Business feature By Leo Odera Omolo
East Africa regional leaders have agreed to set up a regional oil refinery in Hoima town in western Uganda and a pipeline in Lamu on the Kenyan coast.
Kenya, Uganda and Rwanda struck the deal at a recent meeting held in the Rwandan capital, Kigali. Kenya’s President Uhuru Kenyatt, Yoweri Museveni of Uganda and Paul Kagame of Rwanda were in attendance during the mini-summit which was held on April 6 , 2014.
Discussion centered on the oil refinery at Hoima stated presidential joint strategic communications unit issued after the meeting.
The regional leaders also agreed on joint construction of a crude oil pipeline from Hoima to Lamu in Kenya.
The regional refinery and a crude oil pipeline to Kenya’s seaport of Lamu are among a raft of agreements that are covered in a trilateral pact signed last year.
The pact, however, left room for the three states to decide whether to pull resources for the refinery and how to do so.
Uganda and Kenya have both confirmed commercial quantities of recently discovered oil and both are currently sprucing up their midstream capacities
Kenya closed down its aging Changamwe based oil refinery last year citing inefficiencies that made locally refined fuels more costly than imported finished products
The assets of Kenya petroleum Refinery Ltd were also found to be unstable in refining the waxy oil discovered in both countries. The Changamwe based facility was built to handle urban demand and oil from the middle east. As a result, regional leaders have been favorable to pipeline and refinery options when the oil find came online.
Experts, according to media reports, have however warned that a pipeline for waxy oil is likely to be a very expensive undertaking. Concerned states therefore, will not only have to invest in an …heating system to keep the crude flowing, but also ensure its security from sabotage.
South Sudan and Ethiopia are also expected to join the initiative at a later stage as it professes flow at the Lamu port.
Meanwhile EAC countries traded more with each other than with any other trading blocs on the continent, boosting an average intra regional export as a percentage by destination of 19.5 per cent.
Comparatively, southern African Development Community (SADC), is second with an intra regional trade export average of 10.9 per cent, followed by intergovernmental authority on Development, at 0.92 per cent, and West African Economic community (ECOWAS), coming fourth at 8.6 per cent.
However intra EAC trade still suffered hiccups arising from several barriers evicted by member state. For example the latest scorecards on EAC trade launched in February show that Tanzania and Burundi have retained the highest number of restriction to cross boarder trade and flow of foreign direction investment in the East African Region.
Since the common market protocol was implemented in July 2010, Rwanda, Uganda and Tanzania have introduced at least 10 restrictions on the movement of capital in service. Several new restrictions have been introduced – – at least 10 restrictions to cross border on the movement of capital In service. Several new restrictions have been introduced or carried over into laws.
And for the case of goods, since…the enactment of the custom reunion on January 1, 2005, 51 non tariff barriers arising from regulatory measures by governments were identified between 2008 and June 2003.
The UNECA argues that the average intra regional export members are low and more needs to be done to help push them up.
While in the recent past there has been a focus on approving infrastructure by EAC heads of states, it remains a major aim to increasing intra- organization trade. Both roads and railway network are still not well established to allow the easy movement of goods and services.
UNEAC further says that intra- regional trade promotes cohesion and strengthens the barganing power of African countries as a critical of factor when negating trade agreements with rich nations.
The deal which increased intra-regional trade would also help Africa gain more from its measures. Usually the developed world buys raw materials from African Nations to manufacture goods and later sell to the continent at exravegant prices.
“Dependence on commodity prices and in some cases mineral extraction makes growth vulnerable to external shocks,“ says Andrew Mold, a senior economic affairs officer at the sub-regional office for Eastern Africa.
Economics and observers believe a diversified economy will help East African countries more from a traditional agriculture based economy to one industrial one