FUNDING HITCH

Lapsset hit by budget cuts, state saves Sh7.2bn

Government has suspended new development on the project

In Summary

• Treasury says it encourages a public-private partnership approach for the Lapsset.

• While construction of the first three berths at Lamu Port commenced in 2012, after commissioning of the project by former President Mwai Kibaki, the project's construction has been slow.

Lamu youth working at the Lapsset project ./CHETI PRAXIDES
Lamu youth working at the Lapsset project ./CHETI PRAXIDES
Image: CHETI PRAXIDES

The Sh2.5 trillion Lamu Port-Southern Sudan-Ethiopia Transport Corridor is among the biggest casualties in government budget cuts. 

To mitigate the effects of Covid-19, the state has sought Sh95.3 billion from its departments.

The National Treasury has suspended new development at Lapsset to save Sh7.25 billion, according to the Economic Stimulus Package by the state.

Treasury says it encourages a public-private partnership approach for the Lapsset.

State departments and projects have seen their budgets cut with a Sh90 billion kitty being fronted to support SMEs, purchase of milk, cereals and different sectors among them youth and education.

The latest developments leave the Lapsset project in limbo with its completion timelines likely to drag further.

While construction of the first three berths at Lamu Port commenced in 2012, after commissioning of the project by former President Mwai Kibaki, the project implementation has been slow.

This is mainly on low budgetary allocation and lack of support by partner states of Ethiopia and South Sudan.

Ethiopia has not been very keen on Lamu as it has options of Djibouti and Eritrea ports, where there already exist a good road and rail network.

 

According to the shippers' council, the end of political and economic wars between Ethiopia and Eritrea following the July 2018 peace has created a conducive environment for trade.

South Sudan has also been reluctant to support the development of the project.

Let’s not count on these countries. If today South Sudan and Sudan go back to the old days and allow passage of goods through Port Sudan, it will impact Lamu Port. Ethiopia the same with Eritrea and Djibouti,” Shippers Council of East Africa chief executive Gilbert Langat told the Star.

The seaport is among key projects lined up in the Lapsset Corridor aimed at easing the movement of goods and reducing congestion at the port of Mombasa.

The Treasury has allocated Sh21 billion in two tranches of Sh10 billion and Sh11 billion to date.

This is despite the magnitude of the project which is also planned to have a railway line, pipeline and highway connecting the three countries.

The project will also see the construction of an oil refinery, three airports including the expansion of Manda airstrip in Lamu and construction of resort cities in Lamu, Isiolo and Lake Turkana shores.

The Kenyan government is putting up the first three berths and counting on the private sector to support completion of the planned 32-berths seaport.

The first three berths are being developed by China Communication Construction Company for Sh71.2 billion. The first berth was completed on August 6 last year.

Lapsset Development Authority recently confirmed the remaining two berths are at an advanced stage with the actual completion of the project at above 76 per cent.

The delays facing the wider Lapsset project saw state officials meet in Mombasa in January. The three governments renewed their commitment to the corridor.

Kenya’s Transport Cabinet Secretary James Macharia, Ethiopian Ambassador to Kenya Meles Alam and South Sudan’s Undersecretary in the Ministry of Transport Captain David Martin signed an MoU to signify the three states’ commitment in supporting the revitalisation of the project.

Lapsset authority recently confirmed to the Star operationalisation process for the port has begun with making it compliant with International Ship and Port Facility Security Code (ISPS Code) and Marpol regulation. 

Continuous coordination with shipping lines is being done,” Lapsset secretariat told the Star.

The port will however not make economical sense if there is lack of a good road and rail network connecting the three states, shippers say.

Our proposal is we look at Lamu in-terms of minerals, petroleum export and transhipment cargo. We also need to create an industrial zone with proximity to the port,” Langat said in a recent interview with the Star.

Currently, Kenya transships through the Port of Salalah, the largest port in Oman.