Regional energy schemes will expand in East Africa

Subject East Africa energy cooperation. Significance As East African governments look to further ambitious national development plans, the single greatest barrier they face to achieving their goals is a lack of sufficient energy. To close this gap, major new investments are being made in energy production and transmission infrastructures, including cross-border cooperative projects. Impacts New projects will expand energy availability but are unlikely to keep pace with growing needs. Efforts to reach energy self-sufficiency will help to mitigate future shocks in external energy markets. Regional energy cooperation has the potential to stimulate wider regional social and political cooperation.

Significance Coffee and tea farmers across the region face challenges, with knock-on impacts for the wider economies. The national development plans of most East African governments emphasise economic transformation through high-profile infrastructure spending aimed at accelerating industrialisation. However, for now, these countries remain predominantly agricultural economies. Impacts The proliferation of coffee-house chains is influencing domestic drinking habits, but the effects are mainly limited to urban areas. Investments in freeze-drying facilities may allow producers to penetrate domestic markets more deeply. Climate change may alter the dynamics of disease and pest prevalence.


Significance As in 2020 and 2021, this projected growth will be driven by the ongoing expansion of the oil and gas sector, and related investment and state revenues. These rising revenues will support the government’s ambitious national development plans, which include both increased social and infrastructure spending. Impacts The government will prioritise enhancing the oil and gas investment framework. Investment into joint oil and gas infrastructure with Suriname will benefit the growing oil industry in both countries. The expansionary fiscal policy may lead to a rise in inflation, leading to further calls for wage increases. In the medium term, strong growth in the oil and gas sector could lead to increased climate change activism in the country.


Subject East Africa road construction. Significance In late November, the last mile of pavement linking Kenya and Ethiopia’s national highways was completed at the border post of Moyale. With the completion of this final stretch, metalled roads now link all major East African cities. In recent years, governments across the region have placed an emphasis on road-building projects as a tool for achieving economic growth, improving national and regional integration, and gaining political advantage. Impacts Successful road schemes can bolster the political support of regional leaders. Chinese involvement in vital road construction provides Beijing with leverage over East African governments. The African Development Bank has championed a continent-wide highway; East Africa is leading the way with regional developments. Constructing new roads brings political benefits, but maintenance of existing roads may receive lower priority.


Headline EAST AFRICA: Debt concerns may derail rail timetable


Significance Opposition parties reject the new dates, stating that their main demand is for Nkurunziza to step down before polls take place. The new dates adhere to East African Community (EAC) recommendations to delay elections. While the regional bloc may have more influence over Burundi than other external players, it will struggle to play an effective diplomatic role in ending the political crisis. Impacts A prolonged crisis will worsen a poorly performing economy, which is heavily dependent on foreign support. Belgium, the largest donor, may cut further bilateral support should Nkurunziza secure a third mandate. Economic disruption continues to hurt agricultural supply chains across the country, risking food security.


Significance Several of Africa’s largest alcohol markets are in East Africa. Changing consumer tastes, economic growth and government policies are shaping the landscape of the sector. Many of the world’s largest players in the industry are active in the region. Africa and the Middle East could lead growth in the global beer market in the coming years. Impacts Urbanisation and population growth will offer attractive markets for investment. However, reversals in economic growth among East African states would halt expansion in the sector. South Africa’s growing craft beer market could find other markets in the region. While Kenya’s beer market is attractive, the government’s tax policy will give investors pause.


Significance The announcement comes as neighbouring Ethiopia moves toward completing a rail link with Djibouti to increase access to the Red Sea port. Ethiopia's rail expansion is part of a rail building spree across East Africa -- a region attempting to improve economic linkages. Impacts Rwanda's renewed relationship with Tanzania will strengthen as economic linkages grow. The trucking industry may attempt to disrupt economic activity if the new railways erode their business. Ethiopia's economic ties with Djibouti will grow as the Red Sea port becomes more accessible. Kenya may need to rethink other large-scale development projects following Ugandan and Rwandan preferences for Tanzanian options.


Subject East African oil prospects. Significance Statements by South Sudan’s oil minister that French major Total is poised to sign a new oil exploration agreement have shone a spotlight on the French company’s wider East African strategy and potential key role in regional infrastructure development. Should Total’s mooted interest in South Sudan come to fruition, it would have significant implications for regional energy prospects. Impacts The deal would be a major boost for South Sudan, which seeks new partners to deliver new oil revenues and shore up its collapsing economy. Development of South Lokichar could help revive Kenya’s wider infrastructural aspirations, which had begun to look over-ambitious. Total could catalyse flagging regional cooperation, though it will have to manage expectations of governments and local populations.


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