The Uganda-Tanzania oil pipeline construction has moved a notch higher after the two countries signed an agreement in a move that will open new opportunities for Mombasa and Dar es Salaam port that are expected to handle huge volumes of construction materials needed.
Up to 12 million tonnes of equipment and materials will need to be imported and delivered to the Lake Albert region in western Uganda where most oil production activity will take place.
The Sh378 billion East African Crude Oil Pipeline from Hoima in western Uganda to the port of Tanga is expected to open up business opportunities to logistics providers in the entire region.
Uganda had initially planned to transport its oil through Kenya, which wanted a joint facility for the product from its own fields in Turkana County. The signing agreement was attended by Tanzania’s President John Magufuli and Uganda’s President Yoweri Museveni, which now appears to have sealed Kenya’s fate.
Being the largest transit market for Mombasa port, all is not lost. According to estimates by logistic experts, up to 350 truckloads of materials need to be moved by road every day through Kenya on the northern road corridor and Tanzania on the southern corridor to deliver the equipment once the work commences.
In 2007, it was estimated that the oil industry would inject anything between US$8billion and US$20 billion over a period of three to five years. This is a huge chunk of money to be pumped into an economy whose annual budget was about US$7.5 billion. Experts said that close to 60% of this money would be spent on logistics or procurement and transportation of materials.
The issue of logistics had been a contentious one because Ugandan operators have been pushing to have some of this money by handling some of the logistics under what they called “local content”. The Uganda Chamber of Mines and Petroleum (UCMP) and the Petroleum Authority of Uganda (PAU) led in the fight for a slice of the cake going to locals.
Uganda’s case is complicated because of its location in the interior without a coastline. A World Bank study titled: “Trading on Time” established that 25% of trade costs is infrastructure related while 75% is due to administrative hurdles and bureaucratic procedures at borders, also noted that these are magnified for land-locked countries, like Uganda, whose goods have to cross several borders.
Uganda accounted for more than a quarter of the business at the port of Mombasa in 2018, pushing the total transit volumes up by 10 per cent from 8.6 million tonnes in 2017 to 9.6 million tonnes.
Uganda remains a key trade partner for Kenya as its exports and imports passing through Mombasa are increasing and during a visit by President Yoweri Museveni in 2018, Kenya offered Uganda a piece of land in Naivasha to put up a dry port for its cargo.
President Kenyatta said his government would set aside land in the second largest town in Nakuru County for Kampala to develop a dry port for its cargo.
Three months after being operational, the Inland Container Depot (ICD) at Naivasha has positioned itself as an essential node; connecting transit road and railway networks, with a marshalling area having the capacity to hold over 700 trucks at any given time. The 45,000-square-meter facility can handle over two million tonnes of cargo annually.
By handling cargo destined for Uganda, Rwanda, South Sudan, Ethiopia, Burundi and the Democratic Republic of Congo, the facility reduces the transit distance for the Member States by more than 570km.
The Naivasha ICD operates under a One Stop Centre (OSC) model where all government agencies clear cargo. The OSC at ICD Naivasha is set to house all regional Revenue Authorities; including Kenya Revenue Authority (KRA), Uganda Revenue Authority (URA), Rwanda Revenue Authority (RRA), Tanzania Revenue Authority (TRA) and “Office Burundais des Recettes” (OBR).
The ICD at Naivasha was commissioned in May 2020 to enhance the throughput at the port of Mombasa, decongest the Port of Mombasa and the ICD in Nairobi, as well as fast clearance of cargo and improved container handling.
