What you need to know:
- On Tuesday, Kenya announced that China Communications Construction Company (CCCC) – the firm building the Mombasa-Nairobi SGR – will also operate the line.
- Kenya has already put up the Sh427 billion Mombasa-Nairobi section of the line, set for completion next year.
- Lapsset, SGR and the export of Kenya’s oil have been touted to boost Kenya’s Gross Domestic Product (GDP) by 9.5 per cent once complete.
Kenya might be forced to weigh its options as its influence over its neighbours in the East Africa region increasingly wanes with questions being raised on whether there is a deliberate strategy to isolate the country.
In the last one month, Kenya, which is considered East Africa’s economic superpower, has lost two mega infrastructure deals to Tanzania which, experts say, could be on course to overtake Kenya’s economy in just a matter of years.
Even with this, Nairobi is adamant that Kenya’s position in the region is unassailable.
“We have been bending over backwards to accommodate our brothers but we may be looking at a situation where we begin to look at our interests first,” Energy Cabinet Secretary Charles Keter says.
This past week, Rwanda dumped Kenya in favour of Tanzania for its railway project. At the same time, Tanzania announced it will reduce the amount of electricity it buys from Kenya after data from the Kenya National Bureau of Statistics (KNBS) showed a 67 per cent drop in power exports to our southern neighbour.
While announcing its favour for Tanzania for its railway link to the Indian Ocean, Rwanda’s Finance and Economic Planning Minister Claver Gatete said the route is shorter and cheaper than if it was to pass through Kenya.
“We opted for the route transiting to Tanzania during the construction of our railway line because the Kenyan route would be expensive and time-consuming,” he said.
Rwanda said that a study it carried out showed the Tanzanian option would cost between $800 million (Sh80.5 billion) and $900 million (Sh91 billion) while the Kenyan one would consume $1 billion (Sh101 billion).
This is despite the existence of another deal by Rwanda, Kenya and Uganda, under the “Coalition of the Willing” signed in 2013, that would have linked the three countries to the Indian Ocean through the Standard Gauge Railway at a cost of $13 billion (Sh1.3 trillion).
In the original deal, each country was required to source funds and construct its own part of the railway.
Kenya has already put up the Sh427 billion Mombasa-Nairobi section of the line, set for completion next year.
Deals worth Sh654 billion for the construction of the second and third leg of the line to Naivasha and Malaba have already been signed with construction set to start soon.
Also at the core of the apparent back stabbing by the East Africa Community member states is a clash of interests between multinationals and donors on key infrastructure deals, which now also threaten the region’s hard-fought integration efforts.
For the Uganda oil pipeline, France’s Total Petroleum was behind the push for the Tanzania route as it is also drilling oil there.
On Tuesday, Kenya announced that China Communications Construction Company (CCCC) – the firm building the Mombasa-Nairobi SGR – will also operate the line.
This is despite the placement of an advertisement by Kenya Railways inviting firms to bid for the job through an open competitive tender.
Kenya Railways managing director Atanas Maina said state-owned China Exim Bank told Uganda that they would only get funding to build their section on condition that it agrees with Kenya to hire the Chinese contractor.
“Recently Uganda went to engage the China Exim Bank and one of the conditions they were given is that between Uganda and Kenya, we must appoint one operator for maintenance of SGR between Mombasa and Kampala in order for the bank to consider any financing,” he said.
Despite Uganda’s commitment to SGR still hanging in the balance, Transport Cabinet Secretary James Macharia has played down the impact of Rwanda’s exit, even as he admitted that extending the line to Malaba may not be necessary if both countries pull out.
“The decision has not been reached but we have a number of options at our disposal. We can decide to end the SGR in Naivasha or Kisumu but it will still be a viable venture due to the presence of Lake Victoria,” he says.
But with Rwanda out, it remains unclear whether Uganda will construct its section of the railway line because it recently pulled out of a deal to construct its pipeline through Kenya and experts say nothing could prevent it from pulling out of this one too.
The passage of Uganda’s pipeline through Kenya was a major factor as it would determine the speed at which Kenya would export its oil and the success of the Lamu Port South Sudan Ethiopia Transport corridor (Lapsset), which now also hangs in the balance.
“As much as the EAC is a region, each member’s first propriety is addressing its national interests which can be pursued through co-operation or conflict,” Patrick Magero, an international relations and peace studies lecturer at the United States International University Africa (USIU-A), says.
He adds: “From what we have seen on the pipeline and now the railway, it is open that each country is trying to neutralise Kenya’s position which, for a long time, has been seen as privileged.”
TZ CATCHING UP
Mr Magero argues that Kenya’s long standing economic superiority was as a result of its infrastructure.
“Save for Tanzania whose development was bogged down by socialism, all the EAC countries were for a long time politically unstable but we failed to invest in trade incentives and traditionally countries perceived to be of low strategic importance will look for alternatives. This is what is happening,” he says.
Tanzania has in recent years been cutting back on its imports from Kenya. Under its new President John Magufuli, data from KNBS shows it imported Sh5.2 billion worth of goods from Kenya from the beginning of the year to March, from Sh5.7 billion during a similar period last year and Sh10.1 billion in 2014.
Exports to Uganda too — the largest buyer of Kenyan goods — have been declining since 2011 due to a vibrant manufacturing sector in Kampala, and local firms opening shop in the neighbouring country since the creation of the EAC common market in 2010.
Even worse, a World Bank report released in March titled Deal or No Deal: Strictly Business for China in Kenya? said “cheap Chinese products have been slowly displacing Kenyan manufactured products from the Tanzanian and Ugandan markets”.
Lapsset, SGR and the export of Kenya’s oil have been touted to boost Kenya’s Gross Domestic Product (GDP) by 9.5 per cent once complete.
According to Vision 2030, under which these projects fall, Kenya is supposed to have an annual GDP growth rate of 7 per cent in order to attain a middle income economy by 2030.
However, for the last three years, the country’s GDP has been growing at an average of 5.5 per cent.
By comparison, Tanzania’s economic growth rate has averaged 7.2 per cent in the same period.
And while it remains to be seen whether Tanzania with a GDP of $46 billion will overtake Kenya’s GDP of $55 billion, experts say Nairobi cannot afford to sit pretty.
“Kenya has every reason to worry because of such developments. For a country to develop, it cannot ignore its neighbours as well as development partners,” Eric Munywoki, a market analyst at Old Mutual, said.
“I think there is a lapse on the government side. We need the ministers in charge of regional or international trade to be more active,” he added.
Africa Economics managing director David Ndii, in a recent column in the Saturday Nation, said that Kenya’s misfortunes are as a result of political ineptitude.
“It is the misfortune of Uhuru Kenyatta that his presidency is now to be benchmarked against a Tanzanian president who is rekindling Nyerere’s leadership ethos — humility, modesty, integrity, personal discipline and public service ethic,” he wrote on May 7.
“The desperate helter-skelter we have been treated to since losing the Uganda oil pipeline project to Tanzania now confirms that the Jubilee administration has become a victim of its own propaganda,” he said.
Cord co-principal Kalonzo Musyoka, who was the first chair of the Ministerial Tripartite Commission set up in 1993 to work out on how to reintegrate the region, also points an accusing finger at the ruling coalition.
“I shouted when Kenya pushed for the “Coalition of the Willing” that unity of purpose is important. You cannot isolate Tanzania and succeed. Now it has backfired,” he told the Sunday Nation.
“Jubilee is playing funny games at the top and that is why the country is losing out. The European Union, which is hugely successful, borrowed heavily from the original EAC which collapsed in 1977 under Jomo Kenyatta. So maybe it is a case of like father like son,” he says.