17 January 2013

Uganda: Alternative Sea Route Project Kicks Off

The resettlement process of people living in the proposed Bukasa port has begun, a development seen as a giant step in the long road to establishing internal transport infrastructure projects that would ease doing business.

On January 10, the Ministry of Works put out a notice asking for bidders to apply for consultancy services for the resettlement action plan for the proposed port. The ministry also served another notice for services to study the environmental and social impact assessment for the proposed port.

According to sources, funds are available for both consultancy services. In December, the works and transport minister, Abraham Byandala, disclosed that developing the port requires $500m. Uganda signed an MoU with Tanzania to develop Tanga port and the Arusha-Musoma-Bukasa link way, according to Byandala.

In Uganda, the ministry asked that 500 hectares be secured, especially around Bukasa outside Kampala, and also assure locals that they will be compensated for their land.

The MoU expired in June, but Byandala says substantial study was done, especially on the Tanzania side but also in Uganda on the viability of the projects.

The development will come as good news to the long suffering trading community of Uganda, who have had to bear with the unreliability of Mombasa port, the most used coastal facility in East Africa. It also presents a giant leap in the quest to develop an alternative route away from Mombasa and create and connect reliable and cheaper inland alternatives that connect to Dar es Salaam in Tanzania. It is a beginning of preparing for any possible interruptions that may arise from the March 2013 Kenya general elections.

According to a timeline provided by the works ministry, the signing of the contracts should be before March 2013, thus work should commence in the first quarter of the year. Byandala and the ministry spokesperson were not available to clarify how much money had been put aside for this stage of the project.

The East African Community faces daunting infrastructure challenges that have been at the top of discussions in almost all regional forums, including presidential summits. While there are initiatives ongoing, analysts say the pace of infrastructure development is not matching the rate of growth of trade. Key access routes like the ports of Dar es Salaam and Mombasa that are critical to maritime business are often overwhelmed by crowding and growing demand.

A Uganda National Roads Authority (UNRA) 2011 report indicates that out of 1,873km of the northern corridor routes, a survey indicates that only 51.6% are in good condition, 23.8% are in fair condition, while 8.9% is in bad state. The Kampala-Malaba road has however improved.

The Northern Corridor Transit Transport Coordination Authority (TTCA-NC) that oversees the route linking the land-locked states of Uganda, Rwanda, Burundi, DRC and South Sudan with Mombasa still battles with the major obstacles that slow movement of trade and services.

Transport costs, according to a report from the TTCA-NC, have reduced considerably in all the destinations with Juba, Southern Sudan, recording the highest decrease-from $9800 to $6,250, a distance of 1,750km. Bujumbura is the most expensive destination, costing $7,000 to transport a 20-feet or 40-feet container.

The biggest victims of an inefficient transport network are the hinterland states. Kenya accounts for 68.5% of imports through Mombasa, followed by Uganda at 22.5% and DRC at 2.18%, Rwanda at 1.34% and Burundi at 0.01%.

As part of the wider scheme, Uganda is eyeing part of the $20b cash tranche announced by the Chinese government last year to revamp its critical infrastructure, including kick starting works on new ports and a standard gauge railway line.

According to Byandala, Uganda has been in discussion with China Harbour Construction Company, and looking to sign a Memorandum of Understanding (MoU) with the Chinese firm for the railway works from Malaba-Kampala and Tororo-Packwach line.

The company, according to Byandala, has another MoU with Uganda People's Defence Force (UPDF), in which they are training the forces on rail building.

In an interview, Byandala said a Ugandan technical team was scheduled to leave for China early December to do due diligence, especially on the Chinese firm, to ascertain whether they have done railway works before. "When my team comes back, I will ask for solo sourcing, I want to use the relationship they (Chinese) have with UPDF and the possible experience of harbour building to do solo sourcing," said Byandala.

China pledged $20b at the Fifth Ministerial Conference of the Forum on China-Africa Cooperation in Beijing in July 2012. Part of this money is what the Government is targeting to revamp critical infrastructure that are behind schedule because of funding pressures.

"We want to access the $20b China put up for sub Saharan Africa. The Uganda government would finance the project by accessing the loan. Malaba-Kampala would require $2b, Packwach-Nimule-$3b, while Bukasa would require $500m," said Byandala. While Chinese cash offers have drawn praise from several African states as a new form of relationship as opposed to the exploitative relationship with the west, there have also been criticisms.

South African president Jacob Zuma recently said that Africa's commitment to China's development has been demonstrated by supply of raw materials, other products and technology transfer.

This trade pattern, according to Zuma, is unsustainable in the long term. He cautions that Africa's past economic experience with Europe dictates a need to be cautious when entering into partnerships with other economies.

The chep rail, water transport option

Road transport, the most widely used mode of transport in EAC accounts for about 95% of the volume of cargo transported in the region. But it is also the most expensive mode of transport.

Rail transport on the other hand costs about sh134 ($0.05) per tonne of a kilometre, compared with sh241 ($0.09) per tonne-km for road transport- almost twice the cost.

Despite the cost advantage of rail, study estimates are that just about 5% of Northern Corridor traffic moves by rail due to the poor rail network, delays, breakdowns, and service disruptions that make rail transport more unpredictable than roadways.

Thus developing and improving inland port facilities and Mombasa as well as accessing cheaper alternative route through Dar es salaam would reduce average freight costs by sh107,080 ($40.25) per tonne in the Northern Corridor and by sh66,732 ($24.90) per tonne in the Central Corridor.

As a result, it is estimated that EAC trade would increase on average by 15% overall, with a gain of 25% in the Central Corridor through Dar es Salaam. The evidence supporting this cheaper rail, water as well as alternative transport routes are many and are a result of many studies over the years. What is missing, however, is the political commitment and applied urgency to realise them.

For instance, the Kenya general elections are about two months away and discussions on tax breaks to encourage traders using Dar es Salaam have stalled while refurbishing the fuel reservoir in Jinja is not clear that would handle any unforeseen post-election chaos.

A report from TradeMark, a trade facilitating agency says until the underlying causes of these high costs of transport are addressed African countries will remain high-cost producers "with no major direct investments taking place in non-mineral sectors, restricted economic growth opportunities and slow progress made in poverty alleviation".

The Port of Mombasa is the origin of the Northern Corridor, and demand for its services runs well above capacity. Until recently, ships waited an average 2.3 days before coming into the port, and containerised vessels spent 3.1 days on average at berth.

The alternative route for cargo is the Mutukula-Dar es Salaam route, called the central corridor which is another additional 600km from Dar es Salaam.

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