Ideas & Debate

Resources that EAC economies ought to focus on for notable achievements

sgr

The region will also benefit from transport infrastructure projects that are either planned or under construction, including Kenya’s standard gauge railway. PHOTO | FILE

Individual EAC economies are developing at varying speeds guided mostly by their resource based opportunities.

It is the development of extractive resources, agricultural and industrial capacities that are mostly going to shape the economic direction and pace of each member country.

The recent 2016 EAC budgets gave an indication of where each country is focused. I will attempt a snap-shot productive sector analysis of each country 10 years from now.

It should be appreciated that, it is the investment attractiveness that shall differentiate the pace and quantum of individual country socio-economic transformation. And the proof of attractiveness is the streams of FDI flowing into the economy.

In addition to GDP, the other critical success factor is the number of sustainable jobs created directly or indirectly through value addition.

The regional development game changers, with clear early results, are definitely the extractive sectors.

In respect of established hydrocarbon discoveries and planned development, it is Tanzania with its large natural gas deposits that is bound to maintain leadership in oil and gas commercialisation.

Down the line, Uganda takes the second slot followed by Kenya .The varying amounts of oil and gas FDI flowing into these countries are a confirmation of this ranking.

In addition to dollar earnings from oil and gas exports it is the local value addition that will provide further differentiation. In this respect, the natural gas resources in Tanzania provide a huge potential for local industrialisation.

Natural gas is both a raw material and a source of cheap energy for petrochemicals (fertilisers, diverse plastics, paints, industrial alcohols...) manufacture.

In 10 years I foresee a petrochemical industrial hub at Dar mainly focused on both the EAC and SADC markets. In Addition, the LPG (cooking gas) which is a by-product of natural gas processing will most likely make Tanzania a preferred source of LPG imports for the EAC region.

In Uganda the game changing value addition industry shall be the planned local crude oil refining. This shall grant Uganda a virtual command of petroleum products supply to the Great Lakes countries which may touch Western Kenya and Northern Tanzania. Refining and products distribution have a high capacity for local jobs generation.

The existing large quantum and variety of minerals already under exploitation, and the scale of ongoing discoveries will maintain Tanzania leadership in the mining sector.

In Africa, the country is ranked second to South Africa in minerals potential. Mining in Tanzania is a mature sector with tested regulatory and fiscal systems.

Kenya and Uganda are just starting to give priority to and organise their mining potential with Kenya recently committing a countrywide baseline geological survey to establish minerals potential.

Turning to agriculture, it is an open page for all the EAC countries which have previously not sufficiently prioritised this sector.

However, in respect of large-scale commercial agriculture, Tanzania with its large tracts of fertile and mostly semi-idle land and prospects for low cost local fertiliser supply has the potential to develop into a regional breadbasket in the next decade.

On the other hand, Uganda has the best conditions for agricultural productivity while Kenya has existing robust agriculture supporting systems.

In a decade, the two countries will likely take up leadership in agricultural value addition for offshore exports chiefly through application of technology and harnessing of global markets.

Transport infrastructure facilitates productive sectors among others, and in the region many projects are either planned or under construction. Oil pipelines are essentially “buried assets” from point A to point B with routing mostly determined by the least cost tariffs.

The regional crude oil export routes are already mapped with ongoing plans for implementation.

However, it is the railways and highways that dramatically transform the economic faces of nations.

Kenya has a head start with modern railways development with a Standard Gauge Railway (SGR) from Mombasa already at an advanced stage of construction.

At all costs, Kenya will need to ensure that the SGR at least reaches Kampala for maximum regional value and competitiveness.

If the Mombasa SGR reaches Kampala, I do not foresee investors accepting to develop another competing parallel SGR from Tanzania as it would likely fail to give a good return.

Tanzania will most likely prioritise and modernize the existing TAZARA line to Zambia to service the SADC markets. However it is likely that first class highway linkages shall be developed from Dar direct to Kigali, and also to Kampala via Bukoba.

Above all, it the prioritisation and development of human resource and enterprise capacities in each country that shall determine the level of socio-economic benefits from the ongoing resource commercialisation.

Regulatory and fiscal systems that are friendly to investments and to local participation shall also ensure maximum value from resources.

Mr Wachira works for Petroleum Focus Consultants. Email:[email protected]