7 January 2013

East Africa: Experts Predict Bleak EAC Outlook Over Bad Infrastructure

Even as they said that East Africa's growth outlook is positive, economists meeting at a recent regional economic summit in Kigali agreed that poor infrastructure could derail growth.

"East Africa's ports are congested, road and rail networks are in a poor state and both importing and exporting goods involves unnecessary ordeals. If no specific measures are implemented to reduce the time and hassle associated with moving goods across borders, then the economic growth of EAC economies will be slowed." That was their verdict.

East Africa, they said, has potential to become one of the world's fastest growing markets if it can drive through reforms in energy, services, manufacturing, tourism, mining and construction.

And those efforts must be centered on energy and infrastructure, "the movers of the economy."

"Without addressing major infrastructure and trade facilitation constraints, the economic growth of East Africa could be compromised over the next decade," warned Frank Matsaert, Chief Executive Officer of Trademark East Africa.

Recent discoveries of offshore gas in Tanzania and oil in Uganda, the region's prospects look better than ever yet that is no guarantee if some of the glaring gaps are not filled.

Clare Akamanzi, the chief executive officer of Rwanda Development Board (RDB) said Rwanda understands the significance of a developed infrastructure and energy as seen through the number of projects being implemented.

Rwanda plans to invest $4.7billion on electricity aiming to produce at least 1,000 MW by 2017--enough to power industrial growth and reduce the unit cost.

Domestic demand is expected to account for 60% at peak time, while cross-border mining projects are expected to account for 20% with sub regional electricity markets consuming the remaining 20%.

To ready for this future, Rwanda is involved in some inter-state investments within the region including the Rusizi III Hydro power project on Rusizi River being developed by Rwanda, Burundi and DRC. With the feasibility study concluded, the project will finally commence this year at an estimated cost of $565million. Upon conclusion its planned 145 mega watts will be shared equally by three countries.

There's also the US$400 million Rusumo Falls hydro project an undertaking by Rwanda, Burundi and Tanzania whose construction is also set to start this year. It will generate around 90MW.

Non-tariff barriers

There are reports that NTBs on major routes are remerging even after efforts in the past had proven to be working. Enos Bukuku, the EAC deputy secretary general in charge of Planning and Infrastructure, however refutes this.

"NTB's are being reduced, not increased; we have been able to reduce roadblocks from 30 to 15. Bear with us; we are putting in much effort to see that these trade barriers are eliminated," he said.

"While we can't eliminate these barriers in one day, quite a number of things have been improved, it is work in progress and much is being done to eliminate these barriers to reach a stage when there will be no roadblocks anymore," ihe added.

The EAC Partner States agreed to remove roadblocks and replace them with electronic cargo tracking systems and police patrols by December 2012.

During an NTB dedicated session held in Nairobi recently, it was decided that transit vehicles will be weighed twice from the port of entry and port of exit for Kenya, Rwanda, Uganda and Burundi while Tanzania awaits a study on the establishment of the weighbridges.

"We have NTBs monitory committee in Tanzania and we are working closely with other committees from partner countries and I am quite sure these trade barriers are going to be eliminated soon," said the prime minster of Tanzania.

To deal with ports, the regional partners are negotiating to regionalize the ports to improve their efficiency but progress is slow with national interests overriding regional aspirations.

Canarail, a Canadian consultancy firm recently concluded a feasibility study of the East African Railway line project that will connect Rwanda- Tanzania and Burundi project at a cost about $5.2 billion.

"The final study will be complete in February and the remaining big challenge will be for the governments to solicit funds for the construction to commence," said Donald Gillstrom, Canalrail's senior vice president and chief engineer.

"There is no other way for Rwanda to cut the price for the goods without this project. Air transport has its limitations especially the high transportation costs and the railway line would be more favorable to traders," said Alex Nzahabwanimana the infrastructure minister.

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