over opposition to the project! The project Uganda was dogged by controversy, some of it crass.  Mooted in 1990s, Bujagali immediately faced all sorts of opposition from donors and their cohorts in the civil society sector-that at a time when the country experienced 12 hour loading shedding due to drought.  Activists...