Business
Private players pick interest in new sea route
Publish Date: Sep 28, 2012
Private players pick interest in new sea route
A welder working on Bbosas boat which he hopes to deploy on the Musoma-Bukasa route
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By David Mugabe

Dickens Bbosa, a businessman building a 40-foot, 40-ton steel boat at Bunamwaya with a passenger capacity of close to 100 says he wants to deploy on the Musoma route from Uganda.

But as he deploys massive investment in the ship that is almost complete, he wonders whether he will be allowed to use the Bukasa port facility.

Bbosa who said he represents five business groups interested in the business said constructing a (40 by 80 feet) barge costs about sh120m.

Bbosa is one of many in the private sector who have picked interest in the potential opportunity that an alternative route to the sea through Tanzania would present to them.

They are now asking the Government to come clear on whether these new ports and transport infrastructure will be open to the private sector to deploy their resources and benefit from them or will they be exclusive to the Government and some private developers.

The long touted alternative route question popped up again last week when about 600 containers of sugar and 2,000 vehicles were held at Mombasa.

This followed an August 29 directive by Kenya Revenue Authority (KRA) that transit goods coming to Uganda execute a cash bond equivalent to the tax value of the consignments that would be imposed on the same goods were they to be sold in Kenya.

This caused a cargo movement paralysis and a stand-off, bringing back bad memories to Ugandan importers. Mombasa remains the shortest route for inland states that have no direct access to the sea.

Alternative routes

This has led to the question of how much progress has been made on developing other routes to the sea. On paper, there are several good proposals on how to avert disruption of goods in case of instability in Kenya, especially with the impending February 2013 Kenyan general elections.

One of them is building smaller inland ports and a second access route to the sea via the lakeside ports of Bukasa in Uganda, and Musoma in Tanzania. It would be connected by railway to Arusha in the Tanzanian interior and to the port of Tanga on the Indian Ocean.

The close to $2b railway line will link Tanga harbour and Port Bukasa on Lake Victoria via Musoma port. Estimates show that the Mwambani-Musoma-Bukasa route would cost about $3b, a figure that includes buying of vessels, refurbishing the short linkage railway lines and building the ports. The project is expected to be ready by 2015.

Barges from Musoma destined for western Uganda or Rwanda would head straight to Masaka port, while those for eastern Uganda would go straight to Jinja or another port in the east.

The potency of the whole strategy is in its simplicity. Water and rail transport are the cheapest. It is only 1,188km compared to 1,250km from Mombasa to Kampala.

Private investors

It is these barges that present another new opportunity for investors. “I want to know in advance the strictness of the marine business. Will it be exclusive to government or free trade for interested parties?” asked Bbosa.

If Bukasa in Kampala and Musoma in Tanzania are fully set up and connected, it would also open up a new line of economic activity in these areas, greatly reducing the turn-around time and cost of moving goods from the coast to Uganda.

Government go-slow on building projects

But information from the Ministry of Works this week indicates that there is no work on the ground. Only preliminary discussions with residents of the Bukasa area on the shores of Lake Victoria have taken place.

Susan Kataike, the works ministry publicist, said they are trying to negotiate with four institutions that have land in this area.

These are National Forestry Authority, Prisons, National Water and Sewerage Corporation and the residents.
“We had meetings in June introducing this to the residents. Of course it did not go down well knowing that people don’t want to be relocated,” said Kataike.

Kataike said the onus is now on the Government to explain the benefits of this project. “For now it is a government project, the rest will be negotiated with time,” said Kataike when asked if the port will be open to the private sector. The Ministry of Finance has also not committed money to these projects.

About 85% of Ugandan-bound international cargo passes through Mombasa, according to revenue statistics. Also, 47% of total URA’s tax collections are from international trade or customs.

In the 2011/12 financial year Uganda collected about sh3 trillion from international trade, which means about sh2.6 trillion of tax revenue was collected from cargo coming through Mombasa.

This financial year, the target is sh3.4 trillion which means if this target is achieved, Uganda will collect taxes worth sh2.89 trillion from cargo passing through Mombasa.

These statistics indicate the significance of sea access to Uganda. Despite being landlocked, Uganda is now more viewed as land-linked because of its unique geographical position of serving or being the entry point of cargo accessing Rwanda, Burundi, Eastern DRC and South Sudan.

Unpredictable Mombasa

Going by history, analysts believe Uganda and other inland states would be justified to explore Dar es Salaam and other central corridor route.

"It is legitimate (exploring other routes), no doubt about it, international trade of import and exports cannot be one way, unless it works both ways, you always have a discomfort," said Richard Kamajugo, the URA commissioner for international trade.

There have been incidences even under the customs union where Kenya has blocked the entry of chicks from Uganda.

The 2007 post-election violence also paralysed the inland states as inflow of petroleum products and the imports business greatly suffered.

A few weeks ago, political unrests related to killing of a Muslim cleric also led to an uprising, disrupting flow.

The sticking point is the go-slow process of government's projects of such magnitudes. Also the RVR railway line set to link Mombasa to Kampala is yet to fully overhaul the rail yet it is expected to push cargo handling by rail from 15% to 60%.

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