Kenya’s long-anticipated Lamu Port receives its first ships
Kenya has received its first ship at the newly completed Lamu port. The arrival of the first container ship at the port was attended by President Uhuru Kenyatta on Thursday (20 May). It is a significant milestone for Kenya, Ethiopia and South Sudan. However, this is the first phase of a much larger infrastructural development project. And in the long time taken between conception and completion, there has been considerable change in the assumptions underpinning their strategic rationale.
Significance – Plans ravaged by time
The Lamu port was idealised in the 1970s but only began to come into fruition in 2014 when the heads of state of Ethiopia, Kenya and South Sudan came together to lay the cornerstone for the project. It forms part of the USD25 billion Lamu Port-South Sudan-Ethiopia-Transport (LAPSSET) Corridor Development project that seeks to build a large infrastructure network between the three countries including ports, roads, railways and pipelines.
The launch on Thursday is the first of three berths that make up the first phase due to be completed this year by China Communications Construction Company at a cost of USD478 million. The entire project including 32 berths is projected to cost USD5 billion. However, neither financing nor construction contracts have yet been secured. Authorities are expecting the next phases to be privately financed.
The rational is more complicated than it once was. East Africa includes some of the fastest growing countries in the region. Agricultural supply chains and hydrocarbon projects could be well served by additional capacity. High export and import lead times for the region are indicative of enduring need. However, in the time since the three heads of state came together, important strategic elements surrounding the Lamu port have changed:
Competition. (a) Djibouti port is the best performing and fastest growing port in Africa. It currently handles 95% of Ethiopia’s international trade and has a current capacity of around 850,000 containers annually. (b) We can also expect Ethiopia to increase its usage of Berbera port in Somaliland – the Addis Ababa government owns a 19% stake in the project alongside DP Ports. Although a road linking Berbera to the Ethiopian border is not yet completed (due by the end of 2021), DP Ports and Ethiopia’s transport ministry have just signed a USD1 billion agreement to upgrade infrastructure over the next decade and expand the port to be able to handle 2 million containers annually. (c) The standard gauge railway (SGR) linking the port of Mombasa and Nairobi has been completed. The financing requirements around that particular project mean that authorities are keen to push as much traffic through Mombasa and on to the SGR as possible – going as far as mandating shippers to use the train and not road haulage.
Oil and gas. South Sudanese oil was intended to be one of the major exports from the port. However, the current context of lower international prices and OPEC quotas disincentivise investment in heavy infrastructure such as pipelines. Additionally, improving relations between Sudan and South Sudan, particularly around oil production is supportive of the continued use of Port Sudan in Sudan. All the more so because South Sudan is also using shipment through Port Sudan as a means of paying off debts with Khartoum.
Security. Lamu has become one of the focal points of the fight against al-Shabaab. The Islamist group regularly carries out attacks in the area on military, civilian and government targets. The port may be seen as a desirable target. There is also a high rate of banditry on the roads linking Lamu to other hubs in the area with cargo also being a potential target.
Outlook – Scaled down visions
The initial reaction to the launch of the port by domestic traders has been mixed. For example, some celebrating not having to ship goods further inland to then reach Mombasa[1] and others decrying the lack of security and a lack of port handling equipment[2]. Meanwhile, the discounts that are being offered to shipping lines to use Lamu signal the need to fight for container traffic – 40% is being taken off stevedoring as well as shore handling services whilst storage has been cut by between 30% and 50% depending on the length of time. The incentives will be in place for at least the first year of operations according to the Kenya Ports Authority.
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[1] The port is much closer for producers of tea, coffee and avocados in the Mount Kenya area
[2] Not all equipment was ready in time for the commissioning so some cranes were moved from Mombasa.
*Image credit: JPNjoro, CC BY-SA
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