The goal of preparing for crude oil production by 2020 is providing a unique challenge to Uganda – in order to do so, they must first lay the groundwork to become a regional logistics hub for East Africa. We had explored the underlying requirements of the buildout in detail in the first article of this series.
Focus on transportation infrastructure development will help the country serve as a nerve center for neighbors like Kenya, Rwanda, Burundi, Democratic Republic of Congo and South Sudan as shown in the graph below provided by The Law & Development Partnership.
Some of the planned regional co-operation has already seen light of day.
Co-operation between Uganda and Tanzania
Uganda and Tanzania have inked a deal for the construction of a 1,400 kilometer pipeline between the two nations. The pipeline, which would be laid from Hoima district in western Uganda to Tanga port in Tanzania will be used to supply crude oil from the former to the latter.
After signing the East African Crude Oil Pipe Line Agreement (EACOP), Uganda’s President Yoweri Museveni said that peace and stability in Tanzania, coupled with Tanga being a protected port, were key reasons for choosing the country as a partner.
His counterpart, Tanzania’s President John Pombe Magufuli, was optimistic about the revenue generation capability of the project, along with employment opportunities for the local population. He also pointed to a reduction in the cost of oil, which would benefit both countries.
An example for Africa
The co-operation between the two East African neighbors can work as a model for other nations on the continent.
Though several countries in the region are resource-rich, they have been unable to unlock the value of their resources in many cases due to a lack of collaborative effort. Since projects associated with mineral and crude oil resources are cost-intensive, African nations have to rely on overseas companies for support as they themselves do not have the financial muscle to execute such projects.
If they collaborate though, they can leverage on each other’s abilities and divide the ensuing profits, thus reaping the maximum benefit in terms of job creation, infrastructure development, and revenue generation.
This would also make these countries more attractive to foreign investors as collaboration would reduce the requirement of external borrowing, and loans taken for such projects would be divided among countries, thus reducing relative risk for all parties.