Kenya oil facilities face huge losses as Uganda shifts to Dar port

Kenya's economy is facing a significant blow as it has lost $200 million worth of exports to its largest regional market, Uganda, since October 2023. The shift in Uganda's oil imports to Tanzania poses a threat of $200 million in annual losses for Kenya, putting at risk major infrastructure investments and regional trade ties. The implications of this shift have raised questions about the future of regional trade and the economic stability of Kenya. CNBC Africa spoke to Silvester Kasuku, CEO of the African Centre for Transport, Infrastructure & Regional Integration, to delve into the intricacies of this situation. The loss of business for Kenya stems from Uganda's decision to import oil through Tanzanian ports instead of Kenyan ones. While there was a notable convenience in using Kenyan ports due to shorter distances, Uganda seems willing to incur additional logistics costs of about 600 kilometers for importing oil through Tanzania. This shift not only incurs higher transportation costs but also foregoes the efficiency of pipelines for oil transportation. Unlike the well-connected pipeline system from Mombasa to various parts of Kenya, Tanzania lacks such infrastructure linking its ports to Uganda. Kasuku highlighted the substantial investments made by both countries in enhancing their oil transportation facilities. Kenya established pipelines running from Mombasa to Nairobi, Kisumu, and Eldorado, while Uganda developed facilities at the shores of Lake Victoria, including vessels like MV Kabaka Mutebi 1 and 2. These investments were aimed at fostering efficient and cost-effective oil transportation between the two nations. Despite the current loss for Kenya, Kasuku emphasized that other oil importing companies still operate in Uganda, with the shift to Tanzanian ports yet to be fully realized. The discussion extended to the potential negotiation between Tanzania and Uganda to waive certain taxes to facilitate the oil trade. Kasuku compared the costs associated with transporting oil through pipelines and factors such as damage costs incurred during prolonged ship dockings. He underscored the necessity for Uganda to create additional oil storage capacity at Dar es Salaam port to avoid difficulties in handling oil destined for Tanzania instead of merely for domestic consumption. While the talks of tax waivers and negotiation tactics are ongoing, the implications of Uganda's shift to Tanzanian ports are multifaceted. The transition entails logistical challenges, including storing and transporting oil efficiently from the port to distribution points. Kasuku emphasized that these discussions require a serious approach to ensure all parties involved benefit mutually and sustainably. In conclusion, the $200 million loss in oil exports to Uganda presents a critical juncture for Kenya's economy and regional trade dynamics. The shift to Tanzanian ports raises concerns about the impact on existing infrastructure investments and trade relationships. As Kenya navigates through the repercussions of this trade redirection, strategic decisions and collaborative efforts will be pivotal in maintaining economic stability and fostering sustainable regional trade partnerships.