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Ethiopia's SGR plan to Sudan could spell doom for Lamu port project

Ethiopia is keen to develop a SGR to Sudan

In Summary

•It has secured a $1.2 grant from the African Development Bank to finance a feasibility study for construction of a Standard Gauge Railway to Sudan with an extension to Port Sudan on the Red Sea.

•This comes barely a month after the National Treasury suspended new development at Lapsset to save Sh7.25 billion for the Economic Stimulus Package.

An aerial view of the ongoing construction of Lamu Port/COURTESY
An aerial view of the ongoing construction of Lamu Port/COURTESY

Ethiopia has secured a $1.2 million (Sh127.8 million) grant from the African Development Bank (AfDB) for a feasibility study on a planned Standard Gauge Railway (SGR) link to Sudan.

The railway line will have an extension to Port Sudan on the Red Sea.

This comes barely a month after Kenya's National Treasury suspended new development at Lapsset to save Sh7.25 billion, as it mopped up funds towards the government’s Economic Stimulus Package in the wake of Covid-19 pandemic.

 
 

Treasury, led by CS Ukur Yattani, instead says it encourages a public-private partnership approach for the Lapsset.

Delay in the railway link casts a cloud over the Sh2.5 trillion Lamu Port South Sudan-Ethiopia Transport (Lapsset) Corridor project launched almost a decade ago.

While construction of the Lamu Port was commissioned in 2012, during former President Mwai Kibaki’s regime, the project implementation has been slow with the first berths being completed last  August more than seven years later.

The delays have been pegged on lack of political goodwill and budget gaps with Ethiopia having options of Djibouti and Eritrea ports, where there already exists a good road and rail network.

Port Sudan now adds to the list, a move that could leave Kenya stranded with with a highly funded project which has no clients as South Sudan's interest in the project has also waned.

 

According to the Shippers Council of Eastern Africa (SCEA), the end of political and economic wars between Ethiopia and Eritrea following the July 2018 peace accord has created a conducive environment for trade.

“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,” SCEA chief executive Gilbert Langat told the Star in a recent interview.

 
 
 

The grant to the Ethiopian government from the African Development Fund, AfDB's concessional-rate lending arm, will cover 35 per cent of the total estimated $3.4 million (Sh362.1 million )cost of the study.

The remaining funding will be provided by the NEPAD Infrastructure Project Preparation Facility (NEPAD-IPPF) in the form of a $2 million (Sh213,000 million ) grant, and by a contribution of $100,000 (Sh10.7 million) each from the two countries involved.

The two-year, comprehensive feasibility study will assess the proposed project’s technical, economic, environmental and social viability, as well as alternative financing arrangements, including a public-private partnership (PPP).

The railway line will link Addis Ababa in Ethiopia to Khartoum in Sudan, with an extension to Port Sudan on the Red Sea, giving Ethiopia yet another option for its imports and exports.

The route, agreed by both governments, stretches 1,522 kilometres between Addis Ababa and Port Sudan, which is even  longer compared to the 1,279 kilometers distance between Lamu and Addis Ababa.

South Sudan on the other hand is currently comfortable with the existing agreement to use its northern neighbour’s ports, mainly for crude oil exports.

Last year, the two countries extended the oil export deal to 2022. It was originally signed in 2012 and had been extended until December 31, 2019.

According to the document presented to directors of the African Development Fund, “the absence of a regional arterial route linking Ethiopia, Sudan and other countries in the Horn of Africa is a brake on trade, development and regional integration.”

“The feasibility study’s findings will be keenly awaited because its implementation would benefit a large proportion of Ethiopia’s 110 million people and 43 million inhabitants of Sudan, as well as populations in the wider region,” according to communiqué seen by the Star.

Low budgetary allocation and lack of support by partner states has slowed down realisation of the Lapsset corridor, which Kenya is counting on to open up trade with her Northern neighbours.

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 in a Sh71.2 billion contract awarded to China Communication Construction Company.

It is counting on the private sector to support the completion of the planned 32-berths seaport.

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.