East Africa Economic Report

SAA: Ready for shedding off? REPORTS IN THE South African press have it that a local private airline will sue the government over the continued bailout of South Africa Airways.  The Airline, Comair, argues that the bail outs do not comply with; either the domestic aviation transport policy or the law, says the Business Report. Comair wants a level playing field in the domestic aviation market to ensure that all airlines face the same risks and the same requirements to operate on sound commercial principles. In the past 20 years, SAA has sunk 22 billion Rand, (US$2.5 billion) with nothing to show for it. And the government last October guaranteed US$576 million in loans over the next two years. The support was granted the airline to recapitalize after being pushed into insolvency by bad financial decisions. SAA can emulate KQ In 2004, the airline almost closed down after losing US$1.03 billion in hedge loss after a fuel edge went haywire. The airlin...

A hydro dam under construction: Expensive ventures THE AFRICAN DEVELOPMENT BANK, AfDB, is driving a shift in infrastructure financing model in Africa. The change involves unbundling public  sector service provision into several functions inorder to enable  private-public sector partnerships. For instance, electricity generation can be unbundled into; power generation, distribution and transmission functions, each managed separately. And as a result of unbundling of services, the private sector can now be contracted to provide certain public sector services. These contracts are determined according to the financial risk, urgency in service delivery, economic impact and revenue risk. In Africa, demand for infrastructure is growing faster than the public sector's ability to deliver. The African Union, for instance estimates that a US$360 billion investment is needed to provide infrastructure up to 2040, that is a whooping US$13.3 billion a year. Of this energy will r...

Oil Pipeline: Japan interested in the 2000km pipeline from Juba to Lamu  THE NEWS THAT Kenya’s Oil finds announced only last year are commercially viable is definitely a game changer in Kenya.  The prospecting company, Tullow oil has announced that one of the wells, Twiga South 1 has commercially viable deposits. It has also announced that flow Tests for the Ngamia 1 present “real encouragement.” Commercial viability means that the Oil quality and quantity in a well can be sold at market rates plus there are enough stocks to run for a few years.     The flow tests show that the well can produce up to 2,850 barrel per day, way above the 500 barrels per day initially expected.  It is not surprise then that the market both in London and Nairobi, reacted with untamed excitement.  In London, Tullow’s shares gained 5.2 per cent, the highest gain in Europe. The Lapsset Corridor:n Isiolo is a major junction city  Apart from the potential...

A Prototype Aircraft parking Rank AFTER STALLING SEVERAL times, work on Kenya's greenfield terminal will take soon. The Kenyan President, Mwai Kibaki, will lead the ground breaking ceremony for Nairobi’s green field terminal at JKIA, this Friday. This will pave the way for the construction work to start soon thereafter. All necessary inputs are in place: Two Chinese firms, Anhui Construction Engineering Group and state-owned China National Aero-Technology International Engineering Corporation will build the terminal jointly with Pascall and Watson Architects. The supervising consultant is also in place and the government has secured the funding. The project will cost an estimated US$653 million.    The new developments come as a complete surprise to Kenyans for the client, the Kenya Airports Authority, had indicated that the project will begin in November this year. The authority had indicated that the funding negotiations could take a long time. However, it appe...