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Tanzania Oust Kenya in Mega East Africa Projects

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By Kevin Gikonyo,

Former Banker,financial market consultant and a contributor to Nairobi business Monthly.

www.huffingtonpost.com

www.huffingtonpost.com

Dr John Pombe Magufuli popularly known as “The Bulldozer” in his country, is living up to his nickname barely a year into his presidency. He was sworn on 5th of November 2015 after a hotly contested election since its independence, 54 years ago, by close to 9 million voters, of its 49.1 million citizens.

The 57 year old, doctorate of chemistry scholar from the University of Dare salaam, was elected on a platform to transform the economy by increasing youth employment, reducing corruption, provision of free secondary and primary education, amongst other CCM(Chama Cha Mapinduzi) country reforms agenda.

Magufuli’s  7th month “leadership chemistry” has managed to lock in major East African projects and unsettled Kenya as the main economic reference, in regards to infrastructural deals. Kenya has held the mantle of being the biggest East African economy since independence, but according to the recent signings and their magnitude, the button is about to shift to Tanzania, if it continuously replicates this growing impetus.

The southern neighbours have often been considered as the “unwilling partners” in the East Africa coalition for the longest time, since the formation of EAC post-independence in 1966. Many recall an emotional parliamentary speech by the former president Mr Jakaya Kikwete, who vehemently denied being uncooperative and rhetorically referred to other member states, as “coalition of the willing”.

There are many instances that asserts these negative noun, due to the red tapes against EAC business owners-primarily Kenya, the ban on Kenyan tour operators free movement to parks, implementation of free movement of goods and services under the EAC agreement, up to the recent pull-out from the EPA (Economic Partnership Agreement) pact, that sought to benefit EA trade with the EU countries and the list is endless. The later was a 14 year negotiated trade deal, whose disarray will hurt Kenyan exports to EU the most, since it is classified as a middle-income economy. A highly ranked economic stratus country enjoys little tariff concessions, unlike that which is least developed like Tanzania. “We have not pulled out of EPA as a result of Brexit, but for reasons of National interest to protect our nascent industries “said the foreign affairs PS Mr Aziz Mlima.

Historically the EAC cooperation existed before independence of the three nations of Uganda, Tanzania and Kenya and was declared untenable shortly after. Tanzania drew the first salvo by recanting the East African common currency among other agreements and fostered its own communistic path. An attempt to re-join the EAC in 1966 was shortly lived when in 1977 the rosy affair came to a dramatic halt, with Tanzania closing its borders with Kenya and ended up confiscating Kenyan owned vehicles, aircrafts and even detained some of its citizens amidst suspicion from Tanzania’s political class. Tanzania’s government controlled media denounced Kenyans as “business big shots “while the Kenyan government radio in turn claimed that Tanzanians “ talk all day and sleep all night expecting to be fed from the sweat of their neighbours”-Source 6th Feb 1977 Sarasota Herald-Tribune.

 

Twenty Four years on, the EAC union was rebirthed in a colourful launch in Arusha, Tanzania and its vice president then; Dr Omar Ali Juma stated that the cooperation should not be allowed to fail again. Tanzania’s recent political leaders have been quoted on paper as being pro-EAC, but they have always elicited pain to past wounds by their actions or inactions that have sought to sabotage the basic cohesion and mere renaissance of the 145.5 million community bloc.

As much as one may be desirous to fault Tanzania, they must be doing some things right for the past 5 years, which Kenya needs to learn. Their high GDP growth rate and ranking among the 6th fastest growing economies of the world are positions that affirm the leadership of the second biggest economy in East Africa.

EAC commands a combined GDP of close to 150billion dollars and has an average per capita income of nearly 850 USD according to EAC facts and figures report -2015.Kenya and Tanzania contribute close to two thirds of the total GDP of East Africa and the five year, 7point plus economic growth on the country once known as Tanganyika, is breeding a shadow contest with Kenya which has registered a dismal 5point growth since 2013.

 

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Tanzania boasts of natural gas off its coast and minerals such as gold, iron, copper, silver, platinum, nickel and tin; gemstones such as diamonds, tanzanite, ruby, garnet, emerald, alexandrite and sapphire among other stone aggregates. Kenya prides in fluorspar, rare earth, gold, gemstones, titanium soda ash and niobium deposits.

In 2013 Kenya, Rwanda and Uganda had agreed to link up their boarders with a modern Standard Gauge Railway line commonly referred to as SGR. The mega project was estimated to cost 13Billion dollars. Uganda first signed an MOU with Kenya in 2009 and later became a tripartite agreement that saw Rwanda sign In August 2013, committing to conduct a common joint study in order to realise this common goal. Kenya was to become the oceanic link to these landlocked countries that sought to shorten the movement of goods and people. This was never to be, at least for the part of Rwanda that has recently declared through its minister for finance and economic planning, Hon Claver Gatete that its SGR project will run through Tanzania.

Rwanda’s research showed that through the port of Tanga, the SGR would be much cheaper by USD 200Million compared to the Mombasa route that would cost USD 1Billion thus sighting this as the major reason to derailed talks with Kenya. Consequently, this meant that Burundi will be looped into the newly agreed Dare salaam-Isaka-Kigali/Keza-Musongati (DIKKM) route expected to be completed in March 2018.Mombasa to Kigali was expected to be complete by 2018, meaning Rwandese and Burundians would have had to wait longer to enjoy the benefits of SGR.

Another huge deal that slipped from Kenya’s hands is the pipeline project from Lamu to Kampala and consequently Rwanda, Burundi and DR Congo. In one blow Uganda bungled out and shattered Kenya’s dreams of becoming a key connection to this multi-billion dollar business. Uganda sighted the project would be close to 4Billion cheaper and faster through Tanga port that is already operational unlike Lamu port that is deemed to be completed in 2021,if they are lucky to get any infrastructural funding. Uganda’s production meant to start in 2018 ,has already secured French’s Total Company funding for its Tanga route with deposits valued at over 1 billion barrels of “black gold”, the biggest find in the region and equally huge gas reserves.

This new connection would be completed in 2020 from Kabale, Hoima to Tanga which is 1,400 km apart and the plateau much clearer than the ragged terrain in Kenya. Tanzania’s government owns these vast lands, unlike Kenya that has to deal with protracted land compensation battles and otherwise inflated land valuation claims that often benefit the Land registry and ministry officials. The security of the pipeline was also a main decider to dropping the Lamu-northern Kenya route, where there is almost no infrastructure and a lot of tension among communities in sharing existing resources and the pipeline revenues would only seek to complicate matters further. Kenya proposed to charge a pipeline fee of USD17 per barrel compared to Tanzania’s quote of USD12 per barrel, which also offered other incentives like waiving land fees, transit charges and taxes associated with pipeline transmission, a move that caught Kenyan’s project managers flat footed.

In the red is also the LAPSET (Lamu Port, South Sudan-Ethiopia Transport) project, where Ethiopia is in a “near shift” even after their PM’s visit to Kenya. Its minister of mines and petroleum Hon Tolossa issued a statement from Addis Ababa, negating Kenya’s position that they ever inked to a formal agreement and that it was only an MOU to guide a joint feasibility study on the viability of the project. Ethiopia is currently in advanced talks to use Djibouti as its main port and the two countries have just overseen the laying of the last part of the 752km electric SGR to connect the 2nd largest populous and land-locked country in Africa. Djibouti aims to earnestly get the SGR to South Sudan, Central Africa Republic, and Cameroon to connect from the Red sea to the Atlantic.

Kenya has boasted and rightly so, to be the biggest economy in Sub Saharan Africa north of Limpopo, although the torch may soon fade. The ground is shifting faster than Kenyans imagine and the much talked off pillar projects in successive regimes will soon be silhouettes in chronicles of history. Smaller countries like Djibouti seem to be in a race for time and focused to meet their MDGs sooner than later. Tanzania’s sharpened negotiating and deal making skills are just an indication that we need to relook into how we approach our cross boarder and internal projects of national importance. Abortion of the “Green field” airport expansion project is one of the misguided decisions that had poised Kenya to become the next “Dubai airport of Africa”. Dubai’s decision to expand the now 6th largest airport in the world 33years ago, is now finally paying off with their aviation industry contributing to 37.5% (26.7 Billion dollars) of their 2015 GDP through its famous duty free project.

Most of the projects have stalled, abandoned, taken more time due to corruption or degenerated into “talk big-less action” political tools. Questions on these mega projects abound like an abyss on; Why two Chinese state-owned enterprises; Third Railway and Design Institute (TSDI) and China’s Roads and Bridges Corporation (CRBC) were nominated to supervise and build respectively, the 324Billion Mombasa-Nairobi SGR project against a court of appeal order (Case No; Nai 282 of 2014(UR 210 of 2014)? Why have LAPSET investors developed cold feet and fees of USD 20million to Japan Port Consultants (JPC) recording as the highest feasibility fee in Kenya’s history? Why was the Parliamentary Investment Committee (PIC) report on SGR ignored? Why has Kenya abandoned the “Greenfield” project just three years after commissioning?

“The biggest threat to national security is corruption” are the very words of President Kenyatta. Our answers to losing out on mega deals may never be addressed. What is confirming to be true each passing day is that our Kenyan vision 2030 will just qualify to be a well written vision in theory while other regional countries patriotically lift themselves from bonds of poverty.

Author: Kate Mwamba

Financial and lifestyle blogger

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