East Africa Economic Report

Contraband Sugar Being  destroyed at Mombasa  The bulk of the contraband sugar being impounded in the country is smuggled through the Somalia border, we can report. According to a June 2017 FDD report, Kenya imports US$1.2 billion worth of Sugar from Somalia. The report cites an International Business Times report on the same dated June 4, 2014. That, from a country that does not own a single sugar mill!   At the current world Market prices of $349 per ton, that is 3.45 million tons of sugar. However, at the current domestic price of KES 76,000 a ton, we import 1.58 million tons of sugar a year from Somalia!  Local analysts doubt whether Kenya can absorb all this sugar. The demand for sugar in the country is about one million tons a year. The analysts however, say that this could be the total value of all contraband from Somalia including low-volume but high- value goods such as electronics, apparel and textiles. Sugar could form perhaps, 10 to 20 ...

Ndogo Kundu By-pass: an Aerial view: Courtesy Kenha  That would make it the most expensive road project in the world, beating Uganda’s Entebbe expressway by Kshs 100 million (US$1 million).  The Expressway was branded the most expensive road in the world by Uganda’s Parliamentary Committee on State Enterprises. The committee protested that “a kilometer of road cost an alleged $9.3 million.” Of course, the politicians were wrong –either innocently or by design but mainly by design. It turned out that they wanted “to fix” a PS who refused to approve a two-week “bench-marking trip” for them. The Highway cost roughly $2.325 million per kilometer. Back to Ndogo Kundu. Did a kilometer of road cost shs 1 billion?  Yes and No. Here is why: we are accustomed to counting the heads of cows to know how rich we are. Roads engineers count the legs to cost a road. So they come up with more legs than heads. There is more tarmacked road (the legs) than the distance (the co...

A Geothermal Power station in Olkaria, Kenya The African Development Bank has lent a total of US$50 million to Quantum Power East Africa GT Menengai Ltd. This is the first loan to a private sector player in Kenya without a sovereign guarantee. The firm plans to generate 35 MW of geothermal power from Menengai wells. The loan is in two sets; a senior loan of US $29.5 million and a concessional loan of US $20 million.  The firm has already signed a Steam Supply Agreement with GDC, the developers of the Menengai geothermal wells. Quantum has also signed a 20 year Power Purchase Agreement with KPLC, the power distributor at US$0.007 per Kwh. The Geothermal Development Corporation, GDC, is a state-owned corporation whose business is to develop geothermal wells at Menengai. It is currently developing 400 MW-almost 26 percent of the current capacity- of geothermal power from its Menengai fields. The firm hopes to generate a further 3000 MW of by 2020 from the same fiel...

 Lamu city and county are set to become the energy capital of Kenya. With a Port with oil export jetties, a 120,000bpd refinery, two power generators pumping 1150MW into the national grid, the County, and the port city are set for greater things in future. Other things remaining the same, Lamu could in future become the Qatar of Kenya, if not East Africa. The city will be the destination Port for exports leaving or entering East Africa’s landlocked Northern members- Ethiopia and South Sudan, according to LAPPSET and Vision 2030 goals. Even without the neighbours, it is the gateway for Kenya’s oil exports. And with a refinery to boot, it could soon become a major white oils market.  Lamu, Isiolo, and Turkana were conceived as “resort cities” in the Vision 2030 package and also the LAPSSET program. Resort cities are mainly tourist attraction sites. However, they have metamorphosed into energy cities due to developments in the energy sector.  The growth of the energ...

Lokichar field in Kenya. The sweet smell of petrodollars  Kenya and Uganda are salivating over petrol dollars. And there is a stampede for the sweet aroma. Kenya will haul its first crude barrels out of Lokichar fields this Sunday. But Uganda is not far behind.  And both appear set to hit the market come December 2018 in a Pilot programme called the Early Oil export. Kenya is first off the blocks to ship 80,000 barrels from Lokichar to Mombasa for storage until, 400,000 barrels, enough to fill a tanker. Uganda is planning to evacuate 48,000 barrels stored in Hoima Basin fields and is in the process of awarding the contract for the transportation of the crude to Mombasa by road.  It could be shipping its first consignment by the end of June or early July, Uganda watchers say.  The Crude will also be stored in Mombasa at the tanks of the defunct Kenya Petroleum Oil refineries. This means that both countries will have to up their pumping activity in the comin...

Noor Haji: The DPP stamping his authority The fight against graft in Kenya has picked momentum. It has beaten all other previous attempts in terms of speed, breadth, and potential impact. This round of investigations appears designed to be a precedent setter- a deterrent.  Seems like the 40 days of the thief are over. In addition to prosecution, the suspects could also lose the property acquired with proceeds from sleaze.  This will be followed, if the example of the KPLC contractors is anything to by, by blacklisting the same firms so that they cannot do any business with the government in the future. Also, the banks through the funds were channeled are staring at prosecution and heavy fines while the managers could find themselves jobless if they escape prosecution. Some employees of the power distributor, Kenya Power and Lighting, have been sacked for their involvement in graft and 350 companies which they had approved to render services to the firm have had...

The Monsters that will transport the crude Kenya will begin its Pilot oil exports next month. All contentious issues have been cleared and the country is ready to export oil in a few weeks’ time. Kenya’s crude is said to be among the best in the world, at par with the Brent Crude C1 which is now selling at $78.94 at the world market. This means Kenya will gain a windfall of roughly $24 a barrel.  The government and Tullow oil last year said the pilot scheme was viable at the then market price of $56 a barrel. The contentious issue with the Turkana community regarding revenue sharing was the last hurdle in the process. All other technical issues such as the acquisition of transporters have been cleared.  As at February last year, Kenya had 70,000 barrels of crude stored in tanks at the Lokichar Basin where the Wells are with a daily production potential of 2,000barrels.  The country is planning to export 2,000 barrels a day in a pilot project that will e...