How a handshake in the horn of Africa has left Kenya clinging on the short end of the stick

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BY EMAKA MAYAKA GEKARA

Flights from Addis Ababa to Asmara, the Eritrean capital, are overbooked, according to Ethiopian ambassador to Kenya Dina Mufti.

This is thanks to the July 9 historic handshake between Ethiopian Prime Minister Abiy Ahmed and Eritrean President Isaias Afwerki, a game changer that could potentially alter the tide of trade in the Horn of Africa and further embolden Addis Ababa’s desire to pull out of the grand infrastructural development programmes under the Lamu Port Southern Sudan-Ethiopia Transport (Lapsset) Corridor.

Launched in 2012 by President Mwai Kibaki, former Ethiopian Prime Minister Meles Zenawi and South Sudan leader Salva Kiir, the Sh2.7 trillion Lapsset is the most ambitious and expensive development infrastructure undertaking in Eastern Africa region, comprising 70 construction projects spread across four countries.

Project was envisioned as partnership between the countries. It is also a key pillar of Kenya’s growth plan, Vision 2030 and includes the construction of a standard gauge railway, road and oil pipeline from the Lamu port traversing Kenya, Ethiopia and South Sudan.

The pipeline was supposed to be extended to the oil fields of landlocked Uganda.

In an attempt which would open up the economic potential of Kenya’s northern frontier, the government planned to construct resort cities in Lamu, Isiolo and Turkana, as well as airports and industrial districts at these three stops.

The main reason for Ethiopia’s involvement in Lapset was to provide an alternative to the port of Djibouti, having lost Asmara.

Ethiopia became landlocked after Eritrea, which comprised its entire coastline, seceded in 1993.

Because of its hostility with Eritrea, Ethiopia has depended on ports in neighbouring Djibouti, which handle nearly 95% of its imports.

Second, Addis Ababa has wanted to use Lapsset infrastructure to tap into the petroleum resources in northern Uganda and on South Sudan, which don’t seem forthcoming.

For its part, Kenya was keen to service Ethiopia’s 106 million population by providing an exit for its exports. Ethiopia’s economic growth has been phenomenal. It is the only country, other than China, which has been recording more than 10% GDP growth per annum for the past decade.

And with Uganda set to export oil in 2020, Kenya was hoping that petroleum could be routed through a pipeline linking Kabaale to the Lamu port.

However, the partnership has long run into headwinds, with key partners pulling out.

In a dramatic turn of events, Ethiopia abandoned Kenya and struck a deal with Djibouti for a construction of the first electrified cross-border railway line in Africa. The railway that links Ethiopia’s capital, Addis Ababa, to the Red Sea port of Djibouti – a stretch of more than 750 kilometres, was launched in 2016.

Uganda, too, pulled out of the pipeline partnership and resolved to route its oil exports through Tanzania after a report found the country was a cheaper and more secure option.

“Uganda firmly concludes that Kabaale-Tanga (Tanzania) route is the least cost route for the transportation of crude oil from the region to the east African coast,” said President Yoweri Museveni.

There was another blow awaiting Kenya. Addis Ababa, again, signed a second agreement with Djibouti for the construction of a 550-kilometre pipeline to transport diesel, gasoline and jet fuel from port access in Djibouti to Ethiopia.

The 550km long, 20mm-diameter steel Horn of Africa Pipeline has the capacity to transport 240,000 barrels of fuel a day. It will transport refined oil products from Damerjog in Djibouti to a storage facility at Awash in central Ethiopia.

The project includes an import facility and 950,000 barrels of buffer storage tank farm, as well as pump and monitoring stations at Damerjog, connected to a storage terminal and truck loading facility in Awash through the pipeline.

The pipeline is expected to increase the energy security and reduce the carbon emission impact of road-based transportation systems.

It will also improve the fuel import capacities and efficiencies and provide cheapest option for petroleum transportation for both countries.

The Kampala-Addis pullout in the railway and pipeline deal is largely attributable to corruption and crony capitalism that increases the cost of projects in Kenya. The inflated cost of the standard gauge railway (SGR) is a much-cited case.

“I can say that as a country, we have minimised corruption in such projects which brings down the costs drastically,” ambassador Mufti said in a past interview when probed on the low cost of their railway.

Now, with Ethiopia’s investment in the railway and pipeline, does it sustain the motivation to stay in Lapsset?

The Asmara handshake partly provides the answer.

Dr Mukisa Kituyi, the secretary-general of the United Nations Conference on Trade and Development, thinks there is logic in Ethiopia’s lack of enthusiasm for Lapsset.

“With substantial resources spent on building an electrified standard gauge railway and pipeline to Djibouti, a substantial chunk of the justification for Lapset has disappeared,” he argues.

“I support the idea of more ports but even if it were to happen, the longer Kenyan route will not be Ethiopia’s first choice,” says Dr Kituyi.

During the historic Asmara trip – Ethiopian leader has landed there in nearly 20 years – Ahmed Afwerki signed a deal declaring an end to the state of war between the two countries. The deal was received with palpable excitement both in Asmara and Ethiopia. And arguably one of the biggest dividend for Ethiopia from the peace agreement helps resolve its major challenge: That of access to the sea.

Ethiopia will now use Eritrea’s largely underutilised ports of Massawa and Assab – its natural outlet to the Red sea.

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Addis has indicated that reopening of two critical roads leading to the ports of Assab in Eritrea’s south and Massawa in the north will be critical. Analysts are in agreement that the move will dramatically boost Ethiopia’s exports, mainly coffee and tea.

This raises the issue of distance and costs. The Lamu-Addis Port will be obviously longer.

Besides, the Asmara route will be cheaper as it   would only require rehabilitation or expansion of existing infrastructure. 

A former Ethiopian province, Eritrea seceded in 1993 after years of bloody conflict. Relations deteriorated further with the outbreak of war between 1998-2000, claiming more than 80,000 people.

“With the Asmara deal, Ethiopia is no longer landlocked,” says market analyst Eliud Mwamu. “With the Eritrean ports at their disposal, they are unlikely to invest in the Lapset projects. They have peace and the ports,” he noted.

The Ethiopian Premier said his government was keen to implement a deal restoring relations with its former enemy to “make up for lost opportunities.” 

So what are the other dividends of the peace deal? 

Besides peace and stability, the agreement will see free movement of people between the two countries, increase the volume of intra-regional trade, and create jobs and expansion of infrastructure.

Access to the ports is also likely to open up the door to increased employment on both sides of the Ethiopia/Eritrea border and increased economic activities benefiting their mutual economic interests across each other’s borders.

Ethiopian Airlines, the largest and most profitable in Africa, has declared that it now makes daily flights between Addis and Asmara, and that it will purchase a 20% stake in Eritrea’s national carrier.

Ethiopian and Eritrean passport holders would be able to travel to the other country and obtain visas on arrival.

Resuming of ties began in June after Abiy, now largely seen as a breath of fresh air in the Horn announced that Ethiopia would implement the UN-mediated Algiers peace agreement signed by the two countries in December 2000 to end the war. The premier said Addis will withdraw its troops and hand back the disputed border territory to Eritrea. Aferweki has toured Addis Ababa in reciprocation and the two nations have re-opened their embassies.

Eritrea, too, stands to benefit through the revenues from Ethiopian trade through its ports, but also the potential of very substantial potash resources on the Ethiopia-Eritrea border.

Eritrean industries could service the growing markets of its populous neighbour.

“Eritrea is going to gain a lot, because it will be able to follow Ethiopia’s economic momentum,” says Marc Lavergne of the National Centre for Scientific Research in Paris.

Woldemariam argues that settling the dispute with Ethiopia could also spur foreign investors to consider Eritrea free of the fear of incurring Addis Ababa’s wrath.

“It is likely that improving relations between Ethiopia and Eritrea will further solidify the Eritrean state’s rehabilitation on the international scene,” he adds.

Peace between Ethiopia and Eritrea will bring an end to their proxy wars in the Horn while helping to facilitate economic integration, argues Prof Yohannes Gedamu of Georgia Gwinnett College’s School of Liberal Arts.

“I also expect the poor relations between Eritrea and Djibouti to improve in the near future,” he offers.

All this is not good music to the ears of Kenya’s economy which runs the risk of funding long-deserted, expensive projects by former partners, and whose viability has immensely depreciated.