Open alternative routes to sea port
Jan 08, 2008
The current political crisis in Kenya should motivate the Government of Uganda to open alternative routes to the seaport.
BY MOSES KIRUNGI
The current political crisis in Kenya should motivate the Government of Uganda to open alternative routes to the seaport.
Uganda is land-locked and this makes Kenya a key route to the sea. But instability in Kenya may undermine Uganda’s import and export business.
Uganda is currently experiencing fuel shortages, which may lead to escalation of prices in most sectors of the economy. We consume an average of 10, 500 barrels or 1.4 million litres of oil per day. The import bill of petroleum products was $445m dollars in 2006 and is expected to grow by 2% per annum.
During the last fiscal year, total exports, including goods and services, were $1.76 billion and the economy grew by 7%. Since Uganda is a hinterland, a significant volume of imports and exports go through Kenya. Over 95% of oil products are ferried through Kenya by oil tankers.
In 2006, the Government made urgent interventions to respond to the energy crisis.
Short-term measures like the use of thermal power, providing subsidy for industrial diesel generators and the long term strategy of building Bujagali Hydropower Station and the yet to be commissioned Karuma Power Station were timely and such efforts are likely to end the energy crisis and load shedding.
Oil has a ripple effect on the economy. In less than two days of fuel shortage, pump prices tripled, causing transport fares to abnormally hike and the prices for consumer goods to rise. President Museveni, in his New Year address to the nation, stated that inflation averaged 6.6% largely due to unstable fuel prices. Because of the liberalisation policy, the management of oil is in the private sector.
The Government may have to introduce a national oil reserve policy that should require oil companies to maintain an agreed volume of fuel that can last more than 14 days.
Leading oil companies like Shell, Caltex and Total, which have been in the industry for a long period and making super-normal profits, with a big capital base, should be required to have strong measures to mitigate instabilities in fuel supply.
Whereas it is true that prices for oil on the international market keep surging and may hit $100 a barrel with global demand expected to grow by 1.3% per year, oil companies should be able to contain short-term shocks in supply. The contribution of the oil companies to the economy becomes minimal if they cannot restrain some of their dealers, who hoard fuel to create artificial shortage whenever there are temporary disruptions in supply.
Nobody should thump oil companies for being among the top tax payers because they just collect taxes and the real payers are the consumers who suffer the tax burden.
The Government should, therefore, institute and vigorously enforce a policy framework under which these companies operate to save consumers from being ripped. In the same speech, the President further revealed that the Government was developing a National Rail Network Master plan and that railway lines between Tororo and Gulu and Pakwach and between Kampala and Kasese will be re-opened this year to lower transport costs.
If the Government delivers on its promise of a good rail network, then the possibility of routing goods through Mwanza to Portbell becomes more feasible and cost effective.
Another option is through Dar-es-Salaam to Mutukula though this is a long distance and attracts big transport and demurrage costs. But in the interest of stabilising supply of critical goods like fuel, the Government may consider lowering taxes on vital goods that enter the country using such long routes.
Even though the Government plans to start oil production next year, good transport infrastructure and opening up more routes to the sea to facilitate the movement of goods both within and outside the country remains critical and is worth the investment.
The writer is a certified Purchasing and Supply Specialist
The current political crisis in Kenya should motivate the Government of Uganda to open alternative routes to the seaport.
Uganda is land-locked and this makes Kenya a key route to the sea. But instability in Kenya may undermine Uganda’s import and export business.
Uganda is currently experiencing fuel shortages, which may lead to escalation of prices in most sectors of the economy. We consume an average of 10, 500 barrels or 1.4 million litres of oil per day. The import bill of petroleum products was $445m dollars in 2006 and is expected to grow by 2% per annum.
During the last fiscal year, total exports, including goods and services, were $1.76 billion and the economy grew by 7%. Since Uganda is a hinterland, a significant volume of imports and exports go through Kenya. Over 95% of oil products are ferried through Kenya by oil tankers.
In 2006, the Government made urgent interventions to respond to the energy crisis.
Short-term measures like the use of thermal power, providing subsidy for industrial diesel generators and the long term strategy of building Bujagali Hydropower Station and the yet to be commissioned Karuma Power Station were timely and such efforts are likely to end the energy crisis and load shedding.
Oil has a ripple effect on the economy. In less than two days of fuel shortage, pump prices tripled, causing transport fares to abnormally hike and the prices for consumer goods to rise. President Museveni, in his New Year address to the nation, stated that inflation averaged 6.6% largely due to unstable fuel prices. Because of the liberalisation policy, the management of oil is in the private sector.
The Government may have to introduce a national oil reserve policy that should require oil companies to maintain an agreed volume of fuel that can last more than 14 days.
Leading oil companies like Shell, Caltex and Total, which have been in the industry for a long period and making super-normal profits, with a big capital base, should be required to have strong measures to mitigate instabilities in fuel supply.
Whereas it is true that prices for oil on the international market keep surging and may hit $100 a barrel with global demand expected to grow by 1.3% per year, oil companies should be able to contain short-term shocks in supply. The contribution of the oil companies to the economy becomes minimal if they cannot restrain some of their dealers, who hoard fuel to create artificial shortage whenever there are temporary disruptions in supply.
Nobody should thump oil companies for being among the top tax payers because they just collect taxes and the real payers are the consumers who suffer the tax burden.
The Government should, therefore, institute and vigorously enforce a policy framework under which these companies operate to save consumers from being ripped. In the same speech, the President further revealed that the Government was developing a National Rail Network Master plan and that railway lines between Tororo and Gulu and Pakwach and between Kampala and Kasese will be re-opened this year to lower transport costs.
If the Government delivers on its promise of a good rail network, then the possibility of routing goods through Mwanza to Portbell becomes more feasible and cost effective.
Another option is through Dar-es-Salaam to Mutukula though this is a long distance and attracts big transport and demurrage costs. But in the interest of stabilising supply of critical goods like fuel, the Government may consider lowering taxes on vital goods that enter the country using such long routes.
Even though the Government plans to start oil production next year, good transport infrastructure and opening up more routes to the sea to facilitate the movement of goods both within and outside the country remains critical and is worth the investment.
The writer is a certified Purchasing and Supply Specialist