Ventures Africa | LAPSSET: A Peep At The East African Trade Corridor

VENTURES AFRICA - LAPSSET, the Lamu Port, South Sudan, Ethiopia Transport Corridor (LAPSSET) is a flagship project of Kenya’s Vision 2030, the Kenyan government’s national development plan which, like Ethiopia’s Vision 2025, aims to transform Kenya into a mid-level economy with10 percent annual growth.

The corridor will link Lamu on Kenya’s coast to Juba, South Sudan, 1,700 km away, and it aims to combine the development of a new port at Lamu, 2,240 kms of oil pipeline from Lamu to South Sudan and road and railway links to the west of Kenya, then into South Sudan as well as plans for road and rail links to Addis Ababa via Moyale. It also involves plans for the construction of an oil refinery, three international airports at Lamu, Isiolo and Lokichoggio, and three ‘resort cities’ along the line of the railway at Lamu, Isiolo and Lake Turkana.

Any of these elements would have a significant impact on Kenyan development; in combination they could transform the whole region. There are further long-term ideas and as the UN Commission on Trade and Development (UNCTAD) reports, the project is eventually intended “to transform regional economies through increased trade, integration and interconnectivity spanning South Sudan and Ethiopia with a first-time land bridge across the middle of Africa from Lamu, all the way to Doula, Cameroon, on the coast of the Atlantic Ocean”.

LAPSSET was launched on March 2, 2012 by the governments of Kenya, South Sudan and Ethiopia, with Presidents Mwai Kibaki and Salva Kiir and Ethiopia’s late Prime Minister Meles Zenawi at a formal ground- breaking ceremony for the new Lamu port. MoU’s for the proposed railway and pipeline were signed between the three governments, and the World Bank funded the feasibility study and design of the transport corridor linking Kenya to Southern Sudan. In April 2013, Kenya established the LAPSSET Development Authority (LDA), to manage implementation of the various project components, and appointed Silvester Kasuku, former Infrastructure Secretary, CEO. Uganda has subsequently become associated with the project.

Progress has been varied with some aspects on schedule, but construction of Lamu Port, the railway, the oil pipeline and oil refinery all delayed. A Chinese company tender has been accepted for the construction of three berths at the new Lamu Port, crucial for importing construction material for other projects, and these should be completed by 2017. It is planned that the port will eventually have thirty-two berths and will be three times the size of Mombasa, and be deep enough to accommodate post-“Panamax” vessels.

Road links are on schedule. The Lamu – Isiolo – Lokichar – Lodwar – Nadapal section to the South Sudan border measures1,256 kms; and the link to Ethiopia from Isiolo (470kms) is under construction; Ethiopia is constructing the road on its side of the border. Work has started on the international airport at Isiolo, which has also been identified as a ‘resort city’. Isiolo is also intended, under Vision 2030, to become an export processing zone, with livestock and related food processing plants, an oil refinery and will become an international tourist center. Suitable sites have been identified at both Isiolo and Lake Turkana for ‘resort centers’. The railway, 1,500 kms standard gauge from Lamu to Isiolo (530kms), Isiolo to Moyale (450kms) and Isiolo to Nakodok (420km), has yet to start.

The oil pipeline depends upon decisions of the South Sudan government. It commissioned a $3million feasibility study to study a possible route. This looked at two options, comparing merged pipelines from the oilfields in Unity State and Upper Nile State at Juba or elsewhere and then taking these to either Djibouti or Lamu. The results have not been made public, but reportedly, the study found both technically viable, so now South Sudan has to make a decision on the basis of cost, terrain and other aspects. The route to Djibouti would be 1,600km, and to Lamu 2,100 km. The longer distance requires more pumping for the oil to reach the export terminal and also more oil to fill the pipeline. Economically, the pipeline to Djibouti through Ethiopia would be cheaper, but both Kenya and Uganda now want a pipeline following the discovery of commercial oil deposits around Lake Albert in Uganda and the discovery of oil in Turkana County in north-western Kenya. Shared petroleum infrastructure makes sense for Kenya and Uganda. At their summit in Mombasa in August this year, the Presidents of Kenya, South Sudan and Uganda directed officials to integrate plans for a South Sudan, Lokichar, Hoima pipeline into the LAPSSET Corridor plans by the end of the year. LAPSSET expects a tender for a pipeline to be issued by the end of the year.

Oil pipes in Bullisa. The LAPSSET corridor/project is one of East Africa’s major infrastructure projects that is expected to trigger economic growth for the countries involved. PHOTO BY ISAAC IMAKA

The issue of a refinery remains open with possible options for Isiolo, Lamu, or in Uganda. No agreement has yet been reached.

Another area of uncertainty remains funding. The costs are currently budgeted at up to $30 billion but are expected to rise. The Kenyan government is funding 25 percent, and public-private partnerships are expected to provide the back-bone of this. The government will invest approximately six per cent of its annual Gross Domestic Product during the first five or more years of development, and then three and four per cent of annual GDP. There are reports that China has offered low-cost loans to finance Lamu and speculation that foreign government agencies and international development banks will be prepared to invest in infrastructure as a humanitarian or development project. There has been international interest from Japan as well as China, and other possibilities for investment and funding include South Korea, Qatar, Brazil and South Africa. USAID and the Grow Africa Investment Forum have been active in supporting agriculture and livestock growth along the corridor.

Concerns have been raised over potential environmental degradation and destruction of ecosystems, and over the possible impact on local populations. The Kenyan government has made it clear historical sites and fragile ecosystems at Lamu will not be affected by construction. LAPSSET’s CEO, Silvester Kasuku, says firmly that environmental issues have been taken into consideration, and notes that government has allocated funds for capacity development, compensation and setting up community steering committees. “Nothing really meaningful will happen unless people agree; there will be continued engagement with communities and dialogue with local leaders.”

In sum, LAPSSET aims to integrate regional transport infrastructure, covering Kenya, Uganda, South Sudan and Ethiopia, and Kenya’s maritime shipping industry. It will relieve Mombasa, one of the most congested ports in Africa. It will provide massive development opportunities for Kenya, employment creation, investment, and economic growth, as well as help to tap resources, introduce high-value investments, new technologies, create stronger domestic labor capacity, reducing unemployment rates and poverty levels. South Sudan and Uganda would also benefit significantly as would Ethiopia. With Ethiopia’s rapidly growing economy, LAPSSET offers access to other major port to handle its increasing transportation demands. The corridor would provide access to Ethiopia’s planned sugarcane developments in the southwest.

LAPSSET is a highly ambitious project requiring considerable foreign investment but it is now attracting substantial interest from multinational companies as oil discoveries are made in the region. The opportunities presented by LAPSSET promise new trade routes with international partners in the Middle East and Asia, greater regional stability arising from a secure export corridor for South Sudan, and the very real potential to lift millions from poverty through jobs and economic infrastructure development.

Culled from A Week in The Horn of Africa, a newsletter that focuses on economic developments in the Horn of Africa region.