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Kenya: Industrial Might Faces Formidable Challenge
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Business Daily (Nairobi)
COLUMN
25 March 2008
Posted to the web 26 March 2008
David Mataen
Nairobi
Owen Falls hydroelectric dam near the city of Jinja in Uganda is more than just an electric phenomenon. Ever since its commissioning in 1954, it has been the epitome of Ugandan industry if not East Africa's.
Being the first hydro power project to be established in East Africa, and because of a virtually non-existent transmission grid, Jinja by dint of proximity emerged as East Africa's first major industrial heartland.
That was then. Ever since, nothing much has been going on in either Jinja or Uganda worthy of industrial note.
The Owen Falls is running 20 years behind decommissioning, and the decay on the turbines is more of an eyesore than the glitzy industrial spectacle it was in the 50's.
Not a single hydro-power project investment has been made in the country in 50 years, and Owen Falls' capacity, which was 138mw, has gone from the sublime to the ridiculous, from gratifyingly excessive to woefully inadequate.
The country today faces one of the worst power deficiencies in Africa, a cynical irony indeed given the vast fresh water resources Uganda boasts.
The country relies inordinately on thermal power and imports from the neighbourhood for her electric needs.
Few doubt that Uganda is Kenya's second largest trading partner after Britain; and actually the single largest in Africa. What many will not have appreciated fully is why that is so.
Being a vital sea-link is certainly one of them. In fact the recent political crisis in Kenya proved this fact beyond reasonable doubt. Uganda almost shut down completely and even emerged more bruised by the blockade of transport networks more than Kenya herself.
Unknown to many though, is the fact that the electric deficiency and gaping differential in the costs of power is a fundamental pillar in Kenya's manufacturing and economic dominance over Uganda.
I am sad to report that this is bound to change soon. Kenya's industrial and manufacturing competitive advantage faces the danger of being overturned.
Reason? In a word, Bujagali. A hydro electric power project with a capacity of 256 megawatts being developed on the Nile due for completion next year.
Certainly this plant alone will not suddenly bring power to every factory, office or dwelling in Uganda, but it will at once inject into its national grid more power than is currently being produced.
What will be the major effects of this event on Uganda's industrial base? A more reliable power supply. More than a cheaper source of power, regular and reliable power supply is what industries worry about most.
Because it affects the quality of their products, and the operation and lifespan of their equipment, as well as the amount of electricity consumed. Some plants take two to three hours to warm up again after a brown out or black out.
Most industries catering to the Ugandan market preferred to locate in Kenya because of the scourge of unceasing, perilous power cuts. New industries can now be connected faster.
A long list of industries waiting to connect to the power grid has been a major discouragement to new industries seeking to operate in Uganda. Kenya again remained the beneficiary as a proximate and easy fallback.
With new and vast power, this backlog of connections will be eliminated in short order and new arrivals will be able to go straight into the country on the back of assured connection to power.
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Power will be cheaper as dependence shift once again to hydro-based electricity which is the base power source. The underlying cost of power in the economy will come down drastically, adding to its economic and manufacturing competitiveness in the region.
Kenya's manufacturing base ought to take note and re-align so as not to lose from the shifting sands of East Africa's industrial dynamics.
Mataen is Corporate Finance director, Faida Investment Bank.
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