east africa infrastructure

East Africa Infrastructure Report Q2 2012 Published : March 2012

No. of Pages : 83

Price:US$1175

Kenya BMI View: Kenya's booming construction industry has faced significant headwinds, as rampant inflation - due to a weak shilling, among other factors - has seen building costs soar. Moreover, with the Central Bank of Kenya yet to show the commitment needed to support its beleaguered currency, we expect these price pressures to continue to make life difficult for the sector over the coming quarters, with the increasingly prohibitive cost of building materials and bank loans curbing demand for new developments.

Our downwardly revised forecasts for the construction industry in 2012 reflects the deterioration of the economic picture, with real growth substantially eroded as a result. In light of this, we are now pencilling in real growth of 2.5% for construction industry value in 2012.

Key developments include: • The government has development plans with a total cost of US$22bn that include significant improvements to roads, railways, seaports, airports, water, sanitation and telecommunications.

According to the Government, Kenya is focusing on these in the hope of attracting, accelerating and retaining investors who often complain its dilapidated facilities increase the cost of doing business, rendering Kenya's products uncompetitive in the global market • The construction of the port of Lamu in northern Kenya has not yet begun, yet is already generating much interest. Having been mooted for years, it seems that construction of the port is to begin soon. The new facility at Lamu, which will cost US$5.3bn, will spread over 700 acres of land. The port will serve as the maritime entry point to the Lamu Port-Southern SudanEthiopia Transport (LAPSSET) Corridor, which will include rail, road, oil pipeline and fibre optic cable connections with South Sudan and Ethiopia. The site will also be home to a new international airport. In total, price estimates for the multi-modal project range from US$16bn to US$23bn. A new high voltage transmission line linking Mombasa to Nairobi should provide much greater security of supply, transmitting electricity from the power rich coast to the electricity starved capital. The new 450km high voltage transmission line will have the capacity to handle 1,500MW of electricity, equal to Kenya's current installed capacity. The power line will allow electricity generated on the coast around Mombasa to be transported to Nairobi to feed the capital's electricity consumption. With a new 300MW coal power plant planned to be built around Mombasa it is hoped that the power line will help distribute this new electricity further up country.

• The decision by Kenya's National Environment Management Authority to approve the first phase of the US$5bn Tatu City development is an encouraging sign for the country's residential construction sector as it seeks to meet rapidly rising demand.

Sudan BMI View: Rising political tensions represents a key risk to the economies and infrastructure sector of Sudan and South Sudan. These developments reconfirm our view that, though a lack of data for the separate entities impedes accurate forecasting, the Sudanese economy will endure a sharp recession in 2012. The lack of administrative systems to collect taxes in South Sudan and Sudan looking for new ways to help bolster the economy and foment growth, coupled with the potential disruption to oil output in both states, will accentuate pressures on public finances. As a result, BMI believes subdued government revenues will significantly hinder much-needed public spending on housing and infrastructure for the foreseeable future. Tensions have been raised by Sudan-South Sudan’s still undemarcated border, which cuts through oil fields, as well as mutual allegations that each side backs proxy rebel forces against the other.

On January 25 2012, it was reported that South Sudan closed the taps on more than half its oil output, heightening tensions with neighbouring North Sudan after failing to agree on how to divide oil revenues essential to both economies.’The situation in Sudan and South Sudan has reached a critical point, it has become a major threat to peace and security across the region’, Ban Ki Moon told an African Union summit in the Ethiopian capital.

With official data for both states not yet available, the forecasting environment remains fraught with difficulties. However, for the time being, we also expect Sudanese infrastructure and utility sectors to be negatively affected by the reduced income and the uncertain business environment. As a consequence, we see construction industry value falling by -19.5% in 2012.

Among other key trends in the two countries, we note that: 1.Despite various plans to increase electrification level and include renewables in the energy mix, results have largely yet to materialise in Sudan, where the main power utility, National Electricity Corporation of Sudan (NEC) , is still fully state-owned. Despite having retained the majority of the power infrastructure part of the previously unified state, Sudan existing capacity is dismal.

2.We also highlight that the outlook for the utility sector in now independent South Sudan is still relatively unclear. The Southern Sudan Electricity Corporation (SSEC), established as a subsidiary of the Ministry of Energy and Mining (MEM), is responsible for generation, transmission, distribution and sales of electrical energy to consumers in Juba, Malakal and Wau. The government has, however, yet to release a sector strategy paper and present key projects.

3.South Sudan Vice President, Riek Machar, has promised that the country will mobilise US$500bn in investment for infrastructure development in the next few years. The significant oil potential of the country notwithstanding, we note that the target is highly ambitious, and we take a cautious stance on the matter.

4.Sudan's Finance and Economy Minister Ali Mahmoud and the Arab Fund for Economic and Social Development (AFESD)'s Director General Abdullatif Al-Hamad have signed a loan agreement for the Upper Atbara and Stait dams' hydropower project in Eastern Sudan. Under the terms of the agreement signed on December 28 2011, the AFESD will provide financial assistance of US$111mn. The hydropower project is expected to result in a significant progress in the Sudanese government's measures to conserve water, according to Al-Hamad. Meanwhile, the AFESD has already provided US$400mn for the Merwoe Dam on the Atbara River and 50% funding for the Roseires Dam on the Blue Nile River, according to Sudan's Electricity and Dams Minister, Osama Abdullah. He added that both the dams are scheduled to become operational in May 2012.

East Africa Infrastructure Industry BMI Industry View 5 Kenya .. 5 Sudan .. 6 Tanzania . 7 SWOT Analysis . 9 Kenya Infrastructure Industry SWOT 9 Sudan and South Sudan Infrastructure Industry SWOT ... 10 Tanzania Infrastructure Industry SWOT .. 11 Market Overview . 12 Competitive Landscape . 12 Table: Number Of International Contractors In East Africa ... 12 Building Materials .. 15 Global ... 15 Africa 21 Cement Forecasts . 25 Table: Kenya Cement Production and Consumption Data .. 25 Table: Kenya Cement Production and Consumption Data .. 26 Industry Forecast Scenario ... 27 Industry Forecast Scenario ... 27 Kenya 27 Table: Kenya Construction And Infrastructure Industry Data . 27 Table: Kenya Construction And Infrastructure Industry Data . 27 Construction And Infrastructure Forecast Scenario . 28

Sudan 32 Table: Sudan Construction And Infrastructure Industry Data . 32 Table: Sudan Construction And Infrastructure Industry Data . 32 Construction And Infrastructure Forecast Scenario . 34 Tanzania ... 36 Table: Tanzania Construction And Infrastructure Industry Data 36 Table: Tanzania Construction And Infrastructure Industry Data 37 Construction And Infrastructure Forecast Scenario . 37 Transport Infrastructure Overview ... 41 Major Projects Table – Transport 43 Kenya 43 Key Projects – Kenya - Transport 43 Sudan 46 Key Projects – Transport – Sudan & South Sudan... 46 Tanzania ... 46 Table: Key Projects – Transport - Tanzania 46 Energy And Utilities Overview .. 48 Kenya 51 Tanzania ... 54 Sudan And South Sudan 55 Residential And Non-Residential Construction And Social Infrastructure Overview . 56 Kenya 60 Tanzania ... 60 Risk/Reward Ratings .. 62 Kenya Risk/Reward Ratings . 62 Sudan and South Sudan Risk/Reward Ratings . 63 Tanzania Risk/Reward Ratings 64 Regional Overview 65 Africa Infrastructure Risk/Reward Ratings: High Growth Masks Persistent Volatility . 65 Africa Infrastructure Risk/Rewards Regional Table 66 Global Overview . 71 Global Infrastructure View - Themes And Trends In Infrastructure For 2012 .. 71 Methodology ... 76 Industry Forecasts 76 Infrastructure Risk/Reward Ratings .. 81 Table: Infrastructure Business Environment Indicators .. 82 Table: Number Of International Contractors In East Africa . 12 Table: Kenya Cement Production and Consumption Data . 25 Table: Kenya Cement Production and Consumption Data . 26 Table: Kenya Construction And Infrastructure Industry Data . 27 Table: Kenya Construction And Infrastructure Industry Data . 27 Table: Sudan Construction And Infrastructure Industry Data . 32 Table: Sudan Construction And Infrastructure Industry Data . 32 Table: Tanzania Construction And Infrastructure Industry Data . 36 Table: Tanzania Construction And Infrastructure Industry Data . 37 Table: Infrastructure Business Environment Indicators . 82"