Govt talks backup options ahead of Kenya elections

With just under three weeks left before Kenya goes to the polls, there appears to be some ambivalence about what awaits Uganda in the event that the outcome mirrors what transpired in 2007.

Back then, a keenly contested two-horse race between Mwai Kibaki and Raila Odinga climaxed, with either party claiming victory. This triggered chaos that paralysed the northern corridor route from Mombasa port through Malaba used by the hinterland for imports, including petroleum products.

Just as was the case in 2007, the August 9 poll is too close to call, with Mr Odinga, in his fifth crack at the presidency, involved in a two-way battle with Deputy President William Ruto.

The oil shock precipitated by the 2007 poll occupied a couple of months, and steeply spiked prices at the pump.

“Right from January 1, [Uganda] closed its border in Busia to keep out violence, stations of big oil companies (Shell, Caltex, Total, Mobil or Gapco) doubled the price of petrol per litre [from Shs2,400 to Shs6,000], and increased the price of diesel by 10 percent,” Mr Ronan Porhel wrote in a paper titled ‘The Economic Consequences of the Political Crisis.’ He added: “Moreover, this shortage of fuel forced the country to suspend some internal flights. The inflation also affected the main products imported from Kenya, following the depletion of stocks in all shops in the city of Kampala. The price of some products such as soap, increased by 100 percent.”

Once bitten, twice shy

The government of Uganda released a plan on July 13 intended to offer assurances that it won’t be caught unawares this time round. The plan makes clear the government’s intention to ensure a constant, unfettered supply of fuel.

Mr Solomon Muyita, the Energy ministry spokesperson, recently told NTV Uganda, a sister media house to this newspaper, that the government could have as many as three backups if the northern corridor route suffers paralysis.

“We want to ensure that the fuel that we get does not reduce in quantity; because when it does, the retailers base their price hikes upon this,” Mr Muyita said.

According to the Uganda Bureau of Statistics (Ubos), Uganda’s daily fuel consumption stands at five million litres. The vast bulk of this fuel is hauled in using oil tankers that ply the northern corridor route.

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“We are also lucky that Kenya put up a pipeline that reaches Kisumu and Eldoret. It will come in handy in case there is any chaos within parts of Kenya as was the case in 2007,” Mr Muyita said, adding, “In case the whole of Kenya is gripped by chaos, we can either use the central corridor route via Tanzania or transport the fuel via Lake Victoria by barges.”

The water transport option has been entrusted to the care of Mahathi Infra Uganda, who have reportedly assembled a barge with a capacity of 4.5 million litres.

“We have had meetings with the Ministry of Foreign Affairs…in 2007 to 2008 we had not planned enough, but now we have asked for protection of our people,” Mr Stephen Asiimwe, the executive director of Private Sector Foundation Uganda (PSFU), says of the chaos that cost the business community in Uganda.

“In 2007 to 2008, we had not planned because previous elections had been peaceful. But this time, we are asking for protection from the government,” he says.

Central corridor’s lure

While allure of the northern corridor can be captured in the 34.55 million tonnes of cargo it handled in 2017 (as per an April 2022 Northern Corridor Observatory Report), the government believes it has done enough to make the central corridor equally attractive.

When President Samia Suluhu Hassan of Tanzania visited Uganda in May, she dangled a host of incentives to attract Ugandan traders back to the Dar es Salaam port. This included removing trade barriers and improving investment in transport along the central corridor.

President Suluhu secured a bilateral agreement with Uganda to bring down the tab that Uganda-bound cargo trucks from Dar es Salaam through Mutukula picked from $500 (Shs1.9m) per 100km to $10 (Shs38,000). This went into effect at the start of the 2022/2023 financial year.

“Logistically, they have put special infrastructure, which can be used by Ugandan goods. They have added more containers and then they have also repaired the [train] wagons,” Mr Thadeus Musoke Nagenda, the chairperson of Kampala City Traders Association (Kacita), says of the central corridor, adding, “It’s Tanzania that has repaired the Ugandan wagons for transportation of our goods so their trade is simplified. They have extended the Standard Railway Gauge to Mwanza so that we can easily get our goods to Jinja and Port Bell.” 

Mr Nagenda, however, says the government has not done a good job preparing traders in Uganda “for any eventuality.” He added that it has been left to organisations such as Kacita “to sense and forecast and advice our traders to utilise the central corridor.”

Uganda, however, still remains joined at the hip with the Mombasa port. So much that it will catch a cold if Kenya sneezes next month.

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“Despite the option of the central corridor, you find that most traders have already ordered goods via Mombasa. Eighty-five percent of our goods come through Mombasa.  So, by the time the elections are done, the goods might not be here. That’s why we are asking for security to protect those goods that will go through Mombasa during election time,” Mr Asiimwe says.

Other options
Besides the central corridor, the government has also moved to improve its fuel reservoirs. The scorecard on this front, however, remains decidedly mixed. The 30 million-litre fuel storage facility in Jinja remains empty despite having been entrusted to the care of the state-owned Uganda National Oil Company (UNOC).

 “Even if we were to import a lot of fuel, where would we store it?” a Uganda Bureau of Statistics  official, who requested to remain anonymous, asked rhetorically, adding, “The reserves in Jinja are too small and they never repaired them.”

The depot holds reserves equivalent to 4.6 days of fuel stocks given Uganda’s five-million-litres-a-day consumption rate.

Jinja reserves

In 2017, UNOC moved to rehabilitate the reserves when it entered into a joint venture agreement with a number of companies, including One Petroleum (U) and Mbaraki Bulk Terminal. The details were that—under the joint venture—the consortium would stock the reserves to full capacity by July 31, 2017. It would also ensure the facility, at all times, has not less than 40 percent of the storage capacity.

The consortium, according to the agreement, had been anticipated to design and develop a lake transport system at the Jinja Storage Terminal to transport petroleum products over Lake Victoria. The funds were to come from its own pockets, the document further stated.

This year, having poked holes in the agreement, Parliament’s Trade, Tourism, and Industry Committee appeared to upend the entire venture. In fact, it recommended that the joint venture agreement between UNOC and the consortium be terminated. Instead, the recommendation was that essential financial resources be availed to UNOC to acquire fuel for the reserves, as well as develop necessary water transport infrastructure on Lake Victoria.

Mahathi Infra has since figured into the conversation, erecting 14 storage tanks along the shores of Lake Victoria with a capacity of holding 70 million litres of diesel, petrol, aviation fuel, and kerosene.

In an e-mail to Saturday Monitor, UNOC revealed that it plans to import “large stocks of petroleum products” via the central route. UNOC further stated its intentions to “trade, improve the logistical lines by focusing on the use of Lake Victoria.”

The veil was also lifted on plans to “build an additional government storage terminal in Namwabula, Mpigi.”

Djibouti option

Trade experts say the government should even look beyond the central corridor and Lake Victoria.

“…we also have the Djibouti route…Djibouti is like a free zone country: They don’t charge taxes, you can get your goods from China to Djibouti duty-free and then you transport them to Uganda,” Mr Thadeus Musoke Nagenda, the chairperson of Kampala City Traders Association (Kacita),  says, adding, “We have some challenges in transporting goods from Djibouti to Uganda because even Uganda Airlines doesn’t have that route, but we are negotiating and engaging.”

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Ms Pauline Batebe, the Energy ministry Permanent Secretary, recently told the House that the government has ordered eight million litres of fuel to cushion the country against any oil shocks during the Kenyan elections.