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Economy – The Great Lakes Region

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The Great Lakes region, synonymous with unending crises is headed for a promising future if all plans on paper are implemented and war, as a mode of conflict resolution, is relegated to the past.
The region is part of eastern Africa which has the highest economic growth rate in Africa. Most countries in the region such as Rwanda, Burundi, Uganda, Kenya and Tanzania, belong to the East African Community (EAC). The Democratic Republic of Congo is a member of the Southern African Development Community (SADC) while Tanzania belongs to both.
The EAC has massive infrastructure projects in the pipeline that are expected to spur regional economies, unlock landlocked countries and reduce the transport costs for countries like Uganda, Rwanda and Burundi. But, behind the rosy picture dangerously lie competition, mutual suspicion and dangers of war.
There is a trade spat between Kenya and Tanzania, and tension between Tanzania and Rwanda over the Democratic Republic of Congo which could lead to war. There are also conspicuous signs of shifting alliances. Tanzania is shifting its allegiance to SADC while the rest are creating new bridges with Ethiopia and South Sudan.

Regional projects, states isolated

The current Kenyan government is expanding the policy initiated under the presidency of Mwai Kibaki during which big infrastructure projects such as the construction of the Thika highway to include projects of a regional character such as the extension of the railway line to Burundi and an oil pipeline to Rwanda.
doss2Kenya is also building a new port in Lamu which will serve South Sudan and Ethiopia. The port will also play a big role in oil import and export especially when exploitation starts in both Uganda and Kenya. It will also reduce South Sudan’s dependence on Sudan for oil exports. Sudan has consistently threatened to halt oil flow through the common border with negative effects on the South Sudan’s economy which highly depends on oil sale.
The leaders of Uganda, Rwanda and Uganda met in August 2013 in Kampala to inject energy into the EAC integration process. During the talks, they agreed to extend the Kenyan oil pipeline to Rwanda, improve the existing railway line between Mombasa and Kampala and to extend it to Rwanda. Burundi was included in the railway extension project following its participation in the August infrastructure meeting in Mombasa.
Frustration has for some time been building in Uganda, Rwanda and Kenya over the slow EAC integration pace.  
The conspicuous absence of Tanzania and Burundi at the June Kampala meeting, as well as Tanzania’s non-participation in the August Mombasa meeting which was billed as the Infrastructure Summit, have been interpreted as the countries ‘rejection of the integration within the EAC. The Kampala and Mombasa tripartite meetings have given the impression of a divided EAC and Tanzania seen as a reluctant partner and Burundi as a non-committed partner.
doss4Burundi has also been slow in implementing EAC agreements. Its economy is the weakest in the region owing to decades of crises and it cannot cope with the integration rate in other member states. The country has little to sell to other member states but imports a lot of manufactured goods from Kenya and Uganda.
Compared to regional economies, Burundi’s is a dwarf. In 2012, Kenya had a GDP (PPP) of 76.07 billion dollars, Uganda 50.59bn dollars and Rwanda 14.91 bn dollars compared to 5.489 bn for Burundi. Between 2007 and 2008, its trade with other EAC states increased from 86.6m dollars to 94m dollars representing an increase of 8.6 per cent. However, the increase was mainly due to imports which grew from 79.5m dollars to 84.7m dollars in the same period. Consequently, Burundi’s intra-EAC deficit increased from72.5m dollars in 2007 to75.4m dollars in 2008.
Rwanda also suffered the same fate in 2008. The deficit in its trade with EAC partner states increased from 162m dollars to 261.9m dollars due to increased imports. The figure stood at 199.9m dollars in 2007 and rose to 299.8m dollars in 2008 while exporting only goods worth 37.9m dollars in 2007 and the same amount in 2008.
Tanzania, which has put in place non-tariff barriers in its trade with EAC partner states, registered a deficit of 156.5m dollars in its trade with Kenya in 2008.Imports from Kenya were worth 408.2m dollars while exports were 248.8 m dollars. Most Kenyan exports consisted of electrical machinery and, textiles. The Burundian education system also suffered from decades of war and Burundians are less skilled than nationals of other EAC states which makes them less competitive in the regional job market. There is fear in Bujumbura that a quick integration process, which will ultimately open up its small job market, may worsen the already high unemployment rate.  
At the June Kampala meeting, presidents Museveni, Kagame and Uhuru Kenyatta. Each of the three countries was given different roles in the integration process.

Planned Projects

Rwanda will oversee matters related to customs, single tourist visa and the EAC identity card to facilitate movement of people within the region. Uganda will take care of the political federation and railway development projects while Kenya will be responsible for development of the oil pipeline, electricity generation and distribution.
doss15In August, presidents Kenyatta, Museveni and Kagame commissioned a modern 66.7 m dollar berth at the Kenyan port of Mombasa. This will add 200-standard-size containers per year to the port’s capacity. It is hoped that the additional capacity will satisfy landlocked neighbours who had already started to shift their trade activities to Dar es Salaam port. The Mombasa port was already operating beyond capacity, thus could not handle the increasing regional trade.  
Tanzania which also handles a large amount of imports and exports from Uganda, Rwanda, Burundi, the DRCongo, Malawi and Zambia has plans to improve its infrastructures to attract the same customers that Kenya is targeting.
In March, Tanzania signed an agreement with a Chinese company to build a new port in Bagamoyo, about 75km north of the capital, Dar es Salaam. On completion, the port and other connected infrastructures such as an export processing zone, a town with road and rail infrastructure, an export processing zone, will cost 11 bn dollars.
The Bagamoyo port, which is set to become the largest on the east African coast, will handle 20 million standard-size containers per year. Currently, the Dar es Salaam and Mombasa ports combined handle 1.1 million containers per year.
Tdoss3anzania is also planning to extend its oil pipeline and railway line to Burundi, Rwanda, Uganda and the DRCongo. The Dar es Salaam-Kigali route is 500 km shorter than the Mombasa-Kampala-Kigali route. In addition 60-70 per cent of Rwanda’s imports and exports pass through Dar es Salaam. An even higher percentage of Burundi’s imports-exports pass through the same port. However, Kenya seems ahead of Tanzania in the implementation of railway projects. It has already acquired a 3.75 bn dollar soft loan from China for the construction of the section of the railway line on its territory. Construction work is slated to begin in November this year and end in 2018.
The plan to build railway lines in the region is dictated by the need to reduce transport costs. During the colonial and early post-independence period, Burundi imports were brought to the Tanzanian town of Kigoma by train, loaded on ships and transported to Bujumbura. That mode of transport is no longer economically viable. Currently, trucks are the main mode of transport of goods. However, with increasing petrol prices, countries are exploring the use of railway transport as a cheaper alternative.
Both Kenya and Tanzania are also expanding their airports. Kenya is about to finish building a fourth terminal at the Jomo Kenyatta International Airport while Tanzania is expanding its Julius Nyerere International airport in Dar es Salaam through Dutch funding. Of great interest to Burundi and Rwanda is the construction of a hydroelectric power station on the Rusumo falls. The falls are on the Kagera River which demarcates the border between Rwanda and Tanzania. The power station will be financed by the World Bank at a cost of 340 m dollars and will generate 80 megawatt. The electricity will be shared equally between the three states and the project’s overall cost is 468.60 m dollars. Only four per cent of Burundians are connected to electric grid compared to 13 and 15 per cent for Rwanda and Tanzania respectively. (C.B.)

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