Economic and Business News by Leo Odera Omolo in Kisumu City.
POOR infrastructure may derail the immediate realization of the recently launched East African Common Market Protocol, according to the sentiments expressed by the Secretary General of the East African Community, Ambassador Juma V Mwapachu.
He said trade facilitation which accounts for 60 per cent of the costs of doing business in the region must be sorted out if the full benefits of the common market are be realized.
Mwapachu made these remarks while receiving a delegation from the Japan Bank for Investment Cooperation. He told the visiting Japanese delegation that the common market has specific trade and development dimension which must be exploited.
The current cumbersome procedures and inadequacies of infrastructure along the trade facilitation chain would have to be squarely addressed in order to unlock the region’s full development and growth potential.
Several studies have revealed the extent of the financial requirements of the rail, roads and energy needs of the region. But questions remain on where the region will get the requir5ed funding.
Experts believe that if the region overcame infrastructure challenges, East Africa’s GDP would raise beyond the current USD 75 billion.
Ambassador Mwapachu said globalization has made it necessary for African countries to pursue regional integration to maximize the economic of scale and prudent utilization of scarce resources.
With the coming online of the common market two weeks ago, East African Community has moved another step towards full integration and agricultural development and food security, regional industrialization, and harmonization of educational curricular, among other key project and programmes in order to realize a strong and truly regionally integrated economy and cohesive society.
The EAC has identified the East African Railways Master Plan and the East African Road Network to extend comprehensive network of modern rail, road, inland waterways and telecommunication systems that would effectively connect centers of production and market throughout the EAC region and the neighboring countries in particular Southern Sudan and Ethiopia and the Democratic Republic of Congo.
Meanwhile reports appearing in the local media insist the Kenyan Port of Mombasa is facing stiff competition from Dar Es Salaam port as a hub for imported refined fuel destined for the land locked countries of Rwanda, Burundi, Uganda and Burundi bringing in over 90 and 60 per cent of oil products respectively through Tanzania.
This is loosely translates that Kenya is fast losing business payment penalties {demurrage charges} to tankers owners due to delays in off-loading oil products in Mombasa and constr4aints in pipeline pumping capacity of refined fuel inland among other reasons are to blame for the shift.
According to Petroleum Institute of East Africa {PIEA}, there is need to review adequacy of handling facilities including jetties and storage facilities to ensure Kenya remains a competitive entry-point of fuel. The institute’s chairman David Ohana was quoted by the SUNDAY NATION as saying that the industry players and the government should come up with joint efforts in developing sufficient infrastructure to meet rising local and regional demand.
“Such an effort will ensure that Kenya remains the preferred entry hub for landlocked neighboring markets. Recently, we have witnessed a big shift to the Dar Es Salaam port.” He said.
Oil products, however, remains a critical driver for attainment of economic and social goals of Kenya’s Vision 2030 of industrialization with refined fuel contributing the highest percentage of primary energy demand.
It is being moderately estimated that Kenya losses USD 4.3 million {Kshs 3.4 billion} every year as demurrage charges paid by oil firms to tanker owners when ships fail to off-load fuel in good time with marketers passing the burden to consumers.
Demurrage is caused by lack of adequate {storage space at Mombasa and due to low pipeline pumping cycle. And while the construction of a parallel Nairobi-Eldoret fuel pipeline will raise flow rate to Western Kenya, demurrage calls for investment in new storage facilities in Mombasa and inland.
Kenya pipeline Company is normally forced to stop pumping due to slow uptake of fuel from Nairobi depots by marketers when the terminals are full. The company’s operations manager Phillip KIMELU said Nairobi’s congestion is attributable to Western Kenya pipeline system capacity constraints. He said this is being addressed by the building of a parallel line. Western Kenya being served by eight inch diameter pipeline from Nairobi to Burnt Forest where it narrows to six inch to Eldoret and six inch pipeline also branches at Sinendet to Kisumu,” he added.
A parallel Nairobi-Eldoret pipeline will pump 390 cubic meters of fuel per hour alongside existing line of 210 cubic meters. This will save marketers money since they incur extra costs transporting oil products by road from Mombasa.
According to to Metro Petroleum, Burundi and Rwanda give tax rates for the petroleum products passing through Tanzania, while Uganda’s shift to Dar Es Salaam is for reasons strategic to ensure continued supply.”Tax rates of imports are given to partly offset cost of road transport. Uganda shifted part of imports to void recurrence of disruption due to 2008 post-election violence in Kenya,”said metro’s manage Bill Rotich.
He further stated KPC/s Kisumu and Eldoret depots lack enough fuel for local and export market forcing landlocked countries to opt for road transport from Dar Es Salaam despite the distance.
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leooderaomolo@yahoo.com