Following the loss of the Uganda oil pipeline deal to Tanzania, Kenya has a golden opportunity to gain a competitive edge in the region, but analysts argue that it must fast-track the Lamu Port South Sudan Ethiopia Transport (Lapsset) corridor project.
Moreover, they contend that the country can compete effectively with its rivals by boosting its infrastructure efficiency.
The government maintains that it is committed to seeing the Lapsset project through, but analysts said it needs to put money where its mouth is, noting that the Sh10 billion allocated to the Lapsset this year is too little and may ultimately affect timelines for the completion of the project.
Mr Gabriel Ouko, associate director Deloitte East Africa said the budget raises more questions than answers in the infrastructure space.
“Given the $30 billion capital expenditure that is required for the Lapsset project, is Sh10 billion not a drop in the ocean? Are we really serious about getting this project going? The government says it is, the budget it is giving is not reflective,” Mr Ouko said.
The Institute of Economic Affairs (IEA) pointed out that although infrastructure continues to receive a considerable budgetary attention from successive ministers, it remains the least performing sector in terms of implementing projects.
The 2016/17 Budget Summary shows the standard gauge railway will get a whopping Sh154 billion roads (Sh148 billion), Mombasa Port (Sh5 billion) and Lapsset (Sh10 billion).
“Absorption in infrastructure sector has been consistently 50 per cent on average for over a decade due to delay in release of donor funds and long procurement procedures which are often contested,” IEA chief executive Kwame Owino told the Business Daily.
This is against the overall budget performance of 88.7 per cent in 2014/15 with the absorption of recurrent funds being higher than that for development at 93per cent and 78per cent respectively.
This means that the government may only spend Sh5 billion for the Lapsset project by the end of the financial year.
But the State is keen to defend its record. Transport Principal Secretary (PS) Irungu Nyakera said the government is only supposed to pump in Sh43 billion for the development of the port as well a key infrastructure projects of road, rail and airports.
“You cannot juxtapose the Sh10 billion to the Sh2.5 trillion figure considering that the government is not the sole executioner and financier of the entire development. Lapsset will eventually include resort cities under the programme. The government is not in the business of building hotels,” Mr Nyakera said.
The ministry said that the Sh10 billion will fund the construction of the initial three berths at Lamu port whose development is currently underway.
“The project will also be implemented in phases. The notion that the government hasn’t put enough money commensurate to the magnitude of the project is totally misplaced and uncalled for,” the PS said.
It is estimated that the three berths will cost taxpayers in excess of $300 million (Sh30 billion). Lapsset is not just about the Lamu port but a grand project with multiple components including a railway line, a dual carriage highway connecting the port to the hinterland, a crude oil pipeline connecting to South Sudan and Uganda, an oil refinery at Lamu and resort cities and airports.
Mr Nyakera said the core function of government as far as the project is concerned is to ensure requisite infrastructure is in place (Power, Water, Roads, Rail, Pipeline) and avail land.
He said that all other infrastructure and the auxiliary projects including the 29 additional berths, industrial parks will be undertaken by investors through Special Purpose Vehicles and a Public Private Partnership (PPP) plan.
The ministry said that Lamu port was well thought out and is commercially viable given the need to open another corridor away from the Nothern corridor to serve emerging markets in Ethiopia, South Sudan and Uganda.
However, slow implementation of such a huge project for the government may open up room for competition from Djibouti and the new Berbera corridor in Somaliland.
The detailed designs for the first three berths and associated infrastructure of the Lamu port were completed in 2011 but the contractor has not made much progress mainly because the government has not made adequate budgetary allocations.
Just like such landlocked countries like Rwanda, Burundi and parts of eastern DR Congo now have more transport options between Mombasa, Tanga, Bagamoyo and Dar es Salaam, so too are Ethiopia, South Sudan and Uganda’s hinterland increasingly getting options.
Landlocked Ethiopia has outstripped the capacity of Djibouti port and has turned to Somaliland’s Berbera. Ethiopia wanted 30 per cent of its trade to go via Berbera by July last year, according to a five-year growth plan published in 2010.
The option is however hampered by capacity issues and the condition of Berbera’s port, the poor state of roads to Ethiopia and the lack of international recognition for Somaliland’s statehood.
And herein lies Kenya’s golden opportunity. It needs to fast track the Lamu port project and speed up road and rail connections to gain a competitive edge for the markets. Mr Nyakera said that the department of Infrastructure is already supervising construction of roads in northern Kenya to get the project going.
“The Mombasa to Ethiopia road corridor will be completed in three to four months. The key road linking Lamu County to major road networks will start soon to underscore the government’s commitment to open up the Lapsset corridor,” the PS said.
Mr Owino also said that the government should reduce the “over ambitious” 32 berths and instead focus on improving efficiencies at the Mombasa port.
But Mr Nyakera argued that many factors underpin the government’s initiative to launch the Lapsset project, chief among them, the constraints of space at Mombasa Port, and was threfore against scaling back.
Source: Business Daily
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