Master Plan on Logistics

in Northern Economic Corridor

Draft Progress Report No.2

December 2015

Japan International Corporation Agency

Consultants
Nippon Koei Co., Ltd
Eight-Japan Engineering Consultants Inc.
PADECO Co., Ltd
 Project for Master Plan on Logistics in Northern Economic Corridor
Progress Report 2 (Draft)

Table of Contents
CHAPTER 1 : Introduction................................................................................................................1-1
1.1 Background & Objective .................................................................................................. 1-1
1.1.1 Background....................................................................................................................... 1-1
1.1.2 Objective ........................................................................................................................... 1-1
1.1.3 Target Year ....................................................................................................................... 1-1
1.1.4 Target Area ....................................................................................................................... 1-1
1.1.5 Overall Scope of Work ...................................................................................................... 1-2
1.1.6 Work Done ........................................................................................................................ 1-3
CHAPTER 2 : Development Vision and Framework .......................................................................2-1
2.1 Overview of Northern Economic Corridor and EAC ..................................................... 2-1
2.1.1 Socio-Economy .................................................................................................................. 2-1
2.1.2 Trade ................................................................................................................................. 2-2
2.1.3 Regional Integration in East Africa ................................................................................ 2-4
2.2 Development Vision for Northern Economic Corridor .................................................. 2-6
2.2.1 Vision Formulation Procedure ........................................................................................ 2-6
2.2.2 Reviews of Development Visions in the Related Plans and Strategies........................ 2-7
2.2.3 Proposed Vision for NEC ............................................................................................... 2-11
2.3 Socioeconomic Framework ............................................................................................ 2-12
2.3.1 Target Year for the Socioeconomic Framework............................................................ 2-12
2.3.2 Population Framework for NEC and EAC ................................................................... 2-12
2.3.3 Economic Framework for NEC and EAC ..................................................................... 2-16
CHAPTER 3 : Regional Structure Plan ............................................................................................3-1
3.1 Overview of Regional Plans and Land Use along Northern Economic Corridor ........ 3-1
3.1.1 Existing Urban and Regional Plans ............................................................................... 3-1
3.1.2 Present Land Use............................................................................................................. 3-2
3.1.3 Urbanization..................................................................................................................... 3-3
3.2 Spatial Structure of NEC ................................................................................................ 3-6
3.2.1 Current Spatial Structure ............................................................................................... 3-6
3.2.2 Future Spatial Structure Plan ........................................................................................ 3-8
CHAPTER 4 : Industrial Development ............................................................................................4-1
4.1 Marketing and Value Chain Survey in Kenya ............................................................... 4-1
4.1.1 Outline of the Survey ....................................................................................................... 4-1
4.1.2 Survey Results ................................................................................................................. 4-1
4.1.3 Analysis of Results ........................................................................................................... 4-3
4.1.4 Export Potential and Key Bottlenecks ........................................................................... 4-4
4.2 Marketing and Value Chain Survey in Uganda ............................................................ 4-6
4.2.1 Outline of the Survey ....................................................................................................... 4-6
4.2.2 Survey Results ................................................................................................................. 4-6
4.2.3 Analysis of Results ........................................................................................................... 4-8
4.2.4 Export Potential and Key Bottlenecks ......................................................................... 4-10
4.3 Agriculture and Fishery Sectors Development in Kenya ........................................... 4-11
4.3.1 Overview of Current Status .......................................................................................... 4-11
4.3.2 Assessment of Potential Products................................................................................. 4-11
4.3.3 Analysis of NEC-Key Growth Drivers .......................................................................... 4-12
4.3.4 Development Scenario of Key Growth Drivers ............................................................ 4-14
4.3.5 Necessary Interventions with Priorities ...................................................................... 4-15
4.4 Agriculture and Fishery Sectors Development in Uganda ......................................... 4-18
4.4.1 Overview of Current Status .......................................................................................... 4-18
4.4.2 Assessment of Potential Products................................................................................. 4-19
4.4.3 Analysis of NEC-Key Growth Drivers .......................................................................... 4-20
4.4.4 Development Scenario of Key Growth Drivers ............................................................ 4-22

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4.4.5 Necessary Interventions with Priorities ...................................................................... 4-23

4.5 Mining and Petroleum Sector Development in Kenya ................................................ 4-27
4.5.1 Overview of Current Status .......................................................................................... 4-27
4.5.2 Assessment of Potential Products................................................................................. 4-29
4.5.3 Analysis of NEC Key Growth Drivers .......................................................................... 4-30
4.5.4 Development Scenario of key Growth Drivers ............................................................. 4-31
4.5.5 Gap Assessment for Development Scenario ................................................................. 4-33
4.5.6 Necessary Interventions with Priorities ...................................................................... 4-34
4.6 Mining and Petroleum Sector Development in Uganda ............................................. 4-34
4.6.1 Overview of Current Status .......................................................................................... 4-34
4.6.2 Assessment of Potential Products................................................................................. 4-36
4.6.3 Analysis of NEC Key Growth Drivers .......................................................................... 4-38
4.6.4 Development Scenario of key Growth Drivers ............................................................. 4-39
4.6.5 Gap Assessment for Development Scenario ................................................................. 4-40
4.6.6 Necessary Interventions with Priorities ...................................................................... 4-40
4.7 Manufacturing Sector Development in Kenya ............................................................ 4-42
4.7.1 Overview of Current Status .......................................................................................... 4-42
4.7.2 Assessment of Potential Products................................................................................. 4-44
4.7.3 Development Scenario of Key Growth Drivers ............................................................ 4-45
4.7.4 Necessary Interventions with Priorities ...................................................................... 4-48
4.8 Manufacturing Sector Development in Uganda .......................................................... 4-50
4.8.1 Overview of Current Status .......................................................................................... 4-50
4.8.2 Assessment of Potential Products................................................................................. 4-51
4.8.3 Assessment of Potential Products................................................................................. 4-51
4.8.4 Development Scenario of Key Growth Drivers ............................................................ 4-53
4.8.5 Necessary Interventions with Priorities ...................................................................... 4-55
4.9 Tourism and Service Sector Development in Kenya ................................................... 4-55
4.9.1 Overview of Current Status .......................................................................................... 4-55
4.9.2 Policies and Plans for Tourism Development .............................................................. 4-58
4.9.3 Necessary Interventions with Priorities ...................................................................... 4-60
4.10 Status of Tourism and Service Sector in Uganda ........................................................ 4-61
4.10.1 Overview of Current Status .......................................................................................... 4-61
4.10.2 Policies and Plans for Tourism Development .............................................................. 4-63
4.10.3 Necessary Interventions with Priorities ...................................................................... 4-64
4.11 Investment Climate in Kenya ....................................................................................... 4-65
4.11.1 Overview of Current Status .......................................................................................... 4-65
4.11.2 On-going Effort by GOK ................................................................................................ 4-68
4.11.3 Necessary Interventions with Priorities ...................................................................... 4-68
4.12 Investment Climate in Uganda..................................................................................... 4-69
4.12.1 Overview of Current Status .......................................................................................... 4-69
4.12.2 On-going Effort by GOU and Necessary Interventions............................................... 4-70
CHAPTER 5 : Transport and Logistic Infrastructure Development ..............................................5-1
5.1 Current Situation............................................................................................................. 5-1
5.1.1 Overview ........................................................................................................................... 5-1
5.1.2 Current Freight Traffic Demand .................................................................................... 5-2
5.1.3 Logistics Service ............................................................................................................... 5-7
5.1.4 Transport and Logistic Infrastructure ......................................................................... 5-10
5.1.5 Current Gap ................................................................................................................... 5-26
5.2 Preliminary Freight Traffic Demand Forecasting ....................................................... 5-34
5.2.1 Outline and Methodology .............................................................................................. 5-34
5.2.2 Demand Forecast ........................................................................................................... 5-37
5.2.3 Future Traffic Forecasting ............................................................................................ 5-41
5.2.4 Gap Assessment and Future Bottlenecks .................................................................... 5-42
5.2.5 Way Forward .................................................................................................................. 5-45

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5.3 Development Strategy for Transport and Logistic Infrastructure ............................. 5-45
5.3.1 Review of Future Projects ............................................................................................. 5-45
5.3.2 Development Scenario as Base Case ............................................................................ 5-57
5.3.3 Development Strategy ................................................................................................... 5-60
5.4 Logistics Service Improvement ..................................................................................... 5-70
5.4.1 Review of SCT scheme ................................................................................................... 5-70
5.4.2 Current bottlenecks ....................................................................................................... 5-70
5.5 Development strategy .................................................................................................... 5-74
5.5.1 Overview ......................................................................................................................... 5-74
5.5.2 Logistics improvement plan in Kenya .......................................................................... 5-77
5.5.3 Logistics improvement plan in Uganda ....................................................................... 5-78
CHAPTER 6 : Industrial Infrastructure Development ...................................................................6-1
6.1 Power Development in Kenya ......................................................................................... 6-1
6.1.1 Overview of Current Status ............................................................................................ 6-1
6.1.2 Review of Future Projects ............................................................................................... 6-1
6.1.3 Development Scenario As Base Case .............................................................................. 6-3
6.1.4 Alterative Scenarios ......................................................................................................... 6-3
6.1.5 Gap Assessment and Future Bottlenecks ...................................................................... 6-4
6.1.6 Development Strategy ..................................................................................................... 6-4
6.1.7 Suggested Projects and Implementation Plan ............................................................... 6-6
6.2 Power Development in Uganda....................................................................................... 6-7
6.2.1 Overview of Current Status ............................................................................................ 6-7
6.2.2 Review of Future Projects ............................................................................................... 6-8
6.2.3 Development Scenario as Base Case .............................................................................. 6-8
6.2.4 Alterative Scenarios ......................................................................................................... 6-9
6.2.5 Gap Assessment and Future Bottlenecks ...................................................................... 6-9
6.2.6 Development Strategy ................................................................................................... 6-10
6.2.7 Suggested Projects and Implementation Plan ............................................................. 6-11
6.3 Water Sector Development in Kenya ............................................................................ 6-13
6.3.1 Overview of Current Status .......................................................................................... 6-13
6.3.2 Review of Future Projects ............................................................................................. 6-13
6.3.3 Development Scenario as Base Case ............................................................................ 6-14
6.3.4 Alterative Scenarios ....................................................................................................... 6-15
6.3.5 Gap Assessment and Future Bottlenecks .................................................................... 6-15
6.3.6 Development Strategy ................................................................................................... 6-16
6.4 Water Sector Development in Uganda ......................................................................... 6-17
6.4.1 Overview of Current Status .......................................................................................... 6-17
6.4.2 Review of Future Projects ............................................................................................. 6-18
6.4.3 Development Scenario As Base Case ............................................................................ 6-19
6.4.4 Alterative Scenarios ....................................................................................................... 6-20
6.4.5 Gap Assessment and Future Bottlenecks .................................................................... 6-21
6.4.6 Development Strategy ................................................................................................... 6-22
6.5 Review of Information, Communication and Technology (ICT).................................. 6-23
6.5.1 Overview of fiber cable network in Kenya ................................................................... 6-23
6.5.2 Overview of fiber cable network in Uganda ................................................................. 6-25
6.5.3 Development Scenario for NEC .................................................................................... 6-26
6.5.4 Development Strategy for NEC .................................................................................... 6-27
6.5.5 Suggested Projects and Implementation Plan ............................................................. 6-27
CHAPTER 7 : Organizations .............................................................................................................7-1
7.1 Organizations Related to Northern Economic Corridor................................................ 7-1
7.1.1 Overview ........................................................................................................................... 7-1
7.1.2 Preliminary Organizational Assessment ....................................................................... 7-5
7.1.3 Capacity Development Plan ............................................................................................ 7-8
7.2 Financial Capacity in Kenya ......................................................................................... 7-10

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7.2.1 Legal Framework and Organization ............................................................................ 7-10

7.2.2 Reviews of Budget and Expenditure in Kenya ............................................................ 7-10
7.2.3 Financing for the Transport and Logistic Sector ......................................................... 7-11
7.2.4 Private Sector Financing in Kenya............................................................................... 7-12
7.3 Financial Capacity in Uganda ...................................................................................... 7-13
7.3.1 Legal Framework and Organization ............................................................................ 7-13
7.3.2 Reviews of Budget and Expenditure in Uganda .......................................................... 7-14
7.3.3 Reviews of Budget and Expenditure in the Transport and Logistic Sector............... 7-15
7.3.4 Private Sector Financing in Uganda ............................................................................ 7-16
7.4 Way forward and Scope of Work ................................................................................... 7-17
CHAPTER 8 : Proposed Development Strategies ............................................................................8-1
8.1 Transport Strategy: Efficient and Integrated Multimodal Transportation System ... 8-1
8.2 Industrial Strategy: Effective and Efficient Logistical System for Industry and Trade
8-2
8.3 Regional Strategy: Linking Corridor and Feeder Road ................................................ 8-4
8.4 Financial Strategy: Cost Recovery and Diversifying Financial Sources ..................... 8-6
8.5 Organizational and Policy Strategy: Appropriate Institutional Framework for
Transport and Logistics ..................................................................................................................... 8-7
CHAPTER 9 : Environmental and Social Consideration for Master Plan ....................................9-1
9.1 Strategic Environmental Assessment Approach in Kenya ........................................... 9-1
9.1.1 Overview ........................................................................................................................... 9-1
9.1.2 Progress of SEA ................................................................................................................ 9-2
9.1.3 Environmental Scoping ................................................................................................... 9-2
9.1.4 Baseline Information ....................................................................................................... 9-3
9.1.5 Assessment of Past and Current Environmental Issues .............................................. 9-3
9.1.6 Result of First Stakeholder Meetings............................................................................. 9-4
9.2 Strategic Environmental Assessment Approach in Uganda ......................................... 9-6
9.2.1 Overview ........................................................................................................................... 9-6
9.2.2 Progress of SEA ................................................................................................................ 9-7
9.2.3 Environmental Scoping ................................................................................................... 9-8
9.2.4 Baseline Information ....................................................................................................... 9-8
9.2.5 Assessment of Past and Current Environmental Issues .............................................. 9-9
9.2.6 Result of First Stakeholder Meetings............................................................................. 9-9
CHAPTER 10 : Way Forward ............................................................................................................10-1

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List of Figures
Figure 1.1.1: Routes of Northern Economic Corridor Scope of Work and Work Progress .................1-2
Figure 1.1.2: Main Tasks and the Current Progress ............................................................................1-3
Figure 2.1.1: NCTTCA Member States and Transport System ...........................................................2-1
Figure 2.1.2: Total Intra-EAC Trade, 2010-2013 ..................................................................................2-2
Figure 2.1.3: Trade Balance in Kenya, 2010-2014 ...............................................................................2-2
Figure 2.1.4: Export by Destination in 2014.........................................................................................2-2
Figure 2.1.5: Import by Destination in 2014.........................................................................................2-2
Figure 2.1.6: Trade Balance in Uganda.................................................................................................2-3
Figure 2.1.7: Export by Country in 2013 (% of Total Trade) ................................................................2-3
Figure 2.1.8: Import by Country in 2013 (% of Total Trade)................................................................2-3
Figure 2.1.9: EAC Corridor ....................................................................................................................2-4
Figure 2.1.10: Proposed Roadside Station ............................................................................................2-5
Figure 2.2.1: Potential Industrial Aras Identified by Vision 2030 and Proposed SEZs ....................2-7
Figure 2.2.2: Procedures for Formulating the Development Vision....................................................2-8
Figure 2.2.3: Potential Industrial Park/Zone in Kenya .......................................................................2-9
Figure 2.2.4: Strategy in NDP II .........................................................................................................2-10
Figure 2.2.5: Proposed Economic Zones and Trade Area ...................................................................2-10
Figure 2.2.6: Proposed Infrastructure for Mineral Resources ...........................................................2-10
Figure 2.3.1: Population Density by County in Kenya (2009) ...........................................................2-12
Figure 2.3.2: Population Projection in Vision 2030 ............................................................................2-13
Figure 2.3.3: Projected Urban Population in Base Case and High Case ..........................................2-13
Figure 2.3.4: Population Distribution and Regional and Strategic Cities in Uganda .....................2-14
Figure 2.3.5: Projected Urbanization Rate in Uganda (%) ................................................................2-15
Figure 2.3.6: Projected Population in NEC and EAC between 2015 and 2030 ................................2-16
Figure 2.3.7: GDP (current price) and GDP growth between 2007 and 2014 in Kenya ..................2-17
Figure 2.3.8: Projected GDP, 2015-2030 ..............................................................................................2-18
Figure 2.3.9: GDP and Growth in Uganda (2004-13) .........................................................................2-18
Figure 2.3.10: Projected GDP, 2015-2030 (constant price in 2013) ...................................................2-20
Figure 2.3.11: Projected GDP, 2015-2030 ............................................................................................2-21
Figure 3.1.1: Urban and Regional Development Projects by Kenya Vision 2030 ..............................3-1
Figure 3.1.2: Spatial Framework for Uganda Vision 2040 ..................................................................3-2
Figure 3.1.3: Land Use Map of Kenya (2010) .......................................................................................3-3
Figure 3.1.4: Land Use Map of Uganda (2001) .....................................................................................3-3
Figure 3.1.5: Trends of Urban Population and its Proportion of Total in Kenya ...............................3-4
Figure 3.1.6: Distribution of Urban Centers in Kenya ........................................................................3-4
Figure 3.1.7: Trends of Urban Population and its Proportion of Total in Uganda.............................3-4
Figure 3.1.8: Distribution of Urban Centers in Uganda (2014) ..........................................................3-4
Figure 3.1.9: Comparison of Urbanization Level and GDP per Capita of Countries.........................3-5
Figure 3.1.10: Comparison of Urbanization Level and Poverty Ratio of Countries ..........................3-5
Figure 3.2.1: Current Major Cities and Existing Transportation Infrastructures ............................3-6
Figure 3.2.2: Population of Ten Largest Cities in Kenya and Uganda ...............................................3-6
Figure 3.2.3: Spatial Structure Plan (Alternative-A) ...........................................................................3-9
Figure 3.2.4: Spatial Structure Plan (Alternative-B) ...........................................................................3-9
Figure 3.2.5: Spatial Structure Plan (Alternative-C) .........................................................................3-10
Figure 4.3.1: Flow of Rice in 2015, and 2030 ...................................................................................... 4-11
Figure 4.3.2: Projection of the World Consumption of Tea and Coffee ...........................................4-12
Figure 4.3.3: Amount of Production and Import of Major Import Crops in Kenya ..........................4-12
Figure 4.3.4: Flow of Tea in 2015, and 2030 .......................................................................................4-15
Figure 4.3.5: Flow of Coffee in 2015, and 2030...................................................................................4-16
Figure 4.3.6: Flow of Cut Flower in 2015, and 2030 ..........................................................................4-17
Figure 4.3.7: Flow of Processed Fruits and Vegetable in 2015, and 2030 ........................................4-17

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Figure 4.3.8: Flow of Rice in 2015, and 2030 ......................................................................................4-18

Figure 4.4.1: Production Areas for Major Crops, Projects Area of Major Donors and Major
Private Agricultural Plants ............................................................................................4-19
Figure 4.4.2: Projection of the World Consumption of Coffee ............................................................4-20
Figure 4.4.3: Amount of Production and Import of Major Import Crops in Uganda (2012) ............4-20
Figure 4.4.4: Flow of Coffee in 2015, and 2030...................................................................................4-23
Figure 4.4.5: Flow of Palm Oil in 2015, and 2030 ..............................................................................4-24
Figure 4.4.6: Flow of Rice in 2015, and 2030 ......................................................................................4-25
Figure 4.4.7: Flow of Maize in 2015, and 2030 ...................................................................................4-26
Figure 4.4.8: Flow of Maize in 2015, and 2030 ...................................................................................4-26
Figure 4.6.1: Proposed Pipeline Projects in Kenya and Uganda .......................................................4-42
Figure 4.7.1: Quantity Index of Manufacturing Subsector with Large Increase and
Decrease (2014) ...............................................................................................................4-43
Figure 4.7.2: Number of Employees in the Manufacturing Sector in Major Urban Areas in
Kenya ...............................................................................................................................4-43
Figure 4.7.3: Kenya’s Export to EAC countries and DRC (2013, SITC category) ............................4-44
Figure 4.7.4: Kenya’s 20 Large Groups of Exported Goods to EAC countries and DRC (2013,
SITC 2-digit) ....................................................................................................................4-44
Figure 4.7.5: Long-Term Transition from Priority Sector in Kenya’s Industrial
Transformation Programme ...........................................................................................4-45
Figure 4.7.6: Value of Iron and Steel Products Imported and Exported by Kenya and
Uganda (2013) .................................................................................................................4-46
Figure 4.7.7: Forecasted Value of Iron and Steel Products Imported and Exported by Kenya
and Uganda (2030) ..........................................................................................................4-47
Figure 4.7.8: Soaps, Cosmetics and Toiletries Industry and the Possible Interventions in
Kenya ...............................................................................................................................4-48
Figure 4.7.9: Apparel Industry in Kenya and the Possible Interventions ........................................4-49
Figure 4.8.1: Distribution and the Types of the Manufacturing Activities of Medium to
Large Enterprises in Uganda.........................................................................................4-50
Figure 4.8.2: Uganda’s Export and Import of Primary and Finished Plastic Products (HS
39) .....................................................................................................................................4-51
Figure 4.8.3: Uganda’s Import and Export of Soaps, Detergent, Candles and Moulding
Pastes and Organic Surface-Active Products and Preparations for Use as Soap
(HS 3401)(Right) .............................................................................................................4-52
Figure 4.8.4: Uganda’s Import and Export of Palm Oil (HS 11511) (Right) ..................................4-52
Figure 4.8.5: Uganda’s Export of Skin and Hide (HS 4104 & 4106)(Left) and Export of
Semi-Processed and Manufactured Leather Items (HS 4104& 4106 and 42)
(Right) ..............................................................................................................................4-53
Figure 4.8.6: Growth Drivers and the Time Frame for Development...............................................4-53
Figure 4.9.1: Location of Premium Parks, Under-Utilized Parks and 3 Resort Cities....................4-58
Figure 4.9.2: View of Kilifi ...................................................................................................................4-59
Figure 4.9.3: View of Diani ...................................................................................................................4-59
Figure 4.9.4: View of Isiolo Town. ........................................................................................................4-59
Figure 4.9.5: Map Indicating Location of Isiolo Resource City and Conceptual Layout .................4-60
Figure 4.9.6: Target Marketing Strategy ............................................................................................4-61
Figure 4.10.1: National Parks in Uganda ...........................................................................................4-62
Figure 4.10.2: Organization Structure of Ministry of Tourism, Wildlife and Antiquities ...............4-62
Figure 4.10.3: Target Marketing Strategy ..........................................................................................4-63
Figure 4.10.4: Structure of 6 Tourism Development Areas ...............................................................4-64
Figure 4.10.5: 18 Priority Tourism Roads ...........................................................................................4-64
Figure 4.10.6: Target Marketing Strategy ..........................................................................................4-65
Figure 4.11.1: Value of Gross Fixed Capital Formation of Kenya, Uganda and Peer
Countries .........................................................................................................................4-65
Figure 4.11.2: Value of FDI Inflow of Kenya, Uganda and Peer Countries and the Ratio to

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GDP (Right) .....................................................................................................................4-66

Figure 4.11.3: Ease of Doing Business Distance to Frontier Score of Kenya and Rwanda .............4-67
Figure 4.11.4: Wage of Workers and Minimum Wage of African and Asian Cities ..........................4-68
Figure 4.12.1: Ease of Doing Business Distance to Frontier Score of Uganda and Rwanda ..........4-69
Figure 5.1.1: Location of Survey Sites ...................................................................................................5-3
Figure 5.1.2: Traffic Volume on the Survey Sites (Vehicles/day) .........................................................5-4
Figure 5.1.3: Traffic Volume on the Survey Sites (pcu/day).................................................................5-4
Figure 5.1.4: Average of the Loading Weight and Ratio of Unloading Vehicle ...................................5-5
Figure 5.1.5: Ratio of Container Loading Vehicle.................................................................................5-5
Figure 5.1.6: Trip Length .......................................................................................................................5-5
Figure 5.1.7: Contents of Cargo Traffic .................................................................................................5-6
Figure 5.1.8: Cargo Traffic Flow on the Road (Tonnage per Day) .......................................................5-7
Figure 5.1.9: Transit Time from Mombasa to Malaba .........................................................................5-9
Figure 5.1.10: Cargo Pick up Time at Mombasa Port ..........................................................................5-9
Figure 5.1.11: Transit Time from Malaba to Kampala ......................................................................5-10
Figure 5.1.12: Existing Road Condition ..............................................................................................5-12
Figure 5.1.13: Profile of Northern Corridor between Bujumbura/Burundi and
Mombasa/Kenya ..............................................................................................................5-13
Figure 5.1.14: Current Condition of Meter Gage System ..................................................................5-14
Figure 5.1.15: Current Mombasa Port Photos on July 2015 .............................................................5-16
Figure 5.1.16: Freight Volume at Mombasa Port (2010-2014) ..........................................................5-17
Figure 5.1.17: Airport Cargo Volume in Kenya and Uganda .............................................................5-18
Figure 5.1.18: Cargo Throughput at Port Bell between 1996 - 2014 ................................................5-19
Figure 5.1.19: Border Posts in Kenya and Uganda ............................................................................5-20
Figure 5.1.20: Number of Vehicles Crossing the Borders surrounding Uganda ..............................5-21
Figure 5.1.21: Mukono ICD ..................................................................................................................5-26
Figure 5.1.22: Existing Daily Traffic Volumes and Future Traffic Volumes Assumed
Increase of Cargo by 3 Times .........................................................................................5-28
Figure 5.1.23: Kenyans Stuck in '50km' Traffic Jam on Nairobi-Mombasa Road ...........................5-29
Figure 5.1.24: Percent Change Mombasa Port and RVR Cargo 2010-2014 .....................................5-30
Figure 5.1.25: Malaba Crossing Time .................................................................................................5-32
Figure 5.1.26: Traffic Volume as Malaba and Busia ..........................................................................5-33
Figure 5.2.1: Preliminary Freight Traffic Demand Forecasting FlowChart ....................................5-35
Figure 5.2.2: Current Railway Shares –Actual Values and Estimated Values ................................5-37
Figure 5.2.3: Forecasting Result of Grand Total of Import and Export Commodities via the
Port of Mombasa .............................................................................................................5-38
Figure 5.2.4: Change of Freight Tonnage via Mombasa Port by Mode with the Total Cost
Change of SGR in 2030 ...................................................................................................5-40
Figure 5.2.5: Change of the Railway Freight Share via Mombasa Port with the Total Cost
Change of SGR in 2030 ...................................................................................................5-40
Figure 5.2.6: Share of Truck and Railway via Mombasa Port in 2030 - SGR with Half of
Truck cost Case ...............................................................................................................5-40
Figure 5.2.7: Vehicles (PCU) on Road Sections in Both Directions in 2015 (Upper: CBFT,
middle: Domestic Truck and Passenger Vehicle, below: Total) ....................................5-43
Figure 5.2.8:Vehicles (PCU) on Road Sections in both Directions in 2030 (Upper: CBFT,
middle: Domestic Truck and Passenger Vehicle, below: Total) ....................................5-44
Figure 5.2.9: Bottleneck on the Road in 2030 .....................................................................................5-45
Figure 5.3.1: Ongoing Road Projects in Kenya and Uganda .............................................................5-46
Figure 5.3.2: Ongoing Road Projects in Kenya and Uganda .............................................................5-47
Figure 5.3.3: Standard Gauge Railway Developments (Base Case) .................................................5-49
Figure 5.3.4: Proposed Future Development (Airport Classification) ..............................................5-52
Figure 5.3.5: Proposed Layout Plan of Entebbe International Airport ............................................5-53
Figure 5.3.6:Very Ultimate Development Plan/ Long Term Development Plan of Entebbe
International Airport ......................................................................................................5-53

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Figure 5.3.7: Schematic Drawing of Product Pipeline System in Kenya..........................................5-54

Figure 5.3.8: Image of Malaba border(Uganda) .................................................................................5-55
Figure 5.3.9: Malaba OSBP & Busia OSBP Layout Plan at Kenya Side .........................................5-56
Figure 5.3.10: Truck Demand Growth Index by Case ........................................................................5-57
Figure 5.3.11: Railway Share of Mombasa Container Cargo ............................................................5-58
Figure 5.3.12: Railway Share of Mombasa Container Non-Cargo ....................................................5-58
Figure 5.3.13: Development Strategy of Logistics on Northern Economic Corridor .......................5-61
Figure 5.3.14: Current Road Situation between Mombasa and Nairobi along Northern
Corridor in Kenya ...........................................................................................................5-62
Figure 5.3.15: Current Road Situation between Mombasa and Nairobi along Northern
Corridor in Kenya ...........................................................................................................5-63
Figure 5.3.16: Linkage Northern Economic Corridor with Central Corridor and LAPSSET .........5-64
Figure 5.3.17: Multiple lanes ...............................................................................................................5-67
Figure 5.3.18: Designated Lane (Fast Lane) ......................................................................................5-67
Figure 5.3.19: Image of Empty Container Depot with Coloration of Railway .................................5-68
Figure 5.3.20: Services of Logistics Hub .............................................................................................5-69
Figure 5.4.1: Comparison between Current EAC Practice and AEO Scheme..................................5-73
Figure 5.4.2: Photos of ASYCUDA.......................................................................................................5-74
Figure 5.5.1: Image of Logistics Center ..............................................................................................5-76
Figure 6.1.1: Map of Existing and Proposed Power Generation in Kenya .........................................6-5
Figure 6.2.1: Energy Utilities in Uganda by 2014................................................................................6-7
Figure 6.2.2: Map of Power System Development in Uganda ........................................................... 6-11
Figure 6.3.1: Catchment Areas ............................................................................................................6-13
Figure 6.3.2: Storage Volume and Nos. of Dam ..................................................................................6-14
Figure 6.3.3: Annual Deficit by Sub-catchment in 2030 under the Existing Structures
Conditions ........................................................................................................................6-16
Figure 6.3.4: Projected Water Demand and Planned Water Storage and Yield Volume .................6-16
Figure 6.3.5: Summary of Water Resources Development Plan Proposed by NWMP 2030 ............6-17
Figure 6.4.1: Catchment Areas ............................................................................................................6-17
Figure 6.4.2: Target Areas for Water Development ............................................................................6-23
Figure 6.5.1: NOFBI Backbone Fibre Optical Transmission Network .............................................6-24
Figure 6.5.2: Map of Optic Fiber Cable in Uganda ............................................................................6-26
Figure 6.5.3: Map of Development Strategy for Optic Fiber Cable in NEC .....................................6-27
Figure 6.5.4: Typical Duct ....................................................................................................................6-28
Figure 7.2.1: Organizational Structure in the National Treasury ....................................................7-10
Figure 7.2.2: Projection for Railway Development Levy (2013/14-2017/18)..................................... 7-11
Figure 7.2.3: Ceiling for the Transport Sector (billion shilling) ........................................................7-12
Figure 7.2.4:Central Bank Rate and Interest Rate from Commercial Bank in Kenya
(2010-2015) ......................................................................................................................7-13
Figure 7.3.1: Organizational Structure of Ministry of Finance, Planning and Economic
Development in Uganda .................................................................................................7-13
Figure 7.3.2: Revenue, Expenditure and Fiscal Balance in Uganda (FY2012/13 – 2019/20) .........7-15
Figure 7.3.3: Expenditure in the Transport Sector in Uganda (FY2013/14 – 2017/18)...................7-16
Figure 7.3.4: Central Bank Rate and Interest Rate from Commercial Banks (2011 – 2015) .........7-16
Figure 8.2.1: Image of Logistic Hub with ICD and Logistics Center ..................................................8-2
Figure 8.2.2: Image and Candidates of Logistic Hub in Kenya...........................................................8-3
Figure 8.2.3: Image and Candidates of Logistic Hub in Uganda ........................................................8-3
Figure 8.3.1: Proposed Spatial Structure Plan for NEC ......................................................................8-5
Figure 8.3.2: Potential Linkage with Central Corridor and LAPSSET ..............................................8-6
Figure 8.5.1: Possible Institutional Framework for Logistic Promotion and Multimodal
Transport ...........................................................................................................................8-7
Figure 9.1.1: Photographs on the First Round Stakeholder Meetings in Kenya ...............................9-5
Figure 9.2.1: Organization Chart of MOWE .........................................................................................9-6
Figure 9.2.2: Photographs on the First Round Stakeholder Meetings in Uganda........................... 9-11

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List of Tables
Table 1.1.1: Key Deliverables .................................................................................................................1-3
Table 1.1.2: Works Done So Far in Uganda ..........................................................................................1-3
Table 1.1.3: Works Done So Far in Kenya.............................................................................................1-4
Table 2.1.1: Population in EAC and NEC .............................................................................................2-1
Table 2.1.2: GDP Growth Rate in EAC and NEC .................................................................................2-1
Table 2.2.1: Socio-economic Indicators in Vision 2040 .......................................................................2-10
Table 2.3.1: Population Projection up to 2030 in Kenya ....................................................................2-14
Table 2.3.2: Population Projection up to 2030 in Uganda..................................................................2-15
Table 2.3.3: Population Projection in EAC NEC.................................................................................2-16
Table 2.3.4: GDP by Sectors in Kenya, 2006-2014 (Ksh million, constant price in 2009) ...............2-17
Table 2.3.5: Future GDP Projection in Kenya 2015-2030 ..................................................................2-18
Table 2.3.6: GDP by Sector in Uganda, 2005-2013.............................................................................2-19
Table 2.3.7: GDP Projection in Uganda 2015-2030 ............................................................................2-20
Table 2.3.8: GDP Projection in EAC and NEC countries ...................................................................2-21
Table 3.1.1: Urban and Regional Development Programs and Projects by Kenya Vision
2030 ....................................................................................................................................3-1
Table 3.1.2: Share of Population in the Urban Centers around Northern Economic Corridor
in Kenya .............................................................................................................................3-3
Table 3.1.3: Share of Population in the Urban Centers around Northern Economic Corridor
in Uganda ..........................................................................................................................3-4
Table 3.2.1: Role of Node, Network and Logistics Function ................................................................3-8
Table 3.2.2: Spatial Characteristics of Alternatives ...........................................................................3-10
Table 3.2.3: Estimation of Expected Effect of Alternatives ............................................................... 3-11
Table 4.1.1: Value Chain Selection Criteria and the Weighting .......................................................4-1
Table 4.1.2: Result of Evaluation of Long-Listed Products..................................................................4-2
Table 4.1.3: Use of the Titanium Products ............................................................................................4-3
Table 4.1.4: Value of Global and EU Import of Cut Flower and Plantings.........................................4-4
Table 4.1.5: Share of Revenue per Function along Value Chains........................................................4-4
Table 4.2.1: Selection of Long-Listed Products .....................................................................................4-7
Table 4.2.2: Pre-Selection Criteria.........................................................................................................4-7
Table 4.2.3: Result of the Pre-Selection.................................................................................................4-8
Table 4.2.4: Summary of the Selection of 4 VCs ...................................................................................4-8
Table 4.3.1: Production of Tea ..............................................................................................................4-14
Table 4.3.2: Production of Coffee .........................................................................................................4-14
Table 4.3.3: Export of Cut flower .........................................................................................................4-14
Table 4.3.4: Export Processed Fruits and vegetables .........................................................................4-14
Table 4.3.5: Production of Rice .............................................................................................................4-15
Table 4.3.6: Production Projection of Key Growth Drivers ................................................................4-15
Table 4.4.1: Production of Coffee .........................................................................................................4-22
Table 4.4.2: Production of Palm Oil .....................................................................................................4-22
Table 4.4.3: Rice Consumption .............................................................................................................4-22
Table 4.4.4: Production of Maize ..........................................................................................................4-22
Table 4.4.5: Production of Meat ...........................................................................................................4-23
Table 4.4.6: Production Projection of Key Growth Drivers ................................................................4-23
Table 4.5.1: Natural Gas Anchor Customer Development Plan ........................................................4-32
Table 4.5.2: Coal Anchor Customer Development Plan .....................................................................4-32
Table 4.5.3: Niobium Production and Market Development Plan ....................................................4-32
Table 4.6.1: Oil Product Demand Forecast .........................................................................................4-39
Table 4.7.1: Manufacturing Potential Industries in Future of Kenya ..............................................4-44
Table 4.7.2: Apparel Export of Kenya’s EPZ Enterprises under AGOA............................................4-45

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Table 4.7.3: Categories of Kenya’s Manufacturing Growth Drivers .................................................4-45

Table 4.7.4: Growth Projection of Soaps, Cosmetics and Toiletries Export of Kenya (SITC
553 & 554)........................................................................................................................4-46
Table 4.7.5: Growth Projection of Clothing Export of Kenya (SITC 84) ...........................................4-47
Table 4.7.6:Kenya’s Import of Fabrics .................................................................................................4-48
Table 4.8.1: Uganda’s Export of Iron and Steel Products ..................................................................4-51
Table 4.8.2: Categories of Uganda’s Manufacturing Growth Drivers ...............................................4-53
Table 4.8.3: Growth Projection of Uganda’s Iron and Steel Export ................................................4-54
Table 4.8.4: Growth Projection of Soap Export of Uganda (HS3401) .............................................4-54
Table 4.8.5: Growth Projection of Iron and Steel Export of Uganda.................................................4-54
Table 4.9.1: Visitor Arrival in Kenya, 2010-2014 ...............................................................................4-55
Table 4.9.2: Visitors to Parks and Game Reserves, 2010-2014 .........................................................4-56
Table 4.9.3: Hotel Bed-Nights Occupied by Zone, 2010-2014 (‘000) ..................................................4-57
Table 4.9.4: Number of Licensed Service Sector Establishments .....................................................4-57
Table 4.9.5: Main Targets over the Second MTP Period ....................................................................4-58
Table 4.10.1: Visitor Arrivals to Uganda by Region ('000) .................................................................4-61
Table 4.10.2: Visitors to National Parks (Citizens and Foreigners), 2010-14 ..................................4-62
Table 4.11.1: Kenya’s Stock and Net Inflow of FDI Liabilities by Sector in 2013 ............................4-66
Table 4.11.2: Comparison of Electricity Cost ......................................................................................4-68
Table 4.12.1: Uganda’s Actual Investment Value in 2013/2014 and the Share................................4-69
Table 5.1.1: Survey Contents and Number of Survey Sites .................................................................5-2
Table 5.1.2: Imported Lead Time in Kenya...........................................................................................5-7
Table 5.1.3: Import Transit Time ...........................................................................................................5-8
Table 5.1.4: Existing Five Major Roads on the Northern Corridor ................................................... 5-11
Table 5.1.5: Inventory of Operating Facilities (Meter Gauge System) .............................................5-14
Table 5.1.6: RVR Investments ..............................................................................................................5-15
Table 5.1.7: Cargo Volumes (Unloaded & Loaded) at Airport............................................................5-17
Table 5.1.8: Runway in Airport ............................................................................................................5-17
Table 5.1.9: Major Border Posts in Kenya and Uganda .....................................................................5-20
Table 5.1.10: Number of Vehicles Crossing the Borders surrounding Uganda ................................5-22
Table 5.1.11: Current Condition of Border Posts and Access Roads to Border Posts ......................5-23
Table 5.1.12: ICD Performance ............................................................................................................5-25
Table 5.1.13: Rail Share of Cargo Transportation in Western Developed Countries.......................5-30
Table 5.2.1: Summary of Preliminary Freight Traffic Demand Forecasting Model System ...........5-35
Table 5.2.2: Assumed Current Total Transit Time and Cost of 40 Feet Container (2015) ..............5-36
Table 5.2.3: Estimated BL Model Parameters ....................................................................................5-37
Table 5.2.4:Existing Development Projects Considered Explicitly in Preliminary Freight
Traffic Demand Forecasting ...........................................................................................5-37
Table 5.2.5: Assumption of Future Total Transit Times.....................................................................5-39
Table 5.2.6: Assumption of Future Total Transit Costs......................................................................5-39
Table 5.2.7: Forecasted OD Table by Mode between Countries ........................................................5-40
Table 5.2.8: Methodology of Future Traffic Forecasting ....................................................................5-41
Table 5.3.1: Ongoing Road Projects in Kenya & Uganda...................................................................5-46
Table 5.3.2: Ongoing Road Projects in Kenya & Uganda...................................................................5-47
Table 5.3.3: Standard Gauge Railway Developments (Base Case) ...................................................5-48
Table 5.3.4: SGR Development Schedule (Base Case) .......................................................................5-48
Table 5.3.5:SGR Operating Facilities (Base Case Development Scenario) ......................................5-49
Table 5.3.6: Meter Gauge Railway Developments (Base Case) .........................................................5-50
Table 5.3.7: Traffic Forecast in Entebbe International Airport .........................................................5-52
Table 5.3.8: Product Pipeline Expansion Project Summary ..............................................................5-54
Table 5.3.9: Summary of Malaba & Busia OSBP Project ..................................................................5-55
Table 5.3.10: Case Setting for Several Scenarios ...............................................................................5-60
Table 5.3.11: Services of Logistics Hub ...............................................................................................5-68
Table 5.4.1: Benchmark for Import Time (Kenya:from Mombasa to Nairobi) .................................5-71

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Table 5.4.2: Benchmark for Import Transit Time (Uganda: from Mombasa to Kampala) ..............5-71
Table 5.4.3: Bench mark for Export Time (Kenya: from Nairobi to Mombasa) ...............................5-72
Table 5.4.4: Bench mark for Export Transit Time (Uganda: from Kampala to Mombasa) .............5-72
Table 5.5.1: Value Added Operator Concept .......................................................................................5-75
Table 5.5.2: Improvement Plan for Logistics in Kenya ......................................................................5-77
Table 5.5.3: Development Plan on Logistic Facilities in Kenya ........................................................5-77
Table 5.5.4: Improvement Plan for Logistics in Uganda....................................................................5-78
Table 5.5.5: Development Plan on Logistic Facilities in Uganda ......................................................5-78
Table 6.1.1: The Power demand Forecast of Uganda 2015-2030.........................................................6-2
Table 6.1.2: The Development Scenario as Base Case of Power System in Kenya ............................6-3
Table 6.1.3: The Development Strategy of Power System in Kenya ...................................................6-5
Table 6.2.1: Power Demand Forecast of Uganda 2015-2030 ...............................................................6-8
Table 6.2.2: List of Future Projects of Power System in Uganda ........................................................6-8
Table 6.2.3: The Development Scenario as Base Case of Power System in Uganda .........................6-9
Table 6.2.4: The Development Strategy of Power System in Uganda...............................................6-10
Table 6.3.1: Proposed Dam Scheme .....................................................................................................6-14
Table 6.4.1: Annual and Monthly Water Balance by Catchment in 2015.........................................6-18
Table 6.4.2: Key Infrastructural Growth to be Implemented by NWSC in 2015-2018....................6-19
Table 6.4.3: Projected Water Demand by Sub-sector in Uganda .......................................................6-20
Table 6.4.4: Outline of Alternative Scenarios for Water Resources Development ...........................6-20
Table 6.4.5: Annual and Monthly Water Balance by Catchment in 2030.........................................6-21
Table 6.4.6: Components of the Kyoga Study Related to the Regional Development for NEC
..........................................................................................................................................6-22
Table 6.5.1: Development Strategy for NEC .......................................................................................6-27
Table 7.2.1: Budget and Expenditure for the Medium Term in Kenya (Ksh billion) .......................7-10
Table 7.2.2: Medium Term Ceiling for the Transport Sector .............................................................7-12
Table 7.3.1: Budget and Expenditure for the Medium Term in Uganda (Ush billion) ....................7-14
Table 7.3.2: Key Infrastructure Projects in the 2nd National Development Plan (USD
million) .............................................................................................................................7-16
Table 8.1.1: Future Target for Reduction of Bottlenecks .....................................................................8-2
Table 8.2.1: Candidates of Growth Driver in Kenya and Uganda ......................................................8-4
Table 9.1.1: Baseline Environmental and Social Conditions ...............................................................9-3
Table 9.1.2: Summary of Date and Venue of 1st Round of Stakeholder Meetings in Kenya .............9-4
Table 9.1.3: Example of Time Table of 1st Round of Stakeholder Meetings in Kenya ......................9-4
Table 9.2.1: Baseline Environmental and Social Conditions ...............................................................9-9
Table 9.2.2: Summary of Date and Venue of 1st Round of Stakeholder Meetings in Uganda .........9-10
Table 9.2.3: Example of Time Table of 1st Round of Stakeholder Meetings in Uganda ...................9-10

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List of Abbreviations
ACA Athi Catchment Area
AEO Authorized Economic Operator
AFDB Africa Development Bank
AFFA Agriculture, Fisheries & Food Authority.
BIDCO Business & Industrial Corporation
BL Binary Logic
BLT Build-Lease-and-Transfer
BOOT Build-Own-Operate-Transfer
BPS Budget Policy Statement
CBFT Cubic Feet
CBM Cross Border Market
CFS Container Freight Station
CM Common Market
CoK Constitution of Kenya
COMESA Common Market for Eastern and Southern Africa
CU Custom Union
CY Container Yard
D/O Delivery Order
DFR Draft Final Report
DOT Develop-Operate-and-Transfer
DPC Data Processing Centre
DRC Democratic Republic of Congo
DRIMS Dynamic Response Intelligence Monitoring System
DWP Department of Water for Production
DWRM Directorate of Water Resources Management
EA Environment Auditor
EAC East Africa Community
EAR&H East African Railways and Harbors Corporation
EARNP East Africa Road Network Project
EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization
ECTS Electric Cargo Tracking System
EFC Expected Further Clearance
EIA Environment Impact Assessor
EITI Extractive Industries Transparency Initiative
EL Exploration License
ENNCA Ewaso Ngiro North Catchment Area
EP Environment Partner

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EPZ Export Processing Zone

EPZA Export Processing Zone Authority
ERA Electricity Regulatory Authority
ERB Electricity Regulatory Board
ERC Energy Regulatory Commission
ERP Enterprise resource planning
EU European Union
FCL Full Container Load.
FDB Facilities Database
FDI Foreign Direct Investment
FLP Freight Logistic Platform
FR Final Report
FTA Free Trade Area
GAP Global Access Project
GDC Geothermal Development Company
GDP Gross Domestic Product
GIS Geographical Information System
GOJ Government of Japan
GOK Government of Kenya
GOTS Global Organic Textiles
GOU Government of Uganda
GPS Global Positioning System
HACCP Hazard Analysis & Critical Control Points
HGV Heavy Goods Vehicle
ICT Information & Technology
IFC International Finance Corporation.
IMF International Monetary Fund
IPPs Independent Power Producers
IRI International Roughness Index
IRWR Internal Renewable Water Resources
ISO International Standard of Organization
JICA Japan International Cooperation Agency
JIT Just In Time
KAA Kenya Airports Authority
KCB Kenya Commercial Bank
KCCL Kasese Cobalt Company Ltd
KenGen Kenya Electricity Generation Company
KETC Kenya Electricity Transmission Company
KFC Kenya Fluorspar Company

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KFRI Kenya Forest Research Institute

KFS Kenya Forest Service
KIFWA Kenya International Freight & Warehousing Association
KNBS Kenya National Bureau of Statistics
KNEB Kenya Nuclear Electricity Board
KOICA Korea International Corporation Agency
KPA Kenya Ports Authority.
KPC Kenya Pipeline Company
KPLC Kenya Power and Lighting Company
KRA Kenya Revenue Authority
KRC Kenya Railways Corporation
KTA Kenya Truck Association
KWS Kenya Wildlife Service
LAPSSET Lamu Port-South Sudan-Ethiopia Transport
LCL Less than Container Load.
LGV Light Goods Vehicle
LNG Liquefied Natural Gas
LoS Level of Service
LVNCA Lake Victoria North Catchment Area
LVSCA Lake Victoria South Catchment Area
MAAIF Ministry Of Agriculture Animal Industry and Fisheries
MC Management Contract
MEMD Ministry of Energy and Mineral Development
MGV Medieum Goods Vehicle
ML Mining Lease
MoEP Ministry of Energy and Petroleum
MOFPED Ministry of Finance Planning Economic Development
MOIED Ministry of Industrialization Enterprise Development
MOLG Ministry of Local Government
MoLHUD Ministry of Lands, Housing and Urban Development
MoTI Ministry of Transport & Infrastructure
MoTWA Ministry of Tourism, Wildlife and Antiquities
MoU Memorandum of Understanding
MoWI Ministry of Water and Irrigation
MoWT Ministry of Works & Transport
MP Master Plan
MTIC Ministry of Trade, Industry and Cooperatives
MTP Medium Term Plan
MV Massive Vessel

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MWE Ministry of Water and Environment

NAADS National Agriculture Advisory Services
NARO National Agriculture Research Organization
NCIMP Northern Corridor Infrastructure Master Plan
NCTIP Northern Corridor Transport Improvement Project
NCTTCA Northern Corridor Transit & Transport Coordination Authority
NDP National Development Plan
NDP National Development Policy
NEC Northern Economic Corridor
NEMA National Environment Management Authority
NEPAD The New Partnership for Africa Development
NLC National Land Commission
NPA National Planning Authority
NRW Non-Revenue Water
NSP National Spatial Plan
NUCAFE National Union of Coffee Agribusinesses and Farm Enterprises
NUDP National Urban Development Policy
NWSC National Water and Sewerage Corporation
OD Origin Destination
OPBC Output Performance Based Contract
OSBP One Stop Border Post
OVOP One Village One Product
PCU Passenger Car Unit
PIBID Presidential Initiative for Banana Industry Development
PPP Public Private Partnership
PSC Product Sharing Contract
PSIP Power Sector Investment Plan
REA Rural Electrification Authority
REA Rural Electrification Agency
REB Rural Electrification Board
REE Rare Earth Elements
REF Rural Electrification Fund
RFQ Request for Qualification
ROT Rehabilitate-Operate-and-Transfer
RTD Regional Transportation District
RVCA Rift Valley Catchment Area
RVR Rift Valley Railways
SADC Southern African Development Cooperation
SCADA Supervisory Control and Data Acquisition System

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SCT Single Customs Territory

SEZs Special Economic Zones
SGR Standard Gauge Railway
SME’s Small Medium Enterprises
SPV Special Purpose Vehicle
SW South West
SWOT Strength Weakness Opportunity and Threats
TCA Tana Catchment Area
TFTA Tripartite Free Trade Area
TMP Transport Master Plan
TMWDP Thwake Multi-purpose Water Development Program
TOR Terms of Reference
TWG Technical Working Group
UAE United Arab Emirates
UBOS Uganda Bureau of Statistics
UDC University of the District of Columbia
UEDCL Uganda Electricity Distributing Company Ltd
UEGCL Uganda Electricity Generating Company Ltd
UETCL Uganda Electricity Transmission Company Ltd
UIA Uganda Investment Authority
UMA Uganda Manufactures Association
UNBS Uganda National Bureau of Standards
UNRA Uganda National Roads Authority
URA Uganda Revenue Authority
URC Uganda Railways Corporation
VAT Value Added Tax
VCS Value Chain Survey
WENRECO West Nile Rural Electrification Company

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CHAPTER 1 : INTRODUCTION

1.1 Background & Objective

1.1.1 Background

The Northern Corridor is a multi-modal corridor, consisting of road, rail, pipeline, and inland waterways
transport, and is recognized as a significant corridor for logistics in East Africa. The main road network
runs from Mombasa Sea Port through Kenya and Uganda to Rwanda and Burundi and to Democratic
Republic of Congo (DRC). The road network also links Kenya and Uganda to Juba in South Soudan. The
importance of the Northern Corridor is increasing and the current combined transit and transshipment traffic
through the Corridor has been growing at a rate of 20 percent annually.

However, there are some obstacles in Northern Corridor, such as inadequate infrastructure, poor
interconnectivity of modes, long delays (stagnation) of cargo at the port and broad post, and lack of goods to
transport for the return trip from the inland area to Mombasa port. These obstacles raise the transport cost
within the Corridor, which accounts for about 30% of the value of the goods. The high transport cost is one
of the major obstructive factors that hinder economic development of the region, especially inland area.

In this context, the Government of Uganda (GOU) requested Government of Japan (GOJ) to implement a
project to formulate a master plan on logistics in Northern Corridor in order to promote regional
development. Concurrently with this, the Government of Kenya (GOK) also requested GOJ for a project
on Northern Corridor which shares same goal and outputs.

In response to the request of GOU and GOK, Japan International Cooperation Agency (JICA) dispatched
“Detail Design Formulation Team for the project” in October and November, 2014. The team proposed to
apply a project concept as Northern Economic Corridor, since the project should cover not only logistics but
also the regional development along the Northern Corridor. The GOU and GOK agreed with the concept
and signed the Record of Discussion with JICA for the implementation of the Project for Formulation of the
Master Plan on Logistics in Northern Economic Corridor (hereafter the Project).

1.1.2 Objective

The objective of the Project is to formulate a Master Plan on Logistics for Northern Economic Corridor,
along with integrated regional development strategy consistent with sub-regional development plans and
national development plans.

1.1.3 Target Year

The target year of the Master Plan on Logistics for Northern Economic Corridor (hereafter MP) is 2030.

1.1.4 Target Area

The target areas for the MP will cover the following routes which are part of Northern Economic Corridor
and its surrounding areas:

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• Main route: Mombasa-Nairobi-Tororo-Kampala-Katuna-(Kigali/Rwanda);

• Sub-route: Eldoret - Nadapal – (Juba/South Sudan);
• Sub-route: Tororo - Gulu – Elegu – (Juba/South Sudan);
• Sub-route: Kampala- Gulu – Elegu – (Juba/South Sudan); and
• Sub-route: Mbarara- Mpondwe– (Kisangani/D.R.C).

The above routes are illustrated in the Figure 1.1.1 below.

Source: JICA Study Team

Figure 1.1.1: Routes of Northern Economic Corridor Scope of Work and Work Progress

1.1.5 Overall Scope of Work

The project have to cover nine tasks, namely: 1) Understanding of Current Situation and Issues (situational
analysis) ; 2) Freight Transport Survey, Market Survey, and Freight Lead Time Survey, 3) Identification of
Development Potentials and Bottlenecks, 4) Formulation of Development Vision, 5) Establishment of Social
and Economic Framework, 6) Formulation and Comparison of Alterative Development Scenarios, 7)
Formulation of Comprehensive Development Strategy, 8) Development of Draft Master Plan on Logistics
with Regional Development Strategy, and 9) Technical Support to Strategic Environmental
Assessment/Stakeholder Meetings. The main tasks and the current progress are shown below.

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2015 2016
Major Tasks
Mar-Jun Jul-Sep Oct-Dec Jan-Mar Apr-Jun Jul-Sep
Understanding of Current Situation and Issues
(Situational Analysis)
Freight Transport Survey, Market Survey, and Additional Market Survey
Freight Lead Time Survey
Identification of Development Potentials and
Bottlenecks
Formulation of Development Vision
Establishment of Social and Economic
Framework
Formulation and Comparison of Alternative
Development Scenarios
Formulation of Comprehensive Development
Strategy
Development of Draft Mater Plan on Logistics
with Regional Development Strategy
Strategic Environmental Assessment/
Stakeholder Meetings

Deliverables ICR PGR1 PGR2 ITR DFR FR

Source: JICA Study Team

Figure 1.1.2: Main Tasks and the Current Progress

The purpose of the Progress Report No.2 is to show assessment results of the potentials and the bottlenecks,
social and economic framework, development vision, and development strategy. In addition, other reports
listed in Table below will be or were prepared and submitted as the outputs of the Study.

Table 1.1.1: Key Deliverables

Submission
No Report Language No. of Copies
Month
Inception Report 25 copies
1 April 2015 English
Plan and Deliverables Approved
Progress Report 1 25 copies
2 August 2015 English
Situation Analysis and Preliminary Assessment of Current Bottlenecks Approved
Progress Report 2
25 copies
3 Bottleneck and Potential Assessment December 2015 English
Draft Prepared
Framework of Regional Economy and Logistics Development
Interim Report
4 February 2016 English 25 copies
Comprehensive Development Strategy for Northern Economic Corridor
Draft Final Report (DF/R)
5 June 2016 English 25 copies
Draft Logistics Master Plan with Regional Development Strategy
Final Report（F/R）
6 September 2016 English 25 copies
Final Logistics Master Plan with Regional Development Strategy

1.1.6 Work Done

The following works have been done so far.

Table 1.1.2: Works Done So Far in Uganda

No Activity Date Remarks
1 Commencement of Work 17 March 2015
March and April MoWT arranged office space and necessary
2 Arrangement of Office
2015 equipment
3 Meeting with MoWT 25 March 2015 Explanation of Outline of the Study
Explanation of Inception Report for
4 Meeting with TWG 01 April 2015
Comments
Tender and Contracting for Market and Value Chain 24 March – Awarded Contractor is Management
5
Survey 01 April 2015 Innovations
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No Activity Date Remarks

Tender and Contracting for Good Movement and
6 01 – 24 April 2015 Awarded Contractor is Steward Consultancy
Traffic Survey
7 Participation to Logistics Platform Workshop 13 April 2015 Organized by Trade Mark
8 Steering Committee Meeting for Draft Inception Report 30 April 2015 Inception Report was approved.
Sub-Group of TWG for Regional
9 Workshop for Market and Value Chain Survey 19 June 2015
Development was participated.
Submission of Progress Report No.1 for Market and Main Content is Long list and Selection of 4
10 26 June 2015
Value Chain Survey VCs.
Meeting with for Sub-Group of TWG for Logistics and Purpose is to present findings of JICA Team
11 15 July 2015
Related Infrastructure and discuss those in terms of logistic sector.
Submission of Progress Report No.2 for Market and Main content is End Market Analysis for 4
12 20 July 2015
Value Chain Survey VCs.
13 Submission of Draft Progress Report 1 for TWG 18 August 2015 Presentation of the Progress Report 1
Submission of Draft Progress Report 1 for 2nd Steering
14 25 August 2015 Presentation of the Progress Report 1
Committee Meeting
Sub-Group of TWG for Regional
15 Workshop for Market and Value Chain Survey 4 September 2015
Development was participated.
Main content was to develop a
Working Group Meeting for Socio Economic
15 27 October 2015 socio-economic framework Development
Framework and Vision Development
Vision for MP
Sub group meeting for Logistics and Related Main content was results of Goods
16 4 November 2015
Infrastructure of TWG Movement and Vehicle Traffic Survey.
Stake holder consultative meeting for Strategic 16 – 20 November Main Content was to undertake a SEA of
17
Environment Assessment (SEA) of MP 2015 MP. Held in Kampala, Mbarara, Tororo

Table 1.1.3: Works Done So Far in Kenya

No Activity Date Remarks
1 Commencement of Work 21 March 2015
March and April MOTI arranged office space and necessary
2 Arrangement of Office
2015 equipment
Explanation of Outline of the Study to Chief
3 Meeting with MOTI 25 March 2015
Engineer
Explanation of Inception Report for
4 Meeting with TWG 15 April 2015
Comments
Tender and Contracting for Market and Value Chain 16 March – 14
5 Awarded Contractor is PANAFCON Ltd
Survey April 2015
Tender and Contracting for Good Movement and Awarded Contractor is ITEC Engineering
6 01 – 28 April 2015
Traffic Survey Ltd
Participation to Road Side Station (RSS) Investors’
7 28 April 2015 Organized by NCTTCA
Conference
8 Steering Committee Meeting for Draft Inception Report 29 April 2015 Inception report was approved.
Sub-Group of TWG for Regional
9 Workshop for Market and Value Chain Survey 19 June 2015
Development was participated.
Submission of Progress Report No.1 for Market and Main content is Long list and Selection of 4
10 26 June 2015
Value Chain Survey VCs.
Submission of Progress Report No.2 for Market and Main content is End Market Analysis for 4
11 20 July 2015
Value Chain Survey VCs.
The purpose is to present findings of JICA
Meeting with for Sub-Group of TWG for Logistics and
12 23 July 2015 Team and discuss those in terms of logistic
Related Infrastructure
sector.
13 Submission of Draft Progress Report 1 for TWG 21 August 2015 Presentation of the Progress Report 1
Submission of Draft Progress Report 1 for 2nd Steering
14 26 August 2015 Presentation of the Progress Report 1
Committee Meeting
Sub group meeting for Logistics and Related Main content was results of Goods
15 16 October 2015
Infrastructure of TWG Movement and Vehicle Traffic Survey.
Main content was to develop a
Working Group Meeting for Socio Economic
16 6 November 2015 socio-economic framework Development
Framework and Vision Development
Vision for MP
Main Content was to undertake a SEA of
Stake holder consultative meetings for Strategic 2-11 November
17 MP. Held in Mombasa, Nakuru, Nairobi,
Environment Assessment (SEA) of MP 2015
Kisumu and Malaba

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CHAPTER 2 : DEVELOPMENT VISION AND FRAMEWORK

2.1 Overview of Northern Economic Corridor and EAC

2.1.1 Socio-Economy

East African Community (EAC) has a total area of 1,82 million km2, with a total population of 145.5 million
in 2014. The most populous country in EAC is Tanzania, accounting for 47.2 million in 2014, followed by
Kenya (43.0 million) and Uganda (34.7 million). The average population growth in the region is estimated at
2.6 percent in 2014, and the highest growth rate is recorded in Uganda (3.0%) and Burundi (3.0%). The
region’s population density has grown modestly from 78.3/km2 to 84.7/km2 during the past 5 years, and the
highest density is in Rwanda (434/km2), followed by Burundi (373.5/km2) and Uganda (173.0/km2). The
economy in EAC has grown steadily during the past 5 years, as shown in Table 2.1.2. The highest average
GDP growth was recorded in Tanzania (8.7%), followed by Rwanda (7.0%) and Kenya (5.3%). In terms of
per capita income, Kenya became a lower-middle income country in 2013, with per capita income of
USD1,055, followed by Tanzania (USD742.6) and Rwanda (USD709). Burundi is lowest in terms of per
capita income, which accounts for USD294.2 in 2013.

Table 2.1.1: Population in EAC and NEC Table 2.1.2: GDP Growth Rate in EAC and NEC
(Unit: million persons) (Unit: %)
Region/Country 2010 2011 2012 2013 2014 Region/Country 2010 2011 2012 2013 2014
Burundi 8.6 8.9 9.1 9.4 9.7 Burundi 5.0 2.0 -9.0 -3.0 5.0
Tanzania 43.9 44.5 44.9 46.2 47.2 Tanzania 6.1 9.0 4.9 5.1 8.7
Uganda 30.8 31.8 32.7 33.7 34.7 Uganda 9.7 4.4 3.3 4.6 4.9
Kenya 38.5 39.5 40.7 41.8 43.0 Kenya 8.4 6.1 4.6 5.7 5.3
Rwanda 10.0 10.2 10.5 10.7 10.9 Rwanda 7.0 7.0 9.0 5.0 7.0
EAC 131.8 134.9 138.0 141.8 145.5 EAC
DRC 62.2 63.9 65.7 67.5 69.4 DRC 7.1 6.9 7.2 8.5 9.1
South Sudan 9.9 10.4 10.8 11.3 11.7 South Sudan - - -46.8 24.2 5.5
NEC 161.0 165.8 170.9 176.1 179.4 NEC
Total 204.9 210.3 215.9 222.3 226.6 Source: EAC Facts and Figures 2015, EAC; World Population
Source: EAC Facts and Figures 2015, EAC; World Population Prospect: The 2012 Revision, UN
Prospect: The 2012 Revision, UN

Along the Northern Economic Corridor

(NEC), the Northern Corridor Transit and
Transport Coordination Authority (NCTTCA)
was established in 1985 by 5 member
countries, which included Kenya, Uganda,
Rwanda, Burundi, and DRC. The membership
was increased to 6 countries when South
Sudan joined in 2012. The total population in
NEC stands at 179.4 million in 2014, and
DRC is the most populous country among the
member states, with 69.4 million. The highest
population growth was recorded in South Source: Northern Corridor Transport Observatory Report, December 2014
Figure 2.1.1: NCTTCA Member States and Transport System
Sudan during the past 5 years, which accounts
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for 4.3% of growth rate. DRC demonstrated strong macroeconomic performance during the past 5 years, and
the economy has grown by the average annual growth of 7.8%. The performance of economy of newly
established South Sudan is still fluid due to the fluctuation in oil production and political instability. The
shutdown of oil production in 2012 negatively affected the economy of South Sudan. Oil production resumed
to more than 235,000 barrels per day by the end of 2013.

2.1.2 Trade

Regional trade within EAC has been growing significantly with the establishment of EAC Custom Union in
2004 and the EAC Common Market in 2010. The total intra-EAC trade was recorded at USD5,806 million in
2013, and grown by 16.2 % during the 2010-2013 period.

Source: Northern Corridor Transport Observatory Report, Source: Northern Corridor Transport Observatory Report, December
December 2014 2014
Figure 2.1.2: Total Intra-EAC Trade, 2010-2013 Figure 2.1.3: Trade Balance in Kenya, 2010-2014

In Kenya, the trade balance has been deteriorating during the past 5 years, as shown in Figure 2.1.3. This was
mainly attributed to the increasing import such as machinery and transport equipment and the slower growth
of export. EAC is the biggest destination for export, comprising 23.4% of the total export in Kenya. Together
with the rest of COMESA countries, around 40% of export is destined to the COMESA area. The largest
export destination along the Northern Corridor was Uganda, which received Ksh60.8 billion of export from
Kenya in 2014. The main export item from Kenya to Uganda was Cement (Ksh4,551 million), followed by
iron and steel bars (Ksh2,600 million) and oil products (Ksh2,217 million).

Source: Economic Survey in 2014, KNBS Source: Economic Survey in 2014, KNBS
Figure 2.1.4: Export by Destination in 2014 Figure 2.1.5: Import by Destination in 2014

In terms of import, EAC and COMESA countries have a lower share, compared to Asian counties such as
India (16%) and China (15%), as shown in Figure 2.1.5. Import from EAC countries increased significantly
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by 15.9% between 2010 and 2014, and import from COMESA increased by 7.7% during the same period.
Overall, the growth of import exceeded that of export, which resulted in the increased deficit in current
account by Ksh1,081 billion in 2014.

In Uganda, East African Community (EAC) is

also the main export destination, accounting for
USD 782 million or 29% of export in 2013.
Figure 2.1.7 shows the destination of export and
import to Uganda in 2014. Other COMESA
countries were the 2nd largest export destination.
The export to Africa comprises 63% of total
export in 2013. Export to Kenya is the largest
among the neighboring countries, standing at
13.6% of the total export, followed by South
Sudan (10.8%), DRC (9.5%) and Rwanda Source: Economic Survey in 2014, KNBS
(8.6%). Export to Sudan declined from USD Figure 2.1.6: Trade Balance in Uganda
633 million in 2009 to USD 546 million (together with South Sudan) in 2013. The instability in South Sudan
affected the trade balance negatively in Uganda. The main export item from Uganda to Kenya in2011 was
Tea (USD71.87 million), followed by dried vegetables (USD14.45 million) and maize (USD14.35 million).

The largest import to Uganda was recorded from India, which accounted for 26% of the total import,
followed by Europe (13%) and EAC (11%). Import from India increased rapidly by 31% annually between
2009 and 2013. Among the neighboring countries, Kenya was the largest import supplier to Uganda, standing
at 10% of import. Compared to export, import from African countries remains to be small, with 17.4% of the
total value.

Source: JICA Study Team based on the data from Statistical Source: JICA Study Team based on the data from Statistical
Abstract 2014 Abstract 2014
Figure 2.1.7: Export by Country in 2013 Figure 2.1.8: Import by Country in 2013
(% of Total Trade) (% of Total Trade)

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2.1.3 Regional Integration in East Africa

(1) East African Community

East African Community (EAC) is a

regional international organization and
was officially established under Article 2
of the Treaty for the Establishment of the
EAC in 2000. The original member
countries were Uganda, Kenya and
Tanzania, which were then expanded to
include Burundi and Rwanda,
comprising 5 member countries.
Currently, South Sudan is in the process
of participating in EAC. A Protocol for
the establishment of Custom Union (CU)
was signed in 2004 and its
implementation started in January 2005.
Another milestone was the establishment
of the EAC Common Market (CM). The
Protocol on the Establishment of the
EAC CM entered into effective in 2010.
The Partner States in EAC has currently
negotiated with DRC and South Sudan
for their participation in the Common
Market in EAC.

In the transport sector, East African

Transport Strategy and Regional Road
Sector Development Program were
Source East African Transport Strategy and Regional Road Sector
prepared in 2011, in cooperation with the Development Program, 2011
African Development Bank. The EAC Figure 2.1.9: EAC Corridor
Road Sector Development Program identified 10 road corridors, with the total network length of 14,460km,
as shown in figure 2.1.9. Northern Corridor is linked to several corridors such as (1) Coastal corridor, (2)
Namanga corridor, (3) Gulu Corridor, (4) Sirari corridor, (5) Tanga corridor, and (6) Central corridor. Further
to the main corridor, EAC identified 24 feeder corridors. The interview with the EAC Secretariat revealed
that, in addition to NEC, Central Corridor and LAPSSET, the following corridors are considered as a priority
for regional integration:

• Ring road around the Lake Victoria and Tanganyika

• Namanga Corridor (Moyale-Arusha-Dodoma)
• Gulu Corridor (Tororo- Gulu-Nimule/Pakwach)
• Coastal Corridor (Lamu-Mombasa-Dar es Salaam)

In addition to the linkage in EAC, the connection to Kisangani (DRC) and Juba (South Sudan) are
increasingly crucial, and the link to Ethiopia through oil pipeline and power trade will be significant for
regional integration.

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In the railway sector, EAC provided the Railway Master Plan in 2009. The Master Plan considers that the
railway sector and associated rail- marine services have the potential to play an important role in the future
development of EAC, in particular, for long-distance freight and bulk transport, as well as urban transport
and medium distance inter-city passenger transport. Based on the Master Plan, Railway Sector Enhancement
Project has been carried out to prepare an investment package and a policy program in the railway sector.

Recently, EAC has launched the Regional Transport Intermodal Strategy and Action Plan, in cooperation
with the World Bank. Inland waterway used to be a hub of regional trade, and EAC identified the importance
of reviving and promoting inland waterway to facilitate regional trade. EAC produced a Strategy and Action
Plan for Intermodal Development in 2015, which aims at implementing an efficient, rail-centric, inter-modal
transport system along the Central and Northern Corridors in the EAC countries. The restoration of marine
transport in Lake Victoria and Lake Tanganyika as well as rehabilitation programs, especially railways, are
focused in Action Plan of this Strategy. During the Summit of EAC on December 2014, EAC endorsed a
proposed 10 year investment strategy for priority infrastructure projects. The World Bank pledged USD1.2
billion towards intermodal transport infrastructure development for the next 10 years.

The establishment of East African Development Fund has been in progress, which aims at financing the
preparatory stage of regional projects, but this fund could be autonomous under the East African
Development Bank. For regional projects, EAC has been preparing a legal framework for PPP, which
considers a risk-taking and safeguard issues for private sector’s involvement.

(2) Northern Corridor Transit and Transport Coordination Authority (NCTTCA)

The Northern Corridor Transit and Transport Coordination Authority (NCTTCA) is a regional
intergovernmental organization that is mandated to facilitate trade and transport in the Member State. The
Northern Corridor Transit and Transport Agreement was signed in 1985 and ratified in 1986 by 5 member
countries, which included Kenya, Uganda, Rwanda, Burundi, and DRC. The membership is increased to 6
countries to include South Sudan in 2012.

The NCTTCA formulated the

Northern Corridor
Infrastructure Master Plan in
2011, with the support from
the African Development
Bank. Each member state is
to implement and finance the
identified projects in the
Master Plan. Monitoring of
the Master Plan has been
undertaken by the Permanent
Secretariat, and the Northern
Corridor Transport
Observatory Portal is used to
monitor and measure the
performance along the
Source Roadside Stations Investor’s Conference, 2015
corridor (http://top.ttcanc.org) Figure 2.1.10: Proposed Roadside Station
with the support from Trade
Mark East Africa. The Northern Corridor Spatial Development Program was prepared in 2012, with a
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support from New Partnership for Africa’s Development (NEPAD). The Study identified several
opportunities for regional development such as Anchor Investment Projects along the Northern Corridor,
which includes (1) Kondo iron ore resources in DRC, (2) Oil and gas in Lake Albert in Uganda and DRC, (3)
Tororo Phosphate, among others. A business plan for the identified projects is prepared in the Study and a
supplementary study, was conducted in June 2015. The business investment profiles are provided by each
member country and by sectors (agriculture, mining, industry and services).

In addition, the NCTTCA has conducted a study on Roadside Station, with support from Trade Mark East
Africa. A total of 142 locations were identified, among which 67 priorities were selected (Figure 2.1.9).
Around 22 locations are planned to be implemented by the private sector. During the first phase,
approximately 20 locations will be constructed. This roadside station is expected to reduce the traffic on the
Corridor, and provide social and safety services, and promote commercial activities such as supermarket,
restaurant, petrol station, and so on.

(3) Northern Corridor Integration Project (NCIP)

NCIP is a new initiative, led by the Presidents of three countries, namely, Uganda, Rwanda, and Kenya.
Three Presidents had a meeting at Entebbe on 2013 to discuss the cooperation and speed-up of development
in the region, which was renamed to the Northern Corridor Integration Projects (NCIP). South Sudan became
a member of NCIP and each country established a special office to coordinate the initiative. Recently, DRC
joined in the NCIP on October 2015. NCIP is to implement a fast-track project with the leadership from the
Heads of the State. A vision of NCIP is a Northern Corridor that is fully integrated to facilitate the
competitiveness of the region in the global market. While NCIP facilitates the fast-track projects, the
NCTTCA works closely with NCIP in planning, monitoring, and evaluating transport, trade and other
projects along the Northern Corridor.

The framework of NCIP promotes the following projects related the Northern Corridor:
• Single Custom Territory
• Crude Oil Pipeline Development
• Standard Gauge Railway

2.2 Development Vision for Northern Economic Corridor

2.2.1 Vision Formulation Procedure

Figure 2.2.2 shows procedures for formulating the Development Vision for Northern Economic Corridor. As
shown in this figure, the following procedures were taken to formulate the Vision:

(1) Review of the Vision, policies, and strategies in Kenya and Uganda
(2) Preparation of a draft Development Vision in consultation with counterpart
(3) Discussion and elaboration in sub-group Working Group Meeting on Development Vision in Kampala
(4) Discussion and elaboration in sub-group Working Group Meeting on Development Vision in Nairobi
(5) Confirmation of the proposed Development Vision with Kenyan and Ugandan participants through
e-mail communication
(6) Public consultation in stakeholder meetings

First, the JICA Study Team reviewed the Kenya Vision 2030, Uganda Vision 2040, transport and industrial
policies and strategies, in order to understand the development vision of the governments and national

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development plans. Then, a draft Development Vision was prepared through the consultation with
counterpart in Uganda.

The sub-group Working Group Meeting was held in Kampala on 27 October 2015 in order to discuss and
elaborate the proposed Development Vision, in which 8 representatives from Ministry of Work and Transport,
one representative from Ministry of Finance, Planning, and Economic Cooperation, one representative from
Uganda Bureau of Statistics, and two representatives from JICA Uganda Office participated. The revised and
proposed Development Vision from this meeting was then consulted with the outcome of this meeting was a
revised proposed Development Vision which was basis of consultation with counterpart in Kenya, after
which the sub-group Working Group Meeting was held in Nairobi on 6 November 2015. Two representatives
from Ministry of Transport and Infrastructure, one representative from the National Treasury, one
representative from Northern Corridor Transit and Transport Coordination Authority participated in this
meeting. Since there were several revisions in the Development Vision, e-mail-based consultation was made
to Ugandan and Kenyan participants in order to confirm the proposed Vision and formulate one
Development Vision for the Master Plan.

Finally, public consultation with relevant stakeholder on the proposed Development Vision will be held at the
later stage of the Master Plan.

2.2.2 Reviews of Development Visions in the Related Plans and Strategies

(1) Development Vision in Kenya

The Kenya Vision 2030 is a long-term development plan of the country, which aims to transform Kenya into
“a newly-industrialized, middle income country
providing a high quality of life by 2030”. The
Vision 2030 is planned to be achieved through the
five year Medium Term Plan (MTP), and currently
Kenya has been implementing the 2nd MTP, which
started from 2012 and will end by 2017.

The 2nd MTP outlines 16 priority areas, including,

among others, infrastructure, industrialization,
improved trade, investment to support growth, and
Lamu
competitiveness and rebalancing growth. In this
period, the government focuses on increasing its
trade share in the regional and other emerging Proposed SEZ
market, and expanding infrastructure investment
such as roads, railway, ports, and ICT in order to Source: Based on Kenya Vision 2030
“make Kenya a top logistic hub”. Figure 2.2.1: Potential Industrial Aras Identified by
Vision 2030 and Proposed SEZs

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Source: JICA Study Team

Figure 2.2.2: Procedures for Formulating the Development Vision

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The development of Lamu Port, South Sudan and Ethiopia Transport (LAPSSET) corridor and mineral
resources sector as well as private sector investment in infrastructure are given a priority in the 2nd MTP. In
the transport sector, railway is a desired mode of freight transport, and it is planned to increase cargo freight
by railway from the current less 5% to 50%. The crude oil pipeline is planned to be constructed along the
LAPSSET.

The MOIED identified the

potential areas for the
establishment of Special
Economic Zones (SEZs) in (1)
Mombasa, (2) Lamu, (3)
Naivasha, and (4) Kisumu, three
of which are located along the
Northern Corridor. Furthermore,
MOIED formulated the Industrial
Transformation Program in 2015,
in which potential industrial parks
and zones were identified along
the Northern Corridor and
LAPSSET. As shown in Figure
2.2.3, Kisumu (potential SEZ,
cotton, iron industry, etc), Nakuru
(horticulture, etc.), Naivasha
(potential SEZ, geo-thermal
energy, horticulture, textile, etc),
Nairobi/Athi River (leather,
tannary, etc), Sultan Hamud, Voi
(iron extraction, sisal, SME Park),
Mombasa (Dongo Kundu SEZ,
garment, etc) were identified as
Source: Kenya’s Industrial Transformation Program
potential industrial park or SEZ Figure 2.2.3: Potential Industrial Park/Zone in Kenya
along the Northern Corridor.
Furthermore, Eldoret was identified as a potential SEZ, developing a textile industry and other
agro-processing industries. A petro-chemical industrial cluster is planned to establish near Baringo.

With the construction of Standard Gauge Railway (SGR) between Mombasa and Nairobi, industrial parks are
planned to be established at the stations of SGR, which includes Nairobi, Kisumu, Athi River, and Eldoret. It
is therefore considered that designing infrastructure around the proposed industrial parks, regional trade, and
transporting mineral resources are the key for infrastructure development in Kenya.

(2) Development Vision in Uganda

The Vision 2040 is to attain “a Transformed Ugandans Society from Peasant to a Modern and Prosperous
County within 30 years”. The Vision 2040 details a number of socioeconomic indicators and targets that are
to be developed within 30 years. The Vision 2040 aims at transforming Uganda from a predominantly low
income country with per capita income of USD506 to a competitive middle income country with USD 9,500
per person by 2040. In the transport sector, the government aims at transforming the current coverage of
paved road (4% of total) to 80% of total road network. In addition, a railway is a desired mode of freight
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transport and it is anticipated to increase cargo freight by railway from the current 3.5% to 80% within 30
years. The current level of urbanization (13% of population) is expected to increase to 60% of the total
population within 30 years. To achieve the targets set up in the above, the Vision 2040 identified key
opportunities, which are strengthened by the fundamentals. The strategic approach in the Vision 2040 is
based on “harnessing opportunities by strengthening the fundamentals that facilitate maximum returns from
the opportunities”

Table 2.2.1: Socio-economic Indicators in Vision 2040

Socio-economic indicators Baseline 2010 Target 2040
Per capita income USD 506 USD 9,500
Sector composition of GDP
Agriculture 22.4% 10.4%
Industry 26.4% 31.5%
Service 51.2% 58.2%
% of paved roads to total 4% 80%
road network
% of cargo freight on rail to 3.5% 80%
total freight Source: JICA Study Team based on 2nd NDP (2015/16-
% of urbanization 13% 60% 2019/20)
Source: Uganda Vision 2040 Figure 2.2.4: Strategy in NDP II

The 2nd NDP (2015/16 – 2019/20) was launched on June 2015, in which three opportunities, namely, (1)
agriculture, (2) tourism, (3) minerals, oil, and gas, are identified as a priority. These are strengthened by two
priority fundamentals, namely, (1) infrastructure and (2) human capital development (Figure 2.2.4).

Source: Uganda Vision 2040

Source: JICA Study Team based on Uganda Vision 2040
Figure 2.2.5: Proposed Economic Zones and Trade Area Figure 2.2.6: Proposed Infrastructure for
Mineral Resources

The key vision for infrastructure development is to design infrastructure around production zones and sites,
which will underpin agricultural and mineral processing. The Vision 2040 sees an opportunity of Uganda’s
location to “make it a regional hub for industrial production, trade and transit, and air transport”, by
connecting the cities and strengthening cross border trade and establishing key strategic trade zones. Figure
2.2.5 demonstrates the proposed economic zones and trade areas in Vision 2040. The National Industrial
Policy (2008) targets to increase the contribution of the manufacturing sector from the current 6.8% to 25%
of total GDP within the 10 years. In addition, the establishment of Cross Border Market (Elegu, Kabale,
Mphondwe, Busia, and Wrakhakha) has been planned in order to facilitate trade, light manufacturing,
livestock industry, and warehouse with neighbouring countries.
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The Standard Gauge Railway, several express ways near Kampala Metropolitan area, improvement of
existing marine transport to reduce the cost of transport and increase connectivity, and crude oil pipeline
from Hoima to Lamu in Kenya are among the core projects in the transport sector. The Vision 2040 identifies
an opportunity to build a strong mining industry through infrastructure development, and considers that the
railway shall be extended to areas where enormous deposits have been found. The proposed railway route to
connect to the potential mineral industries is shown in Figure 2.2.6.

2.2.3 Proposed Vision for NEC

Based on the above procedures, reviews of the Development Vision, and the discussion during the WGM, the
following Development Vision were proposed for Northern Economic Corridor:

Proposed Development Vision:

“The Leading, Efficient, and Integrated Transportation System with Logistic Hub for the Northern
Economic Corridor by 2030”

[Key words in Vision]

• Leading: No.1 in East Africa, most efficient and reliable
• Efficient: most efficient corridor in terms of cost, time, and reliability in the region
• Integrated: integrated transport mode (road, rail, waterway, and pipeline) and promoting regional
integration in East Africa.
• Logistic Hub: establishment of a hub (centre) of logistic activities along the Northern Corridor, which
connects to industrial areas and mineral and agricultural zones.

[Five strategies to support the Development Vision]

1. Transport Strategy: Efficient and Integrated Multimodal Transportation System
(1) Modal shift from truck to rail, inland waterway, and pipeline
(2) Reduction of bottlenecks of freight traffic and logistics
2. Industrial Strategy: Effective and Efficient Logistical System for Industry and Trade
(1) Connecting industrial areas to logistic hubs/ICD
(2) Logistic hubs at strategic locations such as SGR station, ICD, strategic cities, etc.
3. Regional Strategy: Linking Corridor and Feeder Road
(1) Linking with agricultural productive areas and mineral resources
(2) Linking with LAPSSET and Central Corridor
4. Financial Strategy: Cost Recovery and Diversifying Financial Sources
(1) Diversifying the financial sources.
(2) Expanding the revenue sources of the governments for cost recovery.
5. Organizational and Policy Strategy: Appropriate Institutional Framework for Transport
and Logistics
(1) Role of the governments for logistic and multimodal transportation
(2) Regional coordination for logistical improvement

Four key words for the above Development Vision distinct from other corridors, that is, (1) leading, most
efficient and reliable in the region and the success of NEC can be disseminated to other corridors, (2) most
efficient, less cost, less time, and the most reliable in the region, which facilitates economic and industrial
activities, (3) integrated transportation system, which offers diversified and multi-modal options (road, rail,
waterway, and pipeline) for users and facilitates regional activities and trade, and (4) logistic hub, in which
multi-modal options are available, and industrial areas are connected and promoted by transport and logistic
infrastructure.

The proposed Development Vision will be attained by the implementation of five strategies. Three strategies
(Transport, Industrial, and Regional) will be strengthened by financial strategy and organizational and policy
strategy, as shown in Figure 2.2.2.
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2.3 Socioeconomic Framework

2.3.1 Target Year for the Socioeconomic Framework

In this study, the target years for the planning horizon are set up as follows:
Year 2015: This is the base year of the Study
Year 2020: This is the target year for the first medium term plan
Year 2025: This is the target year for the second medium term plan
Year 2030: This is the target year for the long term plan

6 countries along the Northern Economic Corridor (Kenya, Uganda, Rwanda, Burundi, South Sudan, and
DRC) and the member states of East African Community (Kenya, Uganda, Rwanda, Burundi and Tanzania)
are analyzed in the Socio-Economic Framework for this study. The governments of Kenya and Uganda are
both the main implementing organizations for this Master Plan, and therefore, more detailed analysis on
socio-economic framework is provided for these countries.

2.3.2 Population Framework for NEC and EAC

(1) Population in Kenya

Kenya has a total population of 38.6million as

of the 2009 Population and Housing Census,
which has grown by 3.0% between 1999 -2009
period. The average population density was
calculated at 68/km2, and the population is
concentrated in Nairobi, Mombasa, and Western
Kenya. As shown in Figure 2.3.1, major urban
centres are located along the Northern Corridor,
which consists of 64% of its urban population.
The population living in urban areas was
32.3 % of the total population in 2009. The
most populous county along the Northern
Corridor in 2009 was Nairobi City, which has
3.1 million, followed by Kakamega county
(1,660,651) and Kiambu County (1,623,282).

The Kenya Vision 2030 aims at developing 6

metropolitan regions as a key economic centre
and regional development, of which 4
metropolitan areas, that are, (1) Nairobi, (2)
Mombasa, (3) Nakuru, (4) Kisumu, are located
along the Northern Economic Corridor and
important for urbanization in the country. It can
be said that there is potential for accelerating
Source: JICA Study Team
the urbanization by developing transport Figure 2.3.1: Population Density by County in Kenya (2009)
infrastructure and connecting to metropolitan
regions and potential areas.

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(2) Population Projection in Kenya

The population distribution and urban-rural composition are required for formulating a traffic demand of the
Master Plan. The latest Census was conducted in 2009, in which the population was distributed by the
previous administrative division, that is, district. Under the New Constitution, 47 county governments were
established in 2013. The population distribution by district was then redistributed to the counties, whose
boundary will be used in this study.

The population projection data at the county Urban dwellers

exceed half the
level are available in 2012, 2015, and 2017 country’s
population and
overtake rural
years from the County Development Profile. Urban population in millions dwellers
Rural population in millions
These population data were based on the 2009 31.7 38.2
43.4

Census and sourced from Kenya National 16.9

23.1

5.4 12.3
Bureau of Statistics (KNBS). This is the only 9.0
27.1
25.3 26.5 26.6 24.6
22.7
available data at the county level and thus the 22.3 20.2

study will be formulated based on these data 1999 2007 2012 2017 2022 2027 2030 2032

and the 2009 Census. Total Population

Millions
28.2 34.3 38.8 43.9 49.7 56.2 60.5 63.6

Urban population 19% 26% 32% 38% 47% 56% 63% 68%
%
The Kenya Vision 2030 provides the population
projection at the national level and urban-rural * Based on projections from 1999 National Census
Source: CBS

composition, as shown in Figure 2.3.2. By Source: JICA Study Team

2030, the population is expected to reach to Figure 2.3.2: Population Projection in Vision 2030
60.5 million and the proportion of the
population living in urban area is estimated to
increase rapidly from 32.3% in the 2009
Census to 60.5% in 2030. The 2nd Medium
Term Plan (MTP) of Vision 2030 projected the
population to reach by 46.7 million in 2017,
which increased the population projection by
2.8 million, compared to the Vision 2030 (43.9
million). It is considered that the residual
difference is due to an underestimation of the
Vision 2030 projection on family planning
policies. Thus at the national level, the study is Source: JICA Study Team
based on the total population in the 2nd MTP. Figure 2.3.3: Projected Urban Population in Base Case and
High Case
On the other hand, the population data from the County Development Profile provides the further increase of
the total population, which is summed up by 48.6 million in 2017 or, around 2 million differences compared
to 46.7 million of the 2nd Medium Term Plan. Some population data from County Development Profile
contracts with the 2009 Census and expected growth trend: for instance, the population in Bomet County has
increased by 8.8% between the 1999 Census and the 2009 Census, but the population in 2015 was projected
with a negative growth rate of -0.88% and then increased by 2.63% between 2015 and 2017. These
irregularities were adjusted based on the 2009 Census results and expected growth trend. The population
projection after 2017 at the County level is not available at the time of writing, so the study will be based on
the projected growth rate provided by the United Nation 1.

1
World Population Prospects: The 2012 Revision, United Nations, 2013
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With regards to the urban population, this study considers two scenarios, that is, (1) base scenario, using the
medium fertility growth data from UN, and (2) high-case scenario, assuming that all plans envisaged in the
Vision 2030 and Master Plan will be materialized.

The results of projected population are summarized in the following table. Table 2.3.1 shows that the
population in Kenya is expected to reach at 64.9 million by 2030. The base scenario shows the gradual
urbanization that increases the urban population to 29.2 million in 2030, while the high-case scenario
projects an accelerated urbanization to increase to 38.1 million, based on the Vision 2030 and Master Plan.

Table 2.3.1: Population Projection up to 2030 in Kenya

2009 2015 2020 2025 2030
Census (projection) (projection) (projection) (projection)
Population (million) 38.6 45.4 51.4 57.8 64.9
Growth Rate (%) 3.02% 2.77% 2.42% 2.10% 1.94%
Base Case Scenario
Urban Population 12.5 16.2 19.9 24.2 29.2
Urbanization (%) 32.3% 35.7% 38.8% 41.9% 45.0%
High Case Scenario
Urban Population 12.5 17.0 22.2 29.1 38.1
Urbanization (%) 32.3% 37.4% 43.2% 50.3% 58.7%
Source: JICA Study Team

(3) Population in Uganda

Uganda has a total population of 34.9 million,

according to the 2014 Census. The
population growth in Uganda is highest
among the East African countries, which
accounts for 3.0% of the average annual
growth rate between the 2002 Census and the
2014 Census. Figure 2.3.4 demonstrates the
population distribution by district in 2015. As
shown in this figure, the population is mainly
concentrated in the Kampala Metropolitan
area. The Kampala City accounts for 1.5
million and the surrounding Wakiso district is
the most populous with 2.1 million, which
resulted in stressing on land and transport
system. The urban population consists of
18.4% of the total population, and there are Source: JICA Study Team
Figure 2.3.4: Population Distribution and Regional and
only 21 urban centers with a population more Strategic Cities in Uganda
than 50,000 in Uganda.

The low level of urbanization and concentration of the population in the Kampala Metropolitan area led the
government of Uganda to pursue an urban development vision for the establishment of four regional cities,
namely, (1) Gulu, (2) Mbale, (3) Mbarara, and (4) Arua during the Vision 2040 period. In addition, 5
strategic cities are identified in the Vision 2040, which include Hoima (oil), Nakasongola (industrial), Fort
Prtal (tourism), Moroto (mineral) and Jinja (industrial).

The Uganda Vision 2040 aims at increasing the urban population from the current 18.4% to 60% by 2040.
It can be considered that there is potential for accelerating the urbanization by developing transport

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infrastructure and connecting the regional and strategic cities with potential economic zones, as shown in
figure 2.3.4.

(4) Population Projection in Uganda

The population projection data at the district level

are available for 2015, 2016, and 2017 at the time
of writing, and the study will be based on these
data and the 2014 Census in terms of population
distribution by district. The population is
projected to increase to 61.3 million by 2040,
according to the Vision 2040, whereas the
Uganda Bureau of Statistics (UBOS) projects the
Ugandan population to increase to 40.4 million by
Source: JICA Study Team
2020 and 46.7 million by 2025. These projected Figure 2.3.5: Projected Urbanization Rate in Uganda (%)
population data at the country level will be a basis
for formulating the socio-economic framework in this study.

Regarding the future urban population, two scenarios for urbanization are considered, that is, (1) base
scenario where the urban population is expected to grow with the medium fertility according to the UN’s
urbanization projection2, and (2) high-case scenario where the accelerated urbanization is expected due to the
increased connectivity between regional and strategic cities through transport development, based on the
Vision 2040 and Master Plan. The results of projected population in Uganda are summarized in Table 2.3.2.
The population in Uganda is expected to increase to 55.1 million by 2030.

Table 2.3.2: Population Projection up to 2030 in Uganda

2014 2015 2020 2025 2030
Census (projection) (projection) (projection) (projection)
Population (million) 34.9 35.8 40.5 47.1 55.1
Base Case Scenario
Urban Population (million) 6.4 6.8 8.8 11.3 14.4
Urbanization (%) 18.4% 18.9% 21.7% 23.9% 26.1%
High Case Scenario
Urban Population (million) 6.4 7.9 10.4 14.1 19.2
Urbanization (%) 18.4% 22.0% 25.7% 29.9% 34.9%
Source: JICA Study Team

(5) Population Projection for NEC and EAC countries

The population projection for other NEC and EAC countries are calculated at the country level, based on the
national Census data and UN population data 3. The study then estimates the population in 2015, 2020, 2025
and 2030 using the official projection data (Rwanda and Burundi), the projected population data from the
UN (South Sudan, Tanzania and DRC).

2 World Urbanization Prospects: The 2014 Revision, United Nations. The estimates of the urbanization in UN are based for the most part on national
statistics such as the Census. Since the definition of urban population varies across the country, the study uses the estimated average annual rate of
change of the urban population and the base data from the Census 2014, rather than the estimated number of urban population or urbanization rate
from the UN data.
3 “Rapport des Projections Demographiques 2008-2030”, Institut de Statistiques et D’etudes, Brundi; “Fourth Population and Housing Census,
Rwanda, 2012”, National Institute of Statistics in Rwanda; for South Sudan, “World Population Prospect: The 2012 Revision; “2012 Population
and Housing Census”, National Bureau of Statistics, Tanzania. There is no Census data in DRC for the past 30 years, so the study refers to the
population data available from the internet and the data from UN.
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The future population projected for EAC and NEC countries are shown in Table 2.3.3. The population in
EAC countries is expected to increase from 154.5 in 2015 to 228.4 million in 2030, while the total
population along the Northern Economic Corridor are projected to be 270.1 million by 2030. The most
populous country in 2030 will be DRC (103.7 million), followed by Tanzania (79.4 million), Kenya (64.9
million) and Uganda (55.1 million). The total population in EAC/NEC area is projected to be 349.4 million,
which is around 1.5 times more than the level in 2015.

Table 2.3.3: Population Projection in EAC NEC

Country 2015 2020 20,25 2030
Burundi 9.8 11.2 12.3 13.4
Rwanda 11.3 12.7 14.2 15.7
Tanzania 52.3 60.4 69.3 79.4
Kenya 45.4 51.4 57.8 64.9
Uganda 35.8 40.5 47.1 55.1
Total EAC 154.5 176.1 200.8 228.4
DRC 72.1 81.3 92.1 103.7
South Sudan 12.2 13.9 15.6 17.3
Total NEC 186.5 210.9 239.2 270.1
Grand Total 238.8 271.2 308.5 349.4
Source: JICA Study Team
Source: JICA Study Team
Figure 2.3.6: Projected Population in NEC and EAC
between 2015 and 2030

2.3.3 Economic Framework for NEC and EAC

(1) Economic Performance in Kenya

The economy in Kenya has grown by 6.0% during the past years and registered 5.3% in 2014, as shown in
Figure 2.3.7. The growth was supported by economic growth in mining and quarrying (15.0%), information
and communication (13.5%), construction (10.7%), and electricity supply (9.4%) during the past 5 years. The
tourism and manufacturing sectors were, among others, recorded a negative and slow growth between 2010
and 2014 (-3.0% and 4.0% respectively). The service sector contributed to around 55% of GDP, while the
agriculture sector showed mixed performance, frequently affected by weather conditions. The industry sector
has grown steadily to reach at 21% of the total GDP.

Inflation remains stable within single digit (6% from January to June 2015), but Kenyan Shilling declined by
15% this year to trade at 105 to one US dollar in September 2015. A significant decline in the tourism
earning and a widening trade deficit worked against the shilling this year. Faced with the devaluation of
shilling, the Central Bank Rate gradually increased from 8.5% in December 2014 to 11.5% in July 2015.
This helped to tame the fall of Shilling, but pushed the commercial banks to raise the lending rate up to 27%
in October 2015. The debt to GDP ratio currently stands at 47%, which is slightly above the threshold of
45%.

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Table 2.3.4: GDP by Sectors in Kenya, 2006-2014

(Ksh million, constant price in 2009)
2006 2014
Sector 2006 2010 2014 % of % of
total total
Agriculture 686 736 845 28.8% 24.4%
Industry 488 584 729 20.5% 21.0%
Mining 14 24 35 0.6% 1.0%
Manufacturing 328 358 417 13.8% 12.0%
Services 1,208 1,521 1,895 50.7% 54.6%
Transport and
174 216 252 7.3% 7.3%
Storage
Source: JICA Study Team Total GDP 2,588 3,104 3,834 100% 100%
Figure 2.3.7: GDP (current price) and GDP growth Source: Data from Kenya National Bureau of Statistics, Prepared
between 2007 and 2014 in Kenya by JICA Study Team

(2) GDP Projection in Kenya

The 2nd Medium Term Plan (MTP 2013-2017) forecasts a gradual increase of GDP growth to 10.1% by 2017.
The major drive for this high growth is anticipated from increased investments, especially from the recent
discovery of oil, gas, rare earth minerals, and coal. In addition, a series of infrastructure investments are
anticipated in the 2nd MTP, which includes the LAPSSET corridor project, modernization of the Port of
Mombasa, Standard Gauge Railway, and power projects.

The National Treasury prepared the medium-term macroeconomic outlook in the 2015 Budget Policy
Statement (BPS). Real GDP is expected to expand from 5.3% in 2014 to 6.9% in 2015 and reach 7.0% by
2018. The main underpinning of this growth is expected from infrastructure investment such as Standard
Gauge Railway, increased production in agriculture, expansion of building and construction and so on. The
macroeconomic outlook in BPS was revised in Budget Review and Outlook Paper 2015, in which the
economy is projected to grow by 5.8~6.0% in 2015 and 6.5% over the medium term.

Overall, Kenyan economy is projected to experience solid growth of 6~7% in the medium term, provided
planned infrastructure investments in transport and energy would reduce the cost of business environment,
and irrigation and geothermal investments will be implemented to reduce the weather-related risks. The
improved competitiveness in the manufacturing sector is also a key to expand the economy and export to the
regional market. It is noted that the revenue from mineral resources such as oil and coal are not factored in
the above macroeconomic forecast. With the current low price of mineral resources, it is quite difficult to
project the schedule and revenue from mineral resources in the short-medium terms, but it is considered that
these revenues would be available in the long term and needs to be factored in the projection for the
long-term macroeconomic framework. In addition, the current devaluation of Shilling may tighten the
procurement and repayment in foreign currency, which may slowdown the growth of Kenyan economy in the
medium term.

Based on the data from the National Treasury and the above assumptions, the economy of Kenya is expected
to grow by 6.0-6.5% in the medium term. The agriculture sector is anticipated to grow steadily by the
planned irrigation and fertilizer use in the medium term, and the industry sector is anticipated to benefit from
the current infrastructure investments.

In terms of oil production, the following assumptions are used in this study: 1) oil production would start
from around 2020 and refined oil in Kenya is anticipated to replace the imported fuel, which would improve
the current balance. The impact of oil production may be more significant at the beginning of oil production,
which would diminish gradually as the size of economy grows and the import substitution effect would
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decline like other oil producing countries that started to import more consumer goods. The oil production
would change the composition of sectors, and the industry sector is expected to increase significantly. The
results of macroeconomic outlook are summarized in Table 2.3.5.

Table 2.3.5: Future GDP Projection in Kenya

2015-2030
GDP/Sector 2015 2020 2025 2030
GDP growth
6.0% 8.6% 7.9% 5.7%
(%, base case)
Agriculture
24.0% 22.5% 18.7% 17.2%
(% of total)
Industry
21.0% 23.7% 32.1% 35.3%
(% of total)
Service
55.0% 53.8% 49.1% 47.4%
(% of total)
Source: JICA Study Team
Source: JICA Study Team
Figure 2.3.8: Projected GDP, 2015-2030

(3) Economic Performance in Uganda

The economy of Uganda grew rapidly by around

four times larger than 10 years, as shown in Figure
2.3.9. The average GDP growth rate was 6.6%
between 2002 and 2013, but the GDP growth has
reduced gradually recently to the average 5.0% for
the past 5 years. Figure 2.2.9 shows the GDP growth
rate between 2004 and 2013. Uganda experienced a
reduced growth rate recently, mainly due to political
instability in neighboring countries that caused the
reduced trade and commercial activities, and the
reduced growth in the manufacturing sector. The Source: JICA Study Team based on the data from Statistical
Abstract 2010, 2014
agricultural sector, especially food crop and cash
Figure 2.3.9: GDP and Growth in Uganda (2004-13)
crop, have been stagnated throughout the decade.
The growth of the agriculture during the past 5 years was 1.4% and its share of the total GDP declined from
16.6% in 2009 to 14.2% in 2013. The service sector contributed to around 50% of GDP, with moderate
growth of 6.1% during the past 5 years. The industry sector has grown steadily to increase its share of GDP
from 26.8% in 2005 to 28.4% in 2013. The growth of the manufacturing sector reduced recently from 7.2%
(2005-2009) to 4.1% (2009-2013).

The Ugandan Shilling has been depreciated by 20-25 percent since early 2015. Inflation has been stable by
6.7% in 2013/14, but the recent higher than expected depreciation of Shilling prompted the Bank of Uganda
to raise the central bank rate to 14.5% in order to contain inflation pressure from the currency depreciation.
The current public debt is estimated at 31.2% of GDP, which is expected to increase to 46% by 2019/20 4.

4 The Staff Report for the 2015 Article VI Consultation and Fourth Review, IMF, 2015.

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Table 2.3.6: GDP by Sector in Uganda, 2005-2013

2005 2009 2013 2005 2013
GDP by Sector
(billion Sh) (billion Sh) (billion Sh) (% of total) (% of total)
Agriculture 2,842 2,974 3,117 20.8% 14.2%
Cash crop 223 276 304 1.6% 1.4%
Livestock 234 263 298 1.7% 1.4%
Industry 3,658 4,883 6,259 26.8% 28.4%
Mining 47 59 94 0.3% 0.4%
Manufacturing 1,050 1,380 1,629 7.7% 7.4%
Services 7,170 10,017 12,626 52.5% 57.4%
Road, rail & water transport 377 476 565 2.8% 2.6%
Total 14,814 19,918 24,158 100% 100%
Source: JICA Study Team based on Statistical Abstract, 2010, 2014

(4) GDP Projection in Uganda

The NDP II assumes that stable macroeconomic performance during the NDPII period will be driven by both
public and private investment and increased export growth. GDP is expected to grow by 5.8% to 6.8%
annually, and per capital GDP is anticipated to attain to the lower middle income of USD1,039 by 2018/19.
Key sources of growth are identified in each sector, namely, (1) processing of phosphates into fertilizer to
boost agricultural productivity, (2) development of iron smelting plant in the mineral sector, which would
contribute to 0.5% to GDP growth, (3) Karuma and Isimba dam, (4) oil refinery, (5) crude oil pipeline, (6)
standard gauge railway, and (7) key roads in the infrastructure sector. The infrastructure expenditure during
the NDP II will increase to 5.0% of GDP in 2016/17, mainly spent by Karuma and Isimba dam (USD545
million) and Standard Gauge Railway (USD 570million). Around half of infrastructure costs are planned to
be financed by the private sector through the PPP arrangement, direct private sector investments and so on.
The macroeconomic outlook in NDP II considers the phosphate and iron mineral development, but the
revenue from oil is not factored in.

National Budget Framework Paper 2015/16 (NBFP) foresees a rebound of Ugandan economy driven by
increased agricultural production and public investment for the medium term. The growth is expected to
increase from 5.8% in 2015/16 to 6.8% in 2019/2020, which is aligned with the NDP II. Ministry of Finance,
Planning and Economic Development revised the estimate for 2015/16 to 5.0%, and the medium term growth
to around 6.0% recently.

Based on the above assumptions and reviews, economy in Uganda is expected to increase by 5 to 6% in the
medium term, provided political and exchange rate stability are ensured and planned infrastructure and
mineral resource development will be implemented. The planned investment in phosphate processing and
iron smelling plants are expected to enhance a growth for agricultural production and the manufacturing
sector in the medium term. The growth for the agriculture sector is projected to increase from the current
1.4% to around 3.0 to 3.5% for the medium term, given the planned fertilizer and irrigation projects will be
materialized. The industry sector is expected to grow by around 6-7% during the medium term, which is
driven by the planned infrastructure investments. It is certainly difficult to estimate the impact from oil
production due to the variability of oil price and unpredictability of oil pipeline and other infrastructure
construction, but it is assumed that oil production and refinery would commence from around 2020 and its
full operation would be implemented in 2025. Both the economic impact from oil production and imported
fuel substitution are factored in this study.

The results of GDP projection are summarized in Table 2.3.5. Due to the oil production factor and the size of
economy, the share of the industry sector is projected to expand to 54.3% of GDP by 2030, while the
percentage of the agriculture and service sectors are projected to decline accordingly. The impact from oil

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production would be more significant at the beginning of oil production, due to the size of economy and
public and private investment, which will be then reduced gradually as other oil producing countries.

Table 2.3.7: GDP Projection in Uganda 2015-2030

GDP/Sector 2015 2020 2025 2030
GDP growth
5.0% 9.5% 10.8% 5.7%
(%, base case)
Agriculture
13.4% 10.0% 7.1% 6.2%
(% of total)
Industry
28.6% 40.4% 53.0% 54.3%
(% of total)
Service
58.0% 49.7% 39.9% 39.5%
(% of total)
Source: JICA Study Team
Source: JICA Study Team
Figure 2.3.10: Projected GDP, 2015-2030
(constant price in 2013)

(5) GDP projection in NEC and EAC

The future macroeconomic framework for EAC and NEC countries are formulated to take into consideration
of several factors such as the current economic performance, reviews of the existing macroeconomic outlook
such as World Economic Outlook, African Economic Outlook, and IMF’s Article IV report, and interviews
with representatives and embassies of Burundi, DRC, South Sudan, and donors on future investment plans.

Recent economic performance in Burundi showed a mixed picture from a growth of 5.0% to negative growth
of -9.0% during the past 5 years. According to EAC’s report, real GDP growth was estimated at 5.0% in
2014. Agriculture is the main economic activities in Burundi, which consists of around 32% of GDP. The
current political instability related to the 2015 election is the major risk for the medium term. The World
Economic Outlook 2015 projects the real GDP growth of 4.8% in 2015, which would increase slightly to
5.5% by 2020. The Northern Corridor Infrastructure Master Plan (NCIMP, 2011) projects the average growth
of 4.2% between 2016 and 2030. The potential industries are the tourism and the mining sector, and
Burundi has the reserve of nickel, phosphates, and petrol. It is expected to transport mineral resources
(nickel) through railway, and the current progress of SGR and Single Custom Territory along the Northern
Corridor are of interest in Burundi. Based on the above reviews, Burundi is expected to grow moderately for
the medium–long term, between 4.2 to 4.8% during the study period.

Rwanda attained the strong economic performance during the past 5 years, with the average 7.0% of real
GDP growth. The major contribution to growth in 2014 were attributed to information and communication
(16.9%) and mining sector(11.5%), but Rwanda is predominantly an agricultural state, and the share of
agriculture is around 26% of GDP. The World Economic Outlook 2015 foresees the strong economic growth
for the medium term, from 7% in 2015 to 7.5% in 2020, while NCIMP 2011 provides rather conservative
forecast of 4.7% for the 2016-2030 period. Rwanda adapted a development vision to be a regional hub for
services by 2020, and several reforms for business environment have been undertaken. Rwanda is ranked at
62 in the World Bank’s Doing Business 2016, which is the 2nd highest in Sub-Saharan Africa. Considering
the current performance and business environment, economy in Rwanda is expected to grow strongly for the
medium term, and decrease modestly to stabilize the economy and in proportion to the decline of population
growth.

Economy of Tanzania remained robust with the average real GDP growth of 6.8% during the past 5 years.
The GDP growth in 2014 was recorded at 8.7% in 2014, which was supported by strong performance in

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financial and insurance activities (20.4%), electricity and gas (20.3%), construction (16.8%), and forestry
(15.9%). The medium term macroeconomic outlook is favorable with projected growth of 7.2% (2015) to
6.9% (2020), according to the World Economic Outlook 2015. The growth is expected to be supported by
public infrastructure related to natural gas and gas pipeline from Mtwara to Dar-es Salaam. NCIMP 2011
projects a robust growth of 6.2% between 2016 and 2030. A lower price of natural gas affected the
investment commitment to natural gas both for export and generating electricity. Based on the above, real
GDP in Tanzania is expected to grow by 7.0 to 7.2% for the medium term, which is projected to be more
stabilized to 6.0% by 2030.

Recent economic performance in DRC continued to be strong, with the average growth of 7.8% during the
past 5 years. The GDP growth in2014 was estimated at 9.1%, driven by the strong performance in copper
production, manufacturing industries, and the service sector. The estimated GDP growth in 2015 is 8.5%,
which is declined from the previously projected growth of 9.2%, as a result of lower price of mineral
resource in the world market. The completion of 44,000MW Inga Hydropower project has the potential to
expand economic growth. DRC joined in the Northern Corridor Integrated Project, and it is anticipated to
transport mineral resources from North Kivu Province through SGR connection. The economy is expected to
remain strong for the medium term, with 8.4% in 2016, but political instability and security situation would
crowd out the potential economic growth. NCIMP 2011 provides a modest outlook for the long term,
growing the economy by 5.6% during the 2016-2030 period. With the uncertainty of political situation, the
long term outlook is projected conservatively to grow by 5.4% to 5.5% during the 2020-2030 period.

South Sudan experienced a huge fluctuation of economic performance, from GDP growth of -46.8% in 2012
to 24.2% in 2013, which is expected to slow down to 3.4% in 2015. This instability in economy is mainly
attributed to the on-going political instability within the country and unstable oil production. The economy of
South Sudan is highly dependent on oil production, and around 75 percent of the government revenue comes
from oil production. Other than oil production, South Sudan has the reserves of copper, gold, uranium and
other mineral resources. There are several on-going reconstruction and development plans, which include
Nemule Hydropower Project (400MW), the reconstruction of Eldoret- Nadapal- Juba road and
Gulu-Nimulu-Juba road, and the construction of Keji Keji Cement Plant. The planned pipeline through
LAPSSET is yet to be implemented and it is expected to transport crude oil through Lamu Port in the
medium-long term. It is also expected to transport mineral resources such as copper and cement through
SGR for the long term. The World Economic Outlook 2015 projects a mixed macroeconomic performance
from 20.7% in 2016 to 3.1% in 2020. Due to the on-going political instability, the economy of South Sudan
is expected to grow moderately for the medium term, but with the reconstruction of infrastructure along the
Northern Corridor and crude oil transportation through the LAPSSET, the long term outlook is projected to
be favorable with real GDP growth of 6.0% to 6.5%.

Table 2.3.8: GDP Projection in EAC and NEC

countries
Country 2015 2020 2025 2030
Burundi 4.8% 4.5% 4.5% 4.2%
Rwanda 7.0% 6.0% 5.5% 5.0%
Tanzania 7.2% 7.0% 6.5% 6.0%
Kenya 6.0% 8.6% 7.9% 5.7%
Uganda 5.0% 9.5% 10.8% 5.7%
DRC 8.5% 5.4% 5.5% 5.5%
South Sudan 3.4% 5.5% 6.5% 6.0%
Source: JICA Study Team Source: JICA Study Team
Figure 2.3.11: Projected GDP, 2015-2030
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CHAPTER 3 : REGIONAL STRUCTURE PLAN

3.1 Overview of Regional Plans and Land Use along Northern Economic
Corridor
3.1.1 Existing Urban and Regional Plans

(1) Plans in Kenya

Some programs and projects related to urban and regional development have been implemented based on
Kenya Vision 2030. The figure on the right shows the locations and the following table lists the projects.

The cities and urban areas in the six metropolitan

regions (Nairobi, Mombasa, Kisumu-Kakamega,
Nakuru-Eldoret, Wajir-Garissa-Mandera,
Kitui-Mwingi-Meru) have been prioritized to
develop and they play the roles of economic
centers in each of the regions. The Northern
Economic Corridor will still be the most
important corridor for five metropolitan regions
except for Wajir-Garissa-Mandera which will be
more influenced by the development of Lapsset
Corridor. The LAPSSET (Lamu Port - South
Sudan - Ethiopia Transport) Corridor project
components consist of developments including;
Lamu port, railway line, highway, crude oil
pipeline and product pipeline, oil refinery, resort
cities and airport. The construction and
improvement works of some parts of Lamu port,
highways and airport has already been launched.
Transportation network throughout Kenya will be Source: JICA Study Team based on Kenya Vision 2030
enhanced by connecting the LAPSSET corridor Figure 3.1.1: Urban and Regional Development Projects by
Kenya Vision 2030
and the Northern Economic Corridor.
Table 3.1.1: Urban and Regional Development Programs and Projects by Kenya Vision 2030
Program and Project Location
Preparation and implementation of strategic development and Nairobi, Mombasa, Kisumu-Kakamega, Nakuru-Eldoret,
investment plans in six metropolitan regions and their respective Wajir-Garissa-Mandera, Kitui-Mwingi-Meru
spatial plans
Lamu Port, Southern Sudan and Ethiopia Transport (LAPSSET) Route from Lamu through Garissa, Isiolo, Mararal, Lodwar and
Corridor Development Lokichoggio to branch at Isiolo to Ethiopia and Southern Sudan
Finalization and implementation of Physical Development Plans Lamu, Turkana, Isiolo, Kilifi and Diani
for Resort Cities
Source: JICA Study Team based on Kenya Vision 2030

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(2) Plans in Uganda

Some key core projects were identified in

Uganda vision 2040 and it includes
development plan of the identified areas as
follows; the Greater Kampala Metropolitan
Area (Kampala city, Mpigi, Wakiso, Entebbe
Municipality, Mukono Municipality and Jinja
Municipality), four regional cities (Gulu,
Mbale, Mbarara, and Arua), five strategic
cities (Hoima (oil), Nakasongola (industry),
Fortportal (tourism), Moroto (mining), and
Jinja (industry)), Phosphate industry in Tororo
and Iron ore industry in Muko, Kabale.

The Second National Development Plan

(2015-2019) prepared a Spatial Framework
for the Uganda Vision 2040 (Figure ) which
includes development projects of the area
above and network of railway, international
expressways, 400KV electricity transmission
and fiber optic cable between the main cities.

With respect to area developments along the

Northern Economic Corridor, Kampala area
will promote agriculture including cotton,
maize, milk, coffee and fishery. Clusters of
Industrial towns in Malaba area will have
Mbale, Tororo and Busia. The industries will
Source: Second National Development Plan in Republic of Uganda
(Draft, 2015) include milk processing, rice milling and
Figure 3.1.2: Spatial Framework for Uganda Vision 2040 phosphorus processing. Kampala and Malaba
area will promote regional tourism by
utilizing its lakeside location. The area around Gulu and Lira has variety resources to promote various
industrial developments including fishery, coffee, maize, milk and rice. Mbarara area will mainly promote
milk, tea, coffee and banana, alongside providing regional tourism.

In addition to road network connecting these areas, standard gauge railway line is proposed, the line from
Kenya will go through Malaba, Kampala, Bihanga, to DRC and to Rwanda. The standard gauge railway line
will connect Malaba, Soroti, Lira, Gulu to South Sudan.

3.1.2 Present Land Use

Figure 3.1.3 shows land use map of Kenya in 2010. The land around the Northern Economic Corridor is
varies from rich agricultural land to savannah, shrub/woodland, forest and bare land. Almost 16% of entire
agricultural land is concentrated around the corridor. This is because the area, particularly around Lake
Victoria, is in a humid climate. On the other hand, the northern portion of Kenya’s land mainly consists of
arid and semi-arid lands and the land is not utilized actively for agriculture.

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Figure 3.1.4 shows a land use map of Uganda in 2000-2001. The land around the Northern Economic
Corridor from Kenya to Kampala is used for agriculture, shrub/woodland and urban. And the land around the
route from Kampala to the west is covered with mangrove, shrub/woodland, grassland and agriculture. The
land around the route from Kampala to the north is densely covered with shrub/woodland, grassland and
agricultural land with mangrove scattered around watersides.

Most of urban land in Uganda is located around main and sub route of the corridor.

Source: JICA Study Team based on data from the Source: JICA Study Team based on data from Africover of Food and
Project on the Development of the National Water Agriculture Organization of the United Nations
Master Plan 2030 in the Republic of Kenya
Figure 3.1.3: Land Use Map of Kenya Figure 3.1.4: Land Use Map of Uganda (2001)
(2010)

3.1.3 Urbanization
Urbanization level is defined as the Table 3.1.2: Share of Population in the Urban Centers around
proportion of the population living in Northern Economic Corridor in Kenya
urban areas 5. Figure 3.1.5 shows that the Share of Total
Population in the Number of Urban
urbanization level of Kenya has been Urban Centers Centers
increasing and the rate in 2013 was 25%. Area within 50km from
68% 48%
the NEC
On the other hand, Kenya Vision 2030
Area within 50km from
expects the proportion 0f urban 66% 47%
main route of the NEC
population will be 63% in 2030. The Area within 50km from
33% 8%
Nairobi
expectation of this rapid urbanization is Note: NEC stands for “Northern Economic Corridor”.
based on the belief that with the right Source: JICA Study Team based on data from the 2009 Kenya population and
urban-planning strategy, it will be Housing Census
possible to change the lives of millions of Kenyans for the better. And the Vision will guide the realization by
programs in urbanization and affordable housing. Figure 3.1.6 shows distribution of the urban centers in
Kenya. The population in the urban centers is concentrated around the Northern Economic Corridor as
shown in the Figure 3.1.6 and Table 3.1.2.

5 According to the definition of the Census 2009 in Kenya, urban area is defined as the area having a population of 2,000 and above. In this
definition, urban areas include the followings: Cities, Municipalities, Town Councils and Urban Councils.
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Note: Urban population refers to people living in urban

areas as defined by national statistical offices.
Source: JICA Study Team based on data from World Source: JICA Study Team based on data from the 2009 Kenya population
Bank and Housing Census
Figure 3.1.5: Trends of Urban Population and Figure 3.1.6: Distribution of Urban Centers in Kenya
its Proportion of Total in Kenya

Figure 3.1.7 shows that the urbanization Table 3.1.3: Share of Population in the Urban Centers around
level in Uganda is also steadily Northern Economic Corridor in Uganda
increasing and the rate in 2014 was 18%. Share of Total
Population in the Number of Urban
On the other hand, the Uganda Vision Urban Centers Centers
2040 expects the proportion of urban Area within 50km from
83% 68%
the NEC
population will be 60% in 2040. The
Area within 50km from
expectation of this rapid urbanization is 66% 41%
main route of the NEC
based on the same belief as mentioned in Area within 50km from
33% 7%
Kampala
the part of Kenya. Note: NEC stands for “Northern Economic Corridor”.
Source: JICA Study Team based on data from National Population and Housing
Figure 3.1.8 shows distribution of urban Census 2014 in Uganda
centers in Uganda. Although the urban centers are distributed throughout the entire country, the size of the
urban centers varied widely. The population in the urban centers is concentrated around the Northern
Economic Corridor as shown in the Figure 3.1.6 and Figure 3.1.8
In general, the growth of urbanization is likely to happen around existing urban areas, because it’s easier to
expand existing infrastructures to cover the additional population than developing a new city. Therefore the
future urbanization estimated from the trend shown in Figure 3.1.5 and Figure 3.1.7 will mainly happen
around the Northern Economic Corridor.

Source: JICA Study Team based on data from Uganda Bureau Source: JICA Study Team based on data from National Population and
of Statistics Housing Census 2014 in Uganda
Figure 3.1.7: Trends of Urban Population and its Figure 3.1.8: Distribution of Urban Centers in Uganda
Proportion of Total in Uganda (2014)
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If urbanization is managed well, it can offer great benefits to residents; there is a positive correlation between
urbanization and prosperity. This relationship can be explained by two main ways; through the benefits of
agglomeration, cities potentially generate higher living standards for all their residents and reduce urban
poverty, and through the benefits of economies of scale, public services can be provided in urban areas at a
lower fixed unit cost.

Figure 3.1.9 shows the comparison of the level and GDP per capita with other countries, and Figure 3.1.10
shows the comparison of poverty ratio. These figures suggest the urbanization levels of the both countries
were categorized as very low and they should promote urbanization to increase GDP and decrease poverty.

n=183 n=51
Source: JICA Study Team based on data from World Bank Note: PPP=Purchasing Power Parity
(2013) Source: JICA Study Team based on data from World Bank (2005)
Figure 3.1.9: Comparison of Urbanization Level Figure 3.1.10: Comparison of Urbanization Level and
and GDP per Capita of Countries Poverty Ratio of Countries

Major cities have advantage to boost urbanization and to get more population because they have
development plans and existing infrastructure. To promote urbanization of both countries more efficiently,
existing major cities should be prioritized to be developed.

Regarding current distribution of urbanization of both countries, however, the concentration is around the
Northern Economic Corridor as mentioned above, and too much concentration to the corridor may bring
serious problems including regional gap between urban and rural area in terms of income levels and
infrastructure development. It has been widely established since the late 1980s that sustainable growth can be
realized based on balance of economic affluence, social impartiality and environmental conservation. This
indicates importance of balanced development. One of the most effective countermeasures against the
imbalanced development is to make a formation of multi-axial national land structure. To take Japan as an
example, a main axis which penetrate center of Japan including three biggest cities (Tokyo, Nagoya and
Osaka) had most of industrial area in the country and the area on the axis has been mainly developed since
around 1950 to catch up more advanced countries. Japan is currently suffering regional gap widening
between urban and rural area and it’s said that the structure of only one axis is one of the biggest cause of the
regional gap in the country. Therefore Japan reviewed the structure and currently has been developing four
axes to reorganize the structure and to correct regional gap. This example tells importance of developing not
only one main route but also other sub routes.

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3.2 Spatial Structure of NEC

3.2.1 Current Spatial Structure

This section shows major features of current spatial structure of Northern Economic Corridor region by
dividing the components into nodes and network. Those that indicate the characteristics of current spatial
structure of NEC region as “single-axis and double-center” type, of which axis is
Mombasa-Nairobi-Kampala route and of which major urban centers are Nairobi and Kampala, based on the
characteristics below.

(1) Node

Firstly, characteristics of
distribution and scale of
urban centers are reviewed.
Figure 3.2.1 shows
distribution of urban centers
in both countries and major
cities in neighboring
countries by population level.

As for Kenya, there are three

cities, Nairobi, Mombasa and
Kisumu, which meet some
criteria as “city” under Urban
Areas and Cities Act in
Kenya including formulation
of integrated development
Source: JICA Study Team based on data from Censuses in Kenya (2009), Uganda (2014), plan and enough capacity to
Tanzania (2012), Rwanda (2012), Burundi (2008) and South Sudan (2008) supply urban services.
Figure 3.2.1: Current Major Cities and Existing Transportation Infrastructures
Nairobi is by far the largest
city; the population of Nairobi in 2009 was 3.1 million, which is much higher than Mombasa with 0.94
million and Kisumu with 0.41 million (Figure 3.2.2), and Nairobi alone accounts for 23% of urban
population and 40-50% of GDP in Kenya (data from Kenya Vision 2030). Mombasa and Kisumu are larger
than other municipalities and the major urban areas for the respective areas; Mombasa is located on the
Indian Ocean coast and has a gateway function for Kenya and inland East African countries. Kisumu is
located on the Lake Victoria and the major urban center in the Victoria basin.

In Uganda, Kampala is only one city,

and major urban areas are concentrated
in the surrounding area; not only
Kampala alone accounts for 29% of
urban population, 1.5 million, but the
major urban areas including second and
fourth largest urban areas, Kira and
Mukono respectively, are located around
Kampala and the area within 50 km Source: JICA Study Team based on data from the 2009 Kenya population and
Housing Census and National Population and Housing Census 2014 in
from Kampala accounts for 37% of Ugandan=51
urban population. Although it is smaller Figure 3.2.2: Population of Ten Largest Cities in Kenya and Uganda
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compared to the Kampala area, the other major urban areas such as Mbarara, Gulu, Masaka and Kasese are
located in the western and northern areas in Uganda.

(2) Network

This section outlines current network of transport modes, and their details are mentioned in following
Chapter 5. The existing network is illustrated in Figure 3.2.1 above.

Traffic Demand: According to the result of goods movement and vehicle traffic survey conducted by JICA
Study Team in 2015, both freight volume and traffic volume on roads are much concentrated on the road
between Mombasa-Nairobi and Nairobi-Kampala. The route from Nairobi-Kampala branches from Nakuru
into two route for Eldoret and for Kisumu with dividing traffic volume almost equally, and merges into one
after entering Uganda. The freight volume on the other roads was much less than either of the
aforementioned roads..

Road Infrastructure: The primary route of NEC region is the main route of NEC which connects the
Mombasa port and four capitals, Nairobi, Kampala, Kigali and Bujumbura. In addition, there are other major
routes including i) the three routes to Juba in South Sudan from three points on the primary route, Eldoret,
Malaba and Kampala and ii) the route to Kisangani in DRC from Mbarara. Almost all those roads are two
lines except for urban areas. Feeder roads from the primary route in Kenya towards northern Kenya and
Tanzania are still in poor condition, however they are being improved. Feeder roads from the primary route
in Uganda to northern major cities such as Hoima are almost well connected and in good condition.

Railways Infrastructure: Meter Gauge Railway line is operating in Kenya and Uganda. This includes the
main line from Mombasa to Kampala passing through Nairobi, Nakuru and Eldoret. And there are branch
lines from the main line including routes from Nakuru to Kisumu and Kampala to Port Bell on Lake Victoria.
The branch line between Tororo to Pakwach through Gulu has been closed since 2006.

Airport Infrastructure: JKIA International Airport and Entebbe International Airport are hub airports for
NEC region; they handle much higher volumes of passenger and cargo than the other airport in Kenya and
Uganda respectively.

Inland Waterway Infrastructure: Port Bell, Mwanza and Kisumu are three major ports on shore of Lake
Victoria. The major route was between Port Bell and Mwanza for cargo transport, however currently the
number of operation is limited to once a week or several times a month because of some constraints like lack
of boat due to breakdown or inadequate safety levels and old port facilities.

Linkage with nodes outside Kenya and Uganda: According to the result of goods movement and vehicle
traffic survey mentioned above, cargo traffic volumes between Uganda and neighboring countries, namely
South Sudan, DRC, Rwanda and Burundi are much lower than the ones between Mombasa port and both
countries, although 800-2,000 tonnage/day are imported to South Sudan, DRC and Rwanda. Currently the
connection between NEC and Central Corridor is not well because of lack of improvement of routes
including road to Arusha and waterway to Mwanza and other ports, however they are being improved or
there are plans to improve them.

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3.2.2 Future Spatial Structure Plan

(1) Alternatives for Spatial Structure Plan

It shall be required for NEC to strengthen economic functions of the region, particularly commercial,
industries and logistics, and to improve its living environment at the same time, under high population
growth in the future. In this section, three alternative spatial structures are examined. In this consideration,
operation of the two coming projects which has large impact on the future spatial structure plan of NEC,
namely Standard Gauge Railway (SGR) and LAPSSET Corridor are assumed. SGR has impacts to capacity
and allocation of cargo and passenger volume in NEC region. LAPSSET Corridor has impacts to
transportation flow, and link road between Nairobi and Isiolo are assumed here based on the road transport
strategy presented by MoLHU, Department of Physical Planning in Kenya to JICA Study Team. The
following factors are taken into account for setting the alternatives;

i). Regional Development: Promoting regional development or not

ii). Urban centers of the region: Centralizing to primary city or distributing to secondary city
iii). Transport Network: Regional Linkage

To illustrate compositions of the alternatives, this consideration adapts some symbols for nodes, transport
network and logistics function. The role of these nodes and networks are distinguished by their characters
including function, capacity, and type as following table.
Table 3.2.1: Role of Node, Network and Logistics Function
Symbol Role
Primary City - Main supply source of urban services including business, commerce, health and
education for country level
- Large consumption point
- High populated city with high density
Secondary City - Main supply source of urban services including business, commerce, health and
education for regional level.
Node - Medium consumption point
- Medium populated city with high density
Regional City - Supply source of products: this node supplies products to outside the node with
promoting key industry for the region including industry, agriculture, mining
resources and tourism resources.
Populated Region - Medium/Low consumption area
- Medium/Low populated area with low density
Primary Road Linkage - Road linkage to transport high volume of goods and passengers
- It requires logistics efficiency for mass transportation and crossing border
Secondary Road Linkage - Road linkage to transport medium volume of goods and passengers
Transport
Feeder Road Linkage - Road linkage to transport low volume of goods and passengers
Network
Standard Gauge Railway - Standard Gauge Railway network: it will share some extent of cargo and passenger
almost all of which are transported by road traffic in current.
Inland Waterway - Waterway network in Lake Victoria
Sea Port - Gateway to the sea
International Airport - Gateway to the sky
Logistics
Logistics Hub - Regional hub of logistics: it shall be located near railway station. It composes of
Function
Inland Container Depot, which is for transition of cargo between railway and track
and cargo storage, and Logistics Center, which is for delivery and collection.
Source: JICA Study Team

Considering those above, three alternatives for spatial structure concept are examined as followings;

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(A). Super single-axis and double-center type (Centralizing urban function as usual system)
This spatial structure follows
current market demands and
concentrates investment
especially in Nairobi and
Kampala (“Primary Cities”).
Urban area of those two cities
will expand to outside to
accommodate increased
population and business
activities. Goods
supply will rely heavily on
import from Mombasa Port.
Traffic demand is estimated to
be concentrated mainly on the
route from Mombasa to Source: JICA Study Team
Figure 3.2.3: Spatial Structure Plan (Alternative-A)
Nairobi and Nairobi to
Kampala as ever. Primary Cities will become the regional logistic hub and will transport import goods to
rural area. The initial cost to realize this structure plan will be lesser than the other alternatives because the
area to be newly developed is smaller.

(B). Double-center with regional development type (Centralizing urban function with regional industries
system)
This spatial structure plan aims
for developing “Regional
Production Center” with
promoting their regional
potential products including
industry, agriculture, mining
resources and tourism
resources. The two Primary
Cities still have almost all
function as urban area, which
is the same as the
Alternative-A. Main market
end of the regional products
will be the Primary Cities and Source: JICA Study Team
out of NEC region. The traffic Figure 3.2.4: Spatial Structure Plan (Alternative-B)
demand between a Primary City and Regional Production Centers will increase and transport infrastructure
including logistic hub which contributes to efficient delivery and collection should be considered a necessary
improvement. Export of the regional products is expected to make transportation cost to Mombasa port
decrease with improving the problem of empty return cargo.

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(C). Multi-center with regional development type (Distributing urban function with regional industries
system)
This alternative aims for
balanced growth and efficient
logistics in the NEC region
with promoting urban
functions of “Secondary
Cities”. It promotes
decentralizing urban
functions to Secondary Cities,
urbanization of them and
concentration of population
on them from surrounding
region. It aims for promoting
Regional Cities also as same
with Alternative-B, because
demand for commercial and Source: JICA Study Team
Figure 3.2.5: Spatial Structure Plan (Alternative-C)
services in urban area which
results from surrounding regional area will promote the demand of Secondary Cities. In addition, Secondary
Cities will serve as the regional logistic hub and they will contribute to efficient connection between regional
cities and consumption areas, especially Primary Cities and out of NEC region. The initial cost to realize this
structure plan will be higher than the other alternatives because the area to be newly developed is larger. And
this structure plan needs more public management capacity for urban management and development control
to avoid unnecessary development.

The following table shows a comparison among the alternatives in terms of the three key factors. The urban
structure of the “super single-axis and double-center” is a policy-free system with minimum public
interventions, while “regional development” and “Multi-center” types will need more public interventions to
realize, but it may lead to a more functional corridor.

Table 3.2.2: Spatial Characteristics of Alternatives

(B) Double-center with (C) Multi-center with regional
(A) Super single-axis and
regional development type development type
double-center type
Key Factors (Centralizing urban function (Distributing urban function
(Centralizing urban function
with regional industries with regional industries
as usual system)
system) system)
i). Regional - Promoting potential regional - Promoting potential regional
Development: - No special promotion of products including industry, products including industry,
Promoting regional regional development agriculture and natural agriculture and natural
development or not resources resources
- Centralizing urban functions to - Centralizing urban functions to
- Distributing urban functions to
ii).Urban centers of the two Primary Cities, namely two Primary Cities, namely
Secondary Cities
region: Centralizing to Nairobi and Uganda. Nairobi and Uganda.
- Expanding urban areas of the
primary city or - Expanding urban areas of the - Expanding urban areas of the
Secondary Cities to
distributing to Primary Cities to Primary Cities to
accommodate population in
secondary city accommodate population accommodate population
the region
accumulation accumulation
- The traffic demand on the - The traffic demand and - The traffic demand and
route between regional linkage between a regional linkage between
Mombasa-Nairobi and Primary City and Regional Primary and Secondary Cities
iii). Transport Network:
Nairobi-Kampala will get Cities will get higher. will get higher.
Regional linkage
much higher. - Transport infrastructures will - Transport infrastructures will
- The freight volume from be developed to strengthen the be developed to strengthen the
Mombasa will get much larger linkage between a Primary linkage between Primary

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(B) Double-center with (C) Multi-center with regional

(A) Super single-axis and
regional development type development type
double-center type
Key Factors (Centralizing urban function (Distributing urban function
(Centralizing urban function
with regional industries with regional industries
as usual system)
system) system)
than the volume to Mombasa. City and Regional Cities (ICD, /Secondary cities and Regional
- Primary Cities will become the logistics center and road) Cities (ICD, Logistic center
regional logistic hub and will - The freight volume to and road)
transport import goods to rural Mombasa will get larger from - The freight volume to
area. Regional Cities. Mombasa will get larger from
Regional Cities.
Source: JICA Study Team

(2) Estimation of Expected Effect

To select the best spatial structure of NEC region, three alternatives are compared considering five indicators,
namely i) efficiency of logistics, ii) regional impartiality, iii) living condition and environmental
consideration, iv) cost for realization and v) public management capacity. The indicator i)-iii) are about
public benefit and the indicator iv) and v) are about public intervention. It has been widely established since
the late 1980s that the concept of sustainability indicates the realization of balance of economic affluence,
social imparity and environmental conservation. The indicator i)-iii) are selected from the one of the
indicators of sustainability related to NEC region. The following table shows the comparison.

Table 3.2.3: Estimation of Expected Effect of Alternatives

(B) Double-center with (C) Multi-center with
(A) Super single-axis and
regional development type regional development type
double-center type
Indicator (Centralizing urban function (Distributing urban function
(Centralizing urban function
with regional industries with regional industries
as usual system)
system) system)
i) Efficiency of logistics NOT GOOD GOOD GOOD
- The imbalance of freight (with condition) (with condition)
volume from and to - The imbalance of freight - The imbalance of freight
Mombasa is worst. volume from and to volume from and to
Mombasa is better. Mombasa is better.
- Condition: Transport - Condition: Transport
infrastructures such as ICD infrastructures such as ICD
and logistics center are to be and logistics center are to be
developed to support regional developed to support regional
logistics. logistics.
ii) Regional impartiality NOT GOOD GOOD VERY GOOD
- Benefit of NEC is - Benefits of NEC including - Benefits of NEC including
concentrated to the region income, employment and income, employment and
along the route of urban services are distributed urban services are distributed
Public Benefit

Mombasa-Nairobi-Kampala. to regions. to wider regions.

iii) Living condition and NOT GOOD NOT GOOD GOOD
environmental - Living condition is worse for - Living condition is worse (with condition)
consideration primary cities and rural especially for Primary Cities - Living condition is better for
areas. Primary Cities will due to overcrowding. Rural both Primary Cities and rural
suffer traffic congestion and regions still have less urban areas. The problems of
shortage of affordable services near them. overcrowding and lack of
housing caused by - Although natural services will be mitigated.
overcrowding, and rural environment in rural region - Development of natural
areas will suffer lack of will have less risk to be environment shall be
urban services. developed, one around controlled to reduce to
- Although natural primary cities have risk due minimum extent.
environment in rural region to urban sprawl. - Condition: Public
will have less risk to be management capacity for
developed, one around appropriate urban
primary cities have risk due management and
to urban sprawl. development control are
necessary
Inter
i

iv) Cost for realization NEEDED LITTLE NEEDED NEEDED MUCH

c

- The initial cost to realize this - Initial investment cost shall - Initial investment cost shall

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(B) Double-center with (C) Multi-center with

(A) Super single-axis and
regional development type regional development type
double-center type
Indicator (Centralizing urban function (Distributing urban function
(Centralizing urban function
with regional industries with regional industries
as usual system)
system) system)
structure plan will be lesser be necessary to develop be necessary to develop
than the other alternatives transport infrastructures for transport infrastructures for
because the area to be newly the route between a Primary the route between
developed is smaller. City and Regional Cities. Primary/Secondary Cities and
Regional Cities and to
facilitate urban infrastructures
in Secondary Cities.
v) Public management NEEDED LITTLE NEEDED NEEDED MUCH
capacity - Additional improvement of - To achieve this structure, - To achieve this structure,
urban management capacity more urban management much more urban
and legal system shall not be capacity and legal system management capacity and
necessary. shall be necessary than with legal system shall be
the current conditions. necessary than with the
current conditions.
Note: ICD: Inland Container Depot
Source: JICA Study Team

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CHAPTER 4 : INDUSTRIAL DEVELOPMENT

4.1 Marketing and Value Chain Survey in Kenya

4.1.1 Outline of the Survey

The objectives of conducting the Marketing and Value Chain Survey (hereinafter referred to as “the Survey”)
were as listed below:

• To identify key commodities which are expected to grow as major export commodities of the areas
along the corridors. The commodities should be export-oriented with the potentials of higher value
addition in Kenya along the area of the corridor.
• To estimate the size of export markets of selected commodities produced in Kenya.
• To identify critical issues regarding logistics and development of the production and trade

The Survey comprises the following 5 components: ddevelopment of the long-list of commodities; selection
of the 4 commodities for VC analysis; end-market analysis; and detailed VC survey and analysis.

4.1.2 Survey Results

(1) Developing the long-list

The list of the products produced in the area along the NEC was developed using the HS 2-digit
categorization. The products were evaluated according to the criteria listed below:
• Current production amount
• Trend of export
• Potential for the contribution to the industrial development in the area along NEC

Based on the analysis, 32 commodities were selected.

Table 4.1.1: Value Chain Selection Criteria

(2) Stakeholder Workshop for reviewing the long-list and the Weighting
Criteria Weight
Trend and availability of export market 20％
The long-list was shared with the stakeholders, both
Possible range of value addition 20％
from GOK and the public sectors and consulted in Sustainability and social responsibility 10％
order to check the adequacy of the list in terms of its Enable legal and policy framework for
10％
consistency with various policies and private sector’s investment
Investment demand 10％
views. The workshop was held on 8th May in 2015 in
Technical feasibility for production for export 10％
Nairobi. As a result, the list was enlarged with 6 more Availability of already existing VC studies 10％
products added into the original proposal. The Traffic volume created by the corridor 10％
participants also reviewed the criteria for selecting 4 Source: JICA Study Team
VCs for the further detailed survey.

(3) Selection of 4VCs for the Survey

The long-listed products are scored and evaluated based on the criteria above. The result is as shown in the
Table.
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Table 4.1.2: Result of Evaluation of Long-Listed Products

Selecting the 4VCs
Enabling Production
Scope for Available
Sufficient Commodity’s legal/policy complexity Ability to
sustainable Demand for information
demand for range of framework and local generate high
and socially investment in and studies
commodity in value added for ability to volume of TOTAL
responsible producing the on the
No. Commodity world export products and investment in develop traffic along
local commodity commodity’s
market services the products for the corridor
production VC
commodity exporters
1 2 3 4 5 6 7 8
20% 20% 10% 10% 10% 10% 10% 10% 100%
24 Milled Maize 17 16 8 8 9 8 7 8 81
38 Niobium 18 18 5 5 9 5 8 9 77
28 Coffee 17 14 5 8 8 8 8 8 76
29 Titanium 18 18 5 5 8 5 8 8 75
2 Flowers and plantings 15 13 8 8 8 9 5 8 74
22 Processed milk products 14 17 6 7 8 8 6 8 74
31 Gold 18 18 5 5 9 8 5 6 74
36 Veterinary products 15 15 6 8 8 8 6 8 74
Assembly of
37 15 14 6 8 9 8 6 8 74
motorcycles
4 Edible pulses 18 12 8 8 8 8 5 6 73
8 Processed fruits 16 14 8 8 8 8 5 6 73
15 Alminium articles 15 16 5 8 8 7 8 6 73
35 Pharmaceuticals 17 15 5 7 8 7 6 8 73
Sewed apparel of
5 14 14 8 8 8 7 7 6 72
textibles
10 Steel products 14 16 6 6 8 6 8 8 72
19 Fertilizers 15 15 6 6 8 6 8 8 72
Wood and planned
23 15 14 6 6 8 7 8 8 72
articles
6 Knitted apparel 14 12 8 8 8 8 7 6 71
Cement and lime
7 17 13 4 6 9 8 5 9 71
products
20 Glass and glassware 15 14 6 8 8 6 8 6 71
Metal tools, implements
25 15 16 7 7 7 7 6 6 71
and cutlery
3 Mineral fuels and oils 15 15 6 6 8 6 5 9 70
Animal, vegetable fats
12 15 14 6 8 8 8 5 6 70
and oils
33 Fluorspar 16 16 5 5 8 5 6 9 70
Tea (principally purple
1 15 10 8 7 8 8 5 8 69
tea)
11 Processed fish 17 13 6 6 8 8 5 6 69
21 Wooden furniture 14 14 6 6 8 7 6 8 69
17 Woven fabric 16 12 5 8 8 8 5 6 68
30 Soda ash 15 15 5 5 8 5 6 9 68
34 Coal 13 16 4 4 9 4 8 9 67
13 Beer 15 12 6 6 8 6 5 8 66
Sugar and sugar
16 14 14 6 6 6 7 5 8 66
confectionery
Processed leather
9 15 14 5 6 6 8 5 6 65
products
32 Carbon dioxide 14 14 5 5 8 5 5 8 64
18 Footwear and Gaiters 14 12 5 6 6 8 5 6 62
26 Lead and articles thereof 14 15 6 4 5 6 5 6 61
27 Zinc and articles thereof 14 14 5 5 5 6 5 6 60
14 Alcoholic spirits 14 10 4 5 8 6 5 6 58
Source: JICA Study Team/Panafcon

Based on the result above as well as further analysis explained below, four VCs were selected for the detailed
survey, namely:
• Flower and plantings
• Titanium
• Processed fruits
• Iron and steel products

The results show outstanding score of Milled Maize. On the other hand, the products below Niobium line up
with small differences. Based on the objectives of the Survey to collect information of rather predominant
characteristics and generic bottlenecks of the development of similar products, the products with relatively
abundant documentation were excluded (Milled Maize, Coffee, and Processed Milk.) In addition, Milled
Maize was also dropped regarding the objectives of the Survey which prefers exportable products whereas
Kenya is a net importer of Maize. As Niobium and Titanium both are from the Coast Therefore, titanium was
selected as it has been in operation with some lessons which may be able to apply to other mineral resources.
The structure of the industry was also looked at to see whether it is fit to the value-chain analysis and the
direction of the trade whether it is for export outside of EAC market. For example, fertilizer, pharmaceuticals
and veterinary products imports raw materials and mix them in Kenya for distribution. The products are

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mainly marketed within EAC region if not the domestic market. Some limitation of the future development is
also considered: Apparel industry may be heavily relying on the duty free access to US market under the
African Growth Opportunity Act (AGOA) arrangement. Wood industry is also assessed regarding the wood
reserve in the country. Automobile industry was excluded as the Team was expected to be able to research
more efficiently utilizing the network with Japanese manufacturers.

Iron and Steel on the other hand selected representing the type of manufacturing which use imported raw
materials or semi-finished good and exported heavily into the regional market. It is based on the assumption
that Kenya may be also expected to play an important role as a manufacturing hub for regionally consumed
products.

4.1.3 Analysis of Results

(1) Titanium

Currently, titanium in Kwale is only mined and exported by a single company, Base Titanium Ltd (BT). It is
also only the last quarter of 2014 when BT started the production. BT produces three types of minerals,
namely, ilmenite, rutile, and zircon. Titanium can be utilized in various ways as listed below.

Table 4.1.3: Use of the Titanium Products

Type of Product Major Uses
Base pigment in paint , paper, plastics, paper, ink, rubber, textiles, cosmetics, leather, ceramics and refractive
Ilmenite
industry
Same usages as Ilmenite,
Manufacture of refractive ceramics
Rutile Used in aircraft and spacecraft as light, strong, corrosion-resistant metal
for motor vehicles, desalination plants and in surgical plants, fiberglass
Chemical coating for welding rods
Foundry as sand moulds and cores and as metal chills
Precision investment castings a prime coat slurry, Back-up slurry and stucco and as Shell moulds,
refractory/ceramic industry (including refractory bricks, etc., ladle brick, coatings, mortars and linings; ladle
nozzle fill; ceramic: glass/glazes, sanitary ware, dinner ware, electrical porcelain, glazed bricks and
industrial tiles
Zircon
Welding rods
High performance refractory
Art work
Zirconium metal industries
Production of metal alloys
Source: Panafcon Ltd./JICA Study Team

Despite wide range of the down-stream industries which utilizes these minerals, the products are solely
exported from Mombasa: BT’s view is that the current volume and technical level of Kenya’s domestic
manufacturing sector cannot maintain the demand for the products. On the other hand, the various areas with
growth prospect further explained in the next section shows the export potentials of the product.

(2) Flower and Plantings

Floriculture is leading export industry which employs 90,000 for farms directly and 500,000 indirectly6.
While cut flower is Kenya’s major export product, new move may be found in the industry: first, as many
flower farms have been operating in Africa, Europe-based companies started endeavoring into the
propagation. It was also found that some degree of research and development activities has been moved into
Kenya for propagating new varieties of flowers. Another change overtime is entry of supermarkets into the

6 Kenya Flower Council Web-site

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outlets of cut flowers. By sourcing the products directly from importers, supermarkets do not go through the
auctions.

Table 4.1.4: Value of Global and EU Import of Cut Flower and Plantings
(USD ‘000)
2010 2011 2012 2013 2014
World 15,811,318 19,628,231 18,010,041 18,684,197 19,001,575
Top 10 EU country 9,466,732 10,163,298 9,269,488 9,618,945 9,907,854
(promotion to the world) (59.9%) (51.8%) (51.5%) (51.5%) (52.1%)
Total EU 28 countries 11,785,739 12,671,066 11,564,871 12,071,819 12,304,683
Of which flower import 4,855,609 5,162,455 4,657,315 4,954,570 5,273,310
Of which planting import 6,930,130 7,508,611 6,907,556 7,063,249 7,031,373
Source: Panafcon Ltd. cited from ITC (2015)

EU remains the major importer of the cut flowers with the large share: EU top 10 countries import more than
50% of global flower import (see Table above).

(3) Fruits Processing

Pineapples, bananas, and mangos are sampled for the Table 4.1.5: Share of Revenue per Function along
analysis. Fruits processing in general were found that the Value Chains
Production Collection Retailing
most value addition is done at the level of processing and Pineapple Juice 8.9% 36.1% 55%
exporting (retail) (see table on the right). Banana Chips 3.4% 34.1% 51.1%
Mango Pulp 1.70% 45.0% 53.3%
On the other hand, collecting fruits are also critical to Source: Various sources cited by Panafcon Ltd

operate optimally maintaining high quality. For pineapple industry, it is done by commercial processors who
also have plantations. Bananas and mangos are handled mainly by collectors for collection from the
producers. The spoilage of banana during the handing by collector seems to be problematic as it spoils 30%
of the handled products.

(4) Iron and Steel

Kenya’s steel industry is heavily relying on the imported materials. While some deposit of the iron ore and
coal are identified, the actual plan with a new policy framework for development is yet to be established.

Securing quality and economical input is, therefore, one of the major factor which affect Kenya’s iron and
steel industry. The interviewees often mentioned about the high cost of input. This is attributed to the high
cost of transportation: 31% of the input costs is borne by the transportation cost. Taxation especially customs
are another issues which takes 27% of the cost of the inputs. Based on the Common External Tariff scheme,
semi-processed materials are charged the same rate as other semi-processed goods despite the nature of them
being a raw material. Due to the products with heavy weight, the transportation is a critical factor for not
only for procurement of raw materials but also marketing and distribution

4.1.4 Export Potential and Key Bottlenecks

(1) Titanium

Due to the nature of titanium with wide range of the utilization, the demand for titanium may be expected to
be expanded: global market demand for power sector including solar power would be expected to lead the
demand for titanium. A few examples of the areas which lead the demand of titanium products are power
generation, desalination process, technical sector and oil and gas sector. Also airline industry uses titanium
product heavily.

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The bottleneck can be found in the legal framework: the mining laws developed in 1960 should be replaced
with the new act. While concentrating in the export market, it should also consider the sustainability and
ways to maximize to the local society. Currently, mining royalty is under discussion awaiting the new Mining
Act. While the adequate rate of the royalty payment should be indicated through the legal system, it is also
consider to what extent the mining companies should be burdened by multiple fees and levies, both national
and regional level regarding their cost competitiveness in the global market.

(2) Cut flowers and planting

While European market does not grow, the competition between “Southern” growers in Africa and South
America may become severer. Naturally, large market such as North America and Japan would import flower
during the time of their off-seasons from the nearby production areas: for the former, Columbia and Ecuador
are the major source, whereas the latter increasingly procures from Malaysia, China, Thailand and Vietnam
in addition to Columbia.

The growing concern on the carbon foot print and other environmental consideration may also pose some
questions on the transportation methods for African flowers which heavily rely on air freight. While some
trials of utilization of the sea freight has been attempted, it may be further sought in mid- to long-term to
maintain Kenya’s strength in the production.

Other concerns may be found in the cumbersome administrative procedures and burdensome administrative
fees and levies. There are number of taxes and levies borne by the importers. For example, levies to the
national entities upon the export include the export levy paid to HCDA and phytosanitary certificate levy for
KEPHIS, water levy, and levy to NEMA for composing organic matters. Apart from them, local market levy
and land tax are also charged by the local authorities. On the other hand, VAT refund for imported materials
as an export promotion incentive delayed affecting the cash flow of the growers.

(3) Fruits Processing

Products such as sugar preserved fruits and nuts and jams are imported largely in such countries as UK,
Japan, US, and Germany. For example, the share of US in the global juice import is 12% in 2014. While the
US and European market consumes more processed fruits, demands from the emerging markets are also
expected to grow.

In Europe, although the volume of import is large, it should be noted that the trade among the member
countries takes a large share (e.g., 65% of jams are traded between member countries.) Large part of the
marketing is controlled by giant manufacturing and retail companies through mergers and acquisition. It
causes more pressure on the price and value addition to the producers.

Japan is one of the major importers of processed fruits in the world. The major exporters are US, Brazil and
China which account for 50% of import. Demand fluctuates due to the economic situation and in the
long-run by aging population.

US consume processed foods, but the value addition is rather stagnated comparing with other markets.
Therefore, the growth opportunities are rather limited. Such value added products as organic and fair-trade
products, are however gaining some increased demand.

While it is much smaller comparing with other areas, EAC market shows more opportunities for Kenyan
products with increased demand.

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As seen in pineapples, commercial farming and processing is successful partly because of the expertise in
controlling over the production: Availability and quality control of the fruits is a key issue for the growth of
the sector. Therefore, some encouragement of moving into commercial farming may be desirable.

(4) Iron and Steel

World demand has been declined due to the economic slow-down of China, a manufacturing leader and at
the same time a market. On the other hand, EAC market recorded larger growth with backlogs of housing
and construction demand.

Supply of the input is a major issue for Kenyan producers. Not only availability and the price of the input,
due to the weight of the raw material heavily relying on import, transportation cost is also a problem. 31% of
input cost is incurred from transportation.

Although raw materials’ deposit has been identified, current absence of commercial mining in the country
may not support to have a blast furnace. Building an integrated mill may also encounter problems. Energy
is the critical issue. Also, large investment will require mobilization of the finance from outside of the
country.

4.2 Marketing and Value Chain Survey in Uganda

4.2.1 Outline of the Survey

The objectives of conducting the Marketing and Value Chain Survey were as listed below:

• To identify key commodities which are expected to grow as major export commodities of the areas
along the corridors. The commodities should be export-oriented with the potentials of higher value
addition in Uganda along the area of the corridor.
• To estimate the size of export markets of selected commodities produced in Uganda.
• To identify critical issues regarding logistics and development of the production and trade

The Survey comprises the following 5 components: ddevelopment of the long-list of commodities; selection
of the 4 commodities for VC analysis; end-market analysis; and detailed VC survey and analysis.

4.2.2 Survey Results

(1) Developing the long-list

Using the 4-digit HS Code, products are sorted according to the evaluation of the following points:
Criteria Notes
Currently available production capacity in Uganda and its
estimated level of feasible expansion
Export performance in EU, Middle East, Southeast Asia, East
Asia and US market. The results are rated according to the three
categories, namely champion (growth rate of Ugandan export
Market availability of products in the regional and global market
exceeds that of the overseas market), underachiever (growth rate
of Ugandan products is positive, but under the degree of the
growth of overseas market), and losers.
Checked the accordance with the priority of the National
Accordance with Uganda’s economic development policy
Development Policy and National Export Strategy.

The export trend of goods was analyzed data obtained from UBOS, the Customs (URA), and the data of
informal border trade from the Bank of Uganda and UBOS. The result is as shown in the Table below.

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Comparing with the growth of exported value and the import markets of Uganda’s major export destinations,
the products are categorized as a champion (Uganda’s growth rate is higher than the market growth which
shows growth), underachiever (market growth is higher than Uganda’s export growth rate), achiever
(Uganda’s export growth is positive, but overall import market is declining), and loser (both Uganda’s export
and market are declining). The number of champions and underachievers in 6 major markets are summed
and ranked and selected 16 commodities.

Table 4.2.1: Selection of Long-Listed Products

Performance Category in the Six Markets Champion / Gov’t
Supply (1) (2) (3) (4) (5) (6) Under-achiever priority
Commodity Selection
Capacity North
Description Northern Gulf South East Market rank Rank
Rank South EU USA Y/N
Corridor Countries Asia (X/6)
Corridor
Under-
1 Coffee - Champion Champion Champion Champion 5 Yes 1
achiever
Under- Under- Under-
3 Fish - - Achiever 3 Yes 2
achiever achiever achiever
Dried Leguminous Under- Under-
11 Achiever - Achiever Champion 3 Yes 3
Vegetables achiever achiever
Leather of \bovine or Under-
13 - Champion Loser Champion - 3 Yes 4
equine achiever
Under-
4 Cement Champion - - - - 2 Yes 5
achiever
Under- Under-
6 Cane or beet Sugar - - - - 2 Yes 6
achiever achiever
Under-
7 Maize Champion - - - - 2 Yes 7
achiever
8 Tobacco Champion Loser Loser Champion - Loser 2 No 8
Live plants, Cuttings
9 - - Champion Achiever - Champion 2 No 9
and Slips
Palm oil and its Under-
14 Champion - - - - 2 Yes 10
fractions achiever
17 Wheat or melsin flour Champion - - Champion - - 2 No 11
Under- Under-
18 Iron/steel bars and rods - - - - 2 Yes 12
achiever achiever
Rolled iron or Under-
12 Champion - - - - 2 Yes 13
non-alloyed Steel achiever
2 Petroleum Oils - Champion - - - - 1 Yes 14
Under-
5 Tea - - - - - 1 Yes 15
achiever
Animals, vegetable fats Under-
10 Loser - - - - 1 Yes 16
and oils achiever
Under-
15 Soap and detergents - - - - - 1 No 17
achiever
Cereal Flours excluding Under-
19 Loser - - - - 1 Yes 18
wheat or melsin achiever
16 Grain Sorghum - - - - - - 0 No 19

(2) Selection of 4VCs for the Survey

From the 16 commodities, 4 VCs were further selected using 4 criteria. The criteria and the results are as
summarized as below:

Table 4.2.2: Pre-Selection Criteria

Criteria Notes
Rating according to the Revealed Comparative Advantage (RCA) and
Growth potential of export
market performance
Possibility in leading overall Uganda’s economic growth Possibility of larger value addition, investment demand and the trend
Current situation on the free trade agreement in the regional economic
Easiness of access to the export market
integration, availability of preferential access to the specific market
Expected positive impact on the logistics system Possibility in modal shift

Combining the analysis, 7 products are pre-selected as seen below:

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Table 4.2.3: Result of the Pre-Selection

Growth Potential VA Market Access Impact Shift Overall
Commodity
Rank Rank Rank Rank RANK
1 Cement 2 2 7 1 1
2 Iron and Steel articles 1 1 6 6 2
3 Cereals 3 5 4 2 3
4 Coffee 2 10 4 3 4
5 Fish 5 3 1 11 4
6 Livestock and product 6 5 3 8 6
7 Petroleum Oils 4 9 7 4 6

The final evaluation of the products which selected Iron and Steel Products, Petroleum, Cereal Grains, and
Livestock and Products (including leather).The products were evaluated according to the points listed in the
table below. SWOT analysis was done to check the further market potentials against the threats and the
degree of strength against weakness to examine the competitiveness.
Table 4.2.4: Summary of the Selection of 4 VCs
Commodity Scores and Ranking
Indicators Cereal Petroleu Iron/steel Livestock
Cement Coffee Fish
grains m oils products & products
Existing market demand 3 5 3 5 3 5 3
Current market growth 1 3 1 3 1 3 1
Competitive advantage 3 5 3 3 1 3 3
Existence of market access schemes 3 3 3 3 3 3 3
Potential for larger value addition 1 3 3 3 3 5 5
Public-private investment demand 1 1 1 5 1 5 1
Technical feasibility of commodity development 1 3 5 5 1 5 5
Movement of goods via road or railway 5 5 3 3 1 5 3
Total Score 18 28 22 30 14 34 24
Rank 6 3 5 2 7 1 4

Based on the result, four products VC were selected, namely:

• Iron/steel products
• Petrol oils
• Cereal
• Livestock and products

The result was further shared and discussed at the stakeholder workshop held on 18th June in Kampala.
Relevant stakeholders were invited from the line ministries and agencies such as the Ministry of Works and
Transport, Ministry of Trade, Industry and Cooperatives, Ministry of Energy, Export Promotion Board,
Uganda Investment Authority, and private sector (the National Chamber of Commerce and Industry) as well
as development partners working for the Northern Economic Corridor (EU and World Bank). Some
comments were raised from the participants on such issues attention to the tripartite FTA and grouping of the
products. Based on the comment, the selection of 4 products are finalized and agreed with the MoWT.

4.2.3 Analysis of Results

As the result of the survey shall be utilized in the analysis of the respective industries in the following
sections, only highlights of the findings are summarized.

(1) Iron and steel products

The deposit of iron ore was found in Muko. Due to the ban to export unprocessed ore, the deposit is to be
processed somehow in the country. On the other hand, current iron production is either using semi-processed
inputs or scrap metals. Currently, such products as hollow sections, mild steel plates, galvanized and

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pre-pained iron sheets, and wire products are produced. For domestic and export use, producers established
some depots in major towns which connect to the other countries (e.g., Arua for South Sudan and Kasese for
DRC).

Other distribution networks are also utilized which include house building material distributors. High cost of
financing and energy tariff are the major constraints for the sector. Also, due to heavy importation of the raw
materials and the nature of the product with heavy weight, road network development and competitive
freight costs are critical for the development.

(2) Meat, hide and skins

Wide range of the areas of the country consists of the cattle corridor. On the other hand, the number of
processing facilities is limited. It is only recent that the first industrial abattoir was established in Bombo
(Uganda Food Security Company Ltd.). Slaughter houses are located within Kampala and in the major cities
such as Jinja, Arua,Gulu, Mbarara, and Mbale. Apart from the numerous butchers, very limited numbers of
processors are available in the meat industry. In terms of the leather industry, only 9 tanneries exists in the
country. Of which, 5 are located in Jinja and 2 in Masaka.

The number of processing facilities implies the distance the products has to travel before and after the
processing. Transportation before slaughtering is largely relying on the trekking from farm gates. Cold chain
is only used when processors have their facilities and trucks.

The trading is predominantly handled by middlemen. After the abolishment of the licensing, these trading
systems have almost no quality control mechanism available.

(3) Cereal grain

Ugandan grain export has been growing with average 8% of growth rate per annum. The key destination is
the regional market. Production is relying on the small holders. The collection is not coordinated and little to
no control on quality is done

Exported grains are processed and/or distributed by cross-border traders, medium-to-large scale trading and
grain processing companies. World Food Program is another big player.

In the major market for Ugandan grain, namely, Kenya, DRC and South Sudan, Pakistan, Russia, Ukraine,
Australia, Germany among others are the major competitors. Growing production costs unreliable logistics
harms Ugandan share in these market despite the proximity.

(4) Petroleum oils

While the products are expected to encounter sizable demand in the regional market, the nature of Ugandan
oil is waxy which requires special treatment for distribution through pipeline. It has some characteristics
such as low sulphur contents which is marketable for refining. The pipelines to supplying oil to
neighboring countries are also planned apart from the main one to export outside of region. However, the
construction requires firm agreement and arrangement to deal with security concerns.

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4.2.4 Export Potential and Key Bottlenecks

(1) Iron and steel products

Opportunities in export market in COMESA and SADC countries may be found together with the demand
for construction. While Uganda has the track record of exporting iron and steel products in the regional
market including those countries as DRC, Rwanda, Sudan and Tanzania, the installation and building
capacity of production facilities faces a few critical issues. Business environment may not be adequate for
the large-scale investment with the high cost of finance and energy tariff.

In order to reduce the procurement cost, development of transportation infrastructure to reduce the
transportation cost is also a critical issue. On the other hand, the Common External Tariff scheme which has
only three bands may not be conducive for such industries as iron and steel where the semi-finished products
are still largely imported.

(2) Meat, hide and skin

While meat has not a sizable export, hide and skin has been experiencing a large increase. In 2014 alone, 15
percent annual growth was recorded. The global market is also expanding at the rate of 7% per annum in last
5 years.

The bottlenecks in meat industry for growth may start from the production. Production of cattle is
predominantly small scale. While middlemen handle a large share of the cattle trading, no proper systems for
regulating quality and trading behaviors are in place. The quality infrastructure and the proper processing
facilities are critical for exporting to the destination such as EU where the quality requirement is high.

As for hide and skin industry, it is necessary to have proper tanneries to absorb raw hide and skins. As the
meat processing, adequate facilities are also required.

(3) Cereal grain

The major importers of maize are Japan, South Korea, Mexico and Egypt, whereas the exporters are US,
Brazil, Argentina and Ukraine. The traded volume has been growing at an average of 8% per year over 5
years. Rice shows the same trend of growth. The largest importers are Saudi Arabia, Iran, China and Benin.
Asian countries such as India, Thailand, Pakistan and Vietnam with US are large suppliers.

In terms of the logistics, poor road conditions damage the grain and spillage. Other issue is the storage
capacity which is too low. Overall storage capacity within the country is only 30% of the production volume.
While Kenya is a large importer of Maize, Ugandan products are subjected to go through the inspection by
Kenya’s phytosanitary authority.

(4) Petroleum oils

Expected to bring wealth to the region, the commercialization of the sector requires number of problems to
be sorted out. First, licensing has been just started and so far one license has been issued. The major
constraints may be infrastructure development which makes the products accessible to the market: the route
of the pipelines requires to be decided and the construction to be taken place. The infrastructure in the
production areas including access road to major urban centers in the vicinity requires the construction.
Further problem may be foreseen in the insufficient skilled labor.

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4.3 Agriculture and Fishery Sectors Development in Kenya

4.3.1 Overview of Current Status

The agriculture sector in Kenya comprises crop production (food crops, industrial crops and horticulture),
livestock production (dairy industry, beef industry, sheep and goats, poultry, pigs, apiculture and camels),
aquaculture and Forestry. Over 80 % of the Kenyan population lives in the rural areas. Agriculture remains
the backbone of the economy in Kenya, contributing 25 % of the total GDP and employing 75 % of the
national labor force. Given the importance of the sector, it is a key factor for the overall performance of the
economy.

In Kenya agricultural area is very limited. Agricultural area extends near by the Northern Economic corridor.
Production areas of 10 crops with major production and logistics routes of agricultural crops are shown in the
figure below.

Figure 4.3.1: Flow of Rice in 2015, and 2030

Forestry production isn't included in the figure because forestry production is very small. Livestock is also
not shown since it is dispersed nationwide.

4.3.2 Assessment of Potential Products

It is considered that potential products in Kenya are categorized as follows:

1) Products with existing value chain to abroad market that are expected to be increased by expansion of
production area. Increased value addition will furthermore increase export volume resulting to more
export earnings.
2) Current imports are as a result of shortage in domestic production. In future domestic consumption
demand is expected to increase with the population growth.
3) Production that contribution to the added value to the local economy is large.

The main industrial crops in Kenya are tea, coffee, sugar cane, cotton, sunflower, pyrethrum, barley, tobacco,
sisal, coconuts and rice etc.
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Among these products tea, coffee, cut flower, processed fruits and Vegetable are picked as potential products
for category 1, rice is picked as potential products for category 2 meat production is picked as potential
products for category 3. Demand of dairy products has been expanding with growth of the population, and it
may be expected that the trend will continue. But for dairy products since EU abolished milk quotas (EU
previously restrained surplus production of raw milk by setting up the production upper limits for the raw
milk in every area till March 2015.), it is expected that import volume from the EU will increase. It is a
challenge fort dairy production in Kenya to compete with imports from EU since the abolition of the milk
quotas. So dairy production was eliminated from Key Growth Drivers of Kenya. Sugar, Vegetable oil and
Maize may be potential crops of Kenya but price is not competitive with Ugandan products which come
from rain fed agriculture. Annual average rainfall in Uganda is 1,200mm/year, while in Kenya annual rainfall
of potential area is 750-1000mm/year. Therefore the potential area is very limited. When the rainfall is short
cultivation need irrigation and irrigation cost so much. So Sugar, Vegetable oil and Maize are also eliminated
from Key Growth Drivers of Kenya.

Kenya's Vision 2030 development strategy prioritizes tea, coffee, cut flower, processed fruits and Vegetable
and rice are emphasizes value addition for coffee and tea exports.

As for category 1), demand of tea and coffee will rise in future according to the International Coffee
Organization and FAO. Projection of the world consumption of tea and coffee is shown below. As for
category 2), amount of production and import of major import crops in Kenya is also shown below.

tons '000 tons '000

16,000 1,200

14,000
1,000
12,000
800
10,000

8,000 Coffee 600 Import

6,000 Tea Production

400
4,000

2,000 200

0 0
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030

Wheat Vegetable oils Rice Sugar refined

Source: JICA Study team based on the data of International Coffee Organization and FAO
Figure 4.3.2: Projection of the World Consumption of Figure 4.3.3: Amount of Production and Import of
Tea and Coffee Major Import Crops in Kenya

4.3.3 Analysis of NEC-Key Growth Drivers

Strengths and opportunities of each key growth driver are follows.

(1) Tea

World demand of tea is assumed to be grown in China and India. China and India are major consuming
countries and populations in these countries are expected to grow. Already Kenya has a value chain of
exports to India and China, this makes Kenya to have more advantage than other Tea producing countries In
addition, demand of tea will be diversified in future, organic tea, residual pesticide free tea and, flavored tea
etc. Kenya is historically also a leading tea exporter of the world, so high quality value chain has already
been established. In addition, Kenya's tea is has a characteristic feature to taste and aroma, which is suitable
for processing such as flavor tea. So it is possible to correspond to the world various demand than other
countries. From such a condition tea can be Key Growth Drivers in Kenya.
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(2) Coffee

World demand of coffee is also assumed to be grown in China, India and Latin America. With the increasing
population in these countries, their ’ cuisine culture continues to be westernized. As same as tea, already
Kenya has a value chain of exports to India, China and Latin America. The already established value chain
of exports makes Kenya to have more advantage over other Coffee producing countries. Also in Kenya is
high quality Arabica Coffee that can be cultivated to produce high quality coffee referred to as “special
coffee”. The demand of “special coffee” is nowadays increased. Kenya has more advantage over countries
cultivating Robusta coffee because of its high quality Arabica coffee.. This makes Coffee to be considered as
Key Growth Drivers in Kenya.

(3) Cut flower

Kenya is the third largest exporter of cut flowers in the world, accounting for around 35% of all sales in the
European Union. Main product is of course cut flower but it can develop various the flower related industries,
seed, young planting, plant breeding, construction material of greenhouse and processing factory and cold
storages etc. Kenya has close link to Dutch who are reputed to be amongst largest producers of plantings in
the world. Also they have discount tariff to export to Dutch by KLM. This makes Kenya to have more
advantage than other flower producing countries. Considering this scenario, Cut flower can be Key Growth
Drivers in Kenya.

(4) Processed fruits and vegetable

Demand has grown particularly faster in developing countries as industrial growth has translated into greater
urbanization, higher per capita incomes and expansion in the size of the middle class. As the global middle
class has grown, it has demanded larger quantities of higher quality and more-diverse food. Increased
consumption of fruits and vegetables can be attributed to more households becoming health conscious. In
Thika, Del Monte Kenya Ltd can operate plantation and processing factory successfully. It is a good
sample of valuchain from production to access to the Global market. Consequently, industry operators have
increased their output to meet this growth in global demand. Considering this scenario, processed fruits and
vegetable can be Key Growth Drivers in Kenya.

(5) Rice

The demand of rice in Kenya is assumed to be increasing in future as the population grows. Kenya has a
potential of about 540,000 ha irrigable area and 1.0 million ha rain fed area for rice production. Although
currently Kenya is a net importer of rice, with improved water harvesting, storage, underground water
resource utilization and innovative management technologies, the current irrigation potential can be
increased by a further 800,000 ha and 1.3 million ha. Considering this scenario, Rice can be Key Growth
Drivers in Kenya.

(6) Meat

The demand of meat production in Kenya is assumed to be increasing in future as the population grows. The
county governors expressed confidence the abattoir would spur meat business in the county due to high
demand for quality beef by consumers. Slaughterhouse would also create employment for residents, adding
that it would also be a key source of revenue to the county government. Kenya recently entered into a deal
with China to export meat products, a move estimated to pump billions of shillings into the local economy in

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the next five years and diversify export markets. Considering this scenario, meat can be Key Growth Drivers
in Kenya.

4.3.4 Development Scenario of Key Growth Drivers

Future production forecast of the key growth drivers was calculated based on the following information.
Meat products are still under additional VC survey. So the development scenario of key growth drivers of
meat products will be done after the VC survey result.
(1) Tea
Table 4.3.1: Production of Tea
Projection on production amount was calculated 2010 2011 2012 2013 2014
Production Area
based on data of production area and yield of
Smallholder (ha) 115 123.3 124.9 127.3 128.6
2010-2014. Growing rate of production area is 3% Estates (ha) 56.9 64.5 65.7 71.3 74.4
for Smallholder, and 7% for Estate. Production area TOTAL (000 ha) 171.9 187.8 190.6 198.6 203
Production
of the each year is calculated by this CAGR. Smallholder (ton) 225 218.6 218.5 249.8 262.4
Average yield is 1.9 ton/ha for Smallholder and 2.57 Estates (ton) 174 159.3 150.9 182.6 182.7
ton/ha for Estates. Yield is calculated by these each TOTAL (000 ton) 399 377.9 369.4 432.4 445.1
Yield
average yield. Expected Production of 2015, 2020, Smallholder (ton/ha) 1.96 1.77 1.75 1.96 2.04
2025, and 2030 were calculated based on the Estates (ton/ha) 3.06 2.47 2.30 2.56 2.46
production area and the average yield. Source: Economic survey 2015

(2) Coffee
Table 4.3.2: Production of Coffee
Projection on production amount was calculated 2010 2011 2012 2013 2014
Production Area
based on data of production area and average yield.
Co-operatives (ha) 84.2 82.4 85.2 85.2 85.3
CAGR of production area is 0.3% for Cooperatives, Estates (ha) 24.5 24.5 24.6 24.6 24.7
and 0.2% for Estate. Production area of the each TOTAL (000 ha) 108.7 106.9 109.8 109.8 110
Production
year is calculated by this CAGR. Average yield is Co-operatives (ton) 22.3 19.6 28 21.9 32.7
0.294 ton/ha for Cooperatives and 0.758 ton/ha for Estates (ton) 19.7 16.7 22 17.9 16.8
Estates. In 2030 the target yield for Cooperatives is TOTAL (000 ton) 42 36.3 50 39.8 49.5
Yield
0.758 ton/ha, equivalent to yield average of Estates. Co-operatives
At that time CAGR of yield of Cooperatives is 6.1%. (ton/ha) 0.265 0.238 0.329 0.257 0.383

Expected Production of 2015, 2020, 2025, and 2030 Estates (ton/ha) 0.804 0.682 0.894 0.728 0.680
Source: Economic survey 2015
were calculated based on the production area and
the yield, which is 0.758 ton/ha for Estates and calculated figure by 6.1% CAGR for Cooperative.

(3) Cut flower

Table 4.3.3: Export of Cut flower
Kenya’s export volume of cut flower is shown 2010 2011 2012 2013 2014
Export
following table. CAGR of export production amount 120,220 121,891 123,511 124,858 136,601
2010-2014 is 3.2%. Expected Production of 2015, (ton)
2020, 2025, and 2030 were calculated based on the Source: ICA Study Team based on ITC
CAGR.
(4) Processed fruits and vegetable Table 4.3.4: Export Processed Fruits and vegetables
2010 2011 2012 2013
Kenya’s export value of processed fruits and vegetable Export amount
120,647 121,103 130,651 151,495
is shown following table. CAGR of export (USD)
Source: JICA Study Team based on ITC
production 2010-2014 is 7.9%. Expected Production
of 2015, 2020, 2025, and 2030 were calculated based on the CAGR.
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(5) Rice
Table 4.3.5: Production of Rice
Projection on production amount 2013 2020 2025 2030
was calculated based on National Population 45,372,067 51,386,163 57,843,381 64,890,267
Production area (ha) 25,216 44,794 67,524 101,789
Rice Development Strategy Rice consumption (ton) 362,977 411,089 462,747 519,122
(2008-2019) (NRDS). According to Production(ton) 115,032 213,943 333,261 519,122
Source: JICA Study Team based on National Rice Development Strategy (2008-2018)
NRDS target production is as same
as expected consumption volume. The expected consumption volume was calculated based on the population
data which was prepared by JICA Study Team. The consumption figure per person is an averaged volume in
the last 10 years/Year 2004 to 2013.

Based on the above condition projection on production of key growth drivers are as in Figure 4.3.6.
Table 4.3.6: Production Projection of Key Growth Drivers
unit 2015 2020 2025 2030
Tea 000 ton 455.6 577.9 739.8 955.4
Coffee 000 ton 47.4 57.6 71.5 90.3
Cut flower 000 ton 141 165 194 228
Processed fruits and vegetable 000 USD 176 258 377 550
Rice 000 ton 170.5 247.0 358.0 519.1
Source: JICA Study Team

4.3.5 Necessary Interventions with Priorities

Necessary intervention of each growth drivers are follows.

(1) Tea

Source: JICA Study Team

Figure 4.3.4: Flow of Tea in 2015, and 2030

Necessary interventions for tea and coffee industry are follows;

1) To develop processing technology and labeling in order to encourage domestic value addition. For
example promote not CTC processing way but standard processing way. Main stream of processing way
in Kenya is CTC but tea is processed CTC is low value added;
2) To give technical assistance to increase productivity; for example by using fertilizer and giving proper
financial assistance.
3) To assist to develop new market, fair-trade, organic and traceable products etc. by matching between
producers and buyers.

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4) To construct Collection Center, processing facility and logistics center in the production area. This
will change the logistics in NEC in terms of container movements, the amount of containers moving to
the East shall increase.

(2) Coffee

Source: JICA Study Team

Figure 4.3.5: Flow of Coffee in 2015, and 2030

Necessary interventions for tea and coffee industry are follows;

1) To promote give technical assistance to increase productivity; for example by using fertilizer and giving
proper financial assistance and also post harvest processing. There are several kind of coffee processing
way, washed, un-washed and pulped natural etc. several type of processing way should be introduced in
order to meet various demands of buyers.
2) To assist to develop new market, fair-trade, organic and traceable products etc. by matching between
producers and buyers. Meru coffee farmers have a commercial license to market their product directly
on the Nairobi Coffee Exchange and to international buyers. Direct trading is to be developed as a new
trading way.
3) To construct Collection Center, processing facility and logistics center in the production area. This will
change the logistics in NEC in terms of container movements, the amount of containers moving to the
East shall increase.

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(3) Cut flower

Source: JICA Study Team

Figure 4.3.6: Flow of Cut Flower in 2015, and 2030

Necessary interventions for Cut flower industry are follows;

1) To develop irrigation system especially water saving irrigation like drip irrigation and micro irrigation
further more hydroponic 7 system by using clay ball and perlite, coco peat;
2) To promote investment by attractive investment conditions eg. Tax exemptions, low land lease rates,
low electricity costs.

(4) Processed fruits and vegetable

Source: JICA Study Team

Figure 4.3.7: Flow of Processed Fruits and Vegetable in 2015, and 2030
Necessary interventions for Processed Fruits and Vegetables industry are follows;
1) To improve feeder roads at the Coast area where mango growing dominate.
2) To develop the railway and a better road linking factory to Thika Town in order to catalyse exports of
canned pineapples, case of Thika-based Del Monte Ltd.
3) To develop more seamless connection to the railway system from factory in order to improve logistics
operations.

7 Hydroponics is a subset of hydroculture and is a method of growing plants using mineral nutrient solutions, in water, without soil. Terrestrial plants
may be grown with their roots in the mineral nutrient solution only, or in an inert medium, such as perlite or gravel.
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(5) Rice

Source: JICA Study Team

Figure 4.3.8: Flow of Rice in 2015, and 2030

Necessary interventions for rice industry are follows;

1) To increase investments in research and development of water saving irrigation, for example SRI,
2) To promote viable public private sector partnerships, to utilize private sector’s technical assistance in
order to improve the farming systems,
3) To develop both farmers and farmer organizations to be empowered to undertake production, processing
and marketing of rice as an enterprise.
4) To expand and improve existing schemes together with development of upland and wetland areas will
go a long way in increasing the area under production.
5) To develop clean and certified seed for distribution to farmers.
6) To develop land tenure system in the rice growing schemes to make farmers to be able to access loans,
7) To introduce small-scale mechanization equipment and machinery while gradually shifting to large
scale farming,
8) To develop the public-private sector partnership and development partner collaboration in resource
mobilization for its successful sustainable implementation.

4.4 Agriculture and Fishery Sectors Development in Uganda

4.4.1 Overview of Current Status

The agriculture sector in Uganda comprises cultivation of crops, fishing, livestock production and forestry.
The agricultural sector is still dominant in Uganda, especially in terms of employment, and is therefore a
high priority area in the government’s National Development Plan. Agriculture is still the main industry of
the Ugandan economy, although the contribution was about 24.4% of the total GDP in 2011/2012.
Agriculture also provides 71.9 % of the employment and most industries and services in the country are
dependent on this sector.

Almost all area is suited to agriculture. Products produced in the suburbs of Kampala are exported to South
Sudan and Kenya through the northern economic corridor. Stockbreeding is performed over the whole area.
Production areas for major crops, projects area of major donors and major private agricultural plants are
shown in the figure below.

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Source: JICA Study Team

Figure 4.4.1: Production Areas for Major Crops, Projects Area of Major Donors and Major Private
Agricultural Plants

Fishery and forestry production are not included in the figure because fishery is carried in water bodies and
forestry production is very small.

4.4.2 Assessment of Potential Products

It is considered that potential products in Uganda are categorized as follows:

1) Products with existing value chain to abroad market that are expected to be increased by expansion of
production area. Increased value addition will furthermore increase export volume resulting to more
export earnings.
2) Current imports are as a result of shortage in domestic production. In future domestic consumption
demand is expected to increase with the population growth. Particularly with Uganda, some of the
products that originally came from Mombasa currently are produced in Uganda, this reduces the
logistics westwards. By changing to produce in Uganda, this has the effect of increasing the logistics
eastwards.
3) Production that contribute to the added value to the local economy.

Preliminarily it can be highlighted that coffee, tea, tobacco, maize, fish, coco beans, plant cuttings (flowers),
oil seeds, dried leguminous vegetables (beans) as the most important agricultural primary products for
Uganda. Among these products coffee and Oil seed are picked as potential products for category 1, palm oil
and rice is picked as potential products for category 2, meat production and Maize are picked as potential
products for category 3. Demand of dairy products has been expanding with growth of the population, and it
may be expected that the trend will continue. But for dairy products since EU abolished milk quotas (EU
previously restrained surplus production of raw milk by setting up the production upper limits for the raw
milk in every area till March 2015.), it is expected that import volume from the EU will increase. It is a
challenge fort dairy production in Uganda to compete with imports from EU since the abolition of the milk
quotas. So dairy production is eliminated from Key Growth Drivers of Uganda.

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As for category 1, demand of coffee is likely to rise in future according to the International Coffee
Organization. Projection of the world consumption of coffee is shown below.

(Unit: tons '000) (Unit: tons '000)

600,000

500,000

400,000

300,000 Import
Production
200,000

100,000

0
Wheat Edible oil Sugar refined Rice

Source: JICA Study team based on the data of International Coffee Organization and FAO
Figure 4.4.2: Projection of the World Consumption of Figure 4.4.3: Amount of Production and Import of
Coffee Major Import Crops in Uganda (2012)

4.4.3 Analysis of NEC-Key Growth Drivers

Strengths and opportunities of each key growth driver are follows.

(1) Coffee

World demand of coffee is also assumed to be grown in China, India and Latin America. With the increasing
population in these countries, their cuisine culture continues to be westernized. As same as tea, already
Uganda has a value chain of exports to India, China and Latin America. The already established value chain
of exports makes Uganda to have more advantage over other Coffee producing countries. Also in Uganda,
organic Arabica coffee can be cultivated to produce high quality coffee referred to as “special coffee”. The
demand of “special coffee” is nowadays increased. Uganda has more advantage over countries cultivating
Robusta coffee because of its high quality organic Arabica coffee.

For agricultural development, land is a big issue. Plantation development encountered difficulties and
development type has shifted to accumulate small farmers. In coffee industry the Government promoted
accumulating small farmers and organizing farmers association. As a result there exists some big federation
like National Union of Coffee Agribusinesses and Farm Enterprises (NUCAFE), and also some investors
who developed such a federation, for example The Good African Coffee. Such federation and private
company own processing facilities, so they can add value the products. From such a condition, Coffee can be
Key Growth Drivers in Uganda.

(2) Oil Seed (Sesame)

World demand of Sesame is also assumed to be grown especially in China. China exported big amount of
sesame but now imports it. Livelihood of people is more improved people are more interested in food which
is essentially healthy. In China middle class population is increasing so demand of sesame is expected to
continue increasing. Sesame cultivation needs to be done not mechanically but manually. In Uganda there is
history of sesame cultivation and cheap labor. It is strength to have value chain to China, Korea and Japan,
which are major world consumption countries. From such a condition Palm oil can be Key Growth Drivers
in Uganda.

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(3) Palm Oil

Global demand for edible oils is increasing as a result of the world's rising population and improving
economic conditions among the developing countries. The Oil Palm is a highly productive source of Oil. For
this reason, it has become the prime source of vegetable oil for many tropical countries and constitutes thirty
four percent of total edible oil production worldwide.

Agricultural land is issue in palm industry. However, the Government initiated the Kalangalae Oil Palm
Project under PPP arrangement which has been successful for the last 20 years. There is world class
plantation management practices that are being utilized in this project. Uganda will achieve self-sufficiency
in palm oil production. From such a condition Palm oil can be Key Growth Drivers in Uganda.

(4) Rice

The demand of rice in Uganda is assumed to be increasing in future as the population grows. Uganda has a
potential of about 202,000 ha irrigable area. Although currently Uganda is a net importer of rice, locally
produced rice can replace imported rice by improving irrigation facilities, storage, underground water
resource utilization and innovative management technologies and also branding with consistent quality, and
readily available on the market. In such a situation Tilda Uganda Ltd and other mid-small entrepreneurs have
interest in Rice industry and started investment. From such a condition Rice can be Key Growth Drivers in
Uganda.

(5) Maize

Maize is important cereal food crop. The market opportunity is domestic one and also presented by the
chronic maize deficit especially in Kenya and South Sudan. That is why a bigger percentage of Uganda's
maize that is traded ends up in the export markets, especially in the EAC and COMESA partner states of DR
Congo and South Sudan particularly for the latter. Maize is primarily used for food and animal feeds
production. These two uses, to a larger extent, shape the production, consumption and trade patterns of the
grain in Uganda and the region. EAC partner is also categorized as a food-deficit country with more than 40
percent of its 44 million people living in chronic food-deficit regions. From such a condition the demand of
Maize is assumed to be increasing and Maize can be Key Growth Drivers in Uganda.

(6) eat production

Beef is the most important source of meat for human consumption and there has been increasing national
demand for beef as a result of population growth, change in tastes as well as economic growth. However,
according to FAO the per capita consumption for all meat was only 12.1 kg far from the FAO and WHO
recommended 50 kg. This consumption is very low and there is huge consumption demand in order to satisfy
the domestic demand in addition to the export market to EAC countries. Government also developed the
2003 meat policy with a mission to satisfy the national meat requirements, contribute to food security and
increase farmers’ incomes. From such a condition, Meat production can be Key Growth Drivers in Uganda.

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4.4.4 Development Scenario of Key Growth Drivers

(1) Coffee

Projection on production amount was calculated

Table 4.4.1: Production of Coffee
based on data of production area and yield of 2010 2011 2012 2013 2014
2010-2014. Growing rate of production and Production Area
320 270 320 310 312
(000 ha)
production area is very low. But in eastern area Production
211.7 195.8 166.9 191.3 186.1
average yield is higher, 1.64 ton/ha. And so this (000 ton)
yield, 1.64 ton/ha is to be target yield in 2030. At Yield 0.614 0.612 0.618 0.598 0.600
(ton/ha)
the moment, growth rate of the yield is 6.3%. Yield Source: FAOSTAT and UGANDA CENSUS OF AGRICULTURE
of each year is calculated with this growth rate. 2008/2009
Expected Production of 2015, 2020, 2025, and 2030
were calculated based on the production area and the yield.

(2) Palm Oil

Projection on production amount was calculated based on data

Table 4.4.2: Production of Palm Oil
of production area and yield of strategy plan of Bidco Ltd. Their 2009 2015 2025
yield is 3.74 ton/ha. Target production area of Bidco Ltd. is Production Area
10,695 11,000 41,000
(ha)
100,000 ha in future. In the first phase from 2003 to 2015 they Production
40,000 41,140 153,340
achieved 11,000ha development by PPP. In the second phase (ton)
they set out 30,000ha for the next 10 years for development. Yield 3.74 3.74 3.74
(ton/ha)
Furthermore in future their target production area is 100,000ha. Source: JICA Study Team based on hearing with
Projection production area of 2015, 2020, 2025, and 2030 were Bidco Ltd.,
calculated based on the production area and the target yield.

(3) Rice

Projection on production amount was Table 4.4.3: Rice Consumption

calculated based on Uganda National Rice 2015 2020 2025 2030
Population 35,756,800 40,455,308 47,093,905 55,065,635
Development Strategy (UNRDS) issued in Rice
2008. According to UNRDS, target that rice consumption 286,054 323,642 376,751 440,525
(ton)
self-sustained is achieved in 2013. That was
Source: JICA Study Team based on Uganda National Rice Development
not achieved. So projection on production Strategy (2009)
amount in 2030 is to be as same as expected consumption volume. The expected consumption volume was
calculated based on the population projection data which was prepared by JICA Study Team. The
consumption figure per person is 8 kg according to UNRDS.

(4) Maize

Ugandan production of Maize is shown

Table 4.4.4: Production of Maize
in table on the right. CAGR of 2010 2011 2012 2013 2014 CAGR
production 2010-2014 is 4.83%. Production 2,374 2,551 2,734 2,748 2,868 4.83%
(000 ton)
Expected Production of 2015, 2020, Source: STATISTICAL ABSTRACT 2015
2025, and 2030 were calculated based on
the CAGR.

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(5) Meat Production

Ugandan production of Meat is shown

Table 4.4.5: Production of Meat
following table. CAGR of production (Unit: 000 ton)
2010-2014 is 3%. Expected Production 2010 2,011 2012 2,013 2014 CAGR
Beef 180,300 185,709 191,280 197,019 202,929 1.03%
of 2015, 2020, 2025, and 2030 were Goat/Mutton 33,619 34,627 35,666 36,736 37,838 1.03%
calculated based on the CAGR. Pork 19,669 20,259 20,867 21,493 22,138 1.03%
Source: Ministry of Agriculture, Animal Industry and Fisheries (MAAIF), and
Uganda Bureau of Statistics

Based on the above condition projection on production of key growth drivers are as in Table 4.4.6.
Table 4.4.6: Production Projection of Key Growth Drivers
(Unit: 000 ton)
2015 2020 2025 2030
Coffee 202.6 276.2 376.7 513.7
Palm Oil 41.1 97.2 153.3 209.4
Rice 193 254 334 440
Maize 3,007 3,808 4,823 6,109
Meat Production 270.8 309.8 352.5 403.8
Source: JICA Study Team

4.4.5 Necessary Interventions with Priorities

Necessary intervention of each growth drivers are follows.

(1) Coffee

Source: JICA Study Team

Figure 4.4.4: Flow of Coffee in 2015, and 2030

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Necessary interventions for tea and coffee industry are follows;

1) To promote productivity; give technical assistance in farming methods for example by using fertilizer
and giving proper financial assistance and also post harvest processing. There are several kind of
coffee processing way, washed, un-washed and pulped natural etc.several type of processing way should
be introduced in order to meet various demands of buyers.
2) To assist to develop new market, fair-trade, organic and traceable products etc. by matching between
producers and buyers. The 1st Uganda National Coffee Festival and Exhibition was conducted this
October by NUCAFE, National Union of Coffee Agribusinesses and Farm Enterprises. Such a
exhibition event should be done more.
3) To construct Collection Center, processing facility and logistics center in the production area. This will
change the logistics in NEC in terms of container movements, the amount of containers moving to the
East shall increase.To promote investment by preparation of attractive investment conditions. Several
private companies started operation of their factory and export value added coffee.. Such private
companies will be booster he coffee industry.
4) To promote domestic coffee drinking culture. In Uganda there is tea culture but coffee is not so popular.
The government should take some promotion events.

(2) Palm Oil

Source:
Figure 4.4.5: Flow of Palm Oil in 2015, and 2030

Necessary interventions for Palm Oil industry are follows;

1) To develop feeder road. Palm oil production area is huge. Effective transportion will save production
costs, also to develop inland transportation by water. Now fuel for operation of factory is imported, to
rush domestic petroleum oil or inland transportation by water in order to import more cheaper.
2) To develope good lessons learnt in Karangarato to the other palm oil area.

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(3) Rice

Source: JICA Study Team

Figure 4.4.6: Flow of Rice in 2015, and 2030

Necessary interventions for rice industry are follows;

1) To promote viable public private sector partnerships, to utilize private sector’s technical assistance in
order to improve the farming systems,
2) To develop both farmers and farmer organizations to undertake production, processing and marketing of
rice as an enterprise.
3) To expand and improve the existing schemes together with development of upland and wetland areas
will go a long way in increasing the area under production.
4) To develop a clean certified seed for distribution to farmers.
5) To develop land tenure system in the rice growing schemes to make farmers to be able to access loans,
6) To introduce small-scale mechanization equipment and machinery while gradually shifting to large
scale farming,
7) To develop the public-private sector partnership and development partner collaboration in resource
mobilization for its successful sustainable implementation.
8) To promote investment by preparation of attractive investment conditions. Private companies started
operation of their factory and invested in development field. They will export value added rice . Such
private companies will be booster the Rice industry.

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(4) Maize

Source:
Figure 4.4.7: Flow of Maize in 2015, and 2030
Necessary interventions for maize industry are follows;
1) To develop both farmers and farmer organizations to undertake production, processing and marketing of
Maize as an enterprise.
2) To develop feeder road to reduce post harvest loss. Effective transportation will save production cost.
3) To introduce small-scale mechanization equipment and machinery while gradually shifting to large
scale farming.

(5) Meat Production

Source:
Figure 4.4.8: Flow of Maize in 2015, and 2030

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Necessary interventions for Meat industry are follows;

1) To develop Value chain, from production and processing and transportation with cold chain with the
involvement of private sector.
2) To support disease control and develop processing infrastructure,
3) To develop quality control standard for expansion of beef exports.

4.5 Mining and Petroleum Sector Development in Kenya

4.5.1 Overview of Current Status

(1) General

In the past years in Kenya there has not been any significant consideration of the potential of metallic
resources in the country. The recent discovery of mineral sand enriched with Titanium, Niobium and Rare
Earth Elements (REEs) near Mombasa may direct change towards significant consideration of the potential
of metallic resources in Kenya. In order to attract investors and mining operators, the Government of Kenya
developed Kenya Mining Investment Handbook 2015 in partnership with UK Aid from the UK Government.
Strategic development approach has been made in the mining sector to make Kenya a more attractive
destination for investments, as shown below:

1) Establishment of the Ministry of Mining

Recognizing the importance of mining to the achievement of national development goals, the
government established the first ever Ministry of Mining.
2) Acquisition of Data
The Ministry has intensified efforts to acquire mineral and geological data. A countrywide aero
magnetic survey project is expected to begin imminently. The contract to acquire the data has been
awarded to the Chinese Geological Institute, a non-commercial and government body, which will work
under the supervision of an independent panel that will ensure the quality of data acquired is up to
international standards.
3) Formation of Mining Certification laboratory and Geo-Data Bank
The Ministry is pursuing international accreditation for mining certification for its laboratory in Kenya.
The laboratory will provide qualitative mineral analytical services, certify minerals, and identify various
precious and semi-precious minerals carry out research on mineral analytical techniques.
4) Mining Cadastre System
The Ministry has automated its mineral licensing system through the launch of an online mining
cadastre portal. This system will increase efficiency and transparency in the grant of mineral rights and
concession management.
5) E. Infrastructure Projects
Infrastructure development is a key economic pillar in Kenya’s Vision 2030, the nation’s development
blueprint. These include:
- New Paved Roads Construction Project
- Mombasa Port Efficiency Project
- Standard Gauge Railway Project
- National Optic Fiber Project
- The Lamu Port and South Sudan Ethiopia Transport (LAPSSET) Project

(2) Mining Activities:

Cement Industry: Kenya has sizeable deposits of limestone, marbles and dolomites mostly utilized in
cement manufacturing and construction industries. Among the large cement manufacturers present in Kenya
are Bamburi Cement (Lafarge Holcim Group) with an installed annual capacity of 2.1 million tons; East
Africa Portland Cement Company (EAPCC) with 1.3 million tons, and Athi River Mining (ARM) with one
million tons. Both Mombasa Cement and Savannah Cement have nearly 1.5 million tons of manufacturing
capacity. Overall manufacturing capacity will be 5.9million tpa in total in Kenya.
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Soda Ash: Tata Chemicals Magadi Ltd. of India (formerly Magadi Soda Ash Ltd.) mined trona from Lake
Magadi. Tata Chemicals Magadi increased production capacity at Lake Magadi to 1 million tpa in 2015. Part
of Soda Ash is consumed domestically by glass producers and by ARM in the production of sodium silicate.
Soda Ash is used in detergents, soaps, and chemical and metallurgical applications

Fluorspar: Kenya Fluorspar Company Ltd. (KFC) is one of the major established mining companies in
Kenya and its fluorspar production capacity is 125,000 tpa at its Kimwarer Mine, near Eldoret. The product
is mostly exported to India and Europe.

Kwale Mineral Sand Project: Kwale is located 10 kilometers inland from the coast and 50 km south of
Mombasa. The Kwale mine is estimated to have reserves of 140 million tons of Titanium ore and produce 4.6
million tons of final products for sale. The project commenced production in late 2013 with a mine life of 13
years. Over the first six years, production is expected to ramp up to produce an annual average of 80,000
tones of Retile, 330,000 tones of Ilmenite and 40,000 tones of Zircon.

Mrima Hill Project: The Mrima Hill Mine is a world class niobium and rare earth resource in Kenya,
located 70km southwest of Mombasa. The license was granted on a 21 year Special Mining License to
Cortec Mining Kenya Limited, a private company incorporated in Kenya. In March 2015 the government has
announced based on the court order that no private firm or individual will be allowed to explore minerals at
Mrima Hills in Kwale County. The contentious exploration business of the niobium and rare earth metals at
Mrima Hills will be done by the State through the National Mining Corporation which is yet to be formed.

Gold Mine Projects: Most of Kenya’s gold productions come from artisanal miners in Nyanza, Rift valley
and Western Provinces. Goldplat plc of South Africa has started producing gold at the Kilimapesa project in
Jan 2012, as Kenya's first gold mine commissioned since independence in 1963. Kilimapesa has a
JORC-compliant resource of 8,715,291 tonnes at 2.40 g/t Au for 671,446oz of gold at a cut-off grade of 1 g/t
of gold for all categories. Acacia Mining Project comprises 2,800km2 of the Ndori Greenstone Belt in west
Kenya, which has a significant potential for gold, as well as copper, lead and zinc. Acacia Mining focuses on
three primarily locations where potential gold systems and base metals deposits may exist.

Coal Exploration: Coal deposit was confirmed in the area of Mui sedimentary basin where general
geological survey was carried out in 1940s. In order to explore affordable domestic energy resources,
Ministry of Energy and Petroleum started coal exploration and divided the area into four blocks and put them
to an international tender. According to a media report, Concession Agreement for block C and D was signed
with Fenxi Mining (China) in 2011, and Fenxi Mining would pay the government 3 million US dollars for
Block C and 500,000 US dollars for Block D, in return for a renewable concession of 21 years. It also allows
the government to have an 11 per cent participation in the project, sharing gross revenues at a rate of 23.6 %
for Block C and 21.1% for Block D. The concession will be developed together with a local joint venture
partner, Great Lakes Corporation. 400 million tons of coal reserves have been identified in Block C. Further
tender rounds are planned for 31 blocks, covering all over the Kenya.

(3) Petroleum Sector:

Oil and Gas Discovery: To date, 41 acreages are leased out based on Product Sharing Contract (PSC) with
21 companies. In 2012, Africa Oil with partner Tullow Oil Plc announced successful results from the
Ngamia-1 exploration well on Block 10BB, which was the first exploration well at Lokichar Basin in the
Tertiary Rift Area which is an extension of the productive trend established in the Lake Albert basin of
Uganda. To date, more than 1 billion barrels of recoverable oil has been discovered at Block 10BB and 13T.

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1 Tcf of natural gas was discovered at Block 9 in Anza Basin where provides exposure to the Cretaceous Rift
system and productive in Sudan. 750 Bcf of gas is also discovered in Lamu Basin (offshore)

Petroleum Master Plan: On the discovery of oil in Lokichar basin in 2012, the Ministry of Energy and
Petroleum approached World Bank for assistance to review regulatory and legal framework, and intensify
capacity building In pursuant to the discovery and development of the oil and gas sector. In 2015,
formulation of comprehensive report on development of oil and gas sector in Kenya was completed and
published as” Toward a Petroleum Master Plan 2015”.

Crude Oil Export Pipeline: Dispute on routing of the crude oil pipeline appears to come to an end in Kenya.
A joint communiqué from both Kenyan and Ugandan Governments was issued on 10 August 2015, stated
that "the two Heads of State agreed on the use of the Northern Route i.e. Hoima-Lokichar-Lamu for the
development of the crude oil pipeline." The pipeline is the longest heated pipeline in the world at an
estimated length of 1335 km.

4.5.2 Assessment of Potential Products

Potential mining and energy products which contribute economic development of NEC are considered as
follows:

Coal: Coal is a very basic affordable industrial fuel used for power generation, cement industries, and other
energy intensive industries such as bricks and ceramics. Kenya has used imported coal, mostly from South
Africa, however, this situation will change. Kenya will be a coal self sufficient country in a few years time.
Identified coal reserve in Fenxi Mining Block C is 400 million ton and quality of the coal is classified as
semi-bituminous. Agreement on Mining License was in place and Resettlement Action Plan is in progress.

Crude Oil: Confirmed recoverable oil reserve to date is more than 1 billion barrels from Lokichar basin in
the Tertiary Rift Area. The produced oil will be exported via pipeline from Hoima, Uganda, to Lamu, Kenya,
which was given green right following a state visit to Uganda by His Excellency Hon. Uhuru Kenyatta,
President of the Republic of Kenya in August 2015. The project is expected to be operational in 2020.
Kenyan Government is planning to build oil refinery in Lamu to supply product oils to domestic market and
also export to LAPSSET countries via. pipeline.

Natural Gas: Natural gas can be used for power generation but more importantly it is a very valuable feed
stock for Urea production and its intermediate product of Ammonia. These makes important component of
fertilizer. Kenya is importing one million tons of fertilizer annually, but this situation can be changed.
Considering growing food requirement in African countries, demand for fertilizer will grow, and domestic
urea production will be justified. Natural gas is also used for methanol production as well as a use as an
industrial fuel.

Soda Ash: Kenya is one of the major Soda Ash exporting countries in the world. Production capacity is 1
million tpa and most of the products are exported. Glass manufacturing is one of the area where Soda Ash is
used. Introduction of natural gas will allow the country to manufacture sheet glass domestically to meet the
growing demand in the construction sector. Further growth is expected due to a change of architectural style
of office buildings and more glass is used. Soda Ash is also used to manufacture detergents, soaps, and other
chemical products. Once the market grows to a sizable scale, domestic production will also be viable.

Niobium and Rare Earth Elements: Niobium is a kind of rare metal and Brazil alone reserves majority
(96% to date) of the world niobium resources. The Mrima Hill Mine is a newly emerged world class niobium

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and rare earth mine in Kenya. The development of the niobium and rare earth metals at Mrima Hills was
taken over by the State and will be owned and operated by a National Mining Corporation which is yet to be
formed. Kenya will be a major player in the world niobium market.

Iron Ore-Base Metals: Iron ore was discovered in the Nyanza, Central and Coast Region. Steel industry is
different from other base metal industries. Steel is not a product of purified iron, but alloyed with carbon and
other minor elements. Composition of these minor elements will differ from purpose to purpose of use. Heat
treatment is also very important process to make the product marketable. Huge amount of investment is
required to construct steel making facilities and huge amount of coking coke or natural gas will be used as a
reducing agent, significant amount of pure oxygen is used for converters. Sizable electric power plant is
required to supply the power to electric furnaces. More importantly end product need to be competitive in the
international market. Steel manufacturing facility in Kenya may not be economically viable without
significant domestic demand such as ship building and/or car manufacturing industry.

Titanium: Kwale Mineral Sand Project has started production of titanium ore since 2013. Production rate
will ramp up to about 6% of world production and deplete in 13 years. Titanium exists on earth abundantly
but mostly at low concentration. Kwale Minral Sand Procect will be able to procure higher concentration of
ore. Production process of the titanium Ingot is sophisticated and requires significant investment. With 13
years of mine life, invest in ingot manufacturing facility in Kenya will not be economically viable. Titanium
production will be an economic growth driver in short term but not long term in the country.

4.5.3 Analysis of NEC Key Growth Drivers

Key NEC Growth Driver will be: Crude Oil, Natural Gas, Coal, Soda Ash and Niobium.

(1) Crude Oil Pipeline Project

Crude oil produced in Kenya will be transported by a crude oil pipeline to Lamu for export or refining.
Crude oil from South Sudan will also be connected at Lokichar. Expected production rate from Kenyan oil
field is 100,000-120,000 bpd. This will bring Kenya sales revenue of $2,190 million/yr at $60/bbl base. The
revenue will offset the expenditure for oil products in 2020.

(2) Oil Refinery Project

The oil pipelines and refinery are a major component of the LAPSSET Corridor project. The refined
products pipeline from Lamu to the North Eastern part of Kenya and Ethiopian will ease the current reliance
on Mombasa for refined products to the North of the country and thus potentially reduce the cost of refined
products across the region. Extensive feasibility study will be required to justify the construction of refinery
in Lamu and also alternatively regional micro refinery may also be studied to minimize the infrastructure
investment.

(3) Natural Gas

With natural gas available, Kenya will be able to manufacture Urea and Ammonia by itself. Domestic
production of Urea will contribute to the security of food production in the country. Introduction of natural
gas will also benefit general manufacturing industries, in addition to power industry.

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(4) Coal

Coal plays very important role in power sector and also cements industries. Rail infrastructure must be
constructed from mine site connected to a main railway system to deliver the coal to cement industries and
other potential industries including coal power plant. It is important to plan coal based power plant in
Mombasa area as an anchor customer, and if practical, replacing the idea of constructing LNG power plant
with a capacity of 700 MW. Kenyan government is planning to install coal power plant in Lamu Port area
using an imported coal. Use of domestic coal should also be considered.

(5) Soda Ash

It is reported that Soda Ash production has been slowdown for the last few years due to a contamination by
soil erosion during rainy season. Tree plantation programs are underway to protect the mine (Lake Magadi)
from erosions to maintain quality of Soda Ash product and its production rate. Glass is one of the promising
products in Kenya which can be manufactured by domestically available materials. Glass products are heavy
and bulky, and it is advantageous to manufacture locally. Natural gas is an important heating medium for
manufacturing glass products. Marketing of domestically produced soap and detergent should also be
considered.

(6) Niobium

Kenya will be a major supplier of niobium to the international market. Demand of niobium is expected to
grow with the growth of steel product, electronic devices and the development of electric vehicles. Japan is
one of the major niobium importers in the world and suggested to communicate with Japanese trading
companies and steel manufacturing companies to gain shares in the market.

4.5.4 Development Scenario of key Growth Drivers

(1) Crude Oil Pipeline and Export 1) Study Agreement among the Stake Holders
2) Study Committee to be founded by Stake Holders
3) Detailed Feasibility Study carried out
Kenya has a plan to use its indigenes crude oil for 2015 4) Detailed Route Survey carried out
own refinery at Lamu, otherwise export. Planned 5) EIA carried out
production rate will be some 100,000-120,000 bpd. 6) ROW secured
2016 7) Resettlement Action Plan prepared
The crude oil pipeline from the Hoima in Uganda to 8) Pipeline Operation Company founded
Lamu is expected to be operational by 2020. Further 2017 9) Finance closed
detailed feasibility study should be carried out to 10) EPC Contractor decided
11) EPC Work Started
confirm the construction cost, project schedule, and 2020 12) Commercial Operation start
overall economics. As part of the study, pipeline route
to be finalized and Resettlement Action Plan should be prepared. ROW (right of way) need to be secured and
plan for export terminal need to be firmed up. Project entity for pipeline project should be founded and
finance should to be closed to start the construction work. There are numbers of options in the project.
Development scenario is summarized as above.

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(2) Natural Gas Supply

Important infrastructure to make the natural gas valuable is pipeline. In order to extend the pipeline, anchor
customer should be deployed at strategically important locations or where gas need to be delivered. Anchor
customer includes fertilizer plant, power plant, methanol plant and/or Sponge Iron DRI plant.

Assuming that natural gas supply starts 2020, it Table 4.5.1: Natural Gas Anchor Customer
should be delivered to the anchor customer at nearest Development Plan
strategic Location, i.e., Lamu. Fertilizer with a (Unit: mmscfd)
Urea Power
capacity of 1 million pta is assumed in Lamu in 2020. Year Industry Total
Plant Plant
Pipeline will be further extended to Mombasa where 2020 80 80
2025 160 100 10 270
additional 1 million tons of urea production capacity
2030 160 200 20 380
and also 700 MW of gas power plant are assumed in Source: JICA Study Team
2025. These become an anchor customer to justify the pipeline extension project. Delivery of natural gas to
general industry including glass making industry will also start in Mombasa. In 2030, additional power plant
of 700 MW will be installed either in Lamu or Mombasa. Overall gas demand is assumed as on the right.

(3) Coal

Table 4.5.2: Coal Anchor Customer Development Plan Coal supply is assumed to start in 2020.
(Unit: million tpa) Initial coal customer will be a power
Coal Power General
Year Cement Total plant of 700 MW capacity in Mombasa
Plant Industry
2020 1.8 0.8 0.1 2.7 or mine mouth coal power plant in Kitui.
2025 3.6 1.2 0.2 5
Coal is also delivered to cement
2030 5.4 1.6 0.5 7.5
Source: JICA Study Team industries. Estimated coal requirement
in Mombasa and Nairobi for cement
industries are 0.8 million tpa, if these operate at full capacity. Cement industry is growing at 8% annually and
coal consumption will also grow. Power demand will increase at a higher rate than that of GDP in Kenya.
One additional 700 MW power plant is assumed in Mombasa in 2025, and further 700MW power plant is
assumed in Mombasa. Overall coal requirement is assumed as follows:

(4) Niobium

Niobium is mined and Table 4.5.3: Niobium Production and Market Development Plan
produced in the only limited (FeNb EquivalentBbasis)
World Market Kenya World Kenya Niobium Sales Revenue
countries, and similarly, Year
(ton) Share Production (ton) ($ million)
numbers of buyers are also 2020 80,000 10% 8,833 230
2025 88,326 20% 17,665 459
limited. Acquisition of
2030 97,520 30% 29,256 761
market share may not be Note: FeNb Market Price at $26/kg, @2012 by JOGMEC Mineral Resource Report, World
difficult for new comers in Production Forecast by JOGMEC
Source: JOGNEC Data and JICA Study Team
view of supply security, and
30% of world market share in 2030 may be attainable. Assuming that world market of niobium as a FeNb
equivalent is 80,000 ton with an annual growth of 2% annum, and the price level is the same level as that of
2012, estimated revenue will be as follows:

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(5) Soda Ash

Soda Ash is important ingredient for manufacturing glass and detergent and soap:

- Kenya is importing flat glass and grass wears, although most of the ingredients are self sufficient. Glass
making industry is energy intensive and requires low cost clean energy, i.e., natural gas. Once natural
gas is available, flat grass manufacturing industry will be founded in Kenya. Potential of flat glass
market in East African countries are considered significant and will be a driver of economic growth of
the country.
- Kenya is manufacturing detergents and soaps, and exporting 62,863 ton in 2013. This figure will
increase due to an advantage of self sufficient situation of these ingredients. Market of these products
will mostly be East African nations where potential is considered the highest in the world.

4.5.5 Gap Assessment for Development Scenario

(1) Crude Oil pipeline Project

Crude oil pipeline plays very important role in the economic development of the country. Feasibility study
was undertaken at the hike in crude oil price of $100/bbl. Expected tariff in the study was $15.2/bbl
compared with $11.0/bbl for Great Nile Petroleum of Sudan Crude Oil Pipeline. Nature of the crude oil
produced in Albertine Graben is waxy and highly viscous, and need to be heated to prevent plugging in the
pipe. The pipeline is also designed as an international common carrier; and serves to transport mixture of
different crude oils, from Uganda and Kenya, and in future from South Sudan and Ethiopia. Apart from the
construction and operational issues, following issues should be agreed upon among the stake holders: (1)
Financial Framework, (2) Operatorship, (3) Capacity Right Ownership, (4) Quality Bank.

(2) Refinery in Lamu

In general, refining industry is exposed to a tough international competition and refined product must meet
the international standard. Nature of domestic crude oil may not necessarily be advantageous due to a higher
residue contents. This leads to a heavier investment for cracking capacity, however, nature of low sulfur is
advantageous due to a smaller investment for desulfurization capacity. Further feasibility study need to be
carried out.

(3) Natural Gas Pipeline

In order to introduce natural gas, pipeline need to be installed. Size of the pipe is decided based on the
consumption in terms of flow rate by strategic anchor customers. Anchor customer includes fertilizer plant,
power plant, methanol plant, and/or Sponge Iron DRI plant. Anchor customers should be deployed
strategically important locations or where gas need to be delivered. Framework of such plan should be
prepared as part of master plan.

(4) Coal Transportation Infrastructure

Coal should be transported by rail. Rail branch line will be installed from coal mine to main rail way system.
Coal transportation system including coal terminal should be studied further and location of coal power plant
will need to be identified.

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(5) Mineral Potentials

Large potential of mineral resources are developed in the carbonatite formation in the west side of the
country near the border with Uganda. This area can be developed in collaboration with Ugandan side based
on some type of joint mining development agreement etc. for the benefit of both countries.

4.5.6 Necessary Interventions with Priorities

Potential projects which contribute to the development of NEC will be as follows:

1) Coal mine development and associated construction of railway branch line

i). Develop Coal Power Plant as anchor customers 2020
2) Natural gas development and associated pipeline construction
i) Develop Urea Plant Project as an anchor customer in Lamu in 2020
ii) Develop Urea Plant Project as an anchor customer in Mombasa in 2025
iii) Develop Power Project as a anchor customer in Mombasa/Lamu 2025/2030
3) Crude Oil Pipeline Project
i) Further study is necessary

Acquisition of land for ROW (Right of Way) will be a responsibility of the host government.

4.6 Mining and Petroleum Sector Development in Uganda

4.6.1 Overview of Current Status

Geological aspect of Uganda is dominated by old rocks up to 3,100 million years old and demonstrates high
potential of discovery of minimizations. Pegmatite formation is developed in SW Region and carbonatite
formation is developed in the Eastern Region. Aluminous clays enriched in various minerals including REEs
are also developed in the SE Region. Albertine Rift, part of Great Rift Valley, runs in the west part of the
county developed oil fields in its Tertiary formation. Uganda’s mineral industries are expected to grow with
the development of mineral mines licensed for exploration and mining of tin, cobalt, copper, lead, zinc,
PGMs, phosphate, iron ore, niobium (columbium), salt, tungsten, limestone, and REEs for the next few years.
Mined minerals are expected to be processed and refined in the country to maximize the value. Significant
growth is expected in the petroleum sector in the next few years. Proven oil reserve in the Albert Graben is
estimated 6.3 billion bbl with the recoverable oil of 1.3 billion bbl to date. 0.5 TCF of natural gas was also
discovered.

Major structural change has taken place in the Ministry of Energy and Mineral Development since July 2015.
Former Directorate of Energy and Mineral Development was spitted into three Directorates, i.e., Energy
Resources & Development, Petroleum, and Geological Survey & Mines. Directorate of Petroleum was
further broken down into three disciplinary Departments, Upstream, Midstream, and Downstream. Refinery
and Pipeline (both crude oil and product oil) is governed under the Midstream Department. Directorate of
Geological Survey & Mines was also broken down into three disciplinary Departments, Geological Survey,
Geothermal Resources, and Mines.

60,000 bpd Refinery (initial phase is 30,000 bpd) will be built in Kabaale, Hoima District, and majority of
produced crude oil will be exported through the port on the Indian Ocean. Controversial routing of the crude
oil pipeline appears to be settled between both the government of Uganda and Kenya in August 2015 and
agreed on the use of northern route, i.e., Hoima-Lokichar-Lamu. Government of Uganda has also signed
MOU with Tanzanian Government to evaluate Hoima-Tanga route to develop least cost route to provide
value for Ugandan Resources.

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(1) Activities of Mining Sector:

Most of Uganda’s mining and mineral processing facilities are owned and operated by private companies.
Legal framework was renewed in 2001-2004. Under the new regulatory system, Exploration License (EL)
has been granted to private entities to encourage initiating the exploration. Number of EL holders has
increased significantly from three (3) in 2007 to 508 in September 2014. Mining Lease (ML) holders for
mining operation are 34 as of September 2014. Among those, 15 are non-metallic mines and 19 are metallic
mines including 6 gold, 4 iron ore, 3 wolfram, 3 tin, 2 Tantalite, and one copper mine.

In September 2013, the Government signed an agreement with Guangzhou Dongsong Energy Group of
China for the development of the Sukulu phosphate rock deposit. The company is expected to manufacture
300,000 t/yr of phosphate fertilizers, 300,000 t/year of steel products, and some REEs including niobium.
The Government is planning to build a sulfuric acid plant with a capacity of 200,000 t/yr to support
phosphate fertilizer production.

(2) Petroleum Leasing Round:

Uganda’s first licensing round covering six blocks in the Albertine Graben was announced in February 2015
with a publication of Request for Qualification (RFQ) for the petroleum exploration. The qualified firms will
be issued a detailed request for bids together with the Model Production Sharing Agreement (PSA) for the
specific blocks. Companies submitting the best evaluated bid for each of the blocks will proceed to
negotiations with Government prior to signing the PSA. The licensing round is expected to conclude with the
award of licenses by the first quarter of 2016. Ugandan Government is founding National Oil Company to
takes 15-25 % of share in upstream operation under the PSA.

(3) Current Petroleum Development Status:

Three international oil companies, Tullow Uganda Operations Pty Limited, Total E&P Uganda and China
National Offshore Oil Corporation (CNOOC) Uganda Limited are licensed in EA–1, EA–1A, EA–2 and
EA–3A on Lake Albert (Albertine Graben), each held a one-third share. 21 oil and gas discoveries have been
confirmed in the area to date, four of which were relinquished to government. Appraisal of 17 out of the 21
discoveries has been completed. Proven oil reserves are estimated 6.3 billion bbl in total, and 1.3 billion bbl
will be recoverable oil. Proven gas reserve is estimated 0.5 Tcf.

The Government of Uganda and the licensed companies has entered into a Memorandum of Understanding
(MoU) for commercialization of the discovered resources. This MoU includes development of a refinery at
Kabaale in Hoima District. The refinery would have an initial capacity of 30,000 bpd and expanded to
60,000 bpd to the growth of domestic demand.

The Refinery project will be developed based on a PPP (Public Private Partnership) scheme. The
Government takes 40% of the interest and a joint-venture partner to take 60% in the Project. Through the
competitive bidding process, consortium of RT-Global Resources and VTB Capital PLc and JSC Tatneft was
selected as a joint venture partner. Negotiation with the consortium partner will be closed shortly. Member
states of the East African Community will also participate in the refinery project and take some shares.

The government is planning to acquire 29 km2 of land to host refinery, industrial park and airport, and other
infrastructure facilities, and intending to develop Master Plan for the Industrial Park.

Refinery Project includes product oil pipeline from Hoima to a Buloga, Central Product Oil Terminal near
Kampala. The pipeline is 205 km long, 10 inch diameter, multi-product pipeline. Detailed route survey and
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environmental baseline study is underway.

Development of cross border product oil pipeline is one of the major discussion topics among the EAC
countries. Status of these projects is as follows;
- Kampala-Eldoret Product Oil Pipeline: 325 km, 12 inch bilateral flow, Feasibility Study completed
- Kampala-Mubalala-Kigali Product Oil Pipeline: 450km, 10 inch, Feasibility Study completed
- Mubalala-Tanzania Product Oil Pipeline: Feasibility Study underway

Financial option including PPP scheme has been discussed among the nations.

Following a state visit to Uganda by His Excellency Hon. Uhuru Kenyatta, President of the Republic of
Kenya, a joint communiqué from both Governments was issued on 10 August 2015 which stated that "the
two Heads of State agreed on the use of the Northern Route i.e. Hoima-Lokichar-Lamu for the development
of the crude oil pipeline." The pipeline is the longest heated pipeline in the world at an estimated length of
1335 km.

Government of Uganda has also signed MOU with Tanzanian Government to evaluate Hoima-Tnga route to
develop least cost route to provide value for Ugandan Resources.

Government of Uganda is founding National Oil Company (NOC) shortly. NOC is expected to play an
important role in upstream, midstream (refinery) and downstream (pipeline) sectors, as an entity of PPP
scheme and also as a profit recipient from these projects.

4.6.2 Assessment of Potential Products

According to a statistics of trade volume in terms of weight, cement and clinker, oil products, and steel
products have taken up major part of the cargos. Demand for these products is expected to increase
continuously.

(1) Mineral Mine Sector:

Cement Industry
Cement Industry is founded at limestone mine site. In general, 1.1-1.2 tons of limestone will be used to
manufacture 1 tone of Portland cement. This is the reason why cement industry is located at the limestone
mine site. Demand of cement is growing at the rate of 7-8% annually

Tororo Cement is the largest and long established company in Uganda and located at the limestone mine of
Tororo. Current installed capacity is 1.8 million ton /year but operating at 80% of capacity due to a limited
avail of quality of limestone. Expansion of cement grinding capacity from current 1.8 million to 3.0 million
is underway. Additional capacity of Clinker Producing Plant with 3000 ton/day is also planned, depending on
the discovery of new limestone deposit at Tororo area, otherwise it need to rely further on imported clinkers.

Hima Cement in Kasese is also located at limestone mine, and operating at 850,000 ton/year. Further
expansion to double the capacity was planned. However, life time of limestone deposit is running out in 16
years at the current production rate, and therefore expansion plan may need to be abandoned. Hima Cement
imports petroleum coke as a primary fuel through either port of Darussalam or Mombasa.

Key issue for both companies is that existing limestone deposit is running out. In order to increase the
production, they need to rely on imported clinkers otherwise to develop new limestone mines and
infrastructures.

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Iron Ore and Steel Industry

Demand for steel products is increasing at the rate of 7-8% annually. To meet the increasing demand, import
of final product and intermediate product such as billet and roles are increasing. On the other hand, sponge
iron mill is suffering from the competition. Uganda Steel Rolling Mill Ltd. in Jinja district, using Rotary Kiln
DRI Process, produces 150 Mt/day of sponge iron fueled by charcoal. In order to compete with the import
materials, the company is planning to expand the capacity to 300 Mt/day introducing hematite from Kigazi
region in South Western Uganda. However, available charcoal is limited due to a concern of deforestation,
and need to investigate alternative fuels.

Government of Uganda is trying to initiate an organized approach to develop hematite deposit in

southwestern Uganda. The plan includes the construction of a centralized sponge iron production facility in
Kabale based on PPP scheme, including associated infrastructures as follows:

- Railway network to transport the product to Mombasa and/or Darussalam,

- Natural gas pipeline from Lake Kivu and/or Albertine Graben,
- 1000 MW power plant for induction furnace as part of steel making process.

Phosphate Fertilizer
Production of phosphate fertilizer is coming on stream in few years time. Planned production rate is 300,000
tpa. Market destination is not known yet but Ugandan Government will receive royalties and taxes from the
mining operation.

Other mineral potentials:

Uganda has unique mineralization formations in the country. Pegmatite Formation is developed in SW
Region and Carbonatite Formation is developed in the Eastern Region. Aluminous clays enriched in various
minerals including REEs are also developed in the SE Region. Significant potential is envisaged in the
country. Mining Lease (ML) holders for mining operation are 34 as of September 2014. Among those, 15 are
non-metallic mines and 19 are metallic mines including 6 gold mines, 4 iron ore mines, 3 wolfram mines, 3
tin mines, 2 Tantalite mines, and one copper mine.

(2) Oil and Gas Sector:

Crude Oil Pipeline

Nature of the crude oil produced from Albertine Graben is waxy but very low sulphur. Transportation of this
crude oil will have an operational challenge and need to maintain operation temperature higher than 50 deg C.
The pipeline will also be designed as an international common carrier, and serves to transport mixture of
several different crude oils. Apart from the construction and operational issues, following issues should be
agreed upon among the stake holders: (1) Financial Framework, (2) Operatorship, (3) Capacity Right
Ownership, (4) Quality Bank

Before formulating project entity, further detailed route survey and detailed feasibility study should be
carried out to see if the ROW (Right of Way) can be secured and the project is economically viable.

Refinery Project

Preliminary Feasibility Study of Refinery Project was carried out by Foster Wheeler, a major engineering
contractor in the world, in 2011. The report reviews the crude oil assay, various refinery configurations, and

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preliminary financial analysis. Detailed configuration is left to an operating company to carry out. The report
provides very good basis for further detailed studies.

4.6.3 Analysis of NEC Key Growth Drivers

(1) Cement Industry:

Whole sales price of cement in Uganda is $ 200 per metric ton compared with $120 in Kenya in 2015, and
also compared with an international price level of $100-$120 in 2014. Energy cost take up 40% of
production cost and considered as one of the major contributor to the high cost. In addition, reserve of
limestone is depleting at the major existing cement manufacturing plant. Cement industry is placed in a
difficult situation. Extensive study must be carried out and it can be done as a part of Mining Master Plan
which has not been done in Uganda.

(2) Steel Making Project:

Uganda has a large scale and quality of hematite reserve in South West region. Government of Uganda is
considering utilizing the resources to develop steel making industry. Steel making industry is different from
other base metal industries. Steel is not a product of purified iron, but alloyed with carbon and other minor
elements. Composition of these minor elements will differ from purpose to purpose of use.

Steel Industry is a capital intensive industry and require long time to recover capital investment, and also
very energy intensive. Supply of large amount of coking coal or natural gas should be secured. DRI (Direct
Reduction Iron Process) is considered suitable choice considering the scale of domestic market and
following issues need to be investigated further.

- Abundant natural gas reserve need to be confirmed

- Numbers of skilled people to operate the steel making facilities
- Cost competitiveness need to be confirmed

Uganda Steel Rolling Mill Ltd. in Jinja district, using Rotary Kiln DRI Process, produces 150 Mt/day of
sponge iron fueled by charcoal. The company has developed operating skill and technology to produce
sponge iron and part of steel product (rebar), and may be able to operate natural gas based large scale steel
making facilities. Ugandan natural gas resources are limited in size. However, large scale natural gas
reserves were discovered in Tanzania, and these gases can be introduced to Uganda for steel making facilities
including power plant. Technologies and economical viabilities should be reviewed further as part of Mining
Master Plan, including option to utilize potential petroleum coke produced by refinery in Hoima as a
reduction agent for Rotary Kiln DRI, or Syn gas production process.

(3) Mineral Potential

In addition to Sukuru phosphate mine, where Guangzhou Dongsong Energy Group of China is producing
300,000 t/yr of phosphate fertilizers and some REEs including niobium, there are some other potential of
phosphate and REEs prospects in the Carbonatite Formation Area.More than 500 Exploration License (EL)
are granted to mining entities and 34 mining entities are given Mining Lease (ML) to date, however, no
detailed information for the mining activities has been made available yet. Strategic approach should be
introduced to assess the mining potential in the country.

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(4) Crude Oil Pipeline:

Pipeline is constructed and operated by PPP Company. Ugandan portion of the pipe size will be 24 inch and
capable of transporting 200,000 bpd of crude oil. Pipe size will be enlarged form Kenyan terminal station at
Lokichar to 30-38 inch to accommodate Kenyan crude oil and also South Sudan’s crude oil.

The pipeline is the longest heated pipeline in the world with an operating temperature of more than 50 deg C
at an estimated length of 1335 km. Initial feasibility study of the pipeline project was undertaken at the hike
in crude oil price of $100/bbl and expected tariff in the study was $15.2/bbl. Further detailed feasibility study
is necessary to reflect the change of circumstances.

(5) Refinery:

Construction of domestic refinery in

Table 4.6.1: Oil Product Demand Forecast
Kabaale will benefit the county (Unit: bpd)
significantly i.e., improve the trade Year
Base Latent Demand in S.Sudan
Total Demand
balance and contribute to stabilize Demand in Uganda DRC, and Rwanda
2015 33,074 14,671 47,745
the currency value. Product oils, 2020 44,260 30,205 74,465
including LPG, will fill in domestic 2025 59,230 32,363 91,593
2030 79,263 34,521 113,784
market, and part of the products can
Source: Kenyan Government “Toward Oil Master Plan 2015” and Uganda
be exported to adjacent countries. Government Statistics
Refinery capacity and configuration should be reviewed based on the updated demand forecast and future
potential industries. Summary of oil demand forecast by the Government of Ugandan and also demand
forecast based on World Bank Report in terms of refinery throughput, in S. Sudan, DRC, and Rwanda is as
on the right..

Considering these statistic figures, required refinery scale in 2020 will be 60,000 bpd, and expanded to
120,000 bpd in 2030. Petroleum coke may play an important role as an alternative to coal and support
primary industries such as power generation, cement and brick manufacturing. Detailed crude oil property
analysis to be carried out to maximize the value of the indigenes crude oil. This type of crude oil may make
high quality base oil for lubricant, and electrical insulation oil, and petroleum coke can make a needle coke
for electrode.

4.6.4 Development Scenario of key Growth Drivers

(1) Crude Oil Pipeline Project:

Uganda will be exporting 200,000 bpd of crude oil from 2020. This will bring the sales revenue of $4,380
million/yr to Uganda at $60/bbl base. The Government of Uganda has signed MOU with the Government of
Tanzania to evaluate the Hoima-Tanga Route to develop least cost route to transport the crude oil and to
provide value for Ugandan resources. ROW for the crude oil export pipeline can be shared with other utility
lines including oil product pipeline from Uganda and natural gas pipeline from Tanzania.

(2) Refinery Project:

In accordance with the current plan, Ugandan refinery project with the capacity of 30,000 bpd will be
commissioned in 2020. Further expansion of additional 30,000 bpd capacity will be commissioned in 2025.
Uganda will be a self sufficient country till 2025.Uganda imported 1.32 million m3 of oil product in 2013.
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Amount of the expense was $ 700 million assumed at the crude oil price of $80/bbl. After 2020, expenditure
will be minimized till 2025. Demand forecast indicates that required refining capacity can be 60,000 bpd in
2020 instead of 30,000 bpd, and further expansion to be considered in 2030. Further feasibility study should
be undertaken.

4.6.5 Gap Assessment for Development Scenario

(1) Mining Sector:

Significant potential is envisaged in the country. Although more than 500 Exploration Licenses (EL) are
issued and 34 mining entities are given Mining Lease (ML), no detailed information for the mining activities
has been made available yet. Strategic approach should be introduced to assess the mining potential in the
country. Cement industry is placed in a difficult situation. Extensive study must be carried out, including
cement ingredient sources, fuel options, and overall economics, and require infrastructure. Iron ore
exploration and feasibility of steel industry should be investigated further, including option to utilize
potential petroleum coke produced by refinery in Hoima as a reduction agent for Rotary Kiln DRI, or Syn
gas production process.

Government of Uganda is planning to introduce Mineral Certificate in comply with the Great Lakes Initiative.
It will enable to trace minerals from mine sites and stages of trade among the Great Lakes member states
subsequently will minimize conflicts in the marketing of the mineral products, and deter illegal mining.
However, it appears that this has been left as just an idea. Environmental impacts associated with mining
activities are significant in general, and information about mining activities should be shared among the
relevant ministries i.e., the Ministry of Energy and Mineral Development and the Ministry of Water and
Environment. There must be some mechanism to be in place to work jointly. Joint capacity building exercise
will identify the issues.

(2) Oil and Gas Sector:

According to the demand forecast by the Government of Uganda, refinery capacity may need to be larger
than that of current plan. Required refinery capacity may need to be reviewed. Petroleum coke may play an
important role as an alternative to coal to support primary industries such as power generation, cement and
brick manufacturing industries. Refinery product needs to be further investigated. This type of crude oil may
make high quality base oil for lubricant, and electrical insulation oil, and pet coke can be needle coke for
electrode. Crude oil pipeline is also very important infrastructure to mineralize the oil resources, however,
numbers of issues need to be solved and decisions have to be made among the stake holders. It may take
some more time to reach agreement especially under the lower crude oil pricing situation.

4.6.6 Necessary Interventions with Priorities

(1) Mineral Resource Sector:

Uganda possesses a high potential of mineral resources and may be able to play important role in the
international mineral market. In order to maximize the value of the mineral resources, and also to be
benefited from the value, foundation of National Mining Company may be required. The company is
expected to play important role in the development of mining sector. However, mineral strategy has not been
fully developed yet. Government is required to develop mining short, mid, and long term plan as follows:
• In short term
Set up mining strategy and capacity building through the Mining Master Plan.
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• In Mid Term
Develop infrastructure and develop downstream industries.
• In Long Term
Accommodate mineral resources from adjacent countries including DRC, Ruanda, etc, and provide base
of mineral processing and refining for export.

Outline of Mining Master Plan is as follows;

1. Review of Current Situation

- Legal Framework
- Social Feature, Regional Economy and Industry
- Exploration and Production Status
- Mining Information and Database
- Infrastructure
2. Market Review and Value Chain Analysis of Mineral Resources
3. Strategic Mineral Target
4. Review of Strategic Geological Mineralization Map and Database
5. Mineral Identification and Registration Technology
6. Mining and Mineral Extraction Technologies and Environmental Impact
7. Environmental Standard and Monitoring Technologies
8. Concept of Compact Mining
9. Financial Options
10. Education Program, Training and Capacity Building
11. Recommendation and Action Plan

(2) Oil and Gas Sector

Uganda has a secured reserve of 6.3 billion bbl of crude oil with 1.3 billion bbl of recoverable oil.
Construction of refinery should be given higher priority, to stop expenditure for oil product import. As
discussed before, required capacity of refinery can be larger than current plan, as follows:

2020: 60,000 bpd, instead of 30,000 bpd and expanded to 60,000 bpd in 2025
2030: expanded to 120,000 bpd

Cross country oil product pipeline system should also be developed phased with the refinery construction
project to capture potential market. Further market study should be carried out in S Sudan, Rwanda and DRC,
etc. Overview of the potential projects which contribute to the development of NEC will be as follows:

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Source: JICA Study Team

Figure 4.6.1: Proposed Pipeline Projects in Kenya and Uganda

4.7 Manufacturing Sector Development in Kenya

4.7.1 Overview of Current Status

The manufacturing sectors accounts for around 10% of GDP for recent years. Despite the large expansion of
service sector and gradual growth in agriculture, manufacturing growth rate is rather moderate over years.
Food Products has the largest share with almost a quarter of the manufacturing value-added followed by
Beverage and Printing and Recorded Media with the share of 12% and 9% respectively. 8
The recent trend of the sub-sector breakdown is shown in the Figure on the right. It shows the level of
production comparing with the one of 2009 as 100. It indicates the large increase in Dairy, Animal Feed,
Pharmaceuticals, Basic Metals and Metal Fabrications, Electrical Equipment and Furniture comparing with
the total manufacturing production, whereas such sectors as Fish processing, Textile and Wearing Apparel,
Petroleum Refinery, and Machinery. The only one petroleum refinery in Mombasa closed and the production
was decreased to nil.

8KNBS (2014) Statistical Abstract

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Source: JICA Study Team based on KNBS “Economic Survey 2014”

Figure 4.7.1: Quantity Index of Manufacturing Subsector with Large Increase and
Decrease (2014)

As the recent data on the distribution of

manufacturing production was not
available, the geographical distribution
of the manufacturing sector is analyzed
using the number of employees of
manufacturing sector in major counties
appeared in the Census of Industrial
Production. The major concentration can
be found in Nairobi which forms further
agglomeration with surrounding areas
(Figure 4.7.2). This can be attributed to
the concentration of various economic
functions in Nairobi as well as the
Source: JICA Study Team based on KNBS (2013) Basic Report on the 2010 distribution of population as work force
Census of Industrial Production and the market which are rather skewed
Figure 4.7.2: Number of Employees in the Manufacturing Sector in to the central to western side of the
Major Urban Areas in Kenya
country.

According to CIP, 49% of the employees for the manufacturing sector are in Nairobi: Nairobi has more than
50% of share in all industries except Food Products, Leather and Related Products, Woods and of Products of
Woods, Cokes and Refined Petroleum Products, and Other Transport Equipments. Food Products, Textile,
Leather and Related Products, and Woods and of Products, on the other hand, show some dispersion across
the sampled towns including “Other Towns”. It may be due to either the resource-based nature of the
industries or the requirement of being in the proximity to local markets 9.

9 KNBS (2013) Basic Report on the 2010 Census of Industrial Production

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4.7.2 Assessment of Potential Products

Although the predominant exported (US$ million)
600
products of Kenya are agro-based
500
commodities such as tea and cut-flowers,
400
two distinct characteristics are found in
300
the manufacturing sector of Kenya. First,
200

the exported goods to the regional 100

market are mainly manufactured goods. 0

Together with the domestic consumption,

various manufacturing products may
have potentials for further development
in Kenya. As seen in the figure below,
Kenya’s export to neighboring countries
is manufactured goods rather than 2010 2013

agro-based products. “Chemicals and Source: COMTRADE

related products” and “manufactured Figure 4.7.3: Kenya’s Export to EAC countries and DRC (2013,
goods classified chiefly by materials” SITC category)
are two categories with outstanding export values.

The figure on the left further shows

20 major commodity groups (SITC
2-digit) of the Kenya’s export to EAC
countries and DRC with SITC 2-digit
breakdown. Product groups can be
further categorized: “chemicals
and related products” form a group
(the products in the left dotted circle
Source: COMTRADE in the left Figure); and “manufactured
Figure 4.7.4: Kenya’s 20 Large Groups of Exported Goods to EAC goods classified chiefly by materials”
countries and DRC (2013, SITC 2-digit) (the products in the right dotted circle
in the left Figure). “Essential oils and residuals and perfume materials” (such as beauty make-up
preparations) and “iron and steel”, “non-metallic mineral manufactures” (such as ceramics, glass, and
cements) are the items with larger export value in the two categories explained above.

The types of the products which can exploit regional markets should be viewed as the potential products.
Those can be identified based on the potential growth of demand. The consumer market growth as well as
the economic development activities such as infrastructure development can induce greater export of the
good produced in Kenya. The following items are to be viewed as the example of the potential products.

Table 4.7.1: Manufacturing Potential Industries in Future of Kenya

Source of Growth Potential industries
Growth of the consumer market Consumer goods such as soaps and cosmetics, processed foods, packaging materials
Economic development activities Construction materials: Iron and steel, cement, sheet glass (currently re-export),
ceramics (under current production, partially re-export), PVC pipes, electricity
installation and wires
Source: JICA Study Team

On the other hand, apparel products are manufactured goods exported predominantly outside of the region.
In 2013, out of total export of Kenya which was USD5.5 billion, USD283 million (5% of the total export)
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was earned from the apparel products. Kenya’s apparel industry has started with US’s initiative of providing
duty and quota free access to US market to African countries under the African Growth and Opportunity Act
(AGOA) on which Kenya has been relying heavily. Despite some slow down after the global financial crisis
in 2008, Kenya’s apparel industry resumed the growth. 10 As seen in the table on the right, the export of
EPZ firms has shown growth over years with the compounded average growth rate of 13.2% 11.

Table 4.7.2: Apparel Export of Kenya’s EPZ Enterprises under AGOA

2010 2011 2012 2013 2014*
Exports (KSH million) 16,190 20,948 22,308 24,246 30.119
Growth Rate (%) - 29.4 6.5 8.7 24.2
Note: *Projection
Source: Source: KNBS, Economic Survey 2015

4.7.3 Development Scenario of Key Growth Drivers

In the medium to long term, the growth

driver can change as economies develop
in Kenya and the region. Whereas the
manufacturing sector growth in other
countries may reduce the demand for
Kenyan market, it may also possible for
Kenya to take the role of providing more
technology-intensive and value-added
products. With the growth of industries
in the neighboring countries, for
example, the types of products such as
chemicals may catch more demand. The
Ministry of Industrialization and
Enterprise Development (MOIED) Source: MOIED
depicted the transformation of the Figure 4.7.5: Long-Term Transition from Priority Sector in
industrial sector as Figure 4.7.5. Kenya’s Industrial Transformation Programme

Growth drivers of Kenya’s manufacturing sector can be viewed and categorized as following:

Table 4.7.3: Categories of Kenya’s Manufacturing Growth Drivers

Timeframe for
Category Examples of Industries
Development
Construction materials (e.g., iron and steel, glass), consumer
goods (e.g., soaps and detergents, processed foods), plastics
Processing for domestic and regional market Short to mid-term
packaging
It can be both heavy and light industry.
Export-oriented light manufacturing Short to mid-term Textile and apparel, Leather
Processing with higher technology and
Mid- to long-term Pharmaceuticals and chemicals, automobiles
productivity for domestic and regional market

In this analysis, the short- to mid-term drivers are explained using three example drivers, namely, soap,
cosmetics and toiletries and iron and steel as the driver for domestic and regional market, and apparel for
export-oriented industry.

10 GDS/World Bank (2015) Kenya Apparel and Textile Industry: Diagnosis, Strategy and Action Plan
11 Calculation of JST based on Economic Survey 2015 data.
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(1) Example of growth driver 1: Light industry for domestic and regional market

As an example of the light Table 4.7.4: Growth Projection of Soaps, Cosmetics and Toiletries
manufacturing industry for domestic and Export of Kenya (SITC 553 & 554)
Year 2014 2020 2025 2030
regional market, the total weights of
Volume (Mt) 79,773 113,160 151,433 202,651
exported soaps, cosmetics and toiletries CGAR 6 %
to EAC members and DRC are Volume (2014=1) 1.00 1.42 1.90 2.54
Source: JST calculation based on UN-COMTRADE
forecasted. The compounded growth
average was used from the assumption used for the EAC Industrialization Strategy which sets 6% as real
GDP growth rate of EAC during the period from 20102 to 2032.

It should be noted that the economic development of the other countries may change the preference of the
product mix which may cause some deviation. At the same time, the consumption in Kenya itself will also
grow during this time and the products may be consumed more than exported. In this forecast, the possible
influence of local consumption growth is not taken into the consideration. Under this condition, the volume
of the export of these goods will be doubled by 2025 and 2.7 times larger in 2030.

(2) Example of growth driver 2: Heavy industry for domestic and regional market

As an example of the heavy manufacturing industry for domestic and regional market, trade flow of current
and future are forecasted. The figure below depicts the flow of import and export by Kenya and Uganda in
2013.

Source: JST based on the data of UN-COMTRADE

Figure 4.7.6: Value of Iron and Steel Products Imported and Exported by Kenya and
Uganda (2013)

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Out of 1084.7 million USD

of iron and steel products
imported by Kenya and
Uganda, 260 million USD is
exported to Uganda. Kenya
has two major iron and steel
processing locations, i.e.,
Mombasa and the vicinity
and Nairobi and the vicinity.
While a few large roofing
and construction countries
are located in Mombasa,
Nairobi also has a cluster of
industry with the supply of
scrap metals which can used
for induction furnaces. The
semi-processed products are
exported partially to
Southern African countries, Source: JST based on the data of UN-COMTRADE
Figure 4.7.7: Forecasted Value of Iron and Steel Products Imported and
inland Tanzania apart from Exported by Kenya and Uganda (2030)
those goes to the west.
Uganda also has the processing factories. The number exported to South Sudan, DRC, Burundi, and Rwanda
captures both exports from Kenya and Uganda. In this case, about 15% of total import value to Kenya and
Uganda is eventually earned through export to those countries such as South Sudan, DRC, Rwanda and
Burundi.

Figure4.7.7 shows the projection of the value of iron and steel products in the regional market. The
projection was done based on the GDP growth forecast: GDP growth rates for respective market was applied
to project the import/export volume. In total, the import through Mombasa in 2030 may be increased by
300% comparing the value from 2013. In terms of the distribution in the region, the growth rates of Kenya
and Uganda is higher than those of South Sudan, DRC, Rwanda and Burundi. Therefore, in the forecasted
period, the ratio of those consumed in Kenya and Uganda may be relatively increased vis-à-vis the growth of
the value exported to the regional market.

(3) Example of growth driver 3: Export-oriented light manufacturing

As an export oriented Table 4.7.5: Growth Projection of Clothing Export of Kenya (SITC 84)
commodity, apparel export are Year 2013 2020 2025 2030
Value (USD million) 283.16 393.15 497.01 628.31
projected. The compounded Case 1: CGAR 4.8%
Volume (2013=1) 1.00 1.39 1.76 2.22
growth average was used from Value (USD million) 283.16 355.41 418.06 491.74
Case 2: CGAR 3.30%
the projection of the world Volume (2013=1) 1.00 1.26 1.48 1.74
women apparel market by Source: JST calculation based on UN-COMTRADE
McKinsey and Company. Case 1 utilized the projection from 2010 to 2025 whereas case 2 utilizes lower rate
based on the actual figure during the period from 2004 to 201012.

As the items to be traded overtime may change and the volume can also change depending on the items, it is
difficult to predict the quantity to be exported overtime. If Kenya may be able to rightly access to the demand,

12 McKinsey & Company, “Unleashing fashion growth city by city”

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the trade value of the apparel export can achieve 1.74 times larger in 2030 compared to current value with
the lower case scenario.

However, it should be noted that current Kenya’s apparel industry is heavily relying on US market which
access is facilitated by AGOA. Therefore, growth can only be secured and realized with building capacity of
the industry for sustainable development.

It is also noted that current apparel industry sources raw materials mainly from outside. Inability of procuring
locally available materials causes the industry long waiting time for delivery as sourcing materials requires
long time. It also indicates volume increase in export can cause the increase in import of materials. For
example, Kenya imports the fabrics in 2010 and 2013 as indicated in the table below.

Table 4.7.6:Kenya’s Import of Fabrics

Weight (kg) Value (USD million)
STIC Item
2010 2013 2010 2013
652 Cotton Fabrics, Woven 13,801,853 9,378,124 59.38 60.40
653 Fabrics, Woven, of Man-Made Textile Materials 22,008,789 24,184,532 33.95 56.40
Source: UN-COMTRADE

4.7.4 Necessary Interventions with Priorities

Short to medium growth drivers can be found in the number of the industries which exhibit export growth
especially to the regional market. Among these industries, two examples are explained in the section. Other
sectors as iron and steel can be also expected to grow, but it may require detailed analysis on the division of
the production among the nations within the region as well as the possible commencement of mineral
extraction in the region.

(1) Soaps, cosmetics and toiletries

Consumer goods may be expected to grow overtime. While current products predominantly use the raw
materials such as crude palm oils and perfumes imported for other countries, the demand may also induce
some backward linkages in such industries as chemical industries. At the same time, development of various
raw materials in neighboring countries such as palm oil in Uganda will provide some possible reduction of
cost of raw materials.

Source: JICA Study Team

Figure 4.7.8: Soaps, Cosmetics and Toiletries Industry and the Possible
Interventions in Kenya
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Necessary intervention can be identified in the better business environment and financing which can
facilitate installation of large facilities.

(2) Apparel industry

While the industry has been created employment through its labor-intensive nature, it is observed a number
of constraints such as high labor costs, long lead time for acquiring raw materials, and high cost of power13.
On the other hand, as some apparel producing countries such as China and Vietnam gradually become
apparel consuming countries, the market opportunities for Kenya may still exist 14 . This type of
labor-intensive sector can play a key role for industrial development by generating jobs in the country.

As the problems encountered by the sector are diverse, the arrangement of providing better business
environment may be necessary. The types of EPZ currently observed mainly Mombasa only host one or a
few companies which cannot fully accommodate green field investment. Therefore, EPZ or SEZ type of
arrangement within designated areas with necessary site preparation may be preferred. It is planned that SEZ
arrangement may be also in Naivasha. Another area of interventions should be therefore necessary to target
improvement of technical skills and productivity. Intensive human resource development should be carried
out especially targeting urban areas attached to the garment producing areas such as Nairobi (for Athi River
EPZ enterprises) and Mombasa.

Delivery of the raw materials is also critical for the industry. More sophisticated and efficient trade logistics
may be necessary to facilitate fast movement of imported materials. Considering the effort of Uganda for
development of textile industry, further connection of sourcing lint and yarn may be found in Uganda if the
development may be observed.

The figure below depicts the concept of the interventions.

Sources: ITC calculations based on Uganda Bureau of Statistics

Figure 4.7.9: Apparel Industry in Kenya and the Possible Interventions

13 GDS/World Bank (2015) Kenya Apparel and Textile Industry: Diagnosis, Strategy and Action Plan
14 Ibid.
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4.8 Manufacturing Sector Development in Uganda

4.8.1 Overview of Current Status

The majority of the business establishments in manufacturing sector in Uganda are with less than 10
employees: 51.2% of the businesses are with one employee. The concentration of the business establishment
is found in Kampala and the Central region: both account for 32.3% and 26.8% of the total number of the
establishment, respectively. The share of food manufacturing is 18.3%. According to the samples from the
Census of Business Establishment (COBE), there are only very limited number of enterprises categorized as
“medium enterprises” with more than 50 employees or large enterprises: Out of about 34,900 samples of
manufacturing establishments, only 153 are with more than 50 employees. Out of around about 30,000
employees employed by these companies, 33% is found in Kampala. Buikwe, Jinja and Wakiso follow
Kampala with 20%, 12.8% and 12.4% respectively 15. 60% of the employees are in the food processing
activities.

Source: JST based on UBOS data

Figure 4.8.1: Distribution and the Types of the Manufacturing Activities of Medium to Large
Enterprises in Uganda

The overview of the flow of the goods may be glanced through the example of the plastic products and iron
and steel industry. The net weight of the imported plastics in primary form is outstandingly large comparing
with the finished goods. On the other hand, while imported finished products exceed exported ones,
diminishing difference is also observed. While domestic consumption is large to consume both locally
produced and imported finished products, a part of the finished goods are also exported. The major partners
are Kenya, DR Congo, Rwanda and South Sudan for export and Saudi Arabia, Kenya, UAE, China and
Korea for import. It indicates that the large flow of raw materials may exist up to Kampala whereas the
finished goods can divert to Kenya, DRC and Rwanda in the West and to South Sudan in the North apart
from those to the major consumption areas in country.

15 Based on the calculation of the data provided by UBOS on COBE

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Source: Calculated by JICA Study Team based on the data of UN-COMTRADE

Figure 4.8.2: Uganda’s Export and Import of Primary and Finished Plastic Products (HS 39)

4.8.2 Assessment of Potential Products

While more importation is found, Uganda also exports iron and steel products mainly to the regional market
(See the Table below).

Table 4.8.1: Uganda’s Export of Iron and Steel Products

(USD ‘000)
2012 2013 2014
Burundi 8,921 8,818 9,605
DRC 25,230 34,567 34,829
India - - 42
Rwanda 10,437 9,946 13,677
South Africa 8 - 2
Sudan 26,983 24,218 16,515
Tanzania 8,385 8,869 12,525
Total 79,964 86,418 87,195
Sources: ITC calculations based on Uganda Bureau of Statistics

4.8.3 Assessment of Potential Products

Potential products can be identified from the following aspects: a) growth potentials considering the
available market demand and its growth potential, and market competitiveness; b) market access; and c)
potential impact on the economic growth.

Currently, Uganda’s export is largely lead by agricultural and fisheries products. The products which shows
some growth potentials with the trend of market growth includesuch products as cement, sugar, animal,
vegetable and palm oils, iron and steel products, leather, soap and detergents, and footwear. These processed
products are mainly exported to the regional market 16. Among these industries, soaps and detergent and iron
and steel are analyzed regarding the potential impact on the economic development.

As seen in the left figure on the left, Uganda’s import of consumer goods as soaps and detergents almost
equally. On the other hand, soap applied for skin shows larger export growth while reducing the import
slightly year by year in recent years (see the figure on the right).

16 Based on the analysis by Management Innovations/JST using UN-COMTRADE data. Potentials are measured based on the growth rate of the import
of a few key markets for Ugandan products in the recent 5 years.
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(USD Million)
(t)
50
60,000
45
40 50,000
35
30 40,000
Export Export
25
Import 30,000 Import
20
15 20,000
10
10,000
5
0 0
2010 2011 2012 2013 2014 2010 2011 2012 2013 2014

Figure 4.8.3: Uganda’s Import and Export of Soaps, Detergent, Candles and Moulding Pastes and Organic
Surface-Active Products and Preparations for Use as Soap (HS 3401)(Right)

It should be noted that the products are presumably consumed in the domestic market apart from the one
exported. On the other hand, the change in the life style requires more manufactured consumer goods. In the
short- to medium run, Uganda may first target the types of commodities as soap which can have immediate
demand in the regional market.

On the other hand, Uganda is net-importer of palm oil.

While palm oil is not only raw material for soaps and
detergent, further development of the industry may
stimulate palm oil plantation and utilization of locally
available materials such as sugar cane which can be
utilized for manufacturing of ethanol 17.

Some items under iron and steel industry are listed as

the products which exhibit market growth trend. This
sector also serves for domestic and regional market.
With the massive infrastructure and housing
development project, the demand for iron and steel
products continue to grow. Despite the number of Source: UN-COMTRADE
Figure 4.8.4: Uganda’s Import and Export of Palm
mega projects declined by 55% in 2014 compared
Oil (HS 11511) (Right)
with 2013, it may be due to the fact that new projects
are still in the planning phase 18. Once these projects are to be implemented Iron and Steel industry in Uganda
may be able to expect to access to the demand.

Other areas of the industrial potential should be processed products exported outside of the region. As
explained in 4.2., the market has been growing in the recent years. Ugandan leather industry also shows the
growth (see the left figure below).

17 Japanese company has been manufacturing hand soap utilizing the locally-made ethanol.
18 Deloitte & Touche, Deloitte on Africa: African construction Trends Report 2014
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(t) (USD Million)

35,000 80

30,000 70

China 60
25,000
Switzerland 50 Raw, Tanned and Crust
20,000 Skin and Hide
Italy 40
15,000 Leather Articles
United Arab Emirates
30
10,000 World
20
5,000 10

0 0
2010 2011 2012 2013 2014 2010 2011 2012 2013 2014

Source: UN-COMTRADE
Figure 4.8.5: Uganda’s Export of Skin and Hide (HS 4104 & 4106)(Left) and Export of Semi-Processed and
Manufactured Leather Items (HS 4104& 4106 and 42) (Right)

However, the sector’s value chain is still not well established. The capacity of producing quality products
with a certain quantity is not sufficient. As seen in the figure below, while the export volume is increasing, it
is mostly exported in the raw or semi-finished form (see the right figure above).

4.8.4 Development Scenario of Key Growth Drivers

The potential products can

be categorized in the
following types as a growth
driver of Uganda. First, light
manufacturing and
construction materials to
serve for the immediate
demand of the regional
market can drive the
manufacturing growth in the
short to medium term,
whereas industries as leather
which require the major
Source: JICA Study Team
intervention for upgrading
Figure 4.8.6: Growth Drivers and the Time Frame for Development
shall be developed slowly
(see the figure on the right).

Based on the model depicted in the above-figure, the growth drivers can be categorized as shown in the table
below:
Table 4.8.2: Categories of Uganda’s Manufacturing Growth Drivers
Timeframe for
Category Examples of Industries
Development
Construction materials (e.g., iron and steel),
Answering immediate and growing demand in the region Short to mid-term consumer goods (e.g., soaps and detergents,
processed foods), plastics commodities
Expanding export for relative low value added products Short to mid-term Leather
Construction materials (raw materials of iron
Import substitutions of higher value added products Mid- to long-term
and steel)
Higher value added products utilizing locally available
Mid- to long-term Leather articles
materials
Source: JICA Study Team
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In the following section, a few examples of the short- to mid-term growth drivers are analyzed as examples.

(1) Products answering immediate demand with the possibility in transforming into the mid- to
long-term drivers: Iron and steel

With the recently identified mineral Table 4.8.3: Growth Projection of Uganda’s Iron and Steel
Export
deposits, Uganda has two growth paths Year 2014 2020 2025 2030
for manufacturing development: first, the CGAR 6%
Volume (Mt) 79.773 113.160 151.433 202.651
processing of the minerals can be started; Volume (2014=1) 1.00 1.42 1.90 2.54
Source: JST based on ITC data
and on-going processing of semi-finished
materials can also continue to have the
potentials. These types of development may be forecasted in iron and steel industry. In this section, the
processing of semi-processed materials, the latter case will be focused. As the current level of the steel
production was not able to obtain, the size of the growth of export was projected. Assuming the neighboring
countries will be the main market for Uganda, the total weights of exported iron and steel to them are
forecasted. The compounded growth average was used from the assumption used for the EAC
Industrialization Strategy which sets 6% as real GDP growth rate of EAC during the period from 20102 to
2032.

The result is a seen in the table on the right. It should be noted that the local consumption is not included into
the volume. Therefore, the volume should be also influenced by the local consumption.

(2) Products answering immediate demand: Soap and detergent

The export volume of soap and detergent Table 4.8.4: Growth Projection of Soap Export of Uganda
has grown by 9.5% per annum from (HS3401)
2010 to 2014, whereas the import has Year 2014 2020 2025 2030
Volume (Mt) 79,773 113,160 151,433 202,651
declined by 11% per annum from 2011 CGAR 6 %
Volume (2014=1) 1.00 1.42 1.90 2.54
to 2014. The actual production volume Source: JST based on UN-COMTRADE data
in Uganda is therefore assumed to be growing by even higher growth rate. The projection of the export
volume use GDP growth projection of EAC in order to capture long-term economic growth trend of the main
export market.

(3) Expanding export: Leather product

In the short- to medium-term, the types

of products mainly exported may remain Table 4.8.5: Growth Projection of Iron and Steel Export of Uganda
Year 2014 2020 2025 2030
as semi-processed products. However,
Volume (Mt) 32,649 48,998 68,722 96,386
the large constraints are found in the CGAR 6 %
Volume (2014=1) 1.00 1.50 2.10 2.95
supply chain from the livestock
Volume (Mt) 32,649 39,441 46,169 54,044
producers, abattoirs and tanneries. The CGAR 3.2 %
constraints in the supply will be the Volume (2014=1) 1.00 1.21 1.41 1.66
Source: JST calculation based on UN-COMTRADE
bottleneck. The table below shows two
cases of leather export which assume current trends of either global market demand and livestock population
growth will be constant overtime. The higher case uses the annual growth rate of the global leather import
for 5 years up to 2014, and the lower case UBOS’s data on annual livestock population growth rate.

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In the higher case scenario, the volume of the export will reach to 96 million metric tons in 2030 which is
almost three time larger than 2014. On the other hand, in the lower case scenario, the volume will be more
than 150% of the one in 2014 in 2030.

4.8.5 Necessary Interventions with Priorities

(1) General issues

As explained later, investment trend shows manufacturing has been a key sector attracting investment, both
domestic and foreign. On the other hand, the prematurity of the manufacturing sector requires various
investments first to establish the chain to provide raw materials. Though it requires more thorough review,
financing measures for the sizable investment may be necessary.

Securing market is also important issue. Iron and steel companies are normally with a few own outlets apart
from the agents in the areas where they do not have the outlets. As some products are bulky, heavy or require
some special attention (e.g., cosmetics and foods), the types of infrastructure to transport and store the goods
may be stored and handled.

(2) Leather industry

Leather industry captures some generic problems explained above. The major problems are observed in the
too small and fragmented production. Moreover, the outlet market for the skin and hyde for the processing is
not adequately regulated. Therefore, it is very difficult to ensure both the quantity and quality to access to the
wider market.
- Poor and inadequate infrastructure
- Poor quality standard
- Lack of storage facilities

Interventions will be further reviewed after cross-checking with the government efforts.

4.9 Tourism and Service Sector Development in Kenya

4.9.1 Overview of Current Status

(1) Tourists Arrivals and Destination

Number of visitors is in decrease since 2012 because of insecurity such as Westgate shopping mall attack,
Somali conflict, Ebola spread in Africa. Kenya’s tourism volumes remain relatively low compared to
regional competitors such as South Africa and Egypt (9,537,000 and 9,174,000 in 2013 respectively).
International visitor arrivals are in decrease last years, especially the period 2012/2013, mainly because of
security issues.
Table 4.9.1: Visitor Arrival in Kenya, 2010-2014
2010 2011 2012 2013 2014
Visitor Arrival by Mode of Transport
Air 1,119,971 1,301,156 1,291,842 1,132,785 887,583
Sea 28,382 34,900 5,939 6,047 23,295
Other 460,757 486,829 413,048 380,719 439,488
Total Arrivals 1,609,110 1,822,885 1,710,829 1,519,551 1,350,366
Visitor Arrival by Purpose of Visit
Transit 139,524 72,876 91,816 86,136 89,172
Holiday/Business 1,329,586 1,552,014 1,455,205 1,293,953 1,143,722
Other 140,000 197,995 163,808 139,462 117,472
Source: Statistical Abstract, 2015
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The trend in the number of visitors to national parks and game reserves from 2010 to 2014 is detailed in
Table 4.9.2. The number of visitors to these attractions has been on a downward trend for the last five years.
During the review period, the number of visitors dropped by 7.4% from 2,337,700 in 2013 to 2,164,600 in
2014. The drop in the number of visitors resulted from the continued decline in international visitor arrivals
over the same period. Major declines were observed at Nairobi, Nairobi Mini Orphanage, Tsavo West, Lake
Bogoria, Lake Nakuru and Amboseli national parks. However, Maasai Mara registered significant increase in
the number of visitors from 103,800 in 2013 to 166,000 in 2014. Besides, parks locating in Central area such
as Meru, Samburu and Hell’s Gate have also registered increase. This can be considered the effect of Isiolo
resort city project, as we see later. These places may be another alternative to the coastal beaches, one of the
major destinations though facing to tourists’ decrease last years.

Table 4.9.2: Visitors to Parks and Game Reserves, 2010-2014

Game Park/Reserve 2010 2011 2012 2013 2014
Nairobi National Park 120,813 135,057 151,111 154,712 131,764
Nairobi Safari Walk 201,061 176,265 147,174 136,001 133,036
Nairobi Mini Orphanage 490,152 402,954 474,600 407,361 361,333
Amboseli National Park 208,999 176,247 141,391 141,217 117,050
Tsavo West National Park 138,073 98,868 70,912 68,816 50,958
Tsavo Weast National Park 264,180 267,952 176,704 153,178 103,230
Aberdare 42,798 45,815 44,290 50,123 43,817
Lake Nakuru National Park 241,190 245,030 253,520 262,496 225,981
Maasai Mara 187,312 138,199 101,963 103,812 165,959
Haller's Park-Bamburi 120,446 149,844 125,485 121,508 116,159
Malindi Marine 46,853 49,534 40,799 41,887 28,877
Lake Bogoria 94,394 108,273 114,605 91,513 80,540
Meru Nationak Park 20,362 20,164 17,786 14,721 19,226
Shimba Hills 21,233 29,376 26,139 23,229 17,602
Mount Kenya 29,213 33,282 27,489 24,603 20,185
Samburu 13,086 14,170 14,956 13,539 15,401
Kisite Marine 50,556 59,487 48,446 44,687 29,739
Mombasa Marine 37,896 38,341 34,500 36,762 27,429
Watamu Marine 25,388 37,263 36,305 35,109 31,317
Hell's Gate 121,783 133,087 95,417 88,960 114,086
Impala Sanctuary (Kisumu) 195,231 201,649 246,962 222,329 227,628
Other 93,866 103,214 101,573 101,130 103,308
Total 2,764,885 2,664,071 2,492,226 2,337,693 2,164,625
Source: Statistical Abstract, 2015
Note: Other includes: Mt.Longonot, Arabuko Sokoke, Ol-Donyo Sabuk, Marsabit, Saiwa
swamp, Sibiloi, Chyulu, Ruma National Park, Mwea

(2) Organizational Structure

Ministry of East Africa, Commerce and Tourism, especially the Directorate of Tourism is in charge of
developing the tourist industry with an additional focus on eco, cultural, sports and conference tourism. On
the other hand, the devolution has also proceeded; therefore a number of institutions are involved to the
sector. Kenya Tourism Board (KTB) is charged to the promotion of the country, Tourism Regulatory
Authority (TRA) is mandated to register, license and grade all tourism related activities and services. Kenya
Tourism Federation (KTF) is an umbrella organization at national level that unites the different bodies and
lobbies. It consists of 7 organizations namely Kenya Association of Air Operators, Kenya Association of
Travel Agencies, Kenya Association of Tour Operators, Kenya Association of Hotel Keepers and Caterers,
Kenya Coast Tourism Association, Ecotourism Kenya, and Pubs, Entertainment and Restaurants Association
of Kenya.

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(3) Service Sector

Table 4.9.3 presents the details of hotel bed-nights occupied by zone from 2010 to 2014. The number of
bed-nights occupied by tourists staying in hotel establishments located at the Kenyan coastal beach area
dropped by 8.1% from 2,750,300 in 2013 to 2,527,700 in 2014. This proportion of bed-nights represents
slightly over 40 % of the total number of bed-nights for the whole country. Hotel establishments classified as
Nairobi High Class also registered a drop from 1,175,300 in 2013 to 1,119,100 in 2014. However, increased
performances in hotel bed-nights occupancy in 2014 were observed in Coastal Hinterland, Central,
Maasailand and Nyanza Basin. This tendency is the same as we can observe in visitors’ destination to
national parks.

The decrease in the number of

visitors to national parks and game
Table 4.9.3: Hotel Bed-Nights Occupied by Zone, 2010-2014 (‘000)
reserves that was observed in 2014
Zone 2010 2011 2012 2013 2014*
had a direct impact on the number of Coastal-Beach 3,243.0 3,144.6 3,132.6 2,750.3 2,527.7
bed-nights occupied in hotel Coastal-Other 151.1 283.8 260.0 124.0 95.9
establishments located in these areas. Coastal Hinterland 119.6 82.3 88.7 125.5 133.2
The number of bed-nights occupied Nairobi-High Class 1,123.6 1,155.7 1,145.0 1,175.3 1,119.1
in game lodges dropped from Nairobi-Other 410.7 526.2 490.5 455.7 388.0
Central 463.5 683.3 526.0 622.2 686.3
544,300 in 2013 to 540,400 in 2014.
Maasailand 472.6 418.6 443.7 473.0 479.5
Over two thirds of the total Nyanza Basin 301.2 301.9 252.1 345.3 357.7
bed-nights occupied were by foreign Western 364.1 374.9 464.3 454.1 433.3
residents, though the number dropped Northern 12.9 43.9 57.8 71.2 60.9
by 13.8% to 366,500 in 2014. Total-Occupied 6,662.3 7,015.2 6,860.8 6,596.7 6,281.6
However, bed-nights occupied by Total-Available 17,161.8 17,419.6 18,849.6 18,292.2 19,877.2
East Africa residents were increased Occupancy Rate (%) 38.8% 40.3% 36.4% 36.1% 31.6%
by 45.9% from 119,200 in 2013 to Source: Statistical Abstract, 2015
173,900 in 2014.

TRA is now updating the business licenses of accommodation facilities and other tourism-related services.
Licenses should be applied for each category of tourism related services and be renewed annually to ensure
the quality of services and customer satisfaction. Services are categorized as follows:

- Class A (accommodations facilities)

- Class B (restaurants, other food and
beverage services) Table 4.9.4: Number of Licensed Service Sector Establishments
- Class C (tour operators, travel Class A Class B Class C Class D Class E
agencies, balloon operators, local air Nairobi (Jul 2015) 58 39 358 0 0
charters, tourist service vehicle hire, Western (Oct 2015) 54 17 7 0 2
water sports and boat excursions)
-
Mt.Kenya &
Class D (game fishing outfitters, 25 4 8 0 19
Upper Eastern (Jul 2015)
enterprises offering camps and
camping equipment for hire, nature Lamu (Jul 2015) 65 2 2 0 8
parks, nature reserves, nature trails, North Rift (Jul 2015) 62 28 3 0 1
game ranches, amusement parks, South Rift (Jun 2015) 10 1 11 0 33
non-citizen tour leaders/guides)
-
Kilifi, Tana River and
Class E (local traditional boat Lamu (Jul 2015) 247 31 48 0 71
operators, professional safari Source: TRA
photographers, curio vendors,
private zoos, citizen tour leaders/guides, general vendors and beach operators)

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Table 4.9.4 shows the number of licensed establishments per region. As the number varies widely among the
region and the total establishments number are not shown, it’s difficult to analyze the distribution of
establishments per region. Though it’s likely to say there is more competitiveness among tourism operators
in Nairobi, among accommodation service in Coast region.

4.9.2 Policies and Plans for Tourism Development

The planning and management of tourism sector is mainly guided by the overall national development
framework, especially Vision 2030. In the Vision, the sector is identified one of the six priority sectors with
high potential of spurring the country’s economic growth and development, and expected to be the among
the top 10 long-haul tourist destinations globally. Four key tourism products are identified: Coast product,
Safari product, Niche products, Conference and
business tourism product.
Table 4.9.5: Main Targets over the Second MTP Period
Detailed approaches are showed in National Zone 2013 2017
Tourism Strategy 2013-2018, the Second Arrivals 1.8 million 3 million
Earnings 96 billion 200 billion
Medium Term Plan (MTP) 2013-2017.
Bed-nights domestic 2.8 million 4 million
Beds number +30,000 high-quality beds
Below are the highlighted plans for the sector.
Source: Second MTP 2013-2017

(1) Premium Parks Initiative and Under Utilized Parks Initiative

Because of poor infrastructure or lack of
facilities, visitors concentrate to a few parks
such as Nakuru, Masai Mara and Amboseli.
These are categorized as “Premium Parks”,
over-utilized parks which will be branded
and the quality of accommodation in these
parks will be substantially improved,
making it possible to charge premium prices
for all facilities.

Both Masai Mara and Amboseli are

accessible by road and air. The road
condition is mostly good from Nairobi to
Masai Mara, except the access road which is
still unpaved. As for Amboseli, it’s possible
to access both from Nairobi (toward
Namanga border) and Mombasa by road.
Here also, the last 50km to the Park is in a
bad condition.

Some of other parks are categorized as

“Under-utilized Parks”, where existing
facilities and infrastructure should be
improved and expanded to attract more
tourists. Parks such as Meru, Mt.Kenya, Source: JICA Study Team
Figure 4.9.1: Location of Premium Parks, Under-Utilized Parks
Tsavo East, Tsavo West, Mt.Elgon and and 3 Resort Cities
Ruma are included in this category.

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(2) Development of 3 Resort Cities

This is to promote coast product of the country. 2 cities are identified with a different concept; Diani as a
wellness-focused resort and Kilifi as family-friendly resort. Both cities are accessible from Mombasa, 30km
south and 56km north east respectively.

Source: Wikipedia Source: Wikipedia

Figure 4.9.2: View of Kilifi Figure 4.9.3: View of Diani

The third one is Isiolo as a resort city, which is not located along the coast, but at the centre of the rich
tourism potential area presented by Mt.Kenya, Meru N.P., the Aberdares and Samburu N.P.. Isiolo is also
situated on the LAPSSET Corridor, therefore it will be its tourism hub once the project is realized.

Situated in the Upper Eastern sub-region, and lied 285 kilometers north of Nairobi, it is accessible via
Nairobi- Isiolo A2 highway, paved and in good condition. Access to proposed resort city site (25km from
Isiolo town) is murram road and is in bad condition.

Locations of these 3 cities as well as Premium and Under-utilized Parks are as shown in Figure 4.10.1

Source:http://www.nation.co.ke/counties/Plans-for-resort-city-status-in-top-gear/-/1107872/20135
02/-/2uc1yv/-/index.html
Figure 4.9.4: View of Isiolo Town.

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Source ; Japan Port Consultants (JPC)

Figure 4.9.5: Map Indicating Location of Isiolo Resource City and Conceptual Layout

(3) Niche Products

Besides the above traditional and major products, several products are identified, with potential sites, to be
developed to attract more tourists. Those are eco-tourism (Kakamega Forest, Ruma, Mt.Elgon, and Mt.
Kenya regions), lake tourism (Lake Victoria and Ruma N.P.), cultural tourism (olorgasaille pre-historic site),
among others.

(4) Conference Tourism

MICE are also identified as a key product to generate more visitors to the country. Investment in hotels by
international chains is expected in Nairobi, Mombasa, Kisumu. In Nairobi, 20 hotels will be constructed by
2017.

4.9.3 Necessary Interventions with Priorities

Figure 4.9.6 shows an image of future tourism network. There will be various entrance points besides
Nairobi by developing and enforcing attractive tourism hubs as well as transport networks. Security issues
being external factor therefore hard to control, various projects will be implemented in Central, Western Area,
and Coastal area (which attracts tourists despite the safety issue).

Focusing on the NEC, it passes through or by the sites, such as Nakuru N.P., Tsavo N.P. or Lake Victoria,
which have further potential for tourism. In this point of view, Nakuru might be a tourism hub like Isiolo for
the LAPSSET Corridor. The connection between 2 cities is also possible. The location of Kisumu is also
suitable as a hub for the water-based tourism at Lake Victoria, for the access city to Ruma N.P., and also for
the entrance from EAC countries through Lake Victoria, if an international waterway transport system is
operationalised.

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Necessary interventions are as follows;

- Complement lacking infrastructure

such as the access roads to N.P. (as
mentioned for Masai Mara and
Amboseli), electricity and ICT network
inside and around the Parks;
- Encourage and support investment in
accommodation sector in key tourism
areas: especially low value investment
accommodation (below 4-star hotels) to
premium national parks to widen the
variety of visitor, and high quality
accommodation (4-5 star hotels) with
capacities of 30-50 beds each to
underutilized parks to have a certain
capacity;
- Implement a development plan to the
potential tourism hub cities along the
NEC;
- Investment in training for the sector:
developing national training and testing
standards targeted to the hospitality
industry.

Source: JICA Study Team based on Tourism Master Plan 2014-24

Figure 4.9.6: Target Marketing Strategy

4.10 Status of Tourism and Service Sector in Uganda

4.10.1 Overview of Current Status

(1) Tourist Arrivals and Destination

Total number of visitors is in Table 4.10.1: Visitor Arrivals to Uganda by Region ('000)
large increase in recent years, % Change Share
Region 2010 2011 2012 2013 2014*
2010-14 (%)
though its speed has become Africa 678 875 930 936 989 45.9% 78.1%
slow since 2011. Though it has Europe 113 155 108 109 110 -2.7% 8.7%
increased 33.5% between America 65 59 71 73 77 18.5% 6.1%
2010-2014, its change is not Asia 41 45 61 67 70 70.7% 5.5%
stable: 22%, 4%, 1%, 5% Middle East 14 7 8 10 11 -21.4% 0.9%
Oceania 9 6 10 10 8 -11.1% 0.6%
respectively. The main source
Other & Not Stated 29 4 9 1 2 -93.1% 0.2%
market of foreign visitors to
Total 949 1,151 1,197 1,206 1,267 33.5%
Uganda is regional (78%) with
Source: Statistical Abstract, 2015 *Provisional
Kenya (380,614 in 2013) and
Rwanda (280,431 in 2013) being
the two dominant markets. Visitors from America and Asia are also in increase, on the other hand Uganda
loses visitors from Europe, one of the key market. According to the recent World Bank Survey (TEMS,
2012), more than 40% of international arrivals visit other destinations in Africa, principally Kenya (20%),

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Tanzania (12%) and Rwanda (10%). These figures would indicate a propensity among tourists to make
Uganda part of multi-destination trip.

As for the destination, natural resources attract most of tourists. Table 4.10.2 presents the details of tourists’
destination of N.P.. Visitors to Lake Mburo, Kibale, Kidepo Valley, Rwenzori Mountains and Mount Elgon
have increased in recent years, though these are still not the major destinations like Murchison Falls or
Queens Elizabeth. As shown in the Figure 4.11.1, most of N.P. are located at the periphery of the country.

Table 4.10.2: Visitors to National Parks (Citizens and Foreigners), 2010-14

National Park 2010 2011 2012 2013 2014 Share
Murchison Falls 53,460 60,273 60,803 70,798 68,844 33.7%
Queen Elizabeth 76,037 87,924 58,172 69,193 58,769 28.8%
Lake Mburo 20,966 21,480 22,927 14,068 26,980 13.2%
Bwindi Impenetrable 15,108 17,335 18,259 21,695 20,611 10.1%
Kibale 9,482 10,433 10,372 10,834 12,097 5.9%
Semliki 3,393 3,152 3,591 5,752 4,824 2.4%
Mgahinga Gorilla 3,328 1,899 2,497 8,952 3,033 1.5%
Kidepo Valley 3,208 2,452 2,300 2,890 4,091 2.0%
Rwenzori Mountains 1,529 1,738 1,663 2,724 2,758 1.3%
Mountain Elgon 2,660 2,350 1,565 2,096 2,314 1.1%
Total 189,171 209,036 182,149 209,002 204,321
Source: Statistical Abstract, 2015 Source: JICA Study Team
Figure 4.10.1: National Parks in Uganda

(2) Organizational Structure

Ministry of Tourism, Wildlife and

Antiquities (MoTWA) is responsible
for overseeing, monitoring and
coordinating the sector. The Ministry
has implementing agencies such as
Uganda Tourism Board (marketing),
Uganda Wildlife Authority (wildlife
conservation), and Hotel and
Tourism Training Institute (tourism
and hospitality training). The
organization structure is shown in
Figure 4.11.2. Private sectors are
considered as the driver of the sector.
Uganda Tourism Association is an
umbrella association of private Source: Ministry of Tourism, Wildlife and Antiquities
organizations and expected to
Figure 4.10.2: Organization Structure of Ministry of Tourism, Wildlife
interact with the government, though and Antiquities
the communication level is not
sufficient according to several private travel agencies.

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(3) Service Sector

Statistics from UBOS (2011) indicate there were 64,602 enterprises in the accommodation and restaurant
sub-sector, of which 36,413 (56%) were restaurants, bars and mobile food services; 3,876 (6%) provided
accommodation and 24,313 (38%) provided event and other food services. MoTWA survey indicates there
were 3,913 accommodation establishments in 2012. Accommodation facilities are unevenly distributed, with
47% in the central region, 23% in western region, 18% in eastern region and 12% in the northern region.
Only 13% of accommodation might be considered suitable for mainstream tourist provision.

4.10.2 Policies and Plans for Tourism Development

The planning and management of tourism sector is mainly guided by the overall national development
framework, especially the NDP 2010-2015 and Vision 2040. In Vision 2040, the sector is expected to play a
major role in the economy and a major contributor to GDP. The Tourism Development Master Plan
2014-2024, formulated in 2013, forecasts, by 2024, an increase in foreign receipts to more than 1.4 billion
USD per annum, and the creation of over 150,000 additional tourism jobs.

Below are the highlighted plans for the sector.

(1) Phased Marketing Strategy

The marketing strategy

follows the phased
approach of the master
plan strategy, namely
consolidation during the
phase 1, expansion and
diversification during
the phase 2 (focusing on
emerging market,
promote new products
such as MICE (Meeting,
Incentive, Convention,
Exhibition), and
sustained growth during
the phase 3. Markets
that will be targeted
during the different
phases are divided into
categories according to Source: JICA Study Team based on Tourism Master Plan 2014-24
their potential to Figure 4.10.3: Target Marketing Strategy
generate tourists to
Uganda. Through this strategy, number of visitors to the country is expected to have 8%, 10%, 12% growth
per annum for each term (Figure 4.10.3), which was of 5% for 2012/2014.

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(2) Tourism Development Areas and Infrastructure

Under the regional tourism approach, the MP designated 6 areas as “Tourism Development Areas (TDAs)”
according to the current major destination as well as potential destination locations. In each TDA, it is
proposed a Regional Tourism Hub (RTH) be designated in one of the major towns and a Regional Tourism
Office (RTO) be set up in each hub to guide the development of the TDA and assist local stakeholders in
tourism planning and implementation.

As shown in Figure 4.11.4, TDAs will be connected by the radial roads from Kampala, and by lateral roads
between them. 18 roads were identified as priority “tourism roads” by the government in 2012, shown in
Figure 4.11.5. Once established, those connections will formulate a “Ring road”, defined in Vision 2040.

Also, 5 airports (Entebbe, Pakuba, Kidepo, Kisoro, Kasese) are designated as tourism airstrips/dromes which
realize a direct access to the major N.P. from Entebbe. Northern Corridors will contribute to connect a part of
these airstrips by road passing through future key areas (Mbarara, Mt.Elgon).

Source: JICA Study Team Source: JICA Study Team

Figure 4.10.4: Structure of 6 Tourism Development Areas Figure 4.10.5: 18 Priority Tourism Roads

4.10.3 Necessary Interventions with Priorities

Figure 4.10.6 shows an image of future tourism network. There will be various entrance points besides
Entebbe airport by developing and enforcing attractive tourism hubs as well as transport networks. Regional
areas will consolidate the unique character. Necessary interventions are as follows;

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- Complement lacking infrastructure

such as the access roads to N.P.
(major Parks like Murchison Falls
is even corresponding), electricity
and ICT network inside the Parks
as well as in neighbored towns;
- Encourage and support investment
in accommodation sector
(especially in the mid-range and
budget) in key tourism areas
together with the human resources
development (HRD) coordinated
by proposed HRD Advisory
Committee ;
- Implement a development plan of
RTH together with local industry
development, infrastructure
development (i.e. interact with
related ministries, organizations to
formulate a plan);
- Identify the difference/uniqueness
of Ugandan products (considering
the diversification of tourism
products as well as the combined
tour within East Africa countries) Source: JICA Study Team based on Tourism Master Plan 2014-24
Figure 4.10.6: Target Marketing Strategy

4.11 Investment Climate in Kenya

4.11.1 Overview of Current Status

(1) Trend of Investment and Foreign Direct Investment

(USD Million)
The level of the investment in total of Kenya has 60000
been steadily growing though the volume of the 50000 Kenya
growth may not be outstanding comparing with the Uganda
40000
peer countries: the table below shows gross fixed Tanzania
30000
capital formation over time comparing with regional Ethiopia
20000 Bangladesh
peers and a few Asian countries. Despite the size of
Vietnam
GDP, Ethiopia shows outstanding growth in recent 10000

years. 0
2007 2008 2009 2010 2011 2012 2013 2014

Kenya’s records of attracting FDI inflow have been Source: JST based on World Development Indicator
stagnant for recent years. The left Figure below Figure 4.11.1: Value of Gross Fixed Capital Formation
of Kenya, Uganda and Peer Countries
shows the value of FDI inflow. While Tanzania,
Uganda and even Ethiopia in the very recent figure show the same level, Kenya’s stagnation is rather
noticeable. The ratio to GDP also remains low even comparing with the other East African countries.

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(USD Million)
12000 (%)
12
10000 Kenya
10
Kenya
8000 Uganda
8 Uganda
Tanzania
6000 Tanzania
Ethiopia 6
Ethiopia
4000 Vietnam
4 Vietnam
Bangladesh
2000 Bangladesh
2
0
0
2007 2008 2009 2010 2011 2012 2013
2007 2008 2009 2010 2011 2012 2013

Source: JST based on World Development Indicator

Figure 4.11.2: Value of FDI Inflow of Kenya, Uganda and Peer Countries and the Ratio to GDP (Right)

The table below shows the stock and net inflow of the foreign direct investment in 2013. The sectoral
breakdown of stock indicates that finance and insurance and manufacturing sector have the largest stock. In
2013, larger net inflow was realized in manufacturing. Other sector such as electricity and gas, finance and
insurance and wholesale and retail have also a large share.

According to the licensed investment project data, the total value of direct investment is estimate to increase
by 14.5% due to investment to construction and real estate sector 19. After the devolution following the
constitutional amendment, investors are not required to register at KenInvest. Therefore, the actual
investment flow is not able to capture from the licensed number. However, the large increase indicates
impact on other sectors as construction materials.

Table 4.11.1: Kenya’s Stock and Net Inflow of FDI Liabilities by Sector in 2013
Stock Net Flow
Value Share Value Share
(Ksh million) (%) (Ksh million) (%)
Agriculture, forestry and fishing 20,864.70 4.6 770.82 1.0
Mining and quarrying 19,105.88 4.2 6,550.85 8.3
Manufacturing 101,181.85 22.3 24,141.84 30.6
Electricity, gas, steam and air conditioning supply 18,867.07 4.2 17,182.61 21.8
Water supply; sewrage, waste management - - - -
Construction 9,062.46 2.0 1,870.32 2.4
Wholesale and retail trade 71,794.41 15.8 9,468.51 12.0
Transportation and storage 300,82.00 6.6 2,179.46 2.8
Accommodation and food service 14,181.30 3.1 956.68 1.2
Information and communication 27,139.06 6.0 -1,183.07 -1.5
Financial and insurance activities 129,252.41 28.4 16,080.45 20.4
Real estate activities 82.24 0.0 22.06 0.0
Professional, scientific and technical activities 541.01 0.1 -358.68 -0.5
Administrative and support service activities 4,292.06 0.9 156.61 0.2
Education 5,613.73 1.2 1,066.53 1.4
Human health and social work activities 53.22 0.0 -5.64 0.0
Other service activities 2,462.30 0.5 -0.29 0.0
Total 454,575.71 100.0 78,908.07 100.0
Source: JST based on KNBS “Foreign Investment Survey 2016”

19 JETRO Tsusho Koho 10th July 2015

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(2) Investment climate

According to the World Bank Starting a

Group’s Doing Business business
100
Investment climate has been Resolving Dealing with
insolvency 80 construction…
improving: in 2016, Kenya ranks 60
itself as 108th, whereas it was 129th Trading across 40 Getting
in 2015. Comparing the Distance borders 20 electricity
Kenya
to Frontier indices with those of 0
Rwanda
the regional leader, Rwanda, Enforcing Registering
various issues may require further contracts property

improvement in terms of the

regulatory environment for Paying taxes Getting credit

business. While Kenya has natural Protecting

advantage in “trading across minority…

borders” as opposed to land-locked Source: JST based on Doing Business 2016

Figure 4.11.3: Ease of Doing Business Distance to Frontier Score of
Rwanda, construction permit,
Kenya and Rwanda
registering property, getting, credit
and resolving insolvency show large deviations from Rwanda’s

On the other hand, it is still categorized as “mostly unfree” nation in the Heritage Foundation’s 2015 Index of
Economic Freedom 20.

FDI can encounter the problems differently from the domestic private sector. According to the Foreign
Investment Survey 2015, following issues are evaluated as the procedures which are perceived as taking long
time (percentage indicates the ratio of responding foreign investors):
- Registration of Property (e.g., Land) (58.9%)
- Work permit/passes (48.3% )
- Construction permit

It was also noted that the kind of procedures which are perceived as expensive are the following:
- Business credit (51.3%)
- Electricity (45.4%)
- Work permit/passes (44.3%)
- Registering property (e.g., Land)

20 Heritage Foundation, 2015 Index of Economic Freedom (http://www.heritage.org/index/ranking)

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The Foreign Investment Survey also asked the question regarding the concerns of the business which
requires improvement. Insecurity was
raised as both top concern and the area for
improvement by largest number of
respondents. On the other hand, transport
and infrastructure also raised as one of the
areas for improvement by many
respondents as 15%.

Kenya’s investment climate should be also

assessed by the cost of doing business.
Apart from the cost of freight, labor and
power tariff may be relatively higher than
other competing countries. The figure
below shows the wage level of Kenya and Source: JST based on the data of JETRO and www.afriapay.org/ (Tanzania)
Figure 4.11.4: Wage of Workers and Minimum Wage of African
other countries.
and Asian Cities

Another concern is the electricity cost. As seen in the table below, Nairobi’s electricity cost may require the
improvement comparing with Asian peer.

Table 4.11.2: Comparison of Electricity Cost

(Unit: USD)
Kenya (Nairobi) Nigeria (Lagos) South Africa(Johannesburg) Vietnam (Hanoi)
Electricity 0.08 + fixed charge (USD 196), or 0.15 + fixed charge 0.066 + fixed charge
(per kwh)* Demand Charge (USD 2.53/kVA) (USD 840) (USD 223.59) 0.05-0.12
Note: *: In case of large-scale business
Source: JETRO “Cost of Doing Business (2013)”

4.11.2 On-going Effort by GOK

In order to crease the better business environment, Kenya has been providing the package of incentives
through Export Promotion Zones (EPZ). EPZ enterprises can enjoy 10 years of tax break and duty-free
import of raw materials and machinery as long as export the products to outside of the EAC areas. Currently,
52 zones are registered and 84 enterprises are operating21.

GOK is further preparing the scheme of Special Economic Zone (SEZ). It is to encompass wider economic
activities. The locations of SEZs planned in the Mid-Term Program of Kenya Vision 2030 are Mombasa,
Lamu and Kisumu.

4.11.3 Necessary Interventions with Priorities

Regulatory environment should be further improved. The analysis together with the value-chain survey
hinted the current situation where devolution may pose some confusion on the licensing and taxation. It is
also difficult to capture the detail of the investment due to the change in licensing requirement which does
not have the mechanism of compiling the data centrally.

Continuous infrastructure development for improvement of the situation of the cost of doing business should
be required. For, some sectors which utilize large volume of power may be hesitant to invest in Kenya with
the prevailing high cost of energy.

21 KNBS, “Economic Outlook 2015”

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4.12 Investment Climate in Uganda

4.12.1 Overview of Current Status

(1) Trend of Investment and Foreign Direct Investment

Table 4.12.1: Uganda’s Actual Investment Value in 2013/2014 and the

The level of the investment in total Share
of Uganda has been still low
2013/2014 Share
comparing with neighboring (USD’ 000) (%)
economies, though figure on right Agriculture, Forestry and Fishing 22,761 12.1
shows gradual growth of the table Community and Social Services 13,890 7.4
Construction 17,600 9.4
below shows gross fixed capital Financial and Insurance Activities 12,417 6.6
formation over time. Uganda, on the Electricity, Gas, Steam and Air Conditioning Supply 38,429 20.5
other hand, has been showing a Manufacturing 69,466 37.1
Mining and Quarrying 82 0..0
sizable inflow of FDI relative to its Transportation and Storage 3,510 1.9
size of GDP (see Table 4.12.1). Wholesale and Retail TradTotale 92,240 4.9
187,394 100
The sectoral breakdown of 5-year Source: UIA Investment Abstract Fiscal Year 2013/14
cumulative number of FDI project indicates manufacturing is the leading sector of FDI. On the other hand
investment in total in the latest data also shows manufacturing as the key driver. The table below is the value
of actual investment where manufacturing’s share is 37.1%.

(2) Investment Climate in Uganda

Uganda has been making efforts to Starting a

improve its investment climate business
100 Dealing with
specifically targeting the higher rank in Resolving
80 construction
insolvency
permits
the Doing Business of the World Bank 60
Group. The rank of the latest survey was Trading across 40 Getting
borders 20 electricity
122th out of 189 countries. Comparing Uganda
0
with the score of the regional leader, Rwanda
Enforcing Registering
Rwanda, the regulatory environment was contracts property
measured as not as attractive in general
except for “enforcing contract”. As for Paying taxes Getting credit
“Trading Across Borders”, Rwanda as Protecting
well as Uganda are naturally minority
investors
disadvantaged due to the
Source: JST based on Doing Business 2016
land-lockedness. The score however may Figure 4.12.1: Ease of Doing Business Distance to Frontier Score of
be able to be improved through the Uganda and Rwanda
development of trade logistics including regulatory issues such as customs clearance.

It is still viewed as “mostly unfree” nation in the Heritage Foundation’s 2015 Index of Economic Freedom 22.

According to the Investor Survey 2011, 70.65 of respondents replied tax regulation and registration as
obstacls for their businesses followed by foreign currency/exchange, bureaucracy and business, customs/
foreign trade and environmental regulations with 67.8%, 67.7%, 56.7%, and 50.2% respectively.

22 Heritage Foundation, 2015 Index of Economic Freedom (http://www.heritage.org/index/ranking)

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68.4% of the businesses may be operating with low utilization of their capacity of the facility (less than 70%)
due to such reasons as the low demand, unreliable production input and lack of working capital. For the
expansion of business, energy infrastructure including electricity was raised as obstacles by most of the
respondents (85.7% of respondents). On the other hand, regional level expansion transportation infrastructure
is regarded as the problem (45.3% of respondent).

4.12.2 On-going Effort by GOU and Necessary Interventions

GOU has developed and launched activities to improve business climate under “Competitiveness and
Investment Climate Strategy”. Currently, World Bank is supporting the land administration reform,
business registration and business licensing reforms under “Competitiveness and Enterprise Development
Project (CEDP)”.

Based on the analysis of the sectoral growth driver together with the analysis on the on-going efforts by the
Government, the necessary interventions will be analyzed.

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CHAPTER 5 : TRANSPORT AND LOGISTIC

INFRASTRUCTURE DEVELOPMENT

5.1 Current Situation

5.1.1 Overview

The current situation of transport and logistics on Northern Economic Corridor can simply be said that
movement of cargo heavily relies on condition of road traffic, Mombasa Port operation and cross border
operation. In this regard three crucial agendas are worth considering: how to reduce road congestion,
Mombasa port operation, and cross border operation. These three can be referred to as main bottlenecks.

To begin with, heavy road congestion is experienced around Mombasa, Nairobi, Nakuru, Eldoret, Kisumu
and Malaba in Kenya and also around Jinja, Kampala and Entebbe in Uganda. The congestions around
these points are caused not only by cargo traffic but also passenger traffic. Traffic demands for both cargo
and passengers have been increasing rapidly due to population and economic growth within the countries of
the Northern Economic Corridor. Although improvement of existing road networks and construction of new
ones have been aggressively implemented, road congestion still remains a serious problem.

Secondly, Mombasa port is the only international seaport on the Northern Economic Corridor via which most
import and export pass through. The port of Mombasa has implemented projects with capacity expansion
and efficiency improvement. However, these developments have not matched the 10% average annual
growth rate in demand for import cargo registered in the past five years. New container terminal
construction and cargo handling improvement cannot catch up with the rapid increase in cargo demand. The
net effect translates to longer time at the port. In addition to the congestion of Mombasa port, Mombasa
city is characterized by inadequate road capacity and inappropriately sited container freight stations. These
factors make Mombasa to be the most heavily congested section by trucks of the Northern Economic
Corridor.

Thirdly, as far as cross border operation is concerned, One Stop Boarder Pass (OSBP) projects have greatly
contributed to improved operation efficiency but it still a takes long time to cross the borders. At Malaba
border located between Kenya and Uganda very long queues, sometimes as long as more than 3km, are
commonly witnessed during daytime. Just like Mombasa port, the demand for cross border movement has
been on the increase In addition custom clearance procedures are still inefficient due to lack of human
capacity, electricity, internet communication, inadequate parking lots and access road among others.

On a wider scope for efficient global logistics on Northern Economic Corridor in future, other important
issues such as how the corridor interacts with both central corridor and LAPSSET, how to deal with an
increasing demand in logistics of minerals from Uganda, DRC and South Sudan to the port of Mombasa,
how to develop local industries and promote local products for export have to be considered. In this regard
the following proposals should be considered:

Promoting Modal shift; Modal shift from truck to railway and other modes. In order to utilize the existing
infrastructure assets of effectively, maximize economic efficiency and to provide an eco-friendly transport in

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the future. Freight demand can be categorized by a number of criteria like weight, quantity, distance, lead
time, value and so on. Multimodal transport system should be built for a variety of freight demand.

Building International Road infrastructure for logistics; Road network is the most fundamental requirement
for logistics from short to long distance transport. It is therefore necessary to build international road network
and constantly maintain good road condition.

Assigning Inland logistic hub; in order to promote export and import for inland countries, inland container
depots, logistic centers and warehouse functions are indispensable. Such kinds of functions can also attract
other industrial functions such as manufacturing, trading, market, convention and so on. These functions
should be connected with logistic infrastructure such as standard gauged railway, highway and port.

5.1.2 Current Freight Traffic Demand

Traffic survey relating to the current road freight movement by truck on the Northern Corridor in Kenya and
Uganda was conducted by JST in 2015. This survey focused on the international freight movement or cross
border traffic from Mombasa Port to Kenya, Uganda, Rwanda, Burundi, South Sudan, DRC and Tanzania.
Here, important results obtained from the survey are mentioned and analyzed.

(1) Traffic Survey Sites and Schedule

JST conducted the Freight Traffic Demand Survey as shown in Table 5.1.2 and Figure 5.1.1. The Survey
includes both site survey and statistic survey.

Table 5.1.1: Survey Contents and Number of Survey Sites

No. Survey Type UGANDA KENYA

Malaba, Busia, Mutukula, Mitrama hills,

Katuna, Bunagana, Mpondwe, Goli, Oraba,
Roadside OD
Nimule(10sites at the border posts), Port
Survey 3days
1 16sites Bell(1site at port),Kampala, Jinja, 1site Mombasa/Mariakani 1day count
(12hours counts
Tororo(3sites at ICD), Kampala(1site at
count)
Railway terminal), Entebbe(1site at Airport
terminal)

Malaba, Busia, Mutukula, Mitrama hills,

Mombasa/Mariakani(1site
Katuna, Bunagana, Mpondwe, Goli, Oraba,
near Port), Nadapal(1site at
Traffic Volume Nimule(10sites at the border posts), Port
border post), Mombasa-
Count Survey Bell(1site at port), Kampala, Jinja, 3days
2 19sites 7sites Nairobi, Nairobi-Nakuru、 1day count
(24hours Tororo(3sites at ICD), Kampala(1site at counts
Nakuru-Eldret, Eldret-Malaba、
count) Railway terminal), Entebbe(1site at Airport
Nakuru-Kisumu(5sites on
terminal), Kampala-Gulu, Kampala-Mbarara,
Highway)
Kampala-Tororo(3sites on Highway)
Data Collection
of Freight
3-1 Freight movement by Railway （last 5years, monthly records by items）
movement by
Railway
Data Collection
of Freight
3-2 movement Freight movement by Railway （last 5years, monthly records by items）
from Custom
office
Source :JICA Study Team

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Source: JICA Study Team

Figure 5.1.1: Location of Survey Sites

(2) Characteristics of Freight Traffic on the Road

(a) Traffic Volume

- Highest Cargo Ratio is 72% at Mombasa. Cargo traffic volume is 5,226 vehicles/day. (Cargo
volume breakdown: LHV&MGV: 862vehicles/day, HGV and trailer: 4,364vehicles/day, Ratio
of HGV is 83% of total cargo traffic.）
- Highest traffic volume in Kenya is 12,868vehicles/day between Nairobi and Nakuru.
- Highest traffic volume in Uganda is 13,560 vehicles/day between Kampala and Tororo.
- Cargo traffic volume at border post between Kenya and Uganda ：Malaba(78%) > Busia (39%),
However, total traffic volume at Malaba is 1,153vehicles/day which is less than the total traffic
volume at Busia (2,256vehicles/day).
- Traffic Volume at other border posts
Nadapal (Kenya/South Sudan): 9vehicles/day (27%),
Katuna (Uganda/Rwanda): 287vehicles/day (47%)
*Notes; HGV: Heavy Goods Vehicle, LGV: Light Goods Vehicle, MGV; Medium Goods Vehicle

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Unit: vehicle/day
Total 13,560 3,467 3,374 3,254 127 175 51 104 51 511 394 245 849 187 610 156 592 2,256 1,153 33 4,357 4,407 4,659 12,868 7,905 7,238
Passenger
6,988 2,042 2,307 2,965 51 1 8 0 47 205 351 130 650 67 323 84 385 1,373 254 24 2,682 2,192 2,270 8,362 2,515 2,012
Car
LGV &
2,616 812 870 281 28 1 6 12 4 120 15 62 145 93 135 36 112 635 58 9 941 611 655 1,951 1,144 862
MGV

HGV 3,956 612 197 8 47 173 37 93 0 186 28 52 54 27 152 37 95 248 842 0 734 1,604 1,734 2,555 4,246 4,364

Railway Londiani Webuye Burnt forest Gilgil Emali

Survey Kampala- Kampala- Kampala- Entebbe Nimule Oraba Mpondwe Bunagana Katuna Mirama Hills Mutukula Malaba Lokichogio Mombasa
Terminal/Ka Tororo ICD Jinja ICD Kampala ICD Port Bell Goli Border Busia Border (Nakuru- (Eldoret- (Nakuru- (Nairobi- (Mombasa-
Point Tororo Mbarara Gulu Airport Border Border Border Border Border Border Border Border (Nadapal) (Mariakani)
mpala Kisumu) Tororo) Eldoret) Nakuru) Nairobi)

Source: JICA Study Tean

Figure 5.1.2: Traffic Volume on the Survey Sites (Vehicles/day)
If traffic volume is converted to passenger car unit, the volume of sections between Mombasa and Nairobi,
Nairobi and Nakuru, and Tororo and Kampala are greater than or nearly the same as 20,000 pcu/day. This
means that these sections, with two lanes road, are already are deficient in capacity.

Note: Note: PCU equivalent factor：passenger car(1.0), minibus(1.4), medium bus(1.8), large bus(2.2), medium goods vehicle(2.5),
heavy goods vehicle/trailer(3.5) （based on the road design manual in Kenya/Tanzania and Uganda）
Source :JICA Study Team
Figure 5.1.3: Traffic Volume on the Survey Sites (pcu/day)
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(b) Loading Weight

- The average loading weight of truck is 14 tons/vehicle based on the survey for cross border
cargo trucks including Mombasa survey point. This figure excludes unloading track data.
Those for Trailer and Semi- Trailer are 22 tons/vehicle and 20 tons/vehicle respectively.
- The ratio of unloading of trucks is 42%. The figure of semi-trailer is 52%.

Source: JICA Study Team

Figure 5.1.4: Average of the Loading Weight and Ratio of Unloading Vehicle

Source :JICA Study Team Source :JICA Study Team

Figure 5.1.5: Ratio of Container Loading Vehicle Figure 5.1.6: Trip Length

(c) Ration of Container Lading

- Ratio of container loading trucks are 42%. Those for Trailer and Semi-Trailer are 63% and 53%
respectively.

(d) Trip Length

- Average trip length of loading trucks is 1,124km. The dominant trip length exists in 500-750km
and 1,250- 1,500km, which are the trips from Mombasa to Nairobi and from Mombasa to
Kampala respectively.

(e) Contents of Cargo Traffic on the road

The charts in Figure 5.5 show content of cargo in truck by nation.

- The cargo from Mombasa to the hinterland Kenya is mainly Clinker, Oil, Fertilizer and Rice.
The cargo from the hinterland of Kenya to Mombasa in mainly Tea which has a share of 20% of
the total. The other major items are Alcoholic Beverages, Grains & Cereal, Flowers, and Fruits.
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- The cargo from Mombasa to Uganda is mainly Clinker, Oil and ”Other Metal and non-Metal
products”. The cargo from Uganda to Mombasa is mainly Coffee which has a share of 59% of
the total.
Mombasa ⇔ Kenya ⇔ Uganda
From Mombasa To Kenya From Mombasa To Uganda

Clinker
From Mombasa

Clinker
21%
26%
Others
Others
40,671 41% 14,776
45%
ton/day Oil ton/day
13% Oil
Other 19% Other
Machiner Metal and
Iron,Steel y and non
Fertilizer equipmen
and Metal
8% t
Smelting Rice Salt products
6% 7% 4% 5% 5%

From Kenya To Mombasa From Uganda To Mombasa

Other
Grains,Flo
Tea Alcoholic_ urs,Cereal Others
20% Beverages
To Mombasa

s 23%
10% 3%
Others 4,663
47% 547
ton/day
ton/day Coffee
Beans,Pea 59%
Other
s,Pulses
Grains,Flo
4%
urs,Cereal
s
Maize(Cor
Wood 9%
n)
Products Fruits 4% Cotton
7% 7% 7%

Mombasa ⇔ Rwanda ⇔ South Sudan ⇔ DR Congo

From Mombasa To Rwanda From Mombasa To SouthSudan From Mombasa To DR Congo
Other
Machiner
Oil Other
y and
From Mombasa

14% Others Oil Metal and

Oil equipmen 23%
26% non
Others 29% Cement t
Metal
39% 13% 6%
1,413 2,021 products
Others 827
ton/day ton/day ton/day
15%
55%
Cloths
Clinker 9%
11%
Other
Iron,Steel Food/Drin Iron,Steel
and Plastics k Alcoholic_ Bicycle,M and
Smelting 7% Cement Products Beverages otorcycle Smelting
7% 7% 6% 6% 12% 15%

Other From Rwanda To Mombasa From DR Congo To Mombasa

From SouthSudan To Mombasa
Metal and Others
non 11%
Metal
products Beans,Pea
To Mombasa

10% Beans,Pea s,Pulses

s,Pulses 14%
Coffee Car,Truck, Cotton
25% Coffee 20
18% 51 51 Bus and 58%
ton/day ton/day other 42% ton/day
Vehicles
Other Skins 75%
Food/Drin Leather
k Hide
Products 24%
23%

JICA Study Team

Figure 5.1.7: Contents of Cargo Traffic

(3) Current Freight Movement by Truck

- Road cargo traffic from Mombasa to hinterland Kenya and EACs is about 60,000 tons/day and the
share of cargo that ends within Kenya is about 41,000 tons, a figure that translates to 68% of total
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traffic from Mombasa.

- The cargo traffic toward Uganda is 15,000 tons/day, representing a share of 25% of the total
volume from Mombasa.
- On the other hand, Cargo traffics on the road toward Mombasa from EACs are about 5,400 tons/day.
This is about 9% of total traffic volume from Mombasa to EACs. There is a significant gap
between the two directions.
< From Mombasa to Seven Countries> < From Seven Countries to Mombasa >

Source: JICA Study Team

Figure 5.1.8: Cargo Traffic Flow on the Road (Tonnage per Day)

5.1.3 Logistics Service

(1) Survey Result by JICA Study Team

Although the JICA Study Team (JST) captured the total transit time through a GPS survey, GPS survey can
only cover the portion ranging from cargo dispatch from the port to the final destination. On the other hand,
the data of transit time at port area (port arrival to cargo dispatch from port including customs procedure
time) were collected based on the interviews and port charter performance data.

i) Kenyan case

Import containers have to attach Container Freight Station (CFS) and are basically stored until the cargo
clearance is completed. The survey result indicated:

- Although it took long time (over 10 days) for berthing in past, current berthing/discharging period
has been reduced to three (3) days
- Container transfer to CFS is available from next day of container discharge at port. The latest
NCTTCA report “Impact Assessment of Northern Corridor Performance Improvement Activities”
indicates that port dwell time is 2 days for local import, based on KPA interview.
- According to CFS association interview survey (May,2014), an average of 2.7 days is necessary
ranging from cargo arrival/dispatch at CFS including customs procedure time. Basically, cargo
dispatch is initiated only after customs clearance has been completed. Although customs procedure
can be started before cargo arrival at CFS, there remains the possibility that customs clearance time
is longer than 2.7 days.
- Transit time for Nairobi (one day) is based on the GPS survey.
- As a result of the above, the total lead time is estimated at between 6.7-7.7 days as shown below.

Table 5.1.2: Imported Lead Time in Kenya

Mombasa port Arrival to CFS CFS dispatch To Nairobi Estimated total lead time
2-3 days 1 day 2.7 days 1 day 6.7-7.7 days
JICA Study Team
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ii) Ugandan case

Apart from Kenya, containers for transit country do not use CFS exclusively for specific cargo like vehicles.
The survey result indicated:

- Containers’ free time for import goods at Mombasa port is two (2) days for CFS and seven (7) days
for transit; this implies that the transit procedure takes a longer time.
- According to an interview survey, it is possible to reduce the current transit procedure to within 2
days if all the processes are properly done. Transit procedure can be conducted in parallel with port
side operation so that there is a possibility that transit time for transit procedure covers port
operation time. However, a perfect case is very rare and in most cases it takes 4-6 days. NCTTCA
survey indicates that port dwell time is five days for transit container, based on the KPA interview.

The GPS survey shows that Malaba border crossing takes around 1.5 days and this is considered to be a long
time. The current waiting time on Kenyan side (over 1 day ) is longer than Uganda side (7 hours). This
difference is due to the ongoing development of parking space to reduce congestion on the Kenyan side of
the border as compared to the Ugandan side where such development has been already completed.

The total transit time is estimated to be 7.5-8.5 days from vessel arrival to cargo delivery to Kampala as
shown below.
Table 5.1.3: Import Transit Time
Activity GPS Survey Result
From vessel arrival to cargo dispatch 4-6 days for transit & dispatch
Mombasa to Malaba 1day and11h44m (incl.1h07m night time sleep)
Malaba(Kenya)
1day and12h49m (incl.1 night sleep)
Malaba (Uganda)
Malabar-Kampala 0day and 15h35m (incl. 5h56m night sleep)
ICD clearance 0day and 3h05m
Total 7.5day -8.5 day (after dispatch at Mombasa, it takes 3.5 days )
Source: JICA Study Team

JST GPS survey found no serious bottleneck in the transport portion excluding Mombasa port. In addition,
no-congestion at the weighbridges was observed. Therefore, it seems that transporters carry out speedy
delivery as much as possible so that drivers’ rest time up to Malaba border arrival is relatively short. As a
result, it can be concluded that the JST survey result represents the transit time of “direct delivery” pattern.

(2) Observatory Report by NCTTCA

Apart from JST survey, NCTTCA also carried out similar transit time survey, namely, “Northern Corridor
Transport and Transit Observatory report (hereafter: Observatory report). The survey shows longer transit
time than the JST survey. It is therefore valuable to compare both sets of data in order to identify bottlenecks.

Although NCTTCA observatory report did not specify the Kenyan import or transit import, the following 3
transit time data were applied:

- Customs electronic time data (from the time the cargo exits the port of Mombasa to the time export
certificate is issued at the Malaba border)
- GPS survey time data (from the time the travel starts at Mombasa to the time of arrival at Malaba)
- Ugandan transport time data (from the time dispatched at Malaba border to Ugandan destination)

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Customs electronic data

13.0 The data from October

12.0 2013 to July 2014 were
utilized. The average
11.0
transit time to Malaba
10.0
has been reducing over
9.0 the survey period. In the
Day
8.0 month of July 2014, the
7.0 transit time to Malaba
6.0 was 187 hours (about 8
days). It should be noted
2013.1
2013.2
2013.3
2013.4
2013.5
2013.6
2013.7
2013.8
2013.9

2014.1
2014.2
2014.3
2014.4
2014.5
2014.6
2014.7
2013.11
2013.12
2013.10

that this time includes

delays, approximately 5
days longer than JST’s
Source: Observatory report (2014.Dec) NCTTCA
survey results. JST’s
Figure 5.1.9: Transit Time from Mombasa to Malaba
survey indicates 1-1.5
days from Mombassa
port to Malaba excluding transit time procedure at the port (JST’s survey approximates 4-6 days for transit
procedure at the port).

The reason of additional time in this “customs electric data” is that the time includes the delays after custom
release at the port whereby most transporters keep their cargo at their yard before starting their travel. It
means that the cargo is temporally delivered to truckers’ site and direct delivery is not practiced. On the other
hand, JST GPS data shows such extra time-consuming operation is not required and transporters could
deliver cargo without extra stop-over.

Another reason of delay as

pointed out by the observatory
report is long waiting time
required for container pick-up
from the port. This data is based
on T812 procedure which is for
transit cargo and not for Kenyan
import. According to the
Observatory Report figures, it
took on average 40-90 hours to
pick up cargo after customs Source: Observatory report (2014.Dec) NCTTCA
Figure 5.1.10: Cargo Pick up Time at Mombasa Port
release. This delay is attributed to
transporters/traders not taking the initiative to load their cargo from the port immediately. Transporters,
especially those with large fleet, are likely to prefer to pick up cargo at designated time and day of the week
to allow close monitoring of trucks while on transit. This is a factor that transit time of NCTTCA GPS data
puts at 2-3 days longer than JST survey result.

GPS survey

A total of 200 GPS kits were used from the month of February to September, 2014. Only 68 kits were
switched by transporters from Mombasa port as the start point while the rest were activated at or after
Mariakani weighbridge. The result showed that it takes 3.2 days on average from Mombasa to Malaba. Even
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in the same NCTTCA data, there is a big gap between customs electrical data and GPS data. According to the
observatory survey analysis, the delay can be attributed to the following reasons.

- Traders do not commence their travel immediately after the cargo was released from the port. In
most cases, cargo is consolidated at the yards before transportation.
- Clearance process at the border is sometimes done manually whereby all entries are recorded
manually and later on entered on the system when the track has already crossed the border

JST study also indicates that bond cancellation procedure remains a manual process excluded from electric
processing time.

Ugandan Transport time

Transport time in Uganda has been improved in the period between January-April in 2013 and since then the
performance has been maintained. Travel time from Malaba to Kampala was 2.3 days in March 2013. The
JST survey indicated 1.1 days in March 2015, approximately 1 day shorter, without serious congestion and
less waiting time at weighbridge.

Observatory report points out that construction of a major road is in progress and some bridges need to be
re-constructed. In addition, road blocks/border crossings and weighbridges are causes of delays. It is noted
that JST survey also showed the long waiting time at border, approximately over 1 day.

(3) Conclusion 5.0

4.5
JST’s survey result seems to represent
4.0
the performance of “direct delivery
pattern”, aiming at speedy delivery. On 3.5
the other hand, transporters in 3.0
Observatory report shows various 2.5 Day
wasting time factors and a lot of trucks 2.0
spent their time even after customs 1.5
clearance was finalized. This seems to 1.0
2013.1
2013.2
2013.3
2013.4
2013.5
2013.6
2013.7
2013.8
2013.9

2014.1
2014.2
2014.3
2013.11
2013.12
2013.10

be the main reason of the gap between

JST’s and NCTTCA surveys in terms of
transit time. The result will be finalized
Source: Observatory report (2014.Dec) NCTTCA
through discussion with NCTTCA in Figure 5.1.11: Transit Time from Malaba to Kampala
January 2016 considering i) validation of
transit time as the “Direct delivery pattern”, and ii) identification on cause and resolutions for hampering
direct delivery pattern.
5.1.4 Transport and Logistic Infrastructure

(I) Road
There are five major roads on the Northern Economic Corridor. The main route called NEC1, connecting
Mombasa Port with four nations’ capital cities is the longest at a distance of 1,900 km. Four branch routes
connecting to DRC and South Sudan have a total distance of 2,930km.

In Kenya, there are increasing traffic demand and bottlenecks of road traffic around urban areas of Mombasa,
Nairobi, Nakuru, Eldoret, Kisumu and surrounding areas as well as around the borders, Mombasa Port and

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railway stations. On the other hand, the trunk road network with high capacity is very limited. Road
sections with four lanes are limited to Mombasa, Nairobi and Nakuru.

Heavy trucks cause road surface deterioration over relatively short periods. A road surface condition
whichcan be said to beat a satisfactory level must be less than 4 of IRI (which is International Roughness
Index). In Kenya road surface on the main route is generally good although many pot holes have been
observed in Mombasa County during the survey conducted by JICA Study team in July, 2015. As such
therefore the road network should be continuously improved for increasing traffic demand and well
maintained for safe and efficient logistic transport as well as passenger transport.
Table 5.1.4: Existing Five Major Roads on the Northern Corridor
Roads Major Towns on the Routes Length (km)
Mombasa-Nairobi-Malaba-Tororo-Kampala-Masaka-
NEC 1 Northern Corridor Approx. 1,900km
Mbarara-Kigali (Rwanda)-Bujumbura (Burundi)
Northern Corridor Branch Line
NEC 2 Eldoret-Nadapal-Juba (South Soudan) Approx. 920km
(Access to South Soudan)
Northern Corridor Branch Line
NEC 3 Tororo-Gulu-Nimule-Juba (South Soudan) Approx. 690km
(Access to South Soudan)
Northern Corridor Branch Line
NEC 4 Kampala-Gulu-(Nimule-Juba (South Soudan)) Approx. 270km
(Access to South Soudan)
Northern Corridor Branch Line
NEC 5 Mbarara-Mpondwe-Kisangani (DR Congo) Approx. 1,050km
(Access to South Soudan)
Total of Five Routes Approx.4,830km
Source: JICA Study Team

Source: JICA Study Team

Photo at Malaba Border in Kenya, on 16th of July 2015 by JICA Study Team

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(Number of lanes)

(Road surface condition)

The Results of IRI survey using DRIMS
(VIMS) by KeNHA from Feb 01 to 14, 2015
IRI: International Roughness Index
DRIMS: Dynamic Response Intelligent
Monitoring System

Source: JICA Study Team, KeNHA

Figure 5.1.12: Existing Road Condition
Profile of the Northern corridor between Mombasa-Kenya and Bujumbura-capital city of Burundi is shown
in the following Figure. The Highest elevation is around 2,600m between Nakuru and Nairobi. The lowest
elevation is nearly at sea level in Mombasa, Kenya. Approximately 86% of total distance is over 1,000m
high. Steep gradient sections exist between Nairobi and Nakuru, at the border between Rwanda and
Uganda, and around Bujumbura. There are climbing lanes incorporated along the Northern Corridor in both
Kenya and Uganda. However, there are no climbing lanes on the section within Rwanda.

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Source: JICA Study Team, Google Earth

Figure 5.1.13: Profile of Northern Corridor between Bujumbura/Burundi and Mombasa/Kenya

(II) Railway

The meter gauge system operated by Rift Valley Railways (RVR) spans the entire Northern Economic
Corridor (NEC) from Mombasa to Kampala. RVR operates the system under a Concession awarded by
Kenya and Uganda in 2006. The system includes approximately 1,320 kms of track in Kenya. The mainline
of about 1,185 kms connects Mombasa to Malaba on the Ugandan border passing through Nairobi. Active
branch lines to Thika and Nanyuki and an inactive line to Kisumu complete the system. The Ugandan meter
gauge system operated by RVR includes approximately 1,176 kms of track. The mainline consists of about
240 kms from Malaba to Kampala and 344 kms between Kampala and Kasese. An approximately 525 km
branch line extends from the mainline at Tororo to Gulu and from Gulu to Pakwach. Additional segments are
a 9 km lead to Port Bell, 12 km spur to Port Jinja, 6 km line to the workshops at Nalukolongo, and a 55 km
branch between Tororo and Mbale. When the Concession was awarded in 2006 closed sections of track were
excluded. Kampala-Kasese (344kms) and Tororo to Pakwach (525kms) were closed at the time. The
Tororo-Pakwach branch was added to the Concession in 2013 after RVR reopened it in anticipation of traffic
related to oil discoveries in the Lake Albert area. After operating a commercial train to Gulu in September
2014 RVR has not operated over the branch.

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Source: RVR
Figure 5.1.14: Current Condition of Meter Gage System

The project to implement a standard gauge railway serving the NEC continues. The line between Mombasa
and Nairobi is expected to be in operation by June 2017. Construction contracts have been awarded for
segments to Naivasha Kenya and from Kampala to Tororo Uganda. For other segments feasibility studies
have been completed or are in progress.

The table below lists the currently active operating facilities in place on the meter gauge system, including
marshalling yards, inland container depots, locomotive and wagon depots and locomotive fueling stations.
Facilities that are out of service are not shown.

Table 5.1.5: Inventory of Operating Facilities (Meter Gauge System)

Inland Container
Marshalling Yards Locomotive Depot Wagon Depot Locomotive Fueling
Depot
Mombasa
Mombasa -- -- --
(port container train yard)
Kipevu -- -- -- --
Changamwe -- Changamwe Changamwe Changamwe
Nairobi Nairobi Nairobi -- Nairobi
Nakuru Nakuru Nakuru
Nakuru --
(not operating) (not operating) (not operating)
Eldoret Eldoret Eldoret Eldoret Eldoret
Kisumu Kisumu
-- -- --
(not operating) (not operating)
Malaba -- -- -- --
Jinja -- -- -- --
Kampala Kampala
Kampala Kampala Kampala
(Nalukolongo) (Nalukolongo)
Port Bell
-- -- -- --
(not operating)
Source: Study Team based on publicly available information and interviews of stakeholders

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There is a small marshalling yard at Port Bell. The yard is not operating because the port’s rail wagon vessels
are out of service. A project is in progress to create a new, larger port at Bukasa. Port Bell is to be refurbished
and function as a temporary port while the Bukasa port is implemented. At this time it is not expected that
rail wagon ferry service will be reinstated.

There is a small marshalling yard and ICD at Port Kisumu. The port has in the past operated railway service
on Lake Victoria but currently its rail wagon vessels are out of service and the marshalling yard and rail ICD
are not operating. As part of the SGR project, a new port with initial throughput capacity of 600,000 tons per
year is to be developed. The new port will be served by a branch line from the SGR mainline that will pass
through Kisumu 23.

RVR has struggled to meet the performance targets stipulated by the Concession contract and has lost money
each year of operation. Service and cargo volumes are hampered by a lack of available wagons and
locomotives. In 2014 and in 2015 it appears that RVR’s performance has improved somewhat. Investments
made in track, structures, locomotives and wagons may have begun to make a difference.

The following table lists investments made by RVR:

Table 5.1.6: RVR Investments

Approximate
Investment Description Timing Objective
Value
20 units in service Increase capacity and
Locomotive purchase 20 second hand GE locomotives USD 23 million
as of August 2015 reliability
Track maintenance Accelerate pace of
Plasser ballast regulator & tamper January 2014 USD 887,000
equipment track maintenance
New ICD established near
Commenced Approximately Container cargo to
Mukano ICD Kampala to increase container
operation July 2015 USD 8.6 million and from Mombasa
cargo
Increase capacity,
Technology GPS based train control system June 2013 USD 9.5 million
improve safety
Replace 73km between Mombasa Reduce transit time;
Track June 2013 USD 20 million
and Nairobi improve reliability
Resume service on
Maritime service Reinstate service at Port Bell September 2012 USD 3.5 million
Lake Victoria
Rehabilitate Nalukulongo Bring workshop up to
Maintenance workshops USD 410,000
Workshop standard
Repair 9 major culverts between Contract awarded Improve reliability
ROW USD 4.9 million
Tororo and Jinja March 2012 and safety
Reopen line in
Reopening of anticipation of crude
Branch line October 2013 USD 2 million
Tororo-Gulu-Pakwach oil cargo from
Albertine region
Approximately
Purchased 300
Rail wagons Purchase 400 heavy duty24 On-going USD106,000 per
wagons in 2014/2015
wagon 25
Source: JICA Study Team

RVR is likely to continue to invest in the meter gauge track as it seeks to continue stabilizing and
strengthening the network. Notable improvements in performance reported by RVR include26.

• Q2 2015 (April-June), NTK increased 10% over Q2 2014 to 369 million

• Q2 2015, tons increased 2% over Q2 2014 to 413 thousand

23
Information received from KRC
24 Capable of accommodating loads of two fully loaded 20’ containers or one fully loaded 40’ container (up to 50 tons)
25 Based on Railways Africa, Issue 5 2015, Africa Update, page 11, Rift Valley Orders More Wagons;
http://issuu.com/railwaysafrica/docs/ra407_5-2015_final_web
26 Qalaa Holdings Business Review 2Q-1H15
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• First half of 2015 successfully achieved 1,987,000 net tonne kilometers (NTK) concession target for the
21-months ended March 2015
• Q2 2015 Mombasa-Nairobi-Mombasa transit time reduced 11% versus Q2 2014 to 2.3 days
• Q2 2015 Mombasa-Kampala-Mombasa transit time reduced 4% versus Q2 2014 to 9.2 days
• Q2 2015, tons increased 2% over Q2 2014 to 413 thousand
• Awarded ISOH Railway Group International Award 2015 for reducing injuries in Nairobi area
workshops by about 90% 27.

(III) Port
The port of Mombasa is fully developed with modern equipment making it the principal port in the East
Africa Region. The port is equipped to handle a wide range of cargos including dry bulks such as grain,
fertilizers, cement and soda ash and liquid bulks such as crude oil and oil products as well as bagged
products (coffee, tea, sugar, etc.), break-bulk (iron and steel, timber), motor vehicles, machinery – and
containerized cargo.

After the opening of Berth 19 in 2013 which increases the port’s capacity by some 250,000 TEUs a year, the
Mombasa Container Terminal has a total length of 840m. The terminal can now handle three No 19panamax
Berth
vessels of 250m length at the same time. In addition, the new terminal has been equipped with three
ship-to-shore gantry cranes, eight new reach stackers and 27 terminal tractors. The Second Container
Terminal is a further expansion of the port’s capacity. It will have three additional berths totaling 900m with
a depth alongside of 15.0m. Funding for this new terminal project is being provided by JICA. Freight
volume at Mombasa Port from 2010 to 2014 is shown in the following Figure. Mombasa Port container
traffic volume has increased with 10% of annual growth rate over the past 5 years.

Source: JICA Study Team

Figure 5.1.15: Current Mombasa Port Photos on July 2015

27 Institution for Occupational Safety and Health (IOSH) website, accessed 23 September 2015,
http://www.iosh.co.uk/News/Kenyan-firm-wins-inaugural-IOSH-Railway-Group-international-safety-award.aspx
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2010 2011 2012 2013 2014

Imports 16,201 16,938 18,732 19,150 20,777
Port Total Throughout Exports 2,575 2,788 3,045 2,983 3,366
(‘000’ TEUs) Transshipment 158 227 143 174 732
Total 18,934 19,953 21,920 22,307 24,875

Full 460 517 572 583 666

Container Traffic
Empty 235 254 331 311 346
(‘000’ TEUs)
Total 696 771 903 894 1,102
Source: Annual Review and Bulletin of Statistics 2014, KPA
Figure 5.1.16: Freight Volume at Mombasa Port (2010-2014)

(IV) Airport

Nairobi’s Jomo Kenyatta International airport handled the largest cargo volume within the EAC at 279
thousand tons per year by 2012. Entebbe airport ranked second , with a total volume of handled cargo at 81
thousand tons per year by 2012. Air cargo handling both at Nairobi and Entebbe airports have not increased
in recent years whereas cargo handling at Addis Ababa International Airport have increased rapidly.
Compared to Dubai international airport, the volume of cargo handled at Nairobi is a paltry 12% of that of
Dubai.

Airport cargo volume at Jomo Kenyatta International airport and Mombasa International Airport in Kenya
and at Entebbe International airport in Uganda is shown in following figure. Airport cargo in Kenya has
fluctuated in the past 5 years. A fire disaster happened at Jomo Kenyatta International airport in August 2013.
Airport cargo in Uganda has also fluctuated in the past 5 years.

Table 5.1.7: Cargo Volumes (Unloaded & Loaded) at Airport

Compound Average
2008 2009 2010 2011 2012
Growth Rate
Nairobi Int’l Airport 299 262 228 286 279 -1.7%
Mombasa Int’l Airport 6 6 8 8 4 -9.6%
Entebbe Int’l Airport 80 75 72 72 81 0.3%
Dar es Salaam Int’l Airport 23 19 20 24 25 2.1%
Kigali Int’l Airport No data 6 No data -
No data from 2009 to 2012
Cargo volume data from 2000 to 2008 are as follows; 3.6 2.8%
Bujumbura Int’l Airport 3
(2000), 3.4 (2001), 2.5 (2002), 2.3 (2003), 3.3 (2004), 3.3 (2000-2008)
(2005), 2.9 (2006), 2.6 (2007), 2.9 (2008)
It is difficult to ascertain the total cargo handling figures for JIA. JIA is however the main
Juba Int’l Airport destination for, and origin of cargo transported by air within South Sudan. The airport has neither
a dedicated cargo terminal nor bulk cargo handling facilities.
Addis Ababa Int’l Airport 73 101 134 160 181 25.5%
4,062
Hong Kong Int’l Airport 3,627 3,347 4,128 3,938 2.9%
(Ranking No.1)
2,267
Dubai Int’l Airport 1,825 1,927 2,270 2,270 5.6%
(Ranking No.1)
Source: JICA preliminary study report, Wikipedia, AfDB website

Table 5.1.8: Runway in Airport

Airport Runway
Nairobi International Airport
Runway 1: 4,117m
(Jomo Kenyatta International Airport)
Mombasa international Airport Runway 1: 3,356m
(Moi International Airport) Runway 2: 1,359m
Runway 1: 2,408m
Entebbe International Airport
Runway 2: 3,658m
Source: JICA preliminary study report, Wikipedia, AfDB website

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Source: Statistical Abstract in 2015, Kenya, Statistical Abstract in 2015, Uganda

Figure 5.1.17: Airport Cargo Volume in Kenya and Uganda

(V) Waterway

(1) History of Lake Transport at Port Bell

Up to mid-2005, the management of both ports and ships at Port Bell was under Uganda Railway
Corporation (URC). The railway and marine services were conceded to RVR in 2005. RVR took over
management of both ports and ships from 2005 to 2011 after which the Government returned the
management of ports to URC by 2012. URC had three rail-wagon ferries until 2005.

These ferries were well operated on a part of the Central Corridor between Dar as Salaam and Kampala.
However, one of the three rail-wagon ferries (MV Kabalega) had an accident and sank on Victoria Lake in
2005, and another one (MV Pampa) also stopped operating due to troubles and currently only one ferry
(MV Kaawa) is operational.

As a result, railway connection to Port Bell is out of service at the moment and ferries are not operated as
rail-wagon ferries. By 2005, when ships were operated as a rail-wagon ferry, loading could be finished
within an hour, but currently it takes four days to load because cargos are manually loaded due to lack of
large-scale loading facilities both at Port Bell and Jinja Port which are part of URC. URC loads ships and
handles cargo at the port and RVR operates on Lake Victoria.

Only one boat, not as a wagon ferry but a general cargo ferry or break-bulk service operated between Port
Bell and Mwanza in Tanzania by URC. Very few boats come to Port Bell from Kisumu port. Furthermore,
after 2005 Port Belle rail ferry could have to contend with competition from smaller vessels that entered the
market and offered lower costs.

(2) Record of total cargo throughput at Port Bell

The date of cargo was provided to JICA Study Team between 1993 and 2014, namely, 2002:478,115 tons,
peak year - 2005:126,000 tons - 2013:42,300tons - 2014: 8,100 tons. Cargo throughput at Port Bell in
Uganda has rapidly declined since 2005, currently only 8,100 tons is carried as at 2014. The peak was
recorded at 478,115 tons in 2002. Currently cargo types include:

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• Currently 70% of the Cargo through Port Bell is wheat grain as the only sea cargo and the remaining
30% is comprised of inter-regional cargo between Port Bell and Mwanza mainly comprised of the
following commodities:
• Cotton seeds/cake
• Mineral water (Port bell to Mwanza)
• Building material
• Soap and cooking oil
• Sugar and rice
• Tobacco
• Other agricultural products
• Marine trade is 85% between Port Bell and Mwanza but there are few sailings to other ports of Musoma
and Kisumu comprising 15%
• Fuel and transmission poles are seasonal products
• The Port employs 22 staffs including security guards

Source: Uganda Railway Corporation

Figure 5.1.18: Cargo Throughput at Port Bell between 1996 - 2014

(VI) Pipeline

The first petroleum product pipeline, Line 1, from the oil terminal of Mombasa Refinery to Nairobi (450 km),
was commissioned in 1978. This pipeline is capable of transporting 5.2 million cubic meter of multiple
petroleum products annum. The pipeline was extended to Sinendet (282.8 km) and further to Eldoret (47 km)
in 1994 transporting 1.8 million cubic meter of multiple petroleum products annum. These sections of the
pipeline are named as Line 2. A branch line from Line 2 at Sinendet to Kisumu was also constructed at the
same time period. This section is named as Line 3, with transportation capacity of 0.9 million m3 of multiple
petroleum products annum. The Line 4 from Nirobi to Eldred was constructed to increase the capacity of the
Line 2 from 1.8 to 3.2 million cubic meter annum in 2008.

(VII) Border Post

Location maps of major border posts in Kenya and Uganda are shown in the following Figure. Many border
posts between countries have improved and will be improved to OSBPs as shown in Table below.
Nevertheless, OSBPs for the borders between Uganda and DRC are not yet planed so far.

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Source: JICA Study Team

Figure 5.1.19: Border Posts in Kenya and Uganda

Table 5.1.9: Major Border Posts in Kenya and Uganda

No. Major Border Post Border OSBP Road Condition to access to the border
KE side ongoing/
1 Malaba KE/UG Fair (Paved)
UG side completed/ WB
2 Busia KE/UG Not yet/ TMEA Fair (Paved)
3 Taveta/Holili KE/TZ Completed/TMEA Under construction(Paved)
4 Namanga KE/TZ Ongoing/AfDB-JICA Fair (Paved)
5 Lungalunga/Horohoro KE/TZ Completed/WB Fair (Paved)
6 Isebania/Shirare KE/TZ Ongoing/WB
7 Loitokitok/Tarakea KE/TZ Ongoing/
8 Logichgio/Nadapal KE/SS No Plan
9 Moyale KE/ET No Plan
UG side ongoing/
10 Mutukula UG/TZ Fair (Paved)
TZ side completed/ TMEA
11 Mirama Hills / Kagitumba UG/RW Under construction/ TMEA Under construction/ TMEA
12 Katuna/ Gatuna UG/RW Not yet/ WB Fair (Paved)
13 Bunagana UG/DRC No Plan Good (Paved)
14 Mpondwe UG/DRC Not yet/ AfDB Fair (Paved)
15 Goli UG/DRC No Plan Bad/ Gravel Road
16 Oraba UG/SS No Plan Good (Paved)
17 Nimule UG/SS Next Year Under construction/ JICA/WB
Source: OPBP source book, EAC web site, JICA Study Team

Number of vehicles crossing the borders per day surrounding Uganda is shown in following figures based on
the results of the traffic survey. Several findings are summarized as follows:

- The traffic is the most on the border between Kenya and Uganda, secondary most on the border Between
Uganda and DRC and thirdly most on the border between Uganda and South Sudan.
- The highest ratio of heavy goods vehicles is 32% on the screen line between Kenya and Uganda. In
contrast, the lowest ratio is 10% between Uganda and DRC.
- Malaba on the border between Kenya and Uganda has overwhelmingly has the most
heavy-goods-vehicle traffic of the all borders surveyed in 2015. It is currently the key border in logistics
of the Northern Economic Corridor. Malaba border’s efficiency in traffic movement has a great
influence on realizing smooth traffic on the Northern Economic Corridor as a whole.
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Source: JICA Study Team

Figure 5.1.20: Number of Vehicles Crossing the Borders surrounding Uganda

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Table 5.1.10: Number of Vehicles Crossing the Borders surrounding Uganda

Number of Vehicles Crossing the Borders surronding Uganda vehicle/day
Light & Medium
Country Border Name Passenger Car Heavy Goods total
Goods
Malaba 254 58 842 1,154
Uganda－Kenya Busia 1,373 635 248 2,256
sub-total 1,627 693 1,090 3,410
Mirama Hills 84 34 37 155
Uganda－Rwanda Katuna 323 135 152 610
sub-total 407 169 189 765
Goli 130 62 52 244
Mpondwe 650 145 54 849
Uganda-DRC
Bunagana 67 93 27 187
sub-total 847 300 133 1,280
Oraba 351 15 28 394
Uganda-SouthSudan Nimule 205 120 186 511
sub-total 556 135 214 905
Mutukula 385 112 92 589
Uganda-Tanzania
sub-total 385 112 92 589
Total 3,822 1,409 1,718 6,949
Source: Traffic Survey conducted by JICA Study Team in 2015

Ratio of Coposition byType in the Vehicles Crossing the Borders surronding Uganda unit: %
Light & Medium
Country Border Name Passenger Car Heavy Goods total
Goods
Uganda－Kenya Malaba 22% 5% 73% 100%
Busia 61% 28% 11% 100%
sub-total 48% 20% 32% 100%
Uganda－Rwanda Mirama Hills 54% 22% 24% 100%
Katuna 53% 22% 25% 100%
sub-total 53% 22% 25% 100%
Uganda-DRC Goli 53% 25% 21% 100%
Mpondwe 77% 17% 6% 100%
Bunagana 36% 50% 14% 100%
sub-total 66% 23% 10% 100%
Uganda-SouthSudan Oraba 89% 4% 7% 100%
Nimule 40% 23% 36% 100%
sub-total 61% 15% 24% 100%
Mutukula 65% 19% 16% 100%
Uganda-Tanzania
sub-total 65% 19% 16% 100%
Total 55% 20% 25% 100%
Source: Traffic Survey conducted by JICA Study Team in 2015

From the above borders by traffic and field survey, the findings can be summarized

1) In most of borders, OSBP installation and road improvement are ongoing except for DRC borders.
However, some OSBP’ projects have reportedly delayed because of the need for additional money,
relevant government commitment to pay for better access roads, delayed compensation payments and
procurement.
2) East/West side borders have more problems than North/South side borders. The most serious bottleneck is
the east side border between Kenyan and Uganda, especially on Malaba border where the largest number
of heavy goods vehicles and the longest queues were seen. Related issues are as follows;
- how to effectively utilize two borders, Malaba and Busia
- how to shorten custom clearance time
- how to expand the capacity for access road and entrance/exit gate
3) Projected future candidates of bottlenecks may be DRC borders, such as Mpondwe and Goli, where
border’s infrastructure are not sufficient although the future cargo demand will most probably increase
because DRC’s great potential of exporting minerals and timber.

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Table 5.1.11: Current Condition of Border Posts and Access Roads to Border Posts

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(VIII) Inland Depots

In Kenya, Inland Continent Depot (ICD) is operated by KPA to connect inland and gateway by railway. The
Kenyan ICD aims at providing “modal shit” function spearheaded by the public sector. In contrast, Uganda
has 2 types of ICD: one has the same concept with Kenya and is operated by RVR as the rail/truck modal
facility while the second one is operated by the private sector.

(1) ICD in Kenya

Although KPA currently operatestwo (2) ICDs, one in Nairobi (Embaski ICD) and the other in Kisumu, their
performance is relatevely low. Embaski ICD for instance has a handling capacity of 180 000 TEU’s annually
but only less than 10% is utilized. Kisumu ICD, on the other hand, has almost stopped its operations due to
the collapse of the railway service since 1994.

The low performances of ICD, is mainly due to poor railway performance, delay, unreliable service, low
frequency among other factors. Their low service standard prompts customers to give up using railway.
Table 5.1.12: ICD Performance
Embaski ICD Kisumu ICD
2,010 2,011 2,012 2,013 2,014 2010 2011 2012 2013 2014
Import full 14,185 14,494 15,319 14,811 10,263 Import full 131 66 102 111 32
Export full 5,157 4,607 4,848 5,261 5,319 Export full 2 - - - 1
Empty 18,659 21,830 19,737 26,816 22,138 Empty 95 74 55 93 41
Total 228 140 157 204 74
Total 38,001 40,931 39,904 46,888 37,720
Source: Kenyan Port Authority(KPA)
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(2) ICD in Uganda

Private ICD: Privately-operated ICDs are likely to focus on customs clearance and cargo movement between
Mombasa and Uganda for containerized cargo. Some private ICDs have railway side line, most of which is
currently not optimally used. On the other hand, some advance ICDs try to provide processing services
such as repacking, storing among others, under the bonded storage status.

Mukono ICD: New Mukono ICD has just been completed in July 2015 and all container cargo handling will
be shifted from the current Kampala railway terminal from the beginning of 2016. The land area is 13
acres with 6,000 TEU handling capacity. The location is strategic for both Kampala city area delivery and the
industrial area along the Kampala-Jinja highway.

Source: JICA Study Team based on the information collected from Mukono ICD
Figure 5.1.21: Mukono ICD

5.1.5 Current Gap

(I) Road

(1) Kenya

Road is the most fundamental infrastructure for logistics in Kenya. In fact logistics of cargo from Mombasa
Port to Kenya’s hinterland and six other countries which include Uganda, Rwanda, Burundi, D.R.Congo,
South Sudan and Tanzania, rely significantly on road transport by heavy trucks and trailers. The dominant
share of road transport is said to be more than 95%.

In future, due to the standard gauge railway and pipeline projects, road network will increasingly have a
great role in integrating multi transport infrastructure as a link between multiple modes such as railway,
airway, waterway and pipeline. Usually the last mile of cargo trip is done by road transport.

JICA Study team conducted Traffic Survey, Data Collection Survey and Road Inventory in Kenya, Uganda
and Rwanda and the based on the surveys the following problems should form part of the agenda that should
be dealt with:

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1) In Kenya generally, road improvement has progressed rapidly. In particular the section between Nairobi
and Eldoret can be said to have good surface with a well-balanced capacity. Nevertheless, bottleneck
spots for road traffic is witnessed in the city centers of Mombasa, Nairobi, Nakuru, Eldoret, Kisumu and
their surrounding areas as well as around the borders of Malaba and Busia, Mombasa Port and railway
stations. Currently very long queues of trucks and trailers of more than 2km can be seen in both
Mombasa urban area and Malaba’s border area during the day. Although the introduction of One Stop
Border Posts (OSBPs) have contributed to time savings, trucks still take a lot of time around the
borders of Malaba and Busia. These bottlenecks are clearly generated by cargo traffic. In addition
cargo traffic is estimated to increase up to three times by 2035 based on Mombasa Port Master Plan
Study. How to deal with such increase in demand is one a crucial of agenda.

2) More than 5,000 cargo traffic per day corresponding to 15,000 pcu per day are reported in Mombasa.
This means that the demand for cargo traffic is enough to create traffic jam for a two-lane-capacity road
and therefore difficult to deal with the volume on a one carriage way.

3) In Kenya, there is increasing cargo traffic demand. As a result, heavy trucks cause road surface
deterioration over relatively short periods of time. As such therefore there is need for continuous
improvement and maintenance of the road network to meet increasing traffic demand for safe and
efficient for logistic transport as well as passenger transport. Kenya’s road surface on the main route is
generally good although many pot holes were observed in Mombasa county during the survey
conducted by JICA Study team in July, 2015.

4) Traffic accidents around black spots on the Northern Corridor road network can be said as one of the
major issues. During the survey, JICA Study Team witnessed three traffic accidents within a day
between Nairobi and Mombasa. In order to improve the situation around the black spots it is necessary
to point out the causes of traffic accidents. Several measures such as additional climbing lanes, speed
restriction schemes and pedestrian bridges need to be implemented.

5) Basic observation on the current cargo traffic movement is that too many trailers and heavy trucks
require additional exclusive lanes or new express way to effectively meet the cargo traffic demand. For
example, the main route on Mombasa- Nairobi-Nakuru-Eldoret-Malaba with a distance of
approximately 1,000km could be fronted as a high capacity and high speed logistics highway through
expansion of existing roads or Highway- Bypass construction. The Master plan of the Northern
Economic Corridor would tackle the above arguments by demonstrating solutions.

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Source: Traffic Survey conducted by JICA Study Team in 2015

Figure 5.1.22: Existing Daily Traffic Volumes and Future Traffic Volumes Assumed Increase of Cargo by 3 Times

As shown in the following Figure, on the 19th of November, 2015 BBC News reported a 50km Traffic Jam
between Mombasa and Nairobi. The worst-affected area was around Taru, 80km from Mombasa. People
were reportedly stuck in the jam for more than 48 hours. This jam could be explained by not only heavy rains
but also by regular road maintenance.
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Source: BBC website (http://www.bbc.com/news/world-africa-34867935)

Figure 5.1.23: Kenyans Stuck in '50km' Traffic Jam on Nairobi-Mombasa Road

(2) Uganda

As in the case of Kenya, road is the most fundamental infrastructure for logistics in Uganda. In future, due
to the standard gauge railway project and pipeline project, road network will increasingly have a greater role
in integrating comprehensive multi transport infrastructures as the link between multiple modes such as
railway, airway, waterway and pipeline. Usually last mile of cargo trip is usually done by road transport.

JICA Study team conducted Traffic Survey, Data Collection Survey and Road Inventory in Kenya, Uganda
and Rwanda. Based on the survey the following problems were identified in as far as the agenda which
should be dealt with:

1) In Uganda Bottleneck points of road traffic can be seen in city centers of Kampala, Entebbe and Jinja.
However, this seems to be different from the case of Mombasa where passenger car demand is greater
than cargo truck demand. Therefore, from the view of urban transport management, such bottlenecks
should be dealt with rather than cargo traffic management.

2) Bottleneck points exist at Malaba boundary of Kenya, around Inland Container Depots (ICDs) and
railway cargo station in Kampala. These seem to be the same as Kenya where cargo traffic is the
major cause of congestion. Parking spaces for cargo traffic becomes definitely necessary.

3) Reducing traffic congestion at the bottlenecks and traffic accidents around black spots on the Northern
Corridor road network can be seen as one of major issues. In order to improve the situation around the
bottlenecks it is necessary to point out the causes of traffic congestion, and expand capacity of the
network by construction of new construction of expressway, bypass, ring road, over/under pass,
additional climbing lanes and conducting traffic demand management. Effective measures should be
selected and implemented for each bottleneck. For example, In 2030 the main route on
Malaba-Jinja-Kampala-Entebbe with a distance of approximately 220km could be fronted as a high
capacity and high speed logistics highway by expansion of existing roads or Highway- Bypass
construction.
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(II) Railway

Current gaps in railway service include:

1) Adequate railway service. As of now, the lack of a well-functioning railway is a gap in the logistics system
of the NEC. The meter gauge system handles approximately 5% of freight passing through Mombasa Port.
Railways in western developed countries typically have a share above 15%.
Table 5.1.13: Rail Share of Cargo Transportation in Western
Developed Countries.
Rail Share of Cargo
Country Year Source
Transportation
EU 17.8% 2013 eurostat28
France 15.0% 2013 eurostat
Germany 23.5% 2013 eurostat
United
13.2% 2013 eurostat
Kingdom
United States 15.7% 2011 ATA29
Source: Eurostat and the American Traucking Association (see footnotes below)

The SGR project is intended to address this gap by providing world class railway services along the NEC.
However, SGR is a significant project that will take a number of years to be fully implemented. Over the
next three to five years it is important that meter gauge railway service improve to provide an interim
solution to shippers, begin the transfer of truck transportation to railway transportation and potentially
offer a competitive option to the SGR.
2) RVR track condition and rolling stock availability. RVR has invested in infrastructure and equipment but
overall it appears to have lost share of cargo transportation.

Source: KRC; Mombasa Port

Figure 5.1.24: Percent Change Mombasa Port and RVR Cargo 2010-2014

Further strengthening of track and infrastructure and additions to rolling stock should be considered to
enable RVR to increase share.
3) Railway funding. Uganda recently revised the scope of a standard gauge project because of a borrowing
limit imposed by the International Monetary Fund (IMF). While this may be temporary (the debt limit
increases with GDP) it has delayed Uganda’s progress on the SGR project. Kenya is also experiencing
challenges but so far has not had to adjust its implementation plans.

28 http://ec.europa.eu/eurostat/tgm/table.do?tab=table&init=1&language=en&pcode=tsdtr220&plugin=1
29 American Trucking Association, Forecast: US Freight Transportation Forecast to 2023, Table 2, page 9
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(III) Port

On the Northern Economic Corridor, Mombasa can be seen as the biggest bottleneck of transport.
Important issues relating to cargo logistics are can be pointed.

1) Time shortening of cargo clearance at the Mombasa Port area: It still takes too long time to import cargo,
to clear custom and move out of the port although dwell time and loading/unloading time have recently
improved to significantly reduced than in the past. It also takes time for exporting cargo. Dwell time and
loading/unloading time are dominant time for total travel time of cargo. The empirical data of clearance
time should be shown in the following work.
2) Improvement of road capacity on the trunk roads for cargo traffic within the urban area of Mombasa: The
roads within the urban area of Mombasa are so heavily congested that cargo traffic is usually stuck during
the day time. The most fundamental problem is lack of road network and capacity of trunk road. Southern
by-pass should be constructed urgently. Moreover relocation of CFSs outside the port should be
implemented in the short term in order to avoid the concentration of trucks and trailers into the Mombasa
road. In the long term, based on the trend of increasing demand of cargo and car users, an additional trunk
road in Mombasa and between Mombasa Port and Voi town should be examined, designed and
constructed.
3) Promotion measures for a modal shift from truck and trailer to the standard gauge railway and pipeline:
The Northern Corridor Logistics should be operated by comprehensive multimodal transport
infrastructure consisting of road transport, railway, airway, waterway and pipeline in order to deal with
increasing cargo demand. In this regard Mombasa Port is the most important site. Several issues on the
modal shift at Mombasa Port are arguable For example, how to promote a modal shift from track and
trailers to the standard gauge railway for cargo would be still unclear not only at the port but also at the
other origins and destinations such as railway terminals.

(IV) Airport

Both airports of Nairobi and Entebbe have plans to expand the handling capacity for passengers and cargo,
and strengthen hub function for the region. For example, flowers and ornamental plants or fishes are have
great potential as export goods to Europe by air. In order to promote such types of air cargo handling, the
following issues should be considered:

1) Strategic targeting of several cargos which have a potential demand as export or import goods to Europe
and other foreign countries by air.
2) Estimating warehouse demand for the goods which have a potential as export or import goods near the
airport and providing them with appropriate warehouse.
3) Providing last-mile transport service from the airport to consumption or producing areas by truck and
railway including long trip closing borders

(V) Waterway

Waterway is an eco-friendly transport. The Lake transport in lake of Victoria had a great role for cargo
logistics between Port Bell, Kisumu and Mwanaza. However, cargo transport shifted from lake transport to
road transport with the decline of railway logistics in recent years. It could be possible to revival the Lake
Transport after the standard gauge project is completed and railway is well operated covering the overall
region. In order to revival the Lake transport, the following issues should be looked into:

1) Strategic targeting of several cargos which have potential demand for lake transport as a railway system.
In this regard, interregional trade or EFCs’ trade with both Uganda and Tanzania as well as international
trade should be examined.
2) Flexible operation of not only rail wagon but also track/car ferry should be introduced in order to respond
to the demand with shorter distance than international cargo. Furthermore, Victoria Lake transport is seen
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as an attractive sightseeing ship from Kisumu to Port bell and Mwanza.

3) Providing last-mile transport services from the ports around Lake Victoria to production or consumption
areas by truck.
4) Kisumu and Port Bell should be well linked with Mwanza port through the improvement of infrastructure
of wagon/car ferry port and provision of new vessels including car ferry and passenger vessels.
5) Lake Victoria transport should be supported by road network around Victoria Lake. This is because Lake
Transport tends to be much affected by weather conditions. In addition, there are a variety of activities
such as fishing, farming, transport, leisure boating; and there are a great number of transport related
accidents on the Lake. If new boats for crossing the lake are introduced for crossing the lake, it reported
that it will be difficult to operate throughout the year and at night. As an alternative route across the lake
between Kenya and Tanzania or Uganda and Tanzania, some circular road around the lake should be
planned. This kind of circular road network can contribute stable export or import transport of cargo and
promote tourism around the lake which has rich attractive sites for international tourists.

(VI) Pipeline

Demand for petroleum products has increased significantly and further increase is forecast. In addition,
transit oil products to inland countries adjacent to Kenya, including Uganda, S Sudan, DRC etc. are also
increasing. Majority of these transit oils are transported via Kenyan pipeline system. In order to meet the
increasing demand, pipeline capacity needs to be expanded. The Line 4 from Nirobi to Eldred was
constructed to increase the capacity of the Line 2 from 1.8 to 3.2 million cubic meter annum in 2008. The
Line 5 form Mombasa to Nairobi is under construction to increase the capacity, replacing old Line 1 system.

(VII) Border Post

According to data form Northern Corridor Transit & Transport Co-ordination Authority (NCTTCA) latest
“Northern Corridor Transport Observatory survey” issued in Dec.2014, the transit time for crossing at
Malaba border has been remarkably reduced. The performance as of Oct, 2014 was approximately 7 hours
for border crossing procedures. Although it is certain that border procedure is computerized at both Kenya
and Uganda, this data only calculated the data processing time for border crossing process, not including
time for long queue, and non-computerized procedure.

Source: NCTTCA “Northern Corridor Transport Observatory survey” issued at Dec.2014,

Figure 5.1.25: Malaba Crossing Time

JST’ s GPS survey conducted in March 2015 shows that it takes 1.5 days for border crossing including time
spent for overnight sleep and interview survey for forwarders also indicate 2 days for border crossing is not
long. Long queues and hold up of trucks are common. A 4km long queue with over 200 trucks was observed
when the survey was conducted by June.2014. According to the interview survey at Sep, 2015, the custom
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officials at Malaba in Uganda reported that it took 1.2 days for total crossing time, a reduction of 0.3 days
from JST survey.

There are gaps between more efficient operation and current operation at many borders. As such therefore
improvement projects should be implemented;

1) Border infrastructure provision such as expansion of capacity of border access road.

2) 24 hour operation should be implemented in practice. Clearing agents do not provide 24hours/7days
operations. So border crossing at night is not well worked. In addition, night time driving is unsafe
because of lack of adequate street lights coupled with inadequate security operations thereby making
night time sleep at the border is common.
3) There is no scanner to minimize on physical examination of goods.
4) Frequent power black- out/slow combinations speed for customs procedure.
5) Bond cancellation procedure remains manual, resulting in long time.
6) OSBP procedure is not fully implemented, custom procedures are required at both side.
7) For the borders of Malaba and Busia, it is necessary to efficiently assign traffic to the two borders.
Currently many heavy trucks use Malaba border while passenger cars use Busia border.

Note: HGV: Heavy Goods Vehicle

Source: JICA Study Team
Figure 5.1.26: Traffic Volume as Malaba and Busia

(VIII) Inland Depots

(1) Kenyan side

The ICD performance has been quiet low. Rail competitiveness with trucks has been losing in both cost
and transit time. Due to the little amount of export cargo, empty container is the main commodity to
Mombasa. The current low quality service cannot attracts export cargo, coupled with the fact that export
cargo is time sensitive to meet vessel schedule. Similarly, poor- time dedicated scheduled service cannot
respond to demand, including high risk for miss-shipment. These explain why export cargo terminated the
use of railway service for export, although, originally, ICD tried to provide a comprehensive logistic service,
including inventory control at warehouse. It seems that no measure was put in place to encourage private
sector engagement/collaboration to provide logistic services. Collaborating public and private sector to
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provide comprehensive/high standard service along with using ICD as the modal shift base is the world
trend.

As a positive factor however, two shipping lines have container slot at Embaski ICD for empties. This can
accept the empty containers at this ICD. Some empty containers are used for export while others are returned
by rail or truck.

(2) Uganda side

Private ICD: Private ICDs are likely to be small scale with limited capacity. Since they do not have
enough space for empty container storage, the cost and risk of empty containers’ storage is borne by
the owners. Some aggressive private ICDs however provide “Drop off practice” service, which
includes;
1) carry shipping line “A” containers to Mombasa with export goods,
2) amend transit permit and transshipped cargo to shipping line “B” containers
3) export by shipping line “B” container

This practice enables for exporters to use another shipping lines’ empty container being used for export (so
that transshipment operation from shipping line A container to shipping line B container is necessary at port
site), resulting in cost saving for empty container return to main ports. Normally, shipping lines hesitate to
rent their containers for shipper who will use another shipping line for export even though empty container is
available in domestic transport portion. It seems really unique system observing in the worldwide.

In order to do this, it is needful for them to provide high quality service; matching function of
exporter/importer, negation/deep relation with shipping lines, physical and procedural operational ability at
Mombasa and Kampala as well as at the borders. Therefore, only limited number of qualified ICDs can
provide “Drop-off service”.

One serious forecast is that Single Customs Territory (SCT) scheme aims at abolishing customs clearance at
destination, which involves the risk of loss of an important revenue resource at the customs clearance depot.

Mukono ICD: Mukono ICD is just at the initial stage of providing railway/truck modal shift service for
containerized cargo. According to its layout plan and interview survey in October 2015, Mukono ICD does
not have provision for empty container storage.

5.2 Preliminary Freight Traffic Demand Forecasting

5.2.1 Outline and Methodology

(1) Outline of Forecasting Methodology

The Figure below shows preliminary forecasting flowchart. This shows the outline of Cross Border Freight
Traffic (CBFT) forecasting method. It is based on the four step forecasting method which is one of the most
typical common used methods for traffic demand forecasting.

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GDP in the future by nation

OD Table between Countries Future CBFT OD table between countries

Forecasting Model by Freight Item by Freight Item (tonnage/year)

OD table between Zones Forcasting Future CBFT OD table between zones

Model by Freight Item by Freight Item (tonnage/year)

Freight Mode Choice Model Future CBFT OD table between zones

by Traffic mode (tonnage/year)

Truck CBFT OD table Railway CBFT OD table

Truck Route Assignment Model

Future road Traffic by road section 3

(PCU/day)

Source: JICA Study team

Figure 5.2.1: Preliminary Freight Traffic Demand Forecasting FlowChart

Each forecasting method by step is shown in Table 5.2.1. Especially, the Freight Mode Choice Model is
being described in the next section in detail.

Table 5.2.1: Summary of Preliminary Freight Traffic Demand Forecasting Model System
Model Explained variable Explanatory variable Type of model
・Multiple regression model (time series
Total CBFT flow via
GDP in export partners model)
Mombasa port by freight
(a) OD Table between
item
and current OD table ・Elastic value model calculated based on the
Countries between countries difference between rates of the trade volume
(tonnage/year)
Forecasting Model and the GDP in export or import partners
by Freight Item* The other CBFT flow by GDP in export partners Elastic value model calculated based on the
freight item and current OD table difference between rates of the trade volume
(tonnage/year) between countries and the GDP in export or import partners
(b) OD Table between Current OD table
CBFT OD table between Present OD pattern method and scenario
Zones Forecasting between zones and
zones by Freight Item analysis
Model by Freight existing development
(tonnage/year)
Item plans
(c) Freight Mode Truck and railway shares Total time and cost by
Discrete choice logit model
Choice Model of CBFT OD table mode by OD pair
Road traffic by road Driving time by road
(d) Truck Route All or Nothing (AON) assignment with
section section and current
Assignment Model shortest time route search method
(PCU/day) border post usage share
* The existing models and forecasting result were applied. They were built and forecasted in the JICA Study “The Project for
Technical Assistance to Kenya Ports Authority on Dongo Kundu Port, Mombasa Master Plan（June 2015）”
Source: JICA Study team

(2) Freight Mode Choice Model

(Formulation of the model)

Discrete Choice models methodology is applied for the Freight Mode Choice Model which estimates shares
of railway and truck freight tonnage. Especially, the Binary Logit model (BL) and the Multi-Nominal Logit
model (MNL) have been the most widely used structure for modeling discrete choices in transport behaviour.
Therefore, we adopted BL model for estimating choice probabilities of railway and truck usage.

The structural formulas of the Freight Mode Choice Model as a BL model are shown below.

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ij
=
( ) ij
exp vrail
= 1 − ptruck
ij
p rail
( ) (
exp vrail + exp vtruck
ij ij
) (5-1)

vrail
ij
= α ⋅ Trail
ij
+ β ⋅ Frail
ij
+γ
 ij
vtruck = α ⋅ Ttruck + β ⋅ Ftruck
ij ij
(5-2)

Where:
ij
prail ( truck )
ij Choice probability of railway (truck) mode
vrail Railway's utility function between zone i and j
ij
vtruck
ij
Trailij (truck ) Truck's utility function between zone i and j
:Total transit time by railway (truck) [days]
Frail (truck )
:Total transit cost by railway (truck) [USD]
α，β，γ : Estimated model parameters
(Freight mode usage data)
Railway and truck freight transit data between Mombasa port to or from zones including main railway
stations are used for the model building. The truck data are individual freight trip data from the Roadside
Freight OD Survey in the ‘Goods Movement and Traffic Survey' expanded to annual tonnage volume from
daily vehicle unit. The railway data were current freight flows (tonnage/year）between the zone pairs which
were estimated in this project.

(Assumption of the Level of Service valuables)

Current (2015) Level of Service (LOS) valuables used in formula (5-2) - total transit time and cost - were
assumed like the table 5.2.2 below. Total time and cost of 40 feet container transit were represented as the
LOS valuables used in the model.

Table 5.2.2: Assumed Current Total Transit Time and Cost of 40 Feet Container (2015)
Total time （days） Total cost (USD)
Zone pair
Truck Railway (MGR) Truck Railway (MGR)
East Mombasa Nairobi 7.2 8.7 1,915 2,280
↓ Mombasa Eldoret 7.9 7.7 2,515 2,480
West Mombasa Kampala 8.3 10.4 3,600 3,260
West Nairobi Mombasa 6.2 7.7 1,580 2,080
↓ Eldoret Mombasa 7.6 8.4 2,080 2,280
East Kampala Mombasa 9.5 10.1 3,130 2,810
Source: JICA Study team
Note1: Railway’s time and cost were assumed by JICA Study team using “NCTTCA; Northern Corridor Transport Observatory
Report, December 2014” and “The Sub – Committee of the Stakeholder Forum; Repot on the causes of declining performance of
the inland container depot, Nairobi (IDCN) , and the proposed strategies to reverse the trend, September 2014”
Note2: Total time includes time from vessel arrival to destination arrival, and empty container transportation time in the case of
export. Total cost includes port side charge, cleaning agent charge, transport charge, and IDC usage charge.

(Model parameter Estimation)

Using freight mode usage data and the LOS valuables, the model parameters were estimated. The method of
Maximum weighted likelihood was adopted for that. Then every sample’s annual tonnage expanding
coefficients were used as samples’ weights. This statistical method is commonly used for estimation of
discrete choice models. In this study, it was assumed that the structure of mode choice is same between
freight items, and one model was estimated for all freight items, because current railway OD table data by
freight item could not be collected.

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The estimated model parameters are shown in Table 5.2.3. All parameter’s t-values exceed two, therefore all
parameters are statistically significant at the five percent level.

Figure 5.2.2 shows the comparison of current actual railway shares and estimated railway shares between
zones. This model, according to JICA Study Team has enough reproducibility of current situation. In view of
this, a good model could be built for preliminary forecasting. Note that this model is applied to all items
except oil, fluorspar, and soda ash, because it is assumed that all freight of oil is transported by truck and
pipeline, and all freight of fluorspar and soda ash is transported by railway.

Table 5.2.3: Estimated BL Model Parameters 0.30

( )：t value
Alternative
Truck Railway
Parameter
α： Total time (days) -0.3919 (-2.29 )

Estimated railway share

0.20
β： Total cost (USD) -0.0016 (-3.94 )
γ： Constant - -2.21 (-7.96 )
Sample Size 1,213
*Exclude oil, soda ash, and fluorspar
Source: JICA Study team 0.10

Correlation Coefficient=0.91

0.00
0.00 0.10 0.20 0.30
Actual railway share
Source: JICA Study team
Figure 5.2.2: Current Railway Shares –Actual
Values and Estimated Values

5.2.2 Demand Forecast

(1) Forecasting scenario

In this preliminary freight traffic demand forecasting in 2030，following scenario is assumed as the base line
case:

• Assumed trend freight demand.

• Considering ongoing development project and high feasible project that were shown in Table 5.2.4.
• Especially, considering oil field development at Albert Graben in Uganda and Standard Gauge Railway
(SGR) project and explicitly.

Table 5.2.4:Existing Development Projects Considered Explicitly in Preliminary Freight Traffic Demand
Forecasting
Project Site Existing Development Project Detail
• Oil field development at Albert Graben
• Oil field development • Crude oil pipeline construction from the oil field to Lamu
• Oil refinery construction port via Lokichar in Kenya
Uganda
• Oil product pipeline • Oil refinery construction at Hoima in Uganda
construction • Oil product pipeline construction from Hoima to Kampala, from
Kampala to West Uganda, from Kampala to East Uganda
• Oil product pipeline • New Oil product pipeline construction from Mombasa to Eldret
Kenya
construction taking the place of the current pipeline.
Kenya and Uganda • SGR project • SGR constructed from Mombasa to Kampala by 2030
Borders • OSBP project • Ongoing One Stop Border Post Project
Source: JICA Study team

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(2) Freight OD table Forecasting

(Future total freight tonnage forecasting via the port of Mombasa)

For forecast total CBFT flow via Mombasa port in 2030, existing models and forecasting results from JICA
study were applied. The existing models include, by freight item, some multiple regression models (time
series model) and some elastic value models calculated based on the difference between rates of the trade
volume. These models’ explanatory variables are GDPs in export or import partners.

The forecasting result is shown Figure 5.2.5. It （1,000tons）

60,000
shows that total import freight (tonnage/year) 56,814

from the port of Mombasa is 57 million tons in 50,000

2030, growing 2.3 times of 24 million tons in
2015. Total export freight is 4,650 thousand tons, 40,000

growing 1.7 times of 2,753 thousand tons in

30,000
2015. 24,265
21,536
20,000
Grand Total of Import Comodities
On the other hand, the other future CBFT flows
Grand Total of Export Comodities
which are not via Mombasa port are forecasted 10,000
2,465 2,753 4,650
by GDP elastic value model calculated based on
0
the difference between rates of the trade volume
and the GDP in export or import partners.
Source: JICA;“The Project for Technical Assistance to Kenya Ports
Authority on Dongo Kundu Port, Mombasa Master Plan (The Second
Progress Report June 2015)”
Figure 5.2.3: Forecasting Result of Grand Total of Import
and Export Commodities via the Port of Mombasa

(3) Freight mode Share forecasting

(Formulation of the forecasting model)

The structural formulas of the Freight Mode Choice Model as a MNL model adding the newly alternative
SGR to the BL model are shown below.

pm =
( )
exp vmij
( ) + exp(v ) + exp(v )
exp v ij
1
ij
2
ij
3 (5-3)
Where：
ij
vm ：m=1：Truck's utility function between zone i and j
m=2：MGR's utility function between zone i and j (5-4)
m=3：SGR's utility function between zone i and j
v1ij = α ⋅ Ttruck
ij
+ β ⋅ Ftruck
ij

v 2ij = α ⋅ TMGR
ij
+ β ⋅ FMGR
ij
+γ
v3ij = α ⋅ TSGR
ij
+ β ⋅ FSGR
ij
+γ
α，β，γ ：Estimated model parameters (cf. Table 5.2.3)

(Assumption of future LOS valuables)

The assumption for future LOS valuables which are explanatory variables of the Freight Mode Choice Model
shown formula (5-3) and (5-4) is as follows:

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• According to above figure, port dwell time of import will be shorten from 2.5 days to 2 days, and
customs procedure time at Mombasa port will be shorten from 2.7 days to 1 day in the future.
• According to above figure, CY delivery time of export will be shorten from 3 days to 1.5 days
• Because of OSBP project, border passage time by truck will be shorten from 1.5 days to 1.0 days in the
future.
• Because of rehabilitation of the MGR's tracks, the average speed between the stations will improve to
40km/hour from 35km/hour, and the operation frequency will increase to around 2 times of current
situation.
• Assumed that SGR’s average speed between the stations will be around 50km/h and the operation
frequency will be high enough to avoid waiting time.
• Assumed that total transit costs of truck and MGR will not change from the current situation.
• Simulated with the total transit cost of SGR changing it from 1.0 times to 0.5 times of the truck's total
transit cost, because the SGR costs are uncertain.

Table 5.2.5 and Table 5.2.6 show the assumed future total transit times and total transit costs each.

Table 5.2.5: Assumption of Future Total Transit Times

(days)
Truck Railway(MGR) Railway(SGR)
2015 2030 2015 2030 2015 2030
East Mombasa Nairobi 7.2 5.0 8.7 5.4 - 4.2
↓ Mombasa Eldoret 7.9 5.7 7.7 5.9 - 4.6
West Mombasa Kampala 8.3 6.3 10.4 8.5 - 7.7
West Nairobi Mombasa 6.2 4.7 7.7 5.1 - 4.4
↓ Eldoret Mombasa 7.6 6.1 8.4 6.3 - 5.5
East Kampala Mombasa 9.5 8.0 10.1 7.7 - 7.4
Source: JICA Study team

Table 5.2.6: Assumption of Future Total Transit Costs

(USD)
Truck Railway(MGR) Railway(SGR)
2015 2030 2015 2030 2030
East Mombasa Nairobi 1,915 1,915 2,280 2,280
↓ Mombasa Eldoret 2,515 2,515 2,480 2,480
West Mombasa Kampala 3,600 3,600 3,260 3,260 -10%,-20%,…,-50%
West Nairobi Mombasa 1,580 1,580 2,080 2,080 decreasing for truck cost
↓ Eldoret Mombasa 2,080 2,080 2,280 2,280
East Kampala Mombasa 3,130 3,130 2,810 2,810
Note: Assumed that there is no change with the both of truck and MGR.
Source: JICA Study team

(Preliminary forecasting of freight mode share)

Figure 5.2.3 and Figure 5.2.4 show forecasting results of future freight demand between Mombasa port and
zones with main railway stations of SGR or MGR, using the Freight Mode Choice Model shown formula
(5-3) and (5-4) and the assumption shown in Table 5.2.5 and Table 5.2.6. From these results, the railway
share of SGR and MGR becomes approximately 50% in the case that SGR transit cost level is a half of truck
cost.

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1,000Ton/Year 100%
45000 90%
40000 80%

Transportaion share
35000 70%
30000 60%
25000 50%
20000 40%
15000
30%
10000
20%
5000
0 10%
1.0 0.9 0.8 0.7 0.6 0.5 0%
1.0 0.9 0.8 0.7 0.6 0.5
2015 2030
SGR cost ratio for truck cost
SGR cost ratio for truck cost

Source: JICA Study team

Truck MGR SGR

Source: JICA Study team

MGR SGR
none
Note：tonnage between Mombasa and zones with main railway Note：tonnage between Mombasa and zones with main railway
stations of SGR/MGR stations of SGR/MGR
Figure 5.2.4: Change of Freight Tonnage via Mombasa Figure 5.2.5: Change of the Railway Freight Share via
Port by Mode with the Total Cost Change of SGR in Mombasa Port with the Total Cost Change of SGR in
2030 2030
Figure 5.2.5 shows tonnage shares of railway and truck traffic on
the NEC section at Mombasa in the case that SGR transit cost
level is a half of truck one. As indicated in this figure, the tonnage
share of railway freight flows between Mombasa and zones which
Total tonnage
include zones where railway service is available and not available Railway 48,477
(SGR,MGR) Truck
is approximately 40％. It is expected that if SGR's level of transit 40.4%
[1000 ton/year]
59.6%
cost is same as 0.5 times of truck's transit cost, total railway
demand of MGR and SGR will be nearly 40 % of all freight
tonnage via Mombasa port. And this situation nearly meets the
Railway Base scenario shown in section 5.3.2.2 below. On the
other hand, the railway tonnage share between Mombasa and
Source: JICA Study team
zones where railway service is available is 50% as indicated in the
Figure 5.2.6: Share of Truck and Railway
figure 5.2.4.
via Mombasa Port in 2030 - SGR with
（Future OD table between forecasting result） Half of Truck cost Case

Table 5.2.7and Table 5.2,8 are estimated OD tables between the

countries by mode. In 2030, it is assumed that SGR’s transit cost level is half of truck’s cost.

Table 5.2.7: Forecasted OD Table by Mode between Countries

[Current OD table by mode in 2015]
Mombasa Kenya Uganda Other EAC DR Congo South Sudan Total
1000 Tonnage 1000 Tonnage 1000 Tonnage 1000 Tonnage 1000 Tonnage 1000 Tonnage 1000 Tonnage
/Year share(%) /Year share(%) /Year share(%) /Year share(%) /Year share(%) /Year share(%) /Year share(%)
Truck 12,439 96% 4,555 92% 458 100% 320 100% 646 100% 18,418 96%
Mombasa Rail 461 4% 389 8% 0 0% 0 0% 0 0% 850 4%
Total 12,900 100% 4,944 100% 458 100% 320 100% 646 100% 19,268 100%
Truck 1,415 62% 1,411 97% 207 100% 195 100% 994 100% 4,222 82%
Kenya Rail 858 38% 51 3% 0 0% 0 0% 0 0% 909 18%
Total 2,273 100% 1,462 100% 207 100% 195 100% 994 100% 5,131 100%
Truck 316 77% 430 99% 322 100% 146 100% 55 100% 1,269 93%
Uganda Rail 95 23% 4 1% 0 0% 0 0% 0 0% 99 7%
Total 411 100% 434 100% 322 100% 146 100% 55 100% 1,368 100%
Truck 32 100% 110 100% 653 100% 795 100%
Other EAC Rail 0 0% 0 0% 0 0% 0 0%
Total 32 100% 110 100% 653 100% 795 100%
Truck 9 100% 2 100% 20 100% 31 100%
DR Congo Rail 0 0% 0 0% 0 0% 0 0%
Total 9 100% 2 100% 20 100% 31 100%
Truck 16 100% 82 100% 5 100% 103 100%
South
Rail 0 0% 0 0% 0 0% 0 0%
Sudan
Total 16 100% 82 100% 5 100% 103 100%
Truck 1,788 65% 13,063 97% 6,644 94% 987 100% 661 100% 1,695 100% 24,838 93%
Total Rail 953 35% 465 3% 440 6% 0 0% 0 0% 0 0% 1,858 7%
Total 2,741 100% 13,528 100% 7,084 100% 987 100% 661 100% 1,695 100% 26,696 100%

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[Future OD table by mode in 2030 - SGR with half of truck cost case ]
Mombasa Kenya Uganda Other EAC DR Congo South Sudan Total
1000 Tonnage 1000 Tonnage 1000 Tonnage 1000 Tonnage 1000 Tonnage 1000 Tonnage 1000 Tonnage
/Year share(%) /Year share(%) /Year share(%) /Year share(%) /Year share(%) /Year share(%) /Year share(%)
Truck 18,334 62% 4,881 45% 1,124 100% 776 100% 1,606 100% 26,721 60%
Mombasa Rail 11,449 38% 6,056 55% 0 0% 0 0% 0 0% 17,505 40%
Total 29,783 100% 10,937 100% 1,124 100% 776 100% 1,606 100% 44,226 100%
Truck 1,804 53% 1,073 84% 555 100% 797 100% 2,892 100% 7,121 80%
Kenya Rail 1,630 47% 197 16% 0 0% 0 0% 0 0% 1,827 20%
Total 3,434 100% 1,270 100% 555 100% 797 100% 2,892 100% 8,948 100%
Truck 211 33% 1,424 96% 694 100% 200 100% 129 100% 2,658 84%
Uganda Rail 438 67% 62 4% 0 0% 0 0% 0 0% 500 16%
Total 649 100% 1,486 100% 694 100% 200 100% 129 100% 3,158 100%
Truck 62 100% 213 100% 960 100% 1,235 100%
Other EAC Rail 0 0% 0 0% 0 0% 0 0%
Total 62 100% 213 100% 960 100% 1,235 100%
Truck 17 100% 6 100% 41 100% 64 100%
DR Congo Rail 0 0% 0 0% 0 0% 0 0%
Total 17 100% 6 100% 41 100% 64 100%
Truck 32 100% 192 100% 14 100% 238 100%
South
Rail 0 0% 0 0% 0 0% 0 0%
Sudan
Total 32 100% 192 100% 14 100% 238 100%
Truck 2,126 51% 20,169 64% 6,969 53% 2,373 100% 1,773 100% 4,627 100% 38,037 66%
Total Rail 2,068 49% 11,511 36% 6,253 47% 0 0% 0 0% 0 0% 19,832 34%
Total 4,194 100% 31,680 100% 13,222 100% 2,373 100% 1,773 100% 4,627 100% 57,869 100%

[OD table in 2030 expressed with the index that assumed 2015 year 100 - SGR with half of truck cost case]
Mombasa Kenya Uganda Other EAC DR Congo South Sudan Total
Truck 147 107 245 243 249 145
Mombasa Rail 2484 1557 2059
Total 231 221 245 243 249 230
Truck 127 76 268 409 291 169
Kenya Rail 190 386 201
Total 151 87 268 409 291 174
Truck 67 331 216 137 235 209
Uganda Rail 461 1550 505
Total 158 342 216 137 235 231
Truck 194 194 147 155
Other EAC Rail
Total 194 194 147 155
Truck 189 300 205 206
DR Congo Rail
Total 189 300 205 206
Truck 200 234 280 231
South
Rail
Sudan
Total 200 234 280 231
Truck 119 154 105 240 268 273 153
Total Rail 217 2475 1421 1067
Total 153 234 187 240 268 273 217
Source: JICA Study team

5.2.3 Future Traffic Forecasting

(1) Methodology
Future road traffic forecasting method is summarized in Table 5.2.9. The CBFT truck flows on road are
simply assigned with the All or Nothing (AON) assignment method using the future CBFT vehicle trip OD
table converted from annual tonnage OD tables. Then the other domestic truck flows in the future were
estimated by the supposition that traffic growth from the current situation will double in the future. The
passenger vehicle traffic was also estimated by the supposition that traffic growth from current situation will
be 2.5 times in the future.
Table 5.2.8: Methodology of Future Traffic Forecasting
Category of Traffic Forecasting method Source
• All or Nothing (AON) assignment with
Cross Border Freight Traffic (CBFT)
shortest time route search method
Truck (vehicle/day)
• Adopting current border usage rate.
Assumed growth from 2015 through 2030 Louis Berger; Northern Corridor Infrastructure
Other Domestic Truck (vehicle/day)
2.0 times Master Plan Final Report, 2011.5
Assumed growth from 2015 through 2030 Louis Berger; Northern Corridor Infrastructure
Passenger Vehicle (vehicle/day)
2.5 times Master Plan Final Report, 2011.5
Source: JICA Study team

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(2) Forecasting result

Figure 5.2.5 shows estimated current vehicle traffic flows on the road sections. Figure 5.2.6 shows forecasted
future traffic flows in 2030. In this forecasting, it was assumed that the SGR's transit cost level are half of
truck's transit cost. The upper figure shows the CBFT flows, and the middle figure shows the other domestic
truck and passenger vehicle flows, and below figure shows total traffic flows. This results are summarised as
follows:

• Maximum traffic of the CBFT in 2030 is 23 thousand pcu/day on the section between Nairobi and
Mombasa. The CBFT traffic between Kampala and Malaba is 14 thousand pcu/day in 2030.
• The other domestic truck and passenger traffic is concentrated around Kampala and between Nairobi
and Nakuru.
• In the future, total traffic exceeds 40 thousand pcu/day between Nairobi and Nakuru, and around
Kampala area, 20 thousand pcu/day between Mombasa and Nairobi.

5.2.4 Gap Assessment and Future Bottlenecks

The following shows the main bottlenecks on the road in 2030:

• Even for the current demand in Mombasa area two-lane capacity which is approximately 20,000
pcu/day is not enough. So the traffic demand on the road requires at least four lanes between Mombasa
and Nairobi in the future.
• The traffic between Nairobi and Nakuru and the traffic around Kampala area exceeds 40 thousand
pcu/day which exceeds four-lane capacity.
• The traffic between Nakuru and Eldoret exceeds 20 thousand pcu/day which exceeds two-lane capacity.
• Even if oil transported by trucks from Mombasa to Uganda shifting to the pipeline from Hoima to
Kampala and modal shift from truck to SGR, traffic demand on the Malaba border is forecasted to 11
thousand pcu/day from 5 thousand pcu/day in 2015.
• Simple comparison of traffic volume and capacity of road near the Malaba border shows that the volume
is lower than the capacity.

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48
33 Eldoret
77 Bugiri Malaba
74
Kampala Busia
30

40 Nakuru
Kisumu 114

Nairobi
157

158
0 1～50 50～100 100～200 200～400 400～
Mombasa
100 Vehicles（PCU） per Day

4
15 Eldoret
148 Bugiri Malaba
27
Kampala Busia
27

38 Nakuru
Kisumu 114

Nairobi
44

38
0 1～50 50～100 100～200 200～400 400～
Mombasa
100 Vehicles（PCU） per Day

52
49 Eldoret
225 Bugiri Malaba
101
Kampala Busia
58

79 Nakuru
Kisumu 229

Nairobi
202

197
0 1～50 50～100 100～200 200～400 400～
Mombasa
100 Vehicles（PCU） per Day

Source: JICA Study team

Figure 5.2.7: Vehicles (PCU) on Road Sections in Both Directions in 2015
(Upper: CBFT, middle: Domestic Truck and Passenger Vehicle, below: Total)

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96
67 Eldoret
138 Bugiri Malaba 132
Kampala Busia
61

76 Nakuru
Kisumu 201

Nairobi
223

227
0 1～50 50～100 100～200 200～400 400～
Mombasa
100 Vehicles（PCU） per Day

10
38 Eldoret
360 Bugiri Malaba
68
Kampala Busia
68

94 Nakuru
Kisumu 277

Nairobi
105

90
0 1～50 50～100 100～200 200～400 400～
Mombasa
100 Vehicles（PCU） per Day

107
105 Eldoret
498 Bugiri Malaba
201
Kampala Busia
129

170 Nakuru
Kisumu 479

Nairobi
329

317
0 1～50 50～100 100～200 200～400 400～
Mombasa
100 Vehicles（PCU） per Day

Source: JICA Study team

Figure 5.2.8:Vehicles (PCU) on Road Sections in both Directions in 2030
(Upper: CBFT, middle: Domestic Truck and Passenger Vehicle, below: Total)
• Nevertheless, there is always a long queue at the Malaba border because of long waiting time for
customs clearance of cargo.
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• Therefore actual passing capacity on the Malaba border must be lower than 5 thousand pcu/day as same
as 1.5 thousand trucks/day. It means that the custom clearance time is more than 6 hours on average.
• If the clearance time is shorten to 3 hours on average, passing capacity would be double. With the
success of shortening clearance time, two lane road capacity can have 10 thousand pcu/day capacity as
same as 3 thousand trucks/day which could deal with future traffic demand.

from/to Seeta Freight

Volume
500
from/to Malaba Freight
400 Volume
100PCU per Day

318
300 500

200 400
127

100PCU per Day

41
100 200 300
20 138
77
0 200
Capacity 2015 2030
10
100 200
Cross Border Freight Transport 4
96
48
Domestic Freight Transport 0
Capacity 2015 2030
Passenger Vehicle
Cross Border Freight Transport
Domestic Freight Transport
Passenger Vehicle

105 107 Eldoret

498 Bugiri Malaba 201
from/to Mariakani
Kampala Busia Freight Volume
129
500

400
170 Nakuru

100PCU per Day

Kisumu 479 300 64
25 26
200
13
Nairobi 100 200
158
227
329
0
Capacity 2015 2030

Cross Border Freight Transport

from/to Nakuru Freight Domestic Freight Transport

Volume Passenger Vehicle

600

500
100PCU per Day

400
245
300

200 400 32
98 317
100 16 201
114 Mombasa
0 1～50 50～100 100～200 200～400 400～ 0
Capacity 2015 2030
100 Vehicles（PCU） per Day Cross Border Freight Transport
Domestic Freight Transport
Passenger Vehicle

Source: JICA Study Team

Figure 5.2.9: Bottleneck on the Road in 2030

5.2.5 Way Forward

There are several issues on the freight traffic demand forecasting:

• Forecast CBFT on the roads with truck driving time dependent on the traffic congestion explicitly.
• Forecast the volume of the passage trucks of Malaba and Busia borders with flow dependent assignment
method explicitly.
• Verification of current and future LOS data which are the transit time and cost of truck and MGR and
verification of future LOS data of SGR.
• Model tuning and forecasting for the multiple scenarios with the NEC MP Projects.

5.3 Development Strategy for Transport and Logistic Infrastructure

5.3.1 Review of Future Projects
(I) Road
There are 30 road projects in Kenya related to the Northern Economic Corridor. In Kenya, 5 sections in
addition to 5 OSBPs have completed. Congested sections in Nairobi and Mombasa on the main route are
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ongoing. In Kenya, from the view of road safety improvement, 20 roadside stations will be constructed by
PPP. The other information about new road planning and construction projects will be following.

There are 11 road projects in Uganda related to the Northern Economic Corridor. In Uganda, 5 sections have
completed. Two important sections of Kampala- Jinja and Kampala- Masaka on the main route are
ongoing.

Table 5.3.1: Ongoing Road Projects in Kenya & Uganda

Source: UNRA Source: KeNHA

Source: JICA Study Team

Figure 5.3.1: Ongoing Road Projects in Kenya and Uganda

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Table 5.3.2: Ongoing Road Projects in Kenya & Uganda

Source: UNRA Source: KeNHA

Source: JICA Study Team

Figure 5.3.2: Ongoing Road Projects in Kenya and Uganda

(II) Railway

Future railway projects include implementation of the standard gauge railway network, establishment of
ICDs and railway yards to support SGR operations and locomotive and wagon investments by RVR to
continue improvements to meter gauge railway service.

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(Standard Gauge Railway)

The base case development scenario assumes the following standard gauge railway projects will be
completed as indicated.

Table 5.3.3: Standard Gauge Railway Developments (Base Case)

30 31
Line Segment Km Project Est. Completion Status
Standard gauge line,
Mombasa-Nairobi 472 June 2017 Completion June 2017
locomotives, wagons
Nairobi-Naivasha 120 Standard gauge line December 2017 EPC contract awarded
Nairobi-Longonot-Narok-Bomet-Sondu- FS thought to be in
225 Standard gauge line December 2019
Ahero-Kisumu-Yala-Mumias-Malaba progress
Standard gauge line,
Kampala-Tororo-Malaba 237 December 2019 EPC contract awarded
locomotives, wagons
Tororo-Soroti 140 Standard gauge line June 2020 FS complete
Soroti-Gulu 268 Standard gauge line June 2022 FS complete
Gulu-Pakwach 117 Standard gauge line 2025 FS in complete
Gulu-Nimule 108 Standard gauge line 2025 FS in progress
Kampala-Kasese 344 Standard gauge line 2030 FS in progress
Bihanga-Mirama Hills 200 Standard gauge line 2030 FS in progress
Mirama Hills-Kigali 200 Standard gauge line 2030 FS in progress
Source: JICA Study Team

As noted for the Mombasa-Nairobi and Kampala-Tororo-Malaba segments of the SGR, the EPC contract
includes supply of initial locomotive and wagon fleets by the chosen Chinese contractor. While not indicated,
other segments could require additional rolling stock. That will depend on the extended operating territory
created with the later segments and the amount of additional volume generated by those segments. The table
below is an implementation schedule for the SGR segments:

Table 5.3.4: SGR Development Schedule (Base Case)

2015 2016 2017 2018 2019 2020 2021 2022 2025 2030
SGR Line Segment
1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2
Mombasa-Nairobi
Nairobi-Longonot-Narok-Bomet-Sondu-
Ahero-Kisumu-Yala-Mumias-Malaba
Kampala-Tororo-Malaba
Tororo-Soroti
Soroti-Gulu
Gulu-Pakwach
Gulu-Nimule
Kampala-Kasese
Bihanga-Mirama Hills
Mirama Hills-Kigali
Source: Stakeholder interviews; JICA Study Team assumptions

30 Kilometer distances are estimated using various sources

31 Known to the Study Team as of 22 October 2015
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Source: Stakeholder interviews; JICA Study Team assumptions

Figure 5.3.3: Standard Gauge Railway Developments (Base Case)

In addition, the Base Case Development Scenario assumes SGR operates at the following cargo handling
facilities. These facilities will support standard gauge transportation and logistics in areas expected to be
destinations and distribution points for container and bulk cargo.

Table 5.3.5:SGR Operating Facilities (Base Case Development Scenario)

Location Description Timing Objective
Standard gauge tracks and handling Service for container imports terminating in
Embakasi ICD (Nairobi) facilities added to existing meter 2016 Nairobi and container exports going on rail in
gauge depot Nairobi
Service for imported non-container cargo
New facility to be built as part of terminating beyond Nairobi; dry bulk cargo
Nairobi marshalling yard June 2017
the Mombasa-Nairobi SGR project handling; non-container export through
Mombasa
SGR marshalling yard on land
reclaimed from the Indian Ocean; Service for inbound and outbound container
Marshalling yard, Mombasa
direct access to new terminal; June 2017 traffic at new terminal and existing berths
Container Terminal 2
service to existing container 16-19
terminals
Marshalling yard for other Yard with bulk and general cargo Service for Mombasa Port other than container
June 2017
Mombasa cargo handling capacity berths
Eldoret marshalling yard and Yard with bulk, general cargo and Service for Eldoret area cargo; will serve
June 2019
inland terminal container handling capacity Nakuru, Kisumu and Busia areas
Marshalling yard for customs
Malaba marshalling yard Dec 2019 Customs inspections
inspections
Yard with bulk, general cargo and Service for new Kisimu Port and surrounding
Kisimu marshalling yard Dec 2019
container handling capacity area
Service for new Kisimu Port and surrounding
Kisimu ICD Within marshalling yard Dec 2019
area
Jinja marshalling yard and Yard with bulk, general cargo and
Dec 2019 Service for Jinja area cargo
inland terminal container handling capacity
Service for Tororo area cargo; distribution
Tororo marshalling yard and Yard with bulk, general cargo and
Dec 2019 point for Gulu and Pakwach before SGR
inland terminal container handling capacity
implementation
Service for Kampala area cargo; may be an
Kampala marshalling yard Yard with bulk, general cargo and
Dec 2019 addition to new MGR facility at Mukono;
and inland terminal container handling capacity
distribution point for Kasese
Gulu marshalling yard and Yard with bulk, general cargo and Service for Gulu area cargo including Pakwach
June 2022
inland terminal container handling capacity and Juba until SGR lines are in place

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Location Description Timing Objective

Pakwach marshalling yard Yard with bulk liquid, general cargo
2025 To handle crude oil and other cargo
and inland terminal and container handling capacity
Source: Study Team

Providing SGR access to the oil marketers’ rail loading facilities in Mombasa and Nairobi should be
considered. Each of these locations is currently served by the meter gauge railway. If this access is not in the
design for the standard gauge railway it may be difficult and costly to add to the design.

(Meter Gauge Railway)

The Base Case Development Scenario assumes the following investments for RVR and the meter gauge
system. Some of these investments have been recently completed or are in progress. A healthy meter gauge
system is important to begin the improvement in rail service while SGR is established. As mentioned in the
strategy discussion above, an improved meter gauge railway potentially will reduce the overall cost of
establishing and maintaining effective railway service and provide competition for the standard gauge
railway to the benefit of rail shippers.

Table 5.3.6: Meter Gauge Railway Developments (Base Case)

Approx.
Investment Description Timing Objective
Value
Approximately
Locomotive USD 1.15 million
Additional locomotives As needed Increase capacity and reliability
purchases 32
per unit
Based on content
On-going improvement Reduce maintenance expense;
Track rehabilitation Continuous and timing of
in track condition improve transit times and reliability
work
On-going improvement Based on content
ROW/structures to culverts, bridges, Continuous and timing of Improve reliability and safety
ICDs, marshalling yards work
Reopen out of service line in
anticipation of crude oil development
Rehabilitation of in the Albertine region; potential
USD 50 million
Tororo-Gulu-Pakwach Reopen closed line Mid-2016 inbound well construction and
(URC estimate)
branch line operation materials and outbound
crude if a satisfactory pipeline option
is not available
Based on wagons
purchased and
Rail wagons Additional wagons On-going To support increased volume
timing of
purchases
Source: RVR press releases; various news reports; Study Team

An additional assumption for the Base Case is the expansion of private sector investment in wagons and
containers. Currently two or three companies lease tank containers for transport of bulk liquids. The
containers are ideal for rail-truck intermodal movements because they have a metal frame to facilitate
transloading between truck and rail. The Base Case assumes this activity will continue and expand and
potentially spread to lease of locomotives and rail wagons (i.e., the third party company owns rolling stock
and leases them to the railways and shippers).

(III) Port
Ongoing and planned projects are:
1) Mombasa Port Development Project/ JICA, Project Schedule: Nov. 2007-Nov. 2015
(a) Construction of the Second Container Terminal(depth: 15m and 11m; berth ×.2)
(b) Procurement of cargo handling equipment (SSG cranes and RTG cranes)

32 Based on recent purchase of 20 locomotives for a total of USD 23 million

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(c) Construction of an access road (approx. 1.6km)

(d) Dredging works (dredging volume: approx. 3 million cubic meters)
(e) Consulting services (detailed design, bidding assistance, construction supervision and assistance for
selection of terminal operators, etc.)
2) Project on Master Plan for Development of Dongo Kundu, Mombasa Special Economic Zone/ JICA,
Project Schedule: Jan. 2014-Mar. 2015
3) The Project for Technical Assistance to Kenya Ports Authority on Dongo Kundu Port, Mombasa Master
Plan/ JICA, Project Schedule: Aug. 2014-Oct. 2015
4) Study on the Project for Construction of Mombasa Gate Bridge/ JICA
5) Construction of a new standard gauge railway linking Mombasa with Nairobi, Kampala and other
hinterland destinations was began in 2013
6) Construction of a southern by-pass for Mombasa linking the south to north coasts was began in 2014

(IV) Airport

1) Jomo Kenyatta International Airport Expansion Project

When the airport was first opened in 1958 it had been designed for a maximum capacity of 2.5 million
passengers a year. In 2006 the airport handled in excess of 4.4 million passengers. The Kenya Airports
Authority (KAA) declared their intention to expand and improve Jomo Kenyatta International to make it a
hub not only for EACs but also for Africa. In addition, the airport is a very important cargo hub in EACs. On
7 August 2013, a fire broke out inside the main terminal building at Nairobi’s Jomo Kenyatta International
Airport destroying two of the three units contained in the building. Although no one was killed, two people
were hospitalized with non-life-threatening injuries.

An expansion of the cargo handling facilities particularly for horticulture and floriculture produce is also on
the agenda. So far, as Airport Expansion Project, a new arrival terminal has been completed in 2015 and new
construction of airport runway No.2 is ongoing. A new instrument landing system-equipped runway 5,500
meters in length has been approved for construction at a cost of 12.8 billion Kenyan shillings (USD146.5
million). The runway also will enable direct long haul flights to destinations such as New York City, carrying
up to 32 tones. Construction is scheduled to begin in January 2016 and be completed in December 2017. In
addition, modern cargo facilities with planned and ongoing capacity expansion.

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2) Airport in Uganda

(a) National Airports Development Plan

The National Airports Development Plan
considers a classification system of
functional airport roles which clearly
demonstrates the types of facilities and
services that should be provided at each
airport category.

[International Airport]
Airports in the international category are
airports of entry and exit for international
traffic, which perform all services and
support facilities related to customs,
immigration, health service, quarantine of
animals, plants and similar procedures, in
which air transport is provided on a regular
Source: Uganda Civil Aviation Master Plan, March 2014, Civil Aviation
basis. Airports proposed to cover this deficit Authority in Uganda
are Arua, Kasese and Pakuba, and given the Figure 5.3.4: Proposed Future Development (Airport
future strategic role of the proposed Kabaale Classification)
(Hoima) Airport, it will be necessary to open it to international traffic.

[Regional Airport]
These airports support some level of scheduled commercial airline service in addition to a full range of
general aviation service. It could also include international charter flights, particularly if it is placed in a
tourism destination. Airports proposed in this category are Soroti, Gulu and Kidepo.

[Local Airport]
These airports support most twin and single engine aircraft. They also support local air transport needs and
special use aviation activities. Airports proposed in this category are Jinja, Lira, Moroto, Tororo, Mbarara
and Kisoro.

(b) Uganda Civil Aviation Master Plan

The Civil Aviation Authority (CAA) in Uganda has prepared Uganda Civil Aviation Master Plan in March
2014.

(c) Entebbe International Airport Master Plan

Entebbe International Airport Master Plan Table 5.3.7: Traffic Forecast in Entebbe International
considers the current situation of the airport and Airport
proposes the necessary actions for the next 20 Total Movements Total Passengers Cargo (tones)
2012 43,449 1,475,631 55,907
years. Beyond that, an ultimate vision of the 2018 55,500 2,377,100 77,100
airport development is also proposed. The master 2023 76,300 3,810,700 100.700
plan defines a land use strategy. The traffic 2033 123,700 7,667,700 172,100
Source: Uganda Civil Aviation Master Plan, March 2014, Civil
forecast considers the economic growth of the Aviation Authority in Uganda
East Africa region and the impact of liberalization
of air transport within the EAC. According to the Entebbe International Airport Master Plan, Cargo volume
will increase 3times after 20years from 2012.
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Developments proposed in the master plan are part of the comprehensive land use strategy for the future
airport development. This will enable the optimum allocation of space to each project at the airport. A sketch
of this concept is presented below, followed by a figure with the final image of the airport within the master
plan period of study (2014-2033).

[Ultimate Development Plan of Entebbe International Airport]

For the very long term development of the airport and considering the constraints it is limited by, the
proposal is, first of all, to look for a location for a new airport to serve Kampala. Once a suitable location is
identified, this option should be ompared with the option of a second runway at Entebbe International
Airport.

Source: Uganda Civil Aviation Master Plan, March 2014, Civil Aviation Authority in Uganda
Figure 5.3.5: Proposed Layout Plan of Entebbe International Airport

Source: Uganda Civil Aviation Master Plan, March 2014, Civil Aviation Authority in Uganda
Figure 5.3.6:Very Ultimate Development Plan/ Long Term Development Plan of
Entebbe International Airport

(V) Waterway

1) Implementation of the rehabilitation and expansion programmes for inland ports, including Kisumu,
Port Bell, and Jinja. Rehabilitation of Port Bell is supported by World Bank and EU while that of Jinja
port is supported by World Bank.

2) Development of Mwambani port in Tanga, Musoma Port and New Kampala Port at Bukasa. Bukasa
Port development project as the new Port Bell Project was proposed by MOW in the past. The project
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aimed to realize better port functions, expand port-area, and add not only wagon ferries but roro boats.
In addition, a new industrial park is planned to be constructed near the port. However, it has never
implemented at all.

(VI) Pipeline

In order to meet the increasing demand, pipeline capacity needs to be expanded. The Line 5 is under
construction to increase the capacity from Mombasa to Nairobi, replacing old Line 1 system. The Line 3
from Sinendet to Kisumu will also be replaced with Line 6. Overview of future pipeline system in Kenya is
illustrated as follows:

Eldoret Terminal
Kisumu Terminal Mombasa -Nairobi
Line 1 (existing)
Line 5 (under construction)
Line x (planned)
Sinendet Terminal Nairobi-Eldoret
Line 2 (existing)
Line 4 (existing)
Nakuru Terminal Sinendet-Kisumu
Line 3 (existing)
Line 6 (planned)

Nairobi Terminal

Mombasa Terminal
Source: Toward a Petroleum Master Plan for Kenya 2015
Note: Line 1 will be decommissioned after completion of Line 5; Line 2 will be decommissioned at
the time of upgrading of Line 4; Line 3 will be decommissioned after completion of Line 6
Figure 5.3.7: Schematic Drawing of Product Pipeline System in Kenya

Expansion scheme of petroleum product pipeline is summarized as follows:

Table 5.3.8: Product Pipeline Expansion Project Summary

Installed Flow Capacity
Line Name Size/Upgrade Status
Rate (m3/hr) (million m3/yr)
Mombasa-Nairobi
Line 1 14 inch 2013 880/615 5.2
Line 5 20 inch 2016 880 6.9
Upgrade 2025 1830 15.4
Line x 14-20 inch 2040 1200 10.1
Total (After replacement of Line 1 to 5) 25.5
Nairobi-Eldoret
Line 2 6-8 inch 2013 220 1.8
Line 4 14 inch 2013 378 3.2
Upgrade 2019 531 4.5
Upgrade 2026 757 6.4
Total (After replacement of Line 2 to 4) 6.4
Sinendet-Kisumu
Line 3 6 inch 2013 110 0.9
Line 6 10 inch 2017 400 3.4
Total (After replacement of Line 3 to 6) 3.4
Source: Toward a Petroleum Master Plan for Kenya 2015

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(VII) Border Post

There are several ongoing OSBP projects at the borders as already mentioned. Here, both Malaba and Busia
borders which are the busiest borders are focused on. Malaba and Busia OSBP projects are shown in the
following Table.

Table 5.3.9: Summary of Malaba & Busia OSBP Project

Malaba & Busia OSBP Malaba Border Busia Border
Project Kenya Uganda Kenya Uganda
Implementation Period 2015 2011-2015 2011-2014
Implementation Agency KeNHA MoWT KeNHA MoWT
Fund Resource WB/TMEA WB TMEA TMEA
Source: Interview results to Border post offices.

(1) Malaba border post

Single Custom Territory (SCT) scheme is planned to avoid time consumed at the border. According to
interview survey conducted on September, 2015 for border customs office, the transit time will be minimized
(ultimate goal is 3 hours for total crossing time) along with development of electric seal installation of
reading machine. In practice, bond cancel procedure is planned to shift from manual basis to computerized
procedures. Nevertheless, the performance of OSBP is still limited. Regarding truck transportation, note
process is jointly conducted, but customs procedure is still separately conducted at both counties according
to JST site survey carried on September, 2015.

(Kenyan side)
Poor road infrastructure and
small parking lot result in
the long queues of trucks,
reaching 4-8 km. In
addition, the bridge
between border facilities is
narrow and passenger/cargo
trucks are mixed. However,
those infrastructure (road,
bridge) and facilities
(building for governmental
authorities) are under
construction with the
support of the World Bank.

Source: JICA Study team

Figure 5.3.8: Image of Malaba border(Uganda)
(Uganda side)
Basic infrastructures are more developed than the Kenyan side; modern facility for government authorities,
customs physical inspection area and wide parking area. This results in smooth access from Ugandan inland
to the border. Furthermore, there are many unloading trucks which are much easier for border crossing than
loading trucks hence traffic movement is smooth.

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Malaba OSBP Layout (Kenya)

Following facilities such as Immigration offices, custom offices, border police post, national information
services, Kenya bureau of standards, Kenya plant inspectorate services office, public health offices and
social facilities are accommodated in OSBP.
Review of original design
• Separation of traffic from non-motorized traffic
• Appropriated layout of staff car park for the prevention of all traffic flow
Busia OSBP Layout

Following facilities such as Immigration offices, custom offices, border police post, national information
services, Kenya bureau of standards, Kenya plant inspectorate services office, public health offices and
social facilities are accommodated in OSBP.

Review of original design

• Separation of the inbound and outbound vehicular traffic flows for avoidance of any possible
compromise
• Appropriated zoning and planning of layout for smooth and simple administration
• Provision of certain requirements such as impounding yard
Source: East African Trade and Transport Facilitation Project (EATTFP) Proposed Malaba and Busia One Stop Border Posts
Schematic Design Review Report, November 2011, Katoconsult and Associates, Google Earth
Figure 5.3.9: Malaba OSBP & Busia OSBP Layout Plan at Kenya Side

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(VIII) Inland Depots

(Kenya side)
ICD development depends on railway service. The following projects are taken into account
• New ICD for Standard Gauge Railway (SGR)
The SGR program includes the development of the Nairobi South Hub, located about 4 km to the west of
the current ICD with a capacity of 400 000 TEU per annum, only to serve the SGR, .This terminal is
planned to be owned and operated by KRC.
• Embakasi ICD
The SGR program includes the upgrade of the Nairobi ICD to a capacity of about 400,000 TEU’s, to
serve both Meter gauge and SGR systems. The Nairobi’s Embakasi ICD, and the SGR will be connected
by a freight road, with both terminals being served by new access roads to a new Mombasa
Road-Enterprise Road interchange, and from there along dedicated freight service road connecting to
the Southern and Western Nairobi bypass roads.
• Kisumu ICD
In November 2011, RVR stopped operation on the Nakuru to Kibos branch line majorly due to
vandalism of the rail line. Currently PPP management approach supported by the World Bank is
considered along with the revival plan of lake transport.
• Eldoret ICD
Although it has never been operated by KPA, plans are under way to revive operation of the ICD. It is
currently being used by Moi University for courses training.

(Uganda Side)
ICD project will be dependent on SGR extension plan. According to an interview survey at Mukono ICD,
Northern route (Tororo-Gulu) will be the first priority so that facility development at both points will be
necessary. Trademark also seeks to promote Gulu as a “Trade hub” with the aim of providing a total trade
function including logistic functions.
5.3.2 Development Scenario as Base Case
Three kinds of scenarios for future cargo Truck Demand Growth Index by Case1,Case2 and Case3
demand by truck are set up as follows; 300
Case-1(Base Case)
• Case-1 is set up as Base Case in which 250
Case-3
(Pessimistic)
from 2015

railway will have a share of 40% for Cargo

transport from Mombasa Port. 200
Case-2
(Conservative)
• In Case-1, truck demand is assumed to
increase around 1.7 times from 2015 to 2030. Case-1
growth index

150 (Base Case)

Case-2 (Conservative Case)
• Case-2 is set up as Conservative Case in 100
which railway will have a share of 20% for
Cargo transport from Mombasa Port. 50
• In Case-2, truck demand is assumed to year
2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

increase around 2.3 times from 2015 to 2030.

Source: JICA Study team
Case-3 (Pessimistic Case) Figure 5.3.10: Truck Demand Growth Index by Case
• Case-3 is set up as Pessimistic Case in which
railway will have a share of 10% for Cargo transport from Mombasa Port.
• In Case-3, truck demand is assumed to increase around 2.5 times from 2015 to 2030.

The above cases are set up by modal share to railway in the future with the assumption that Standard Gauge
Project will be implemented in Kenya and Uganda because the future cargo demand by truck on roads of

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Northern Economic Corridor will greatly be affected by the future railway share for cargo from Mombasa
Port. For example, if the railway share decreases, the demand of truck increases.

As Base Case, it is assumed that railway will have a share of approximately 40% of total container and
non-container cargos from Mombasa port in 2025 excluding petroleum product transported by pipeline. The
share could be attained by Standard Gage Railway in Kenya and Uganda which could begin operation from
2018. Modal share by truck is calculated at 60% from 2025 to 2030.

It is expected that SGR will relatively quickly capture approximately 40% of the import and export container
traffic at Mombasa. This volume would require approximately three to four trains in each direction per day,
approximately 65% SGR’s estimated capacity.33 SGR should address shippers’ concerns with service
reliability, transit times and cost. SGR’s heavier track structure and wider gauge allow faster operating
speeds and heavier trains than the meter gauge railway. With new signaling systems and rolling stock the
SGR system will provide reliable service that consistently achieves the railway’s commitments to customers.
In addition, as mentioned in 5.2.2, it is expected in this case that if SGR's level of transit cost is same as 0.5
times of truck's transit cost.

Over time railway’s share of non-container cargo is projected to increase to approximately 29%. The
projection assumes continued investment by RVR and the presence of SGR will increase shippers’
confidence in the railway to deliver effective services.

Source: JICA Study Team

Figure 5.3.11: Railway Share of Mombasa Container Figure 5.3.12: Railway Share of Mombasa Container
Cargo Non-Cargo
The main assumptions supporting the rail volume estimate include:
• The SGR system is developed between 2015 and 2030 with the core route to Kampala operating by the
beginning of 2020.
• RVR continues to invest in track infrastructure, locomotives and rail wagons.
• Uganda, working with RVR, ensures that the meter gauge line Tororo-Gulu-Pakwach by mid-2016 is
rehabilitated sufficiently to provide effective service over the entire branch with the capacity to transport
well pipe and other materials for development of the oil fields in the Albertine region.
• SGR focuses primarily on container traffic; its share of container traffic at 40% is believed to be the
share estimated in SGR feasibility studies.34
• Over time RVR concentrates on general and bulk cargo and maintains a presence in container transport.
• ICDs and railway yards are implemented appropriately to support SGR and MGR operations and an
efficient flow of cargo along the NEC.

On the other hand, it would not be easy to get share back from truck to railway in that truck has strength as a
flexible mode for cargo demand especially over relatively shorter distance transport, small sized cargo and

33 SGR capacity Study Team’s estimate based on container train service from Mombasa to Nairobi and train service details provided by KPA
34 Stated in Railway-technology.com, http://www.railway-technology.com/projects/mombasa-nairobi-standard-gauge-railway-project/; Study Team
interviews of various Kenya and Uganda government officials
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bulk cargo. Furthermore, in order to compete with trucks and maximally utilize railway strength as a fuel
efficient mode for longer, heavier and voluminous cargo, cost- efficient and time-accurate operation should
be managed well. However, it can be said that there is a risk that it takes longer time to implement such
efficient operations. Therefore, other two cases are set up as Conservative and Pessimistic Cases in the event
that railway share is lower than Base Case.

As Conservative Case, it is assumed that railway has a share of 25% for cargo (excluding petroleum product
transported by pipeline) from Mombasa port by 2025. Modal share by truck is calculated as a share of 65%
from 2025 to 2030. This can be seen as a case on the way to railway share of 50%, Base Case, in the long
term after 2030. As mentioned in 5.2.2, it is assumed in this case that if SGR's level of transit cost is same as
0.8 times of truck's transit cost.

As Pessimistic Case, it is assumed that railway has a share of 10% of cargo (excluding petroleum product
transported by pipeline) from Mombasa port in 2025. Modal share by truck is calculated as a share of 90%
from 2025 to 2030. This can be seen as a case of failure of Standard Gauged Project as well as logistics
strategy and implementation on Northern Economic Corridor. As mentioned in 5.2.2, it is assumed in this
case that if SGR's level of transit cost is more than truck's transit cost.

Road development policy for logistics on Northern Economic corridor should have a target to attain Case-1
or Case-2 at the minimum until 2030. This means that demand increase of cargo by truck between 1.5 times
and 2.0 times from 2015 until 2030 is basic assumption for road transport planning of Northern Economic
Corridor Master Plan.

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Table 5.3.10: Case Setting for Several Scenarios

Assumption of Cargo Demand Growth by Trucks
Case description
from Mombasa Port
Case-1(Base Case)
-Case-1 is set up as Base Case in which railway will have a share
Road Traffic assumption (Case-1: Rail 40%, Truck 60%)
of 40% for Cargo transport (excluding petroleum product 300

growth index from2015

transported by pipeline) from Mombasa Port.
-In Case-1, truck demand is assumed to increase around 1.7 times 250
from 2015 to 2030.
200
Case-1(Base Case) 2015 2020 2025 2030
150
Rail Share 5.0% 33.3% 40.0% 40.0%
Truck Share 95.0% 66.7% 60.0% 60.0%
100
Truck Demand Growth Index 100 105 131 169
Cargo Demand Growth Index
100 150 207 268 50
(Mombasa Port)

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030
year

Case-2 (Conservative Case)

-Case-2 is set up as Conservative Case in which railway will
have a share of 20% for Cargo transport (excluding petroleum Road Traffic assumption (Case-2: Rail 20%,Truck 80%)
product transported by pipeline) from Mombasa Port.
300
-In Case-2, truck demand is assumed to increase around 2.3 times
from 2015 to 2030. growth index from2015
250

Case-2 (Conservative) 2015 2020 2025 2030 200

Rail Share 5.0% 18.8% 20.0% 20.0% 150

Truck Share 95.0% 81.2% 80.0% 80.0%
100
Truck Demand Growth Index 100 128 174 226
Cargo Demand Growth Index 50
100 150 207 268
2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030
(Mombasa Port)
year

Case-3 (Pessimistic Case)

-Case-2 is set up as Pessimistic Case in which railway will have a
share of 10% for Cargo transport (excluding petroleum product Road Traffic assumption (Case-3: Rail 10%, Truck 90%)
transported by pipeline) from Mombasa Port.
-In Case-2, truck demand is assumed to increase around 2.5 times 300
growth index from2015

from 2015 to 2030. 250

200

150

100

50
2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

year

Source: JICA Study Team

5.3.3 Development Strategy

(I) Transport Network

The Northern Corridor should be built as a Comprehensive Multimodal Transport System consisting of
road transport, railway, airway, waterway and pipeline in order to utilize the existing and planned assets of
infrastructure effectively, to maximize economic efficiency and to be in eco-friendly transport in the future.

Modal shift from truck to rail and other modes is a key issue on the Northern Corridor in the near future.
Currently 95% of cargo from Mombasa port to EACs is reported to be carried by truck on the roads. Railway
is usually a cost-efficient mode for long distance, heavy, large amount of freight such as coal, cement,
construction materials and so on. Railway should be used more for cargo transport through the Standard
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Gauge Railway Project. Moreover, pipeline should be promoted for oil transport, lake transport in Victoria
should be reactivate as an eco-friendly transport especially between Kenya, Uganda and Tanzania.

Improvement of the bottlenecks on roads is urgently required; particularly in Mombasa, Nairobi, Nakuru,
Eldoret, Kisumu, Kampala and their surrounding areas. There are increasing traffic demands and bottlenecks
of road traffic around these areas and therefore it is necessary to expand the capacity of the road network
through road widening.

Near Mombasa port, railway and airport cargo terminals, junction of road, ICDs and borders, industrial park
development for manufacturing, warehouse, fishery /agricultural/ timber processing should be planned by the
government as a logistics hub. Such kind of development can be called as Cargo-Oriented Development
(COD). COD is supposed to activate regional economic vitality, create jobs and promote international trade
effectively. As a result, it would lead to improve a gap of cargo between import and export, and decrease a
great number of unloaded trucks and empty containers on the road.

Source: JICA Study Team

Figure 5.3.13: Development Strategy of Logistics on Northern Economic Corridor

(II) Road

The cargo volume at Mombasa port is forecasted to increase from 1mllion TEUs to 3 million between 2015
and 2030. By assumption, even if the modal share of railway including the Standard Gage Railway for total
cargo from Mombasa Port to EACs will be 45% in the future, road traffic demand on Mombasa road will
increase 1.5 times. This increasing demand would influence greatly on the road section from Mombasa to
Nairobi and Kampala.

Considering both the current situation and also the future projection of demand, Mombasa road should be
reformed as the Mombasa Logistics Highway with at least four lanes in order to secure efficient and safe

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traffic in the future. The priority section must be between Mombasa port and Voi intersection with a distance
of 165km.

A development strategy for the base case is shown as follows.

Short/ Mid Term
• Widening from 2 to 4lanes of Mombasa Road between Mombasa and Voi
• Improvement of circular road of Mt. Kilimanjaro foothill road
Mid/Long Term
• Widening from 2 to 4lanes of Mombasa Road between Voi and Nairobi
• Improvement of circular road of Lake Victoria

(Assumption of traffic demand on the road of between Nairobi and Mombasa in the future)
• If assumed that the future annual throughout at Mombasa port is 3 million TEUs/year or three times of
the current demand, several scenarios can be supposed by the modal share of Standard Gaged Railway
for cross border cargos from Mombasa Port.
• Simply calculated, if the rail share is 40%, the demand of cargo traffic on the road would be 1.7times of
the current demand. If the share is 20%, the demand of the traffic would be 2.3times. If the share is very
low at 10 % as is the case with the current railway, the demand is 2.5 times roughly.
• Even for the current demand in Mombasa area, the two-lane capacity which is approximately 20,000
pcu/day is not enough. So the traffic demand on the road will require at least four lanes between
Mombasa and Nairobi in the future.

Source: JICA Study Team

Figure 5.3.14: Current Road Situation between Mombasa and Nairobi along Northern Corridor in Kenya

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Source: JICA Study Team

Figure 5.3.15: Current Road Situation between Mombasa and Nairobi along Northern Corridor in Kenya

Furthermore in order to build a more effective logistics road network in the East African Countries, the
Northern Corridor should be effectively connected with the Central Corridor and LAPSSET (The Lamu Port

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Southern Sudan-Ethiopia Transport) Corridor. In the long term, for example, Lake Victoria Circular Road
and Mt. Kilimanjaro Foothill Road should be examined as the link between the corridors.

Source: JICA Study Team

Figure 5.3.16: Linkage Northern Economic Corridor with Central Corridor and LAPSSET

(III) Railway

A development strategy for the Base Case has several elements:

Short term:

• Implement SGR to Kampala

The SGR project is an opportunity to return railway to a meaningful option for transporting goods of all
types on the NEC, reduce the overall cost of transportation for shippers and achieve modal shift by
shifting truck movements to rail.
Implementation to Kampala includes the ICDs and railway yards identified.

• Involve the private sector in railway investments

This could be major projects such as an ICD or terminal or smaller initiatives like leasing rail wagons
and locomotives to the railways and shippers. Private companies are currently leasing tank containers
capable of being loaded on rail and truck for transportation of edible oils and petroleum products. This
is a relatively small-scale way to leverage the private sector and expand supply of essential railway
equipment.

Medium term:

• Implement SGR to Gulu, Pakwach and Nimule

The implementation includes the ICDs and railway yards identified.

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• Develop a plan for meter gauge and standard gauge side-by-side operations
One option is the railways compete head to head across the spectrum of commodities. A more
productive approach may be to encourage each railway to focus on certain areas. This appears to be
happening with SGR’s prime access to the new container terminal. Having SGR as the dominant carrier
in the container sector is appropriate because of SGR’s ability to run longer trains at faster speeds, both
critical in the intermodal container market. This could result in meter gauge becoming the dominant
carrier in bulk sectors where consistency of service is more important than absolute transit time. This
could make sense because many bulk rail loading facilities are in place for meter gauge. Duplicating
facilities for SGR may be costly and inefficient.

For example, SGR would concentrate on moving 95-100 car block container trains from Mombasa to
Nairobi and Kampala and as the SGR system is implemented to Kigali, Rwanda, Juba, South Sudan, and
Kisangani, DRC. The initial service plan is for the SGR to operate four (4) northbound container block
trains per day from Mombasa to the Nairobi ICD. Each train will have approximately 95 wagons and
carry approximately 200-216 TEUs. Three (3) southbound trains from Nairobi to Mombasa will operate
daily. Two will be cargo trains and one will be an empty container train.

As Mombasa’s throughput increases from 952,000 TEUs in 2014 (excluding transshipments) to an

estimated 3,046,000 TEUs in 203035, SGR service will expand to more train starts per day. Much of the
increase at Mombasa will be driven by the new container terminal to which SGR will have designed
access.

SGR is expected to have a significant presence in bulk and general cargo traffic as well.

Additional sidings may be needed between Mombasa and Nairobi as container volume increases.

The meter gauge system, operated by RVR, with its existing access to bulk and general cargo shippers at
Mombasa and its marshalling yard infrastructure designed to handle that cargo is in position to develop
the non-container market while still participating in container transport. Currently RVR operates an
unscheduled train service. In general RVR does not start a train, container or bulk/general cargo, before
receiving cargo sufficient to build a train near full capacity. As RVR improves its equipment and track
and overall volume increases, it is expected that RVR will publish a daily train schedule and adhere
fairly closely to that schedule.

According to KPA, RVR currently operates one container train per day averaging 50-60 TEUs and 25
wagons (approximately two (2) 20’ containers per wagon). The Base Case estimate indicates RVR will
transport approximately 51,000 TEUs per year in 2025 (139 TEUs per day). RVR can absorb the volume
increase with one and one-half additional trains per day based on current locomotive and wagon
capacities and transit times. However, RVR is improving its capacity and transit times and so should
comfortably handle the increase in container traffic and perhaps exceed the Base Case estimate.

• Improve enforcement of regulations on truck load weights

A truck’s tonnage capacity is lower than a single standard gauge railway wagon. Preventing overloading
by truck operators will enhance SGR’s tonnage capacity advantage. Enforcing truck load restrictions
will also reduce wear and tear on road and improve road safety.

35 Study Team’s Base Case estimate

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Long term:

• Invest in and maintain the standard gauge railway

A weakness that sometimes occurs with large infrastructure projects is failure to maintain infrastructure
and equipment during operation. In part this reflects the fact that development financing like the China
Export-Import Bank is generally available only for project finance and not on-going investment and
maintenance.

It is expected that Kenya and Uganda will retain ownership of the SGR infrastructure and contract
operations to a private company. The two countries should monitor closely the condition of the railway
and ensure that sufficient time and expenditure is devoted to maintenance. The national governments of
the two countries should make efforts to provide a stable source of funding for railway maintenance that
is insulated to the greatest extent possible from the politics affecting annual government budget
preparations.

(IV) Border Post

SCT full implementation allows for passing through borders only by a simple electrical seal reading and
checking by systems at OSBP. In order to achieve this goal, infrastructure development (road, bridge and
OSBP facilities at Kenyan side) is currently underway. After completion of these infrastructure, transit time
will depend on the cargo volume expansion. Malaba border is the main branch point for several countries and
therefore its congestion is a serious bottleneck for the whole EAC region.

In order to reduce the possibility of congestion, the following two interventions should be considered;

(1) Establishing multiple lanes

The border is likely to become the bottleneck for smooth cross border transport even if various
facilitation procedures have been promoted. It is a common practice in the world to set up multiple lanes
at the border as they help in reducing congestion upto to the time of full implementation of SCT.

(2) Designated lanes for specific commodities/transporters (Fast lanes)

Dedicated lane (Fast lane) is another option for speedy border crossing for specified cargo/transporters.
This will be an incentive for Authorized Economic Operators(AEO). Currently, petroleum represents
approximately 20% of total goods at Malaba border crossing. A dedicated lane for petroleum will be
beneficial for speeding up its border crossing and even for other commodities.

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(Case1) Mongol/China (Zamin Und) (Case 2) Russia/Finland (Vaalima)

Figure 5.3.17: Multiple lanes

(Case) Thailand/Laos (Savannakhet)

Figure 5.3.18: Designated Lane (Fast Lane)

(V) Inland Depots

Short and Medium Term:
ICDs for rail/truck modal shift function are basically established; Kenya- at Nairobi (Embakasi), Uganda at
Mukono. ICD can expand the possibility for empty container depot, realization of cheaper empty container
delivery between mother ports. Considering the current situation that empty container is delivered from/to
Mombasa, the cost reduction effect of empty container deport is remarkable. Eventually, empty container
depot should be prioritized.

The container owners, such as shipping lines, have been negative for empty container depot mainly because
of absolute low cargo volume (few attraction for business) and low quality inventory control (no-returning
containers, uncertainty of identifying container location, unreliable return schedule ,etc). These facts are
likely to cause lower container turnaround and loss of business profits for container owners. In this scenario,
container owners are unlikely to establish their container deport inland.

It is ideal but unrealistic to carry stuffed container by railway at present, viewing from the customer’s
demand and railway capacity. On the contrary, empty container does not require high service standard as
long as low transport cost is available Unlike stuffed cargo demanding timely deliver, retuning empty
containers to main port is available only when the number of containers are collected to the degree where
train service can be commissioned. This will be an effective method for reducing transport cost.
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Source: JICA Study Team

Figure 5.3.19: Image of Empty Container Depot with Coloration of Railway

An empty container facility is so simple; only land area and a container handling equipment are required.
The important issue is to get negotiation power with shipping lines in order to get nomination from them. ,
Collaboration among stakeholders is required to match export/import in order to use the empty containers. In
this context, public sector involvement seems necessary at initial stages to some degree until when export
industry development is achieved.

Medium and Long term:

SCT plans to conduct customs clearance at port of entry. This means that the role of ICD is eliminated as the
place of import customs clearance. Customs procedure is the important revenue resource for ICDs and
therefore there has to be a change in business model to maintain the revenue. Already, ICD model change has
been initiated to realize comprehensive logistics service. As the result, ICD will have modal shift/empty
container depot function, inventory depot function, inventory/warehouse-oriented service. Such “Logistics
hub” concept is regarded as the ultimate goal for a advanced “ICD”.

“Logistics Hub” connects international to domestic “door” delivery through logics center. The total service
menus are summarized d as following table.

Table 5.3.11: Services of Logistics Hub

Functions Detailed service
Scheduled delivery and its management
Loading/unloading
Customs clearance (not necessary)
Rail export and import Cargo receipt/dispatch
Transshipment
LCL service
Consolidation
Truck arrival and dispatch
Truck export and import Loading/unloading
Scheduled delivery and its management
Container depot Empty van depot
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Functions Detailed service

Stuffed container yard (depot)
Container arrival/dispatch
Inventory control for empty van
Returning empty container to origin port
Modal sift
Multimodal Tracing the operation
Document arrangement upon transferring modes
Smooth and short transit cargo receipt
Scheduled pick-up planning and implementation
Inbound Scheduled truck operation for cargo pick up
Route planning for efficient route operation
Quantity and item check upon cargo receipt
Inventory control and management
Speedy picking and packing
Sorting
Accurate and quick picking
Inventory
Order picking
Re-packing
Warehouse Quick dispatch
Schedule controlling
Processing
VMI (Vendor Management Inventory)
Cross-dock
Package material control
Return cargo inventory and shipment
Just In Time(JIT )delivery
Delivery Outbound Returnable package pick-up
Scheduling and planning delivery route/operation
Note: Block capital indicate target operation for ICD and normal capital for logistics center.
Source: JICA Study Team

The respectable component/role of “Logistics Hub” image representation is illustrated as follows;

Component 1 Component 2
（ICD: Modal shift + empty Container Deport) ( Logistics Center)
Initiated by public sector (Basic infrastructure should be Initiated by private sector or PPP
developed by public sector) Providing delivery service with dedicated
inventory function

ICD(modal shift) Logistics Center

Customer
Loading/
Unloading
Truck
Rail transport
Container delivery
Inventory management
storage

(Customs
clearance)

Container
delivery
Container
delivery Customer

Customer Customer

Source: JICA Study Team

Figure 5.3.20: Services of Logistics Hub
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5.4 Logistics Service Improvement

5.4.1 Review of SCT scheme

(1) Import from overseas

The procedure for cargo movement under Single Custom Territory (SCT) scheme is regulated by “SCT
procedural manual” issued by EAC secretariat as at July 2014. According to this procedure, import from
overseas is facilitated as follows:
• Import customs clearance is conducted at port of entry through joint verification with customs officials
of port entry and cargo destination countries
• After duty payment, declaration process can be started
• Cargo movement is traced by Electrical seal while on transit
• Red channel cargo(physical inspection required cargo) are moved to Container Freight Satiation (CFS)
• Border checks involves only electrical seal data check in order to confirm cargo status,

Those actions will lead to the following significant effects;

• There will be increased workload at the port of Mombasa. This is because all declaration procedures are
handled at port of entry. Data transaction between the port and destination countries becomes larger.
• Transit procedure basically becomes unnecessary due to the fact that import custom clearance process is
implemented at the port. However, the issue of transit transport rule for bonded storage or bonded
warehouse regimes still remains.
• Attaching CFS to Green channel (no inspection required) cargo is unnecessary
• The role of Inland Container Depot (ICD) will be reduced as the place for customs clearance service.
Under the SCT scheme, import customs clearance becomes unnecessary at the destination.

(2) Export to overseas

Export procedure is facilitated as follows:

• Export clearance is conducted at exporting country. Custom authority processes the declaration and
gives the permission for loading of goods into vessels.
• Export goods should be covered by regional bond and armed with electrical seal.
• In the case of red chancel, verification/scanning should be conducted at country of origin
• Release information is transmitted to customs authority where cargo is exported to
• The cargo may be armed with electrical seal and shipped to destination
• Upon arrival at the port, scanning inspection is indispensable. This is mandatory for all export
containers.
The above actions will lead to the following significant effects;
• Customs clearance is conducted at export country and clearance data are transmitted to transit country
and to the destination port
• Electrical seal should be attached and checked at border posts.
• X-ray scanning inspection becomes mandatory at the port of export.

5.4.2 Current bottlenecks

(1) Import

Three bottlenecks in imports have been identified as below.

1) Port side time

Kenya
The port dwell time is still longer than international standard from the Port charter report, 2014. However,
the smooth cargo movement to CFS is achievable. In this context, the port side time depends on customs

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clearance time. According to the latest data “Northern Corridor Transport Observatory Survey” issued on
Dec, 2014 the Data Proceeding Center (DPC) can provide short time for duty assessment (under 2 hours
from Jan to Jul 2014), but One Stop shop center’s work still takes longer time for inspection (average 107
hours). CFS’ association indicates that an average of 2.7 days is required.

Uganda
The container cargo transit time is long. On average, 5-6 days are required (best case is at 2 days). Import
container’s free time at Mombasa port is 2 days for CFS cargo and 7 days for transit, which may imply that
the transit procedure takes a long time.

2) Transportation time at Mombasa area

Traffic congestion in Mombasa area is severe. JST GPS survey shows that it takes 12 hours to drive over a
distance of 8km. Apart from this congestion, speedy transport is available for both Kenya and Uganda
territories.

3) Border crossing at Malaba border

According to JST GPS survey, it takes approximately 1.5 days including night time sleep.

Overall Assessment
JICA study team indicates the benchmark from world standard transit time as sown in the following table to
set the target time in development plans.

Table 5.4.1: Benchmark for Import Time (Kenya:from Mombasa to Nairobi)

Activity Survey result World benchmark
Port dwell time 2.0-3.0 days 48 hours (world standard)
Arrival to CFS 1.0 day 1.0 days (No benchmark is available, since CFS is not common
practice in the world)
CFS dispatch 2.7 days 1.0-2.0 days (considering current custom procedure)
To Nairobi 1.0 day 1.0 day
Total 6.7 days-7.7 days 5.0 days-6.0 days
Source: JICA Study Team

Table 5.4.2: Benchmark for Import Transit Time (Uganda: from Mombasa to Kampala)
Activity Survey result World benchmark
From vessel arrival to cargo 4-6 days for transit & dispatch 48 hours for port discharge(world standard)
dispatch 1-2 days for customs clearance (world standard. SCT scheme
conducts customs clearance at port instead of transit
procedure)
Land transportation to 1.5 days(including night sleep) to 1.5 days
border Kampala
Border crossing time 1.5 days(including night sleep) 0.5 day to 1.0 day (Thailand/Malaysia case requires 1.0 day
for customs clearance and cargo transshipment)
Land transportation to 16 hours(incl. night rest) 16 hours(incl. night rest)
destination
ICD procedure 3 hour No(Customs procedure is completed a port side)
Total 7.5 days-9.5 days 6 .2days-7.4 days
Source: JICA Study Team

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(2) Export

Three major bottlenecks are observed:

1) Mombasa access road (same as import)

Access to Mombasa port is characterized by road congestion. In addition to export containers, a lot of
empty containers are carried by poor-standard towing equipment in order to export them.

2) Border facilitation (same as import)

The required time for border crossing is shorter than import. The transit procedure at Kenyan side takes
a little bit longer time than Uganda side.

3) Scanning inspection
Scanning inspection is mandatory at Mombasa port. According to JST interview survey, waiting time is
so long with forwarders approximating the time needed at 2 days. This means that exporters have to
deliver export containers at least 3 days before ship arrival. In world standards, Container Yard (CY)
cut-off date is 1 day before ship arrival date. The extra 2 days at Mombasa port are therefore a serious
constrain for export promotion. It is normal in the world that export cargo are allowed to be delivered
before Container Yard (CY) cut-off date (one day before ship arrival) so long as the custom clearance
had been completed including X-ray scanning or physical check. Reducing waiting time for scanning
inspection is indispensable

JICA study team indicates the benchmark from world standard transit time as sown in the following table to
set the target time in development plans.

Table 5.4.3: Bench mark for Export Time (Kenya: from Nairobi to Mombasa)
Activity Survey result World benchmark
Empty container delivery to exporters premises 1 day for Nairobi 1day for Nairobi
Custom procedure and vanning 0.5-1.0 day 0.5 day (world standard, which is shorter than import)
Delivery to port 1.0-1.5 day 1.0 day
Port entry 0.5-1.0 day 0.5 day(depends on congestion)
Container yard operation to load vessel 3.0 day ( 2.0 day for 1.0 -1.5day (1.5 days is due to scanning waiting. In
scanning) world standard, loading operation is one day and CY
cut-off time is 1.0 day before ship arrival)
Total 6.0-7.5 days 4.0 -4.5 days
Source: JICA Study Team

Table 5.4.4: Bench mark for Export Transit Time (Uganda: from Kampala to Mombasa)
Activity Survey result World benchmark
Empty container delivery to exporters premises 1.5-2.0 days 1.5-2.0 days
Declaration to truck departure at Kampala 1.0 day
(customs declaration: 3-4 1.0 day
h）
Truck delivery from Kampala to Malaba 4.0-5.0 hours 4.0-5.0 hours
Border crossing 1.0 day 0.5 day
Malaba departure to Mombasa port entry 2.0-3.0 days 2.0-3.0 days
Cargo receipt at Mombasa CY to vessel 1.0-1.5 day (1.5 days are due to scanning waiting.
departure 3.0 day( 2.0 day for In world standard, loading operation is one day
scanning) sand CY cut-off time is 1.0 day before ship
arrival)
Total 8.7days-10.2days 6 .7days-8 .7days
Source: JICA Study Team

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(3) Customs procedure

The bottleneck is not only on customs responsibility, but also poor information infrastructure. Power outages,
slow speed and unstable data transmission are obstacles to daily operation for importers/forwarders and
speedy clearance.EAC has been working with WCO (World Customs Organization) to implement trade
facilitation project. Under the support of Swedish International Development Agency (SIDA), risk
management, Authorized Economic Operators (AEO) and post clearance audit programs have been
promoted. .

Risk management development can assess the risk of cargo or importer status from database so that speedy
clearance can be attained, contributing to paperless clearance, avoiding yellow (document check), red
channel clearance instead of increasing green channel clearance. Audit system aims to monitor and amend
finished declaration results so that duty payment amendment becomes easy. These factors increase the
possibility of reducing clearance time. .

One notable reason for delay in clearance procedure is that duty payment practice is different with
developed countries. Usually, developed countries estimate import clearance time to be within a day (in the
case of Japanese AEO forwarders, approximately 80-90 % are cleared within 30-40 minutes with “green
channel” status). This is partially because forwarders are likely to pay duty from their account on behalf of
importers based on enough financial background and deep relation with importers.

The EAC process on the other hand involves three steps. These are: 1) duty calculation by forwarders ⇒2)
Duty payment by importers ⇒3) Customs declaration initiated by forwarders. The conductor of duty
payment and declaration process is separated, which is likely to take increase idle time between duty
payment and declaration. As for forwarders, overlap paper work is time-consuming and increases workload.

Source: JICA Study Team

Figure 5.4.1: Comparison between Current EAC Practice and AEO Scheme

As shown above, current EAC practice can divide declaration patterns into 3 categories; 1) red channel, 2)
yellow channel, and 3) green channel. AEOs basically are guaranteed to get green channel declaration
because of their high compliance ability for customs rules.

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It is failed screen for accessing to ASYCUDA. Prior to completing ASYCUDA data entry, it is necessary to
System shut-downs are frequent prepare duty calculation sheet for importers to pay duty.
After duty confirmation, similar data input is started by
ASYCUDA, that is overlap paperwork.
Note: ASYCUDA (Automated SYstem of CUstoms DAta)
Source: JICA Study Team
Figure 5.4.2: Photos of ASYCUDA

5.5 Development strategy

5.5.1 Overview

“Development strategy” represents solutions for improving logistics standard as well as cost reduction.

(1) Empty container depot function

In Kenya, Embasaki ICD already performs an empty container depot function. Two shipping lines use this
ICD as their empty container depot. In Uganda, Mukono ICD does not have any an intention of handling
empty containers. In remote areas from mother port with trade imbalance, the transport cost becomes
expensive due to the fact that long empty container haulage is unavoidable. In order to resolve this problem,
collaboration with stakeholders is necessary. Uganda has a plan to establish and promote the “Maritime
authority” in order to increase the negotiation power with shipping lines. However, private sector (Export
promotion council) does not have enough negotiation power with shipping lines due to their small cargo
volumes. Public/private cooperation is therefore essential.

In order to get the status of empty container depot, it is necessary to have importer/exporter data to prevent
“one-way” cargo transportation from/to Mombasa. Basic data collection therefore is first priority, especially
for import. Exporters can find empty containers easily because of trade imbalance so that collecting import
information and empty containers will be important. If empty containers are available, export cost is
drastically reduced (approximately 40% cost reduction is projected).

Although stuffed export container is most preferred for railway, it is unrealistic to realize the import/export
balance. Up to then, it seems to be required to use railway for empty container return to Mombasa from the
point of transport cost reduction.

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(2) Logistics hub/center

ICDs will face to lose business opportunities as the place for import customs clearance when SCT scheme is
fully implemented. Thus, it will be necessary to shift their business model to value added operators. The
value added operator will work as a wide range of business providers as well as transport modes as shown in
the table below.

Table 5.5.1: Value Added Operator Concept

Target Business Target Transport Pattern
• Logistics providers, • International/domestic
• Traders • Rail/truck, Air/truck
• Wholesalers/Retailers • Domestic/domestic (small lot delivery)
• High-end product manufactures • Bonded cargo (SCT warehouse regime)
Source: JICA Study Team

In the developed nations, it is observed that production/consumption activities have been gradually shifted
from product-push economy to demand-pull economy. This shift demands logistics provider to provide
frequent/small quantity delivery instead of large quantity/one time delivery. Needless to say, this change is
likely to push up logistics cost and to grow the risk of excess inventory.

Logistics providers in developed countries have been making effort to provide accurate and cost-effective
inventory operation for handling large variety/small lot commodities while achieving cost reduction In
addition, customers (especially manufactures) are likely to focus on their core activity in order to survive;
outsourcing of logistics services becomes the trend. As for logistics providers, inventory and processing
operation abilities are key components.

Following after inventory-oriented service, transportation is another important service menu. Logistics hub
(center) leads to providing “Just In Time (JIT)” delivery by small-medium sized trucks. This is because the
road situation is insufficient for large sized trucks except primary road like Northern Economic Corridor.
Procurement of small/medium size trucks is desirable. This has the potential to promote employment
opportunities to local drivers.

The operational process of JIT is summarized below:

• Receipt of large lot inbound cargo at warehouse (in order to minimize procurement cost, large lot
procurement is sensible)
• Inventory control at warehouse
• On receipt of shipping order from customers, processing operation is conducted (piece picking, sorting,
labeling, re-packing, and etc.)
• Cargo dispatch and JIT delivery to customers

It is also possible to reduce dedicated delivery days (for instance in Japan, next day delivery is possible and
common).

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Source: JICA Study Team

Figure 5.5.1: Image of Logistics Center

(3) CFS development plan

Since customs procedures have to be completed in Mombasa under the SCT, the workload for Mombasa
becomes heavier. This is because multiple data transmission for customs procedure is required between
Mombasa and the destination/transit countries. Although import containers to Kenya are attached to CFS,
transit countries’ ones are able to deliver directly from Mombasa port. However, if congestion becomes
serious due to the heavy workload at Mombasa port, it will be necessary for transit countries to have their
CFS at Mombasa area. Since priority mission of CFS is to decongest Mombasa port, their location hove to
be limited within 10km from the port under the port’s regulation. However, from the practical viewpoints, it
is better to locate closer to destination area for CFS owned by transit countries.

If CFS for transit countries can provide a port side service, “Drop-off practice” becomes more familiar
because CFS can contribute to the port-side operation. This is beneficial for promotion of export.

“Drop off practice” service, which includes; i) they carry shipping line “A” containers to Mombasa with
export goods, ii) amend transit permit and transshipped cargo to shipping line “B” containers, and iii) export
by shipping line “B” container. Normally, shipping lines hesitate to rent their containers for shipper who will
use another shipping line for export even though empty container is available in domestic transport portion.
This practice can realize cost saving by using empty container to main ports.

(4) Port operation

Resolution for port access road congestion

Here, two practical solutions are taken into account for resolving port access road congestion. One is to
promote container stuffing activity by CFS and another is to have wide area for parking lot initiative by
Mombasa County. These solutions will be beneficial for mitigating road congestion both for port access and
inside the port. In addition, trucks turnover from remote areas will be improved if transshipment service is
provided.
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Resolution for long waiting time of scanning inspection

Although customs officer’s supervision is required at container vanning site, the scanning inspection is still
mandatory at the port. Worldwide, double-checking system is likely to be avoided as much as possible.
While preventing unofficial export is an important issue, it is possible to skip scanning inspection when an
officer’s physical checking is reliable. If AEO status is qualified to skip scanning inspection, then it is an
incentive to get AEO status.

5.5.2 Logistics improvement plan in Kenya

Logistics improvement plan for Kenya is summarized below.

Table 5.5.2: Improvement Plan for Logistics in Kenya

Target Field Short term Middle term Long term
Port development - New terminal - Efficient operation - Facilitate cargo exit process
- Number of gate increases
Target time (Current port
2 days (48 hours)
dwell time:2-3 days)
Customs procedure at port - Basic IT infra. development - Basic IT infra. development - Basic IT infra. development
- Duty payment practice
- Risk management - Green channel clearance
facilitation
- Audit system promotion
- AEO system - Immediate release
increment
Target time
2 days 1.5 days 1 day
(Current: over 2.7 days)
Malaba border - Infrastructure development - Multiple lane - Providing information of
border congestion
- OSBP full implementation - Dedicated lane
Target time (Curent:1.5 days
for import from Mombasa to 6 hours for procedural time. However, considering night time rest ,drivers rest, unexpected risk for
Kampla; 1 day for export congestion, we propose one day as target for whole border crossing time for both export and import
from Kampala to Kenya)
Export - Increment scanning - Facilitation on overlap
inspection
machine at port area
- Parking lot development
- CFS activation for export
- 2 day before ship arrival
Target time
including scanning waiting
(CY delivery: 3 days before
time - 1 day before ship arrival including scanning waiting time
ship arrival)
- Scanning waiting time: - Scanning waiting time: bellow 6 hours
(Scanning waiting time: 2
bellow 1 day
days)
Source: JICA Study Team

Table 5.5.3: Development Plan on Logistic Facilities in Kenya

Target Field Short term Middle term Long term
Empty container depot - Railway service development - New ICD for SGR - Embasaki ICD Improvement
Target cost USD700-1000 USD500-600
(Current: USD700-1,000 (approximately 30-40% reduction)
/container from Nairobi
Logistic hub/center - Logistics hub for Nairobi - Other candidate if any
(based on New ICD)
-Kisumu/Eldret
CFS* - CFS establishment if port
congestion is serious due to
the insufficient SCT scheme
development
*Remark: Although CFS is located in Kenyan, this would be targeted for Uganda under the condition that there is serious congestion
at the port of Mombasa due to SCT scheme development. .
Source: JICA Study Team
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5.5.3 Logistics improvement plan in Uganda

Logistics improvement plan for Uganda is summarized as below.

Table 5.5.4: Improvement Plan for Logistics in Uganda

Target Field Short term Middle term Long term
Customs procedure at port* - Basic IT infra. development - Basic IT infra. development - Basic IT infra.
- Clearance at Mombasa - Green channel clearance development
under SCT scheme promotion - Duty payment practice
- Risk management - Immediate release facilitation
- Audit system increment
- AEO system
2.0 days + port dwell time (2 1.5 days + port dwell time (2 1.0 day + port dwell time (2
Target time days) have to be added, since days) have to be added, since days) have to be added since
(Current: 4- 6 days including 4.0 days are necessary from 3.5 days are necessary from 3.0 days are necessary from
port dwell time) vessel arrival to cargo vessel arrival to cargo vessel arrival to cargo
dispatch. dispatch. dispatch.
Remark: Transit procedure remains the main constrain for transit countries., which requires long time. SCT scheme however aims to
conduct import customs clearances while cargo is still at the port of origin. As a result, transit procedures will implement with
customs clearance.
Source: JICA Study Team

Table 5.5.5: Development Plan on Logistic Facilities in Uganda

Target Field Short term Middle term Long term
- Facility development
- Maritime authority
Empty container depot - Linkage with railway for
development
empty container back
Target cost USD2000 (in the case of
USD800-1000(in the case of return container is available for
(Current: USD2500/container return container is available by
export
from Kampla rail
- Kampala - Tororo
Logistic hub/center
- Gulu - Mbarara
Source: JICA Study Team

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CHAPTER 6 : INDUSTRIAL INFRASTRUCTURE

DEVELOPMENT

6.1 Power Development in Kenya

6.1.1 Overview of Current Status

Currently, the interconnected system in Kenya had a total installed capacity of 2,177MW as at March 2015;
made up of 820.6MW of hydro, 717MW of thermal, 588MW of geothermal, 25.5MW of wind, 26MW from
cogeneration. There was also 26MW in isolated mini-grids. The total effective capacity was 2,127MW during
normal hydrology of which 2,106MW was from the interconnected system. Hydro accounts for around 37.7%
of the total energy supply. Registered interconnected national sustained peak demand was 1,512MW recorded in
February 2015.

The country’s electricity supply industry structure is the single buyer model where all generators sell power in
bulk to KPLC for dispatch and onward transmission and distribution to consumers. Currently the transmission
network is shared between KPLC and KETRACO. The total transmission network (220kV and 132kV) for
KPLC stood at 3,947km by June 2014. KETRACO transmission network stood at 328.5km for 220kV and
428km for 132kV by December 2014. The entire distribution network of 52,850km (as at June 2014) in the
country is operated by KPLC. The network consists of 66kV feeder lines around Nairobi and 33kV and 11kV
medium-voltage lines elsewhere in the country.

In Kenya, electricity is supplied to about 37% of the total population. This is predominantly middle and upper
income groups. The utility’s strategy to connect more customers to enhance sales growth is currently under
implementation. At present, the number of customers connected to the national grid is 2,766,441 in 2014.
Electricity sales for Kenya are 7,244 GWh in the year 2013/2014. The share of rural domestic consumers to
urban ones is 19%.

6.1.2 Review of Future Projects

In 2013, Updated Least Cost Power Development Plan (2013-2033) was issued by Energy Regulatory
Commission (ERC) which is a strategic document in overall planning.

The power demand forecast is showed in the table 6.1.1 below:

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Table 6.1.1: The Power demand Forecast of Uganda 2015-2030

Year 2015 2016 2017 2018 2019 2020 2021 2022
Power
consumption 12,146 13,809 15,678 17,719 20,042 22,686 25,687 29,150
demand (GWh)
Power peak
2,069 2,353 2,676 3,034 3,443 3,910 4,441 5,057
demand (MW)
Year 2023 2024 2025 2026 2027 2028 2029 2030
Power 33,088 37,578 42,698 48,536 55,196 62,793 71,461 81,352
consumption
demand (GWh)
Power peak
5,758 6,561 7,480 8,531 9,735 11,113 12,691 14,446
demand (MW)
Source: JICA Study Team based on Updated Least Cost Power Development Plan (2013-20133) by ERC

In order to meet the power and energy requirements, the Kenya government has some big projects as follows:

(1) 5000+MW for Transforming Kenya

The government formulated a 40-Month target to increase the capacity by 5000MW additional capacity within
40 months has been under implementation. The target was to achieve this in the period between June 2013 and
December 2016 and thereby increase the total installed capacity to 6,762MW. The main objectives of this
initiative are to:

1) Provide adequate capacity to meet the suppressed and growing demand

2) Provide a 30% reserve margin
3) Power energy needs arising from activities in the counties.
4) Power electrification of rail lines and new economic zones under Vision 2030
5) Reduce the cost of generation by displacing fossil thermal energy with cheaper energy.

However, the implementation of the programme is in full swing and only 507.4MW (~10% of target) has been
commissioned under the programme by 2015.

(2) Generation Projects under Feed in Tariff (FiT) Policy

The Government of Kenya incorporated the Feed in Tariff as a strategy to promote the contribution of the
renewable energy sources in generation of electricity. In this planning period the FIT projects for capacities
below 10MW will contribute 134.85MW.

(3) Regional Power Trade Projects

The Ethiopian Electric Power Company and Kenya Power have a PPA for export of 400MW to Kenya through a
500kV HVDC line spanning over 1,100 km. The line is currently being developed by KETRACO on the
Kenyan side and it is expected to be commissioned by 2018. Kenya Power has signed a Power Purchase
Agreement (PPA) with the Rwanda power utility Rwanda Energy Group Limited (REG) for export of 30MW
through the Ugandan transmission line.

(4) Generation Projects under Prefeasibility and Feasibility Studies

Hydro projects:

- - High Grand Falls Multipurpose dam (500MW)

- - Magwagwa Multipurpose dam (120MW);
- - Arror Multipurpose dam (60MW);
- - Nandi Forest Multipurpose dam (50MW).
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Nuclear Electricity

Kenya Nuclear Electricity Board is currently conducting a Pre-Feasibility Study (PFS) with the objective of
assessing the current status of development of the national infrastructure against the guidelines recommended
by the International Atomic Energy Agency (IAEA) and to propose measures to mitigate the gaps identified in
the 19 infrastructure issues which include National Position, Electrical Grid, Siting and Procurement among
others.

Baringo - Silali Geothermal development block

The objective of this project is to develop 800MW of steam equivalent. The financing of the project is being
sourced from the government. The required financing is mainly for acquiring additional rigs.

6.1.3 Development Scenario As Base Case

Based on Updated Least Cost Power Development Plan (2013-2033), the peak demand of base case is forecast
to grow from 1,512MW in February 2014 to 14,446MW in 2030. The Base Case expansion analysis was
performed respecting the limitation in number of geothermal plants per year, maximum number of nuclear
plants in the period, project lead times among other constraints.

In order to meet the power and energy requirements, the generation expansion planning is planned with the
installed capacity by 2020 is 4,860MW, by 2025 is 9,070 and by 2030 is 16,982MW. The development
scenario as base case in Table 6.1.3 is utilized.

Table 6.1.2: The Development Scenario as Base Case of Power System in Kenya
Year 2015 (Current) 2020 2025 2030
Peak Demand 1,512MW 3,910MW 7,480MW 14,446MW
Installed Capacity 2,177MW 4,860MW 9,070MW 16,982MW
Generation mix:
Hydro power plant 820.6MW 839MW 979MW 979MW
Geothermal 588MW 2,019MW 3,279MW 5,331MW
Thermal 717MW 698MW 1,408MW 2,968MW
Wind 25.5MW 686MW 786MW 1,486MW
Cogeneration 26MW 18MW 18MW 18MW
Import 600MW 1,400MW 2,000MW
Coal 900MW 2,400MW
Nuclear 300MW 1,800MW
Source: JICA Study Team based on Updated Least Cost Power Development Plan (2013-20133) by ERC

6.1.4 Alterative Scenarios

The power demand focus is revolves around 3 scenarios: Low scenario, Reference scenario and High scenario.
All the above scenarios have been considered in developing Updated Least Cost Power Development Plan
(2013-2033). In implementing the Updated LCPDP, the government of Kenya through Project 5000MW
initiative, the government of Kenya reorganizes the timing of the projects as indicated in Updated Least Cost
Power Development Plan (2013-20133). The reorganizations were made on the assumptions of demand driven
projects. To guide this implementation, there was a 5 years Power Sector Expansion Plan (2015-2015) as short
term plan and a 10 years Power Sector Expansion Plan (2014-2014) as midterm plan to address the challenges
that are being experienced in energy sector evolution. With the confirmation of ERC, the reality of 2030 Power
demand is long term plan as depicted in Updated Least Cost Development Plan (2013-20133), and this
document should be used as a reference material for long term power demand focus.

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6.1.5 Gap Assessment and Future Bottlenecks

Power sector of Kenya faces several challenges in three fields: generation, transmission and distribution as
follows:

(1) Generation challenges:

- Inadequate infrastructure for power supply in the locality of generation plants.

- Underdevelopment of the immerse potential of renewable energy for power generation.
- Thermal power generation causes environmental pollution which requires costly mitigation measures.
- High price volatility of petroleum products affecting electricity generation cost.
- Thermal power plants have a relatively short life span.
- Stringent emergency power plan conditions.
- Thermal power plants have relatively lower conversion efficiencies of less than 50% compared to
hydropower plants which have over 90% efficiency
- Nuclear plants require high upfront capital cost and nuclear waste is highly radioactive and non
biodegradable.

(2) Transmission challenges:

- Weak, inadequate and poorly integrated transmission infrastructure.

- Displacement of population and settlements.
- Vandalism on transmission network
- Land and way leaves acquisition.
- Undeveloped legal, regulatory and institutional framework for a competitive wholesale electric power
market.

(3) Distribution challenges:

- Weak distribution network characterized by limited redundancy and aging

- Frequent and prolonged supply interruptions.
- High distribution system losses.
- Illegal power line connections and theft of electricity.
- Scattered nature of population in rural areas
- High costs of rural electrification projects

6.1.6 Development Strategy

Power demand is expected to increase meteorically as Kenya's economic activities are accelerated. New sources
of energy will include exploitation of geothermal power, coal, renewable energy sources, nuclear and
connecting Kenya to countries in the region for energy trade. They comprise of a mixture of public developed
projects, private developed or both. They are in different stages of development and hence have different
completion timelines. As a strategy for timely implementation of these projects, they have been categorized and
prioritized as follows: Short term by 2020, Midterm by 2025 and Long term by 2030.

The development strategy of power system and map of power system development are presented in Table 6.1.4
and Figure 6.1.1 below.

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Table 6.1.3: The Development Strategy of Power System in Kenya

Year Descriptions
Current (2015)
Peak Demand 1,512MW
Installed Capacity 2,177MW
Key projects: Olkira 4 (70MW); Olkira 1B (70MW); Olkaria Well Head (40MW); Prunus (50MW); SMHYD
(25MW); Kipeto (100MW); Aelous ( 60MW); Kipevu 1&2 (100MW)
Short term (2020)
Peak Demand 3,910MW
Installed Capacity 4,860MW
Rural electrification 22%
Key projects: Olkaria 4 (70MW); Silali (150MW); Olkaria 4 (140MW); Eburru (26MW); Lake Turkana Wind
(300MW); Fit wind (50MW); Menengai (400MW); Import (600MW); Menengai Well Head
(40MW); OLKV (140MW); Agil (140MW) Olkaria 1 (45.9MW); Geothermal (280MW); Munias
(26MW); Wind (100MW);
Midterm (2025)
Peak Demand 7,480MW
Installed Capacity 9,070MW
Key projects: Hydro power plant: 1410MW; Geothermal: 1260MW; Thermal: 710MW; Wind: 100MW; Import:
800MW; Coal: 900MW; Nuclear: 300MW
Long term (2030)
Peak Demand 14,446MW
Installed Capacity 16,982MW
Key projects: Geothermal: 2052MW; Thermal: 1560MW; Wind: 700MW; Import: 600MW; Coal: 150MW;
Nuclear: 1500MW
Source: JICA Study Team based on Updated Least Cost Power Development Plan (2013-20133) by ERC

Source: Ministry of Energy and Petroleum (MEMD)

Figure 6.1.1: Map of Existing and Proposed Power Generation
in Kenya
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6.1.7 Suggested Projects and Implementation Plan

The power generation of power sector is mainly by hydro power, thermal and geothermal power. Therefore, the
need to develop alternative energy sources such as renewable, nuclear energy. In addition, the current
electrification rate in Kenya is about 30% of the total population with rural areas constituting only 13% of the
total (predominantly middle and upper income groups). And the road map of power sector will accelerate access
to quality electricity to more than 50% of Kenyans by 2030. To solve these issues, suggested projects and
implementation plan are showed as follows:

(1) Accelerate connectivity

Objectives
- In order to reduce the cost burden of increased connectivity on KPLC, as well as reduce the amount paid by
the customer to connect to the grid, the plan is to extend the distribution network to as near the customer as
possible using external or government funding to get the target of electrification more than 50% by 2030.

Development Items
- Extending the low voltage network on existing and other upcoming distribution transformers to reach
households lying within transformer protection distance
- Building low voltage lines both single phase and three phases along rural access roads.

(2) Extension of the National Transmission Network

Objectives
- Improve quality and reliability of electricity supply throughout Kenya by ensuring adequate evacuation
capacity.

Development Items
- Develop new transmission lines comprising of about 5,000km in the short term and 16,000km by 2030.
- Provide interconnection links with the neighboring countries in order to facilitate power exchange and
develop electricity trade in the region
- Open up off-grid areas in order to ease connectivity to electricity by constructing transmission lines to link
them up to the national grid.

(3) Promote Nuclear Energy

Objectives
- The critical need for nuclear energy is premised on the fact that, with the rising demand for power in Kenya
due to the accelerated investment in the economy, it is one of the forms of energy that can produce
enormous amounts of electricity at a relatively economical cost.

Development Items
- Develop a comprehensive legal and regulatory framework for the development, regulation and utilization
of nuclear energy for electric power generation.
- Identify an operator for the nuclear power plant and establish any other body required for the development
and operation of nuclear electricity programme.
- Carry out pre-feasibility and feasibility studies to address all requisite infrastructure issues for the
development of a nuclear power programme.
- Commence human capacity building programme for recruitment of highly knowledgeable and skilled
human resource in nuclear energy and ensure continuous training in all relevant specializations required for
the support of the nuclear power programme.

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6.2 Power Development in Uganda

6.2.1 Overview of Current Status

Currently, Uganda has stable electricity supply which is provided from large and mini hydropower resources as
well as cogeneration plants. The existing supply from renewable energy sources is sufficient to meet the current
demand. The total system demand in 2015 is about 560MW. The Generation mix by 2015 stood at 873.34MW,
of which 695MW were from hydro, 118.84MW from petroleum-based thermal and 59.5MW from biomass
co-generation sources. Total energy generated in 2014 was 3,257,710MWh, slightly higher than the previous
year’s generation by 7.2%. Most of this energy came from large hydro power plants (78.6%), while small
proportions of 16.1%, 4.2% and 1% came from embedded generators, thermal generators and imports,
respectively. Energy exports were 125,064MWh while imports stood at 32,696MWh.

Umeme is the biggest distribution company. By the end of December 2014, the biggest proportion of
Energy (94.6%) had been sold to Umeme. Besides, Umeme sold the largest portion (45.8%) of energy to large
industries since they do heavy work that requires plenty of energy to run the machines. This was followed by
commercial and medium industries consumers (30.4%), domestic consumers (23.7%). The least energy (0.1%)
was used for street lighting. On balancing the purchases and sales, the distribution system incurred energy
losses amounting to 619,402MW in 2014.

The figure 6.2.1 shows the energy utilities in Uganda by 2014.

Source: Ministry of Energy and Mineral Development (MEMD)

Figure 6.2.1: Energy Utilities in Uganda by 2014
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6.2.2 Review of Future Projects

In 2014, UETCL issued The Grid Development Plan (GDP) 2014-2030 which is a strategic document in overall
planning. It details the future grid requirements in terms of projects and investment costs to meet the national
load growth, generation developments and regional interconnection requirements. It presents the latest demand
forecast update, generation expansion plan, Demand – Supply Balance for the current and subsequent years,
power system analysis results, financial projections, the Grid Investment Plan and Implementation Schedule.

The power demand forecast was showed in the table 6.2.1.

Table 6.2.1: Power Demand Forecast of Uganda 2015-2030

Year 2015 2016 2017 2018 2019 2020 2021 2022
Domestic (MW) 548 652 708 770 837 914 905 987
Total (MW)
560 665 721 785 902 1030 1022 1208
(Domestic + Export)
Year 2023 2024 2025 2026 2027 2028 2029 2030
Domestic (MW) 1097 1216 1272 1338 1478 1551 1622 1707
Total (MW)
1367 1436 1523 1589 1729 1802 1872 1957
(Domestic + Export)
Source: The Grid Development Plan 2014-2030 by UETCL

In the Grid Development Plan, the generation mix by 2030 is forecasted as Hydro power plant with 86%,
Thermal power plant with 10% and Cogeneration with 4%. So, Hydro power plant occupies a very large
proportion of power generation system in Uganda.

Table 6.2.2: List of Future Projects of Power System in Uganda

Power plants Status Financier
Large Hydro power plants
Karuma (600MW) Under construction China EXIM Bank
Isimba (183MW) Under construction China EXIM Bank
Ayago (600MW) Planned China EXIM Bank
Oriang (500MW) Planned
Kiba (500MW) Planned
Uhuru (650MW) Planned
Small Hydro power plants
The sites feasibility studies have
Nyamwamba; Kikagati; Kakaka; Lubilia; Kagando; Sipi; Waki;
been completed and now at the
Nengo Bridge; Nshogenzi; Nyamba B; Muzizi; Maziba
stage of financial closure.
Source: JICA Study Team based on Power Sector Report by UETCL

6.2.3 Development Scenario as Base Case

Based on the Grid Development Plan 2014-2030, the peak demand of base case is forecast to grow from
560MW in 2015 to 1957MW in 2030. And the rural electrification is currently at 7%. The rate is expected to be
22% by 2022 basing on Government of Uganda Rural Electrification Strategy and Plan. It is estimated that the
rural electrification rate will be 31% by 2030. Besides, with the new generation and transmission projects, it
will reduce non-technical and technical losses, non-technical losses will reduce to 3% by 2020 and that
distribution technical losses will reduce to 14% by 2020. Thereafter losses are assumed to remain at these levels
to 2030.

In order to meet the power and energy requirements, the generation expansion planning is planned with the
installed capacity by 2020 is 1563MW, by 2025 is 2171 and by 2030 is 2520MW. The development scenario
as base case in Table 6.2.3 is utilized.

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Table 6.2.3: The Development Scenario as Base Case of Power System in Uganda
Year 2015 (Current) 2020 2025 2030
Peak Demand 549MW 1030MW 1523MW 1957MW
Installed Capacity 873MW 1563MW 2171MW 2520MW
Generation mix:
Hydro power plant 89% 80% 86% 86%
Thermal power plant 3% 15% 10% 10%
Cogeneration 8% 5% 4% 4%
Rural electrification 7% 22% 22% 31%
Non-technical losses 3.4% 3% 3% 3%
Technical losses 20% 14% 14% 14%
Source: The Grid Development Plan 2014-2030 by UETCL

6.2.4 Alterative Scenarios

The Grid Development Plan 2014-2030 presents an outlook of four scenarios showing their planned
implementation strategy and recommendations, such as:

1. The base case scenario looks at the normal business as usual case.
2. The National Development Plan (NDP 2010-2015) scenario that aims at transforming Uganda from a
peasant to a modern and prosperous country with set targets to be implemented within 5 years, with the
target of installed capacity of 22,222MW by 2030.
3. The Electricity For All scenario in which 100% of the Uganda population has access to Electricity by 2035
as per energy policy directive, with the target of installed capacity of over 17,00MW by 2025.
4. The Uganda’s VISION 2040 scenario that aims at transforming Ugandan Society from a Peasant to a
Modern and Prosperous Country within 30 years, with the power demand forecast up to 41,738MW by
2040.

With the confirmation form Electricity Regulatory Authority (ERC) and Ministry of Energy and Mineral
Development (MEMD), base case scenario is more realistic. However if the country oil industry, Standard
Gauge railway project and other large scale projects such as iron and steel industry take off, the high case is
possible.

6.2.5 Gap Assessment and Future Bottlenecks

Despite the significant structural reforms implemented in the power sector, Uganda still faces several challenges
in this sector, which are affecting growth, such as:

- Inadequate public financing to develop electricity supply projects to match growing demand. The
government prefers to maximize private investment in infrastructure in order to allocate more resources
to the social sector.
- Low electricity coverage throughout the country, especially in rural areas.
- High technical and non-technical losses.
- Delayed way leaves acquisition is a major hindrance to timely project completion
- High subsidy cost of the power sector arising from its inability to service its long-term debt.
- Securing funding for new investments
- Rampant vandalism.
- Lengthy procurement processes
- Depreciation of the Uganda Shilling against foreign currencies
- The Bulk Supply Tariff is not cost reflective.
- High taxes on power imports/exports and infrastructure projects.

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6.2.6 Development Strategy

To fulfill the development of power system, there are numerous power projects that have to be implemented. As
a strategy for timely implementation of these projects, they have been categorized and prioritized as follows:
Short term by 2020, Midterm by 2025 and Long term by 2030.

The development strategy of power system and map of power system development are presented in Table 6.2.4
and Figure 6.2.2 below.

Table 6.2.4: The Development Strategy of Power System in Uganda

Year Descriptions
Current (2015)
Peak Demand 560MW
Installed Capacity 873MW
Rural electrification 7%
Energy losses Non-technical losses: 3.4%; Technical losses: 20%
Short term (2020)
Peak Demand 1030MW
Installed Capacity 1563MW
Rural electrification 22%
Energy losses Non-technical losses: 3%; Technical losses: 14%
Key projects:
Generation Large hydro: Karuma (600MW); Isimba (183MW); Agago/Achwa (88MW); and Ayago
(600MW);
Medium scale: Kabaale/Albatros/Albertine (53MW); Katwe Geothermal (50MW); Kinyara
upgraded to 35MW;
Mini-hydros: 11 power plants with capacity of 155.1MW;
Small scale: 9 power plants with capacity of 66.7MW;
Transmission 400kV transmission line: 4 projects
220kV transmission line: 7 projects
132kV transmission line: 15 projects
Midterm (2025)
Peak Demand 1523MW
Installed Capacity 2171MW
Rural electrification 22%
Energy losses Non-technical losses: 3%; Technical losses: 14%
Key projects:
Generation Oriang (500MW)
Transmission 400kV transmission line (2 projects): Karuma – Tororo (400kV); Kenya-Uganda-Rwanda
interconnection upgraded to 400kV.
220kV transmission line (2 projects): Mutundwe Kabulasoke-Nkenda (220kV);
Hoima-Kinyara-Kafu upgraded to 220kV
Long term (2030)
Peak Demand 1957MW
Installed Capacity 2520MW
Rural electrification 31%
Energy losses Non-technical losses: 3%; Technical losses: 14%
Key projects:
Generation Kiba (500MW)
Source: The Grid Development Plan 2014-2030 by UETCL

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Legend:
Proposed Large Hydro Power Plants (importan t projects): A: Murchison; B: Klba; C: Ayago; D: Oriang; E: Karuma; F: Isimba
Proposed Mini Hydro Power Planst: 1: Siti; 2: Nyamabuye; 3: haisesero; 4: Kisisi; 5:Nengo Bridge; 6: Bugoye; 7:Mubuku; 8: Kakaka; 9: Ngete;
10: Sogahi; 11: Muzizi; 12: Muyembe; 13: Kikagati; 14: Ruizi; 15: Sipi Falls; 16: Buseruka; 17: Waaki; 18: Kyambura; 19: Nsongezi;20: Nyamambwa;
21: Nyagak 3; 22: Siti 2; 23: Sindira; 24: Ndugutu; 25: Achwa1/Agao; 26: Achwa 2/Agago; 27: Achwa 3/Agago; 28: Kabale Peat; 29: Rwimi; 30: Lubilia
Source: Ministry of Energy and Mineral Development (MEMD)
Figure 6.2.2: Map of Power System Development in Uganda

6.2.7 Suggested Projects and Implementation Plan

Access to the national grid remains low due to limited national power grid coverage. In terms of Rural –Urban
divide, only 7% of the household in the rural areas have access to grid power as compared to 40% of urban
households. While access is higher in urban areas a significant proportion of households till rely on
non-renewable energy sources. To solve these issues, suggested projects and implementation plan are showed as
follows:

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(1) Accelerate rural electrification

Objectives
- Expand the grid to the rural areas to get the target of rural electrification up to 31% by 2030.

Development Items
- Extend the grid to District Headquarters; maximize connection of major economic centers and social
service facilities.
- Implement community schemes.
- Provide subsidies to independent power producers operating the mini grids.
- Invest in energy transmission to rural and urban areas.

(2) Promote Energy Efficiency

Objectives
- Reduce power losses to get the target of total energy losses as low as 17% by 2030.

Development Items
- Reduce technical power losses mainly through revamping the transmission and distribution system.
- Review policy, legal and institutional frameworks to attract more private investment into the power sector.
This will among others, improve coordination of institutional planning to incorporate key sectors affected
and those that contribute to the energy sector.

(3) Promote Renewable Energy

Objectives
- Promote and facilitate the use of Renewable Energy Technologies (biomass, solar, gasification
technologies and stoves) at household and institutional level.

Development Items
- Develop and implement a strategy for bio fuels crop growing.
- Provide subsidies for solar PV systems.
- Provide subsidies and loan systems for bio gas systems.
- Develop database for wind energy and its characteristics

(4) Promote and regulate peaceful application of atomic energy.

Objectives
- Carry out specialized training of human resource in nuclear energy.

Development Items
- Carry out specialized training of human resource in nuclear energy.
- Seek authorization of atomic energy practices with proper monitoring.
- Monitor atomic energy applications.

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6.3 Water Sector Development in Kenya

6.3.1 Overview of Current Status

Kenya is classified as a chronically water-scarce country. Although the UN

recommends per capita available water resources of 1,000 m3/year, Kenya
has only 586 m3/year as of 2010. To overcome this water stress situation,
the National Water Master Plan 2030 (NWMP 2030) was formulated in
2013.

With the promulgation of the Constitution of Kenya (CoK) 2010, all

existing laws and public institutions had to realign to the new provisions.
With the realignment, the Ministry of Water and Irrigation (MWI) drafted a
Water Policy and Water Bill 2014. As of October 2015, the Bill is awaiting
the final enactment for it. Accordingly, the water sector’s administrative
structure is in the progress of reconstituting as of October 2015. Note:The country consists of the six
catchments 36.
From the aspect of water, the most likely bottleneck for the development of Source: JICA Study Team
Figure 6.3.1: Catchment Areas
the NEC is considered to be the volume of available water resources in the
country. The NWMP 2030 provides the result of water balance study by comparing the years 2010 (present) and
2030 (projection). It indicated that most sub-catchments along the NEC particularly the areas between Nairobi
and Mombasa suffer from water deficit even in 2015.

It is evident from the result of NWMP 2030 that even present water demands are exceeding available water
resources under the conditions of existing water resources structures. The NWMP 2030 provided a clear water
resources development plan for the respective six catchment areas toward 2030. The real issue here is whether it
will be implemented by 2030. Even the initial National Water Master Plan formulated in 1992 had slow
progress up to its target year of 2010.

Based on the recent water sector review report as well as discussions with the MWI, the low development rate
against the target is referable to the following factor and it could be issue on the supply side: a) social
challenges with affected communities within the potential infrastructure sites. On the other hand, key issues on
the demand side are analyzed by the NWMP 2030 as follows: b) insufficient water saving, and c) high level of
non-revenue water.

6.3.2 Review of Future Projects

To meet the rising water demand, the NWMP 2030 proposed 59 dam schemes and 12 water transfer schemes to
be constructed by 2030 across the country. According to its implementation schedule, those dams are expected
to be completed sequentially after 2017 as summarized below.

36 a) Lake Victoria North Catchment Area (LVNCA), b) Lake Victoria South Catchment Area (LVSCA), c) Rift Valley Catchment Area (RVCA), d)
Athi Catchment Area (ACA), e) Tana Catchment Area (TCA), and f) Ewaso Ngiro North Catchment Area (ENNCA)
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Table 6.3.1: Proposed Dam Scheme 16,000 100

Effective Storage Volume

Proposed Dam
14,000 Storage Volume 90

Number of Large Dam

Catchment

of Large Dams (MCM)

Effective Storage
Area Nos. 12,000 Nos. of Large Dam 80
Volume (MCM)
LVNCA 7 1,080 10,000 70
LVSCA 10 1,000 8,000 60
RVCA 10 659
ACA 16 1,689
6,000 50
TCA 11 5,729 4,000 40
ENNCA 5 522 2,000 30
Total 59 10,679 0 20
Source: NWMP 2030 (JICA, 2013)

2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Year
Source: JICA Study Team based on NWMP 2030 (JICA, 2013)
Figure 6.3.2: Storage Volume and Nos. of Dam

As seen in the graph, the total storage volume abruptly increases in 2018 because the High Grand Falls dam in
TCA was expected at the study stage of NWMP 2030 to be completed in 2017. It has a storage volume of 5,000
MCM functioning as domestic and industrial water supply, irrigation (106,000 ha), power generation (700 MW)
and flood control. However, not much progress has been reported since signing the contract with China State
Construction Engineering Corp Ltd in May 2014 and therefore the completion will be delayed.

Out of the proposed 59 dam schemes, 13 dams have made the following progress as of October 2015 after the
formulation of NWMP 2030.

- Construction commenced: 2 dams (Siyoi: LVNCA, Ruiru-A: ACA)

- Procurement on-going: 2 dams (Thwake: ACA, Mwache: ACA)
- Financial arrangement agreed with donor: 1 dam (Itare: LVSCA)
- Detailed design completed: 2 dams (Nzoia-34B: LVNCA, Nyando: LVSCA)
- Feasibility study completed: 6 dams (Londiani: LVSCA, Upper Narok: RVCA, Kamii-1: ACA, Stony
Athi: ACA, Nyahururu: ENNCA, Rumurti: ENNCA)

Although the projects proposed in NWMP 2030 have not been implemented completely as scheduled, the
government has been steadily advancing the water resources development projects putting priority on the
flagship projects mentioned in the Kenya Vision 2030.

6.3.3 Development Scenario as Base Case

Based on the national development target described in the Kenya Vision 2030, the NWMP 2030 estimated the
water demand by sub-sector for the years 2010 and 2030 as summarized in Table 6.3.2. The irrigation demand
of 8,063 MCM/year in 2030 was estimated so as to fall within the available water resources through the water
balance study because it was revealed that the amount of available water resources is not enough to fulfill the
water demands required for the 1.2 million ha irrigation area mentioned the Vision.

Also, it must be noted that the domestic, industrial and irrigation water demands were estimated in expectation
of demand-side improvements by 2030. The non-revenue water (NRW) ratio was set at 20% for 2030 in line
with the Water Sector Strategic Plan 2009 though it was 45% in 2010. The overall irrigation efficiency should
be increased from 60% in 2010 to 70% in 2030 considering the successful introduction of water saving
methods.

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Table 6.3.2: Projected Water Demand by Sub-sector in Kenya

Sub-secto Water Demand (MCM/year) Basic Condition for Projection
r 2015 2020 2025 2030 Major Index (2010 / 2030) 2010 2030
Domestic 1,530 1,874 2,217 2,561 Population (million person) 38.53 67.84
Industrial 164 203 241 280 Industrial activity level by district - -
Irrigation 3,217 4,833 6,448 8,063 Irrigation area (ha) 141,900 765,575
Livestock population / consumption and - -
Livestock 316 376 437 497
export
Wildlife 8 8 8 8 Wildlife population by species - -
Fisheries 50 58 66 74 Pond surface area (km2) / population growth 19.01 -
Total 5,284 7,351 9,417 11,483 - - -
Note: The 2015, 2020, 2025 water demands are computed with the linear-proportion between 2010 and 2030 data based on NWMP
2030.
Source: JICA Study Team based on NWMP 2030 (JICA, 2013)

6.3.4 Alterative Scenarios

Although there is almost no change in external factors influencing the water resources development sector after
the formulation of NWMP 2030, the projects proposed in the NWMP 2030 are implemented slightly behind
schedule as of October 2015. Accordingly, alternative scenarios may be set from the following two sides:

Supply Side: Since 59 dams were proposed to be constructed by 2030, almost four dams in average should be
completed every year. However, in the fiscal year 2014/15, only two dams were commenced. Therefore it is
necessary to consider the case that dam and water transfer schemes are advanced at a half pace compared to the
original implementation schedule.

Demand Side: The NWMP 2030 assumed the improved NRW ratio of 20% and irrigation efficiency of 70%. As
an alternative scenario, the case without those improvements shall be compared. The domestic and industrial
water demands are estimated with the NRW ratio of 45% and the irrigation water demand is estimated with the
irrigation efficiency of 60% for this case.

6.3.5 Gap Assessment and Future Bottlenecks

Considering the above water demand in 2030 for the base case, water deficit was computed by sub-catchment
under the existing structures conditions as shown in Figure 6.3.3. It indicates that many areas will have severer
deficits in 2030 compared to 2010 with few exceptions if the condition of water resources structures would be
unchanged.

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Notes: 1. NWMP 2030 initially calculated deficit in 2030 only in the case of 1.2 million ha irrigation area. Thus the deficit
in the above figure was re-estimated by deducting the reduction of irrigation water demand from the initial deficit in 2030.
2. Irrigation demand in 2030 in some sub-catchment areas was decreased compared to 2010 through the water
balance study.
Source: JICA Study Team based on NWMP 2030 (JICA, 2013)
Figure 6.3.3: Annual Deficit by Sub-catchment in 2030 under the Existing Structures Conditions

To fulfill these deficits, the NWMP 2030 has proposed various water resources structures including dams, water
pans, water transfer, boreholes and desalination. Figure 6.3.4 below provides the comparison between projected
water demands and planned water storage and yield volume up to 2030. The storage and yield volume in the
graph consist of i) the effective storage volume of large dam, ii) storage volume of small dam and water pan, iii)
annual yield volume of borehole, and iv) annual treatment capacity of desalination.

14,000 Total Demand Total Demand

12,720 Water Demand Side:
= 11,483 MCM = 13,537 MCM
Storage + Yield Volume (MCM)

12,000 Domestic
Water Demand (MCM) /

10,007 Industrial
10,000 Irrigation
7,905 Livestock
8,000 6,853
5,496 Wildlife
6,000 Fisheries
4,445
4,000 Water Supply Side:
Dam Storage
2,000 985 985 + Borehole Yield
0 Relatively small demands:
2015 2020 2025 2030 2015 2020 2025 2030 *Wildlife: 8 MCM (2030)
Year
*Fisheries: 74 MCM (2030)
Base Case Alternative Scenario
Notes:1. The dam storage volume in 2015 is estimated excluding hydropower dams.
Notes:2. The completion year of Umaa and Badasa dams, which are initially scheduled to be completed in 2013, was set as 2016 due to
the delay in the on-going construction works.
Source: JICA Study Team based on NWMP 2030 (JICA, 2013)
Figure 6.3.4: Projected Water Demand and Planned Water Storage and Yield Volume

It must be noted that the effective volume of large dam includes some environmental maintenance flow which is
not available for any water use, while the actual water supply volume to be allocated to each sub-sector include
surface water from river and lake in addition to the storage volume. Although the storage and yield volume in
the graph does not directly indicate net supply capacity, in either case the NWMP 2030 has been formulated so
as to satisfy the entire water demand by 2030 if all the proposed structures are completed as scheduled.

As seen in the above graph, if the supply and/or demand sides are not improved by 2030 as planned, almost half
of water demand would not be satisfied.

Major future bottlenecks in implementing the respective water resources development schemes proposed in the
NWMP 2030 are considered i) social issues including resettlement of affected communities and ii) financial
arrangement, as is now the case in many large infrastructure projects in the country.

6.3.6 Development Strategy

The NWMP 2030 has been formulated after taking into account all the water-related issues as well as regional
development in the entire country. The development strategy in the water sector is therefore to follow the plans
proposed by the NWMP 2030. The water demand is scheduled to be met in 2030 by pressing ahead with the
NWMP 2030 as well as the on-going projects. The water resources development plan is summarized in Figure
6.3.5 below. Although it is not divided into short, mid and long terms, the expected achievements for each term
can be approximately read from Figure 6.3.4 above. In addition, the NRW ratio and irrigation efficiency should
be improved so as to minimize future water demand.
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Source: JICA Study Team based on NWMP 2030 (JICA, 2013)

Figure 6.3.5: Summary of Water Resources Development Plan Proposed by NWMP 2030

6.4 Water Sector Development in Uganda

6.4.1 Overview of Current Status

With a mean annual rainfall of around 1,200 mm, Uganda may be considered to be endowed with significant
freshwater resources. However, their uneven spatial and temporal distribution coupled with the ever increasing
pressure on the resource due to rapid population growth, increased urbanization and industrialization, and so
forth still remains a big challenge to the sustainable water resources management and development.

As water-related concerns are growing in recent years, the study on National Water Resources Assessment
(NWRA) was conducted and its final report was issued in 2013. Based on the study result, the National Water
Resources Development and Management Strategy has been
formulated37 aiming to provide a framework for integrated management
and development of the country’s water resources. The strategy sets the
stage for the development and management of Uganda’s water resources
up to the year 2040.

The 2013 assessment provides the result of water balance study between
water demands and internal renewable water resources by comparing the
years 2009 (present) and 2030 (projection). Based on the said assessment,
further water balance study on a monthly basis was conducted in this
report by reviewing and modifying the future water demand. As a result,
the overall water utilization rate in 2015 stands at 6.6% 38 as summarized
in Table 6.4.1. Even monthly utilization rate, which is referred to as Notes:1)The country consists of the eight
catchments; 2) Shaded areas show cattle
exploitation index (EI) in the assessment report, does not exceed 100% in corridor.
any catchment areas. The current situation is by no means critical, though Source: JICA Study Team
shortages can be experienced at local levels at some points in time. Figure 6.4.1: Catchment Areas

37 The strategy has been already finalized but it has not been reflected to this report because it has not been provided to JICA Study Team except for its
Annex-3 regardless of the repeated requests since July 2015.
38 Progress Report No.1 (August 2015) explained the utilization rate of 5.3% because the rate was calculated by using the future water demand data
mentioned in the NWRA 2013 report as it is. The demand in 2030 was reviewed and modified in Progress Report No.2 and accordingly the water demand
for 2015 was also modified.
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Particularly so-called cattle corridor 39 is considered to be water-scarce area and therefore a lot of valley dams
and valley tanks have been constructed along the cattle corridor. The cattle corridor is shown in Figure 6.4.1.

From the past relevant studies as well, the current situation on water resources is not severe in a macro
perspective. Although water shortage has been reported in the cattle corridor, the situation is still manageable,
according to the Ministry of Water and Environment (MoWE).

Table 6.4.1: Annual and Monthly Water Balance by Catchment in 2015

No.
Catchment Demand IRWR Annual Monthly Exploitation Index (%) in 2015
Area (MCM) (MCM) EI (%) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Max
Lake
1 288 1,680 17.1 38 24 12 10 12 49 54 26 16 15 11 18 54
Victoria
2 Lake Kyoga 381 2,320 16.4 59 40 16 11 12 22 13 12 14 13 15 44 59
Victoria
3 92 1,440 6.4 30 22 6 5 6 11 8 4 4 4 4 14 30
Nile
Lake
4 78 4,470 1.7 6 2 1 1 2 4 6 2 1 1 1 2 6
Edward
5 Lake Albert 32 2,890 1.1 5 5 1 1 1 2 2 1 1 1 1 4 5
6 Aswa 40 1,770 2.2 11 11 4 2 1 2 1 1 2 2 3 11 11
7 Albert Nile 105 450 23.4 84 84 54 26 24 27 7 15 16 15 29 84 84
8 Kidepo 5 210 2.4 7 7 7 2 1 2 1 1 2 4 7 7 7
Miscellaneo
15 360 4.1 11 11 6 2 2 4 2 2 5 5 7 11 11
- us
Total / Average 1,036 15,590 6.6 22 14 6 5 5 11 7 6 5 5 5 12 22
Note: 1. The Exploitation Index (EI = demand/IRWR) is calculated with the internal renewable water resources (IRWR); whereas in
many studies it is considered in relation to the total renewable water resources.
Note: 2. The Internal Renewable Water Resources (IRWR) without adjustment for contribution / losses from major lakes are used.
Source: Computed by JICA Study Team based on the National Water Resources Assessment (MoWE, 2013)

6.4.2 Review of Future Projects

In terms of water resources development, key projects that may become promotional factors for the regional and
industrial developments along the NEC areas are summarized as follows:

(1) Water for Production (WfP) for Rural Areas:

MoWE through the WfP department is undertaking several programs to improve the livelihoods of the people in
rural areas through construction/rehabilitation of dams, valley tanks, bulk water transfer schemes and irrigation
schemes. As of October 2015, there are three on-going projects for dams and irrigation scheme in Katakwi,
Mbarara and Lira districts. Also, the WfP department plans to implement the construction of dams in 9 districts,
rehabilitation of dam in 1 district and bulk water transfer scheme for water use covering 4 districts, though
detail studies for those projects have not been commenced yet.

(2) Multi-purpose Water Resources Projects:

Studies on multi-purpose water resources development are being conducted in the following NBI40-led
projects:

39 Cattle Corridor is the areas where animals are always on the move in search of pasture and water and is known as water-scarce area.
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i) Nyimur Multi-purpose Water Resources Project

This is a trans-boundary project conducted through the NBI’s Nile Equatorial Lakes Subsidiary
Action Program (NELSAP)40 in the Aswa River basin between Uganda and South Sudan. The
objectives of the multipurpose dam include flood mitigation, irrigation, hydropower, fisheries
development as well as water supply and sanitation. The feasibility and design studies which
started in February 2015 will be completed by December 2017.
ii) Nile Cooperation for Results Project
ENTRO 41, NELSAP-CU41 and Nile-SEC41 are jointly implementing the project between
February 2013 and April 2017. One of its three components aims to undertake feasibility and
design studies for water resources development in the NEL41 region. The project includes two
multi-purpose dams in Uganda, namely, Kabuyanda Dam (irrigation 4,300 ha; hydropower 0.1
MW) in Isingiro district and Nyabanja Dam (irrigation 5,500ha; hydropower 47 kW; storage 170
MCM) in Tororo district.

(3) Water Supply Projects by NWSC:

National Water and Sewerage Corporation (NWSC) intends to implement infrastructural growth projects in the
next three years in several towns located along the NEC as enumerated in Table 6.4.2 below.

Table 6.4.2: Key Infrastructural Growth to be Implemented by NWSC in 2015-2018

Undertakings and Deliverables Time Frame
Delivery of Kampala Water (Lake Victoria WATSAN project) including refurbishment of Gaba I & II and limited December
water network interventions, Katosi water treatment plant, and WATSAN Improvements in urban poor areas 2017
Substantial Completion of Uganda Water Management & Development Project in the towns of Gulu, Bushenyi and
June 2017
Mbale
Integrated Project to Improve Living Conditions in Gulu (IPILC): substantial completion of phase-1 and work
June 2018
commencement of phase-2
South West Water & Sanitation Project (Mbarara-Masaka Corridor): completion of FS & pre-design, work
June 2018
commencement
Completion of New Intake for Soroti October 2016
Preparation of bankable project proposals for expanding water and sewerage infrastructure in priority towns: Fort
June 2018
portal, Kasese, Lira, Kitgum, Bugiri and Soroti
Source: Abstracted by JICA Study Team from the NWSC Corporate Plan July 2015 - June 2018

6.4.3 Development Scenario As Base Case

The future water demands by sub-sector were estimated mainly based on the socio-economic frameworks set in
the National Water Resources Assessment (NWRA 2013) as summarized in Table 6.4.3. The domestic and
irrigation water demands in 2030 have been estimated in the NWRA 2013 based on the population projected by
UNPD42 and the potential irrigation schemes identified by Hydromet43, respectively. The industrial and
livestock water demands in 2030 were modified in line with the respective sector GDP growth rates projected
by the JICA Study Team because NWRA 2013 set exactly the same demands for both 2009 and 2030 without
apparent reason. Besides, the wildlife and fisheries water demands were newly estimated by using wildlife
population and fish pond’s surface area, respectively, because NWRA 2013 did not estimate them.

40 The NELSAP is an investment program under the Nile Basin Initiative (NBI) that promotes investments in power development, water resources
management, management of lakes and fisheries, agricultural development, and control of water hyacinth.
41 ENTRO: Eastern Nile Technical Regional Office, NELSAP-CU: Nile Equatorial Lakes Subsidiary Action Program-Coordinating Unit, Nile-SEC:
Nile Basin Initiative Secretariat, NEL: Nile Equatorial Lake
42 UNPD: United Nations Population Division
43 Upper Nile Hydromet Survey Project (1967-1982) supported by UNDP/WMO
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Table 6.4.3: Projected Water Demand by Sub-sector in Uganda

Sub- Water Demand (MCM/year)*1 Basic Condition for Projection
sector 2015 2020 2025 2030 Major Index (2009 / 2030) 2010 2030
Water production / Population
Domestic 286 401 516 630 33.8 60.8
(million person)
Water production / GDP growth
Industrial 46 63 85 111 - -
[Ave. 5.9%*4]
Irrigation 396 706 1,016 1,326 Irrigation area (ha) 4,124 249,048
Livestock population/ GDP growth
Livestock 264 311 361 409 - -
[Ave. 3.0%]
Wildlife*2 1.5 1.5 1.5 1.5 Wildlife population by species - -
Fisheries*
42 49 56 63 Pond surface area (km2) / population growth 16 -
3
Total 1,036 1,532 2,035 2,540 - - -
Notes: (*1) The 2015, 2020, 2025 water demands are computed with the linear-proportion between 2009 and 2030 data based on NWRA.
(*2) Calculated based on Uganda Wildlife Authority (UWA) survey reports and assumed that future water demand will remain
constant as efforts are being made to sustain the wildlife population.
(*3) Calculated as the amount of water required to compensate for the evaporation and percolation losses from the surface of fish
ponds for aquaculture production.
(*4) The industry growth rate for no oil production factor was used for estimating industrial water demand because oil development
itself consume little water resources.
Source: JICA Study Team based on NWRA 2013 (MoWE, 2013), Technical Reports for aerial surveys of the Greater Virunga Landscape,
Kidepo Valley National Park and Karenga Community Wildlife Area, and Murchison Falls Conservation Area (UWA, October
2014), Biodiversity Surveys of Kabwoya Wildlife Reserve and Kaiso Tonya Community Wildlife Area (UWA, October 2009)

6.4.4 Alterative Scenarios

In the course of formulating the National Water Resources Development and Management Strategy, according
to its draft version, four scenarios were prepared in order to assess the hydrological and environmental impact
and economic benefit. The scenarios are tabulated as follows, though there is a difference in the target years:
Table 6.4.4: Outline of Alternative Scenarios for Water Resources Development
No. Scenario Sub-sector to be Considered Notes for Estimation of Water Demand
1 S0 Include 2040 domestic, livestock and oil & gas ---
water demands as well as the existing hydropower
and irrigation development
2 S1 S0 + addition of 2040 hydropower potential Hydropower is a non-consumptive use of water.
3 S2 S1 + addition of 2040 wetland irrigation potential
Irrigation water demand for 247,000 ha is almost included in
(247,000 ha) the base case.
4 S3 S2 + addition of full 2040 upland irrigation Irrigation water demand for 437,000 ha has not been
potential (437,000 ha) estimated and it should be calculated as needed after the
details including locations, crop types and cropping patterns
are determined.
Source: JICA Study Team based on National Water Resources Development and Management Strategy, Annex-3 (MoWE, draft as of
2013)

In general, hydropower generation is a non-consumptive use of water. Thus the major difference between the
scenarios in terms of water demand is whether wetland and/or upland irrigation potentials are added or not.
Since the irrigation areas estimated for the base case in the previous section 6.4.3 correspond approximately to
the above wetland irrigation (S2), the issue here is whether the upland irrigation is further added or not.

According to the NWRA 2013 report, the upland irrigation potential area of 437,000 ha was estimated to be
10% of the existing cultivated area and therefore does not represent an actual resource assessment. Also, the
National Irrigation Master Plan 2010-2035 (MoWE, 2011) set up a target of 253,000 ha by 2035. Accordingly,
the upland irrigation potential should not be included in the development scenario for this master plan, though it
remains possible that upland irrigation might be added to a development plan toward 2040 as needed.

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6.4.5 Gap Assessment and Future Bottlenecks

Considering the above water demand in 2030, annual and monthly water utilization rates were estimated by
catchment as summarized in Table 6.4.5. Unlike the Kenya’s case described in the previous section, the existing
water storage capacities are not taken into account in the water balance study for Uganda. Although there are a
number of water resources structures across the country, their storage capacities have not been clearly identified
and also many of them have relatively small capacities for water balance study. Furthermore, it must be noted
that the internal renewable water resources used in the calculation does not consider deducting maintenance
flow and adding groundwater use in the rural areas.

Table 6.4.5: Annual and Monthly Water Balance by Catchment in 2030

Catchment Demand IRWR Annual Monthly Exploitation Index (%) in 2030
No.
Area (MCM) (MCM) EI (%) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Max
Lake
1 Victoria 635 1,680 37.8 82 51 25 23 26 110 110 59 37 34 25 39 110
2 Lake Kyoga 1,023 2,320 44.1 154 105 42 31 33 63 34 31 38 35 38 118 154
3 Victoria Nile 228 1,440 15.8 72 54 14 13 15 29 19 9 10 9 10 36 72
Lake
4 Edward 177 4,470 4.0 13 5 3 2 4 9 14 5 3 2 3 6 14
5 Lake Albert 61 2,890 2.1 9 8 2 1 2 3 3 2 1 1 1 7 9
6 Aswa 81 1,770 4.6 25 25 7 3 3 4 2 3 3 4 6 25 25
7 Albert Nile 301 450 66.8 222 222 160 77 72 79 14 42 47 42 84 222 222
8 Kidepo 9 210 4.2 13 13 13 3 3 3 2 2 4 6 13 13 13
Miscellaneo
- us 26 360 7.3 20 20 11 5 4 7 4 4 8 10 12 20 20
Total / Max (EI) 2,540 15,590 16.3 52 33 15 12 14 29 16 14 12 11 12 30 52
Notes: (1) The Exploitation Index (EI = demand/IRWR) is calculated with the internal renewable water resources (IRWR); whereas in
many studies it is considered in relation to the total renewable water resources; (2)The Internal Renewable Water Resources (IRWR)
without adjustment for contribution / losses from major lakes are used.
Source: Computed by JICA Study Team based on the National Water Resources Assessment (MoWE, 2013)

As seen in the table, monthly exploitation index (EI) exceeds 100% for a few months in the following three
catchment areas. This means that available water resources will not be sufficient for the future water demand in
2030, though the annual EI values of less than 100% give a false impression as if demands were satisfied.
Furthermore, OECD (Organization for Economic Co-operation and Development) defines the situation as
“under severe water stress” in case the annual EI exceeds 40%.

In the Lake Kyoga catchment, which stands at the second highest annual EI of 44.1%, a comprehensive study 44
on water resources development and management was conducted in 2009-2011. The study also concluded that
the exploitable volume of water resources even for the 1/3 probable drought year is only able to meet the water
demand until around 2025. According to the said study, 5 sub-catchment areas of Lake Kyoga catchment will
have water deficit particularly between December and March. In this regard, the above monthly water balance
study represents a similar result and therefore it is considered reliable, though there is a difference in computed
accuracy between catchment and sub-catchment.

Although the water deficit in the Lake Victoria catchment is not large and limited to the dry season between
June and July, the main route of NEC pass through this area and thus it is considered important catchment area
for this master plan. Particularly this catchment accounts for 89% of total industrial water demand of the
country. Also the catchment is characterized by the high proportions of domestic (34%) and industrial (15%)
water demands out of the total demands of the catchment.

The Albert Nile catchment has high EI values because this area has fairly large irrigation potential areas
compared to relatively little rainfall amount. The groundwater level in this area is considered high and therefore

44 Development Study on Water Resources Development and Management for Lake Kyoga Basin (JICA, March 2011)
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the farming activities mostly rely on groundwater as well as water pumped from local stream. Currently, as far
as MoWE recognize, the Albert Nile catchment has very few reservoirs and it does not have even future plans
for large scale water resources development.

Since this water balance study is rough calculation at catchment level, it is desirable to conduct more detailed
assessment at sub-catchment level particularly in the areas that have high EI values. In addition, as pointed out
by the NWRA 2013 report, it is further important to bear in mind that not all renewable water resources can be
exploited.

6.4.6 Development Strategy

Based on the above gap assessment, the development strategy is set for three catchment areas where water
shortage is anticipated in the future as follows. The respective locations are presented in Figure 6.4.2 below.

(1) Lake Kyoga Catchment:

The above-mentioned Kyoga study44 has been carried out for the specific area on the basis of more detailed
studies than those of this NEC study. Therefore, the NEC study will follow the line suggested by the said study.
It decided that groundwater should be used mainly for rural domestic water, while surface water from river and
lake should be used for agricultural and urban domestic water. Although no specific measure for agricultural
water use is planned in the Kyoga study, it proposed to carry out the rehabilitation and the study for newly
construction of earth dams and valley tanks in the five priority sub-catchments, namely Okok, Okere, Lwere,
Kyoga Lakeside Zone and Mpologoma sub-catchments, which were identified through a detailed water balance
study. The components proposed by the Kyoga study related to the water use in the regional development for
the NEC master plan are summarized in Table 6.4.6 below.

Table 6.4.6: Components of the Kyoga Study Related to the Regional Development for NEC
Component Descriptions Short-term Mid-term Long-term
1.Comprehensive 1-1 Water Resources Gauging station and monitoring network for

Water Resources Assessment river, lake, groundwater and meteorology
Management 1-2 Organization 1) Setting up sub-basin liaison council
 
Strengthening for WRDM 2) Capacity development of DWRM
2.Effective, Stable2-1 Controlling Water 1) Effective water use
and Equitable Demands 2) Introduction of water-saving technology   ()
Water Supply 3) Awareness of water user
2-2 Increasing Water 1) Urban water supply (small town
Supply through WRDM dominant)
  ()
2) Rural water supply
3) Agricultural water supply
Notes: WRDM = Water Resources Development and Management, DWRM = Directorate of Water Resources Management
Source: Abstracted and summarized by JICA Study Team based on the JICA Kyoga Study (JICA, 2011)

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(2) Lake Victoria Catchment:

There has been neither specific water resources

assessment nor development plan for the Lake
Victoria catchment so far. Although the Victoria
Lake provides water resources to some extent, the
intake volume from the lake should be controlled
in accordance with the internally agreed rules.
Therefore, it would be necessary to use water
resources before it flows into the Victoria Lake by
constructing water storage structures. Firstly, it is
required to conduct water resources assessment at
sub-catchment level as an action in the short-term.
Thereafter, water resources development should be
planned and implemented in the mid to long-terms
as needed depending on the result of assessment
during the short-term. As mentioned in the section
6.4.2, currently the feasibility and design studies
on the Kabuyanda Dam, which will be located in
Isingiro district within the catchment, is being Source: JICA Study Team
Figure 6.4.2: Target Areas for Water Development
conducted. It should be incorporated into the
catchment plan depending on the study result, though it may cover only a part of irrigation areas. Key factors in
the assessment and planning for this catchment will be the water-saving method in domestic and industrial
water use.

(3) Albert Nile Catchment:

As is the case with the above Lake Victoria catchment, neither specific assessment nor plan for the Albert Nile
catchment has been prepared. Therefore, the Albert Nile catchment also requires more detailed water resources
assessment at sub-catchment level in the short-term and then specific water resources development should be
planned and implemented in the mid to long-terms.

6.5 Review of Information, Communication and Technology (ICT)

6.5.1 Overview of fiber cable network in Kenya

Currently, Kenya is connected to the international broadband highway through the SEACOM, TEAMS (The
East African Marine System, EASSY (Eastern Africa Submarin Cable System), and LION (Lower Indian Ocean
Network) undersea fibre cables.

Most major towns in Kenya are connected through the National Optic Fibre Backbone Infrastructure (NOFBI).
NOFBI is a project being implemented by the ICT Authority for the Ministry of ICT and it aims at ensuring
connectivity in all the 47 counties. The implementation of this project aims to ease communication across
counties as well as improve government service delivery to the citizens. This project once fully implemented,
will cover 2,100 km of fiber cable in all 47 Counties. The NOFBI Backbone Fibre Optical Transmission
Network is showed in the figure 6.5.1.

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Source: ICT Authority of Kenya

Figure 6.5.1: NOFBI Backbone Fibre Optical Transmission Network

There are two phases of NOFBI:

(1) NOFBI Phase I

Phase I of the project established a National Optic Fibre Backbone Infrastructure with access points in most of
the district headquarters and some border towns.

Total distance of cable: 4,300 km – completed in 2009.

Fibre backbone passes through 57 towns in 35 counties across Kenya.

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(2) NOFBI Phase II

NOFBI Phase 2 was to further increase the coverage and safety protection of the existing transmission network,
so as to enable the local government departments of the 47 counties to form an efficient transmission network
with the central government.

Total distance of NOFBI Phase II cable: 2,100 km – currently under implementation to be completed in Dec
2015. The objectives of Phase 2 are:

• Project to cover all 47 county Headquarters

• Will provide Last Mile Fibre Connectivity to County Headquarters from the Backbone
• Will also provide network redundancy for NOFBI phase I links

As at end of May 2015, there are 18 counties remaining and they ought to be completed by December 2015.

6.5.2 Overview of fiber cable network in Uganda

Fibre cable network deployment in Uganda is around 5,110.65 km which laid by both the Government and
Private Sector. The Government of Uganda, through the National Information Technology Authority - Uganda
(NITA-U) is implementing the National Data Transmission Backbone Infrastructure and e-Government
Infrastructure Project (NBI/EGI) whose major objective is to connect all major towns and Government agencies
within the country onto a high speed Optical Fibre Cable based Network.

Currently NITA-U has extended connectivity to a total of 48 Government entities which are now utilizing the
Internet Bandwidth provisioned through the National Data Transmission Backbone Infrastructure (NBI).

NBI/EGI is being implemented in 3 phases.

• Phase I: Connected Kampala, Mukono, Jinja, Bombo and Entebbe and 27 Government Ministries and
Departments to a 198km of optical fiber cable.
• Phase II: Connected Busia, Tororo, Mbale, Malaba, Kumi, Soroti, Lira, Gulu, Elegu, Masindi, Kyenjojo,
Fort Portal, Kasese, Bushenyi and Mbarara to a 1400 km of optical fiber cable.
• Phase III (on-going): NITA-U will extend connectivity to the towns of Masaka, Mutukula, Mbarara,
Kabale and the Katuna Border Post.

The main issue of fibre cable in Uganda is the duplication of long-haul fibre along major road routes with metro
networks in Kampala and Wakiso districts. With 5,110.65 km of fibre cable, most of this is route
duplication, reducing to just over 2,100 km. There are about 282 km of Kampala’s metro fibre network, and
about 57 districts have no fibre on their land (57%) and 1031 sub-counties do not have any fibre traversing any
of their boundaries. The map of optic fibre calbe in Uganda is showed in the figure 6.5.2.

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Source: ICT Sector Strategy and Investment Plan (2015 - 2020)

Figure 6.5.2: Map of Optic Fiber Cable in Uganda

6.5.3 Development Scenario for NEC

As discussed above, the National Optic Fibre Backbone Infrastructure (NOFBI) of Kenya and the National Data
Transmission Backbone Infrastructure (NBI) of Uganda has been connected to the district headquarters of both
Kenya and Uganda. The optic fiber cable network should be extended to cover the entire of Northern Corridor.
The Ministries responsible for ICT infrastructure in the member states agreed to incorporate fiber optic access
facilities particularly the ducts in regional infrastructure projects. In Kenya, they have drafted a bill that will
enable ICT infrastructure to be incorporated in the Northern Corridor Integration Projects. And in Uganda,
installation of the fiber access facilities particularly the ducts has already been included in the Standard Gauge
Railway (SGR), oil pipelines and power lines projects. The ducts will be installed parallel to standard gauge
railway lines, oil pipelines and power lines. In future, fiber will be installed in such ducts by the Government or
private sector

The development scenario of ducts for optic fibre cable assumes installed parallel to standard gauge railway as
follows:

Short term (2020):

• Implement the ducts along SGR from Mombasa to Kampala (the main route).
• Issue a bill that will enable ICT infrastructure to be incorporated in the Northern Corridor Integration
Projects.

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Medium term (2025):

• Implement the ducts along SGR from Gulu to sub-route.
Long term (2030):
• Implement the ducts along SGR from Kampala to sub-route.

6.5.4 Development Strategy for NEC

A development strategy for NEC as in the table 6.5.3 and figure 6.5.2:
Table 6.5.1: Development Strategy for NEC
Year 2015 2020 2025 2030
Route Mombasa-Nairobi Soroti-Gulu Kampala-Kasese
Nairobi-Naivasha Gulu-Pakwach Bihanga-Mirama Hills
Nairobi-Bomet-Eldoret Gulu-Nimule Mirama Hills-Kigali
Nairobi-Nakuru-Eldoret
Eldoret-Malaba
Naivasha-Kisumu
Kampala-Tororo-Malaba
Tororo-Soroti
Total length (km) 1,864 493 744
Source: JICA Study Team

Source: JICA Study Team

Figure 6.5.3: Map of Development Strategy for Optic Fiber Cable in NEC

6.5.5 Suggested Projects and Implementation Plan

Currently, the fibre optic cable network was built by both the government and private sectors. This
will lead to duplicate and sometime overprovision especially in the urban areas, leaving the rural
communities underserved. The traditional licensing framework that required voice an data service
providers to deploy their own infrastructure was a barrier to entry for new players into the ICT
market. In addition, weak enforcement of infrastructure sharing has led to high costs of network
expansion and has limited innovative approaches to expansion. To solve this issue, develop and
implements of sharing infrastructure should be proceed.
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Sharing ducts

Objectives
• Reduce costs and digging buried optic fiber cable and minimize the dubbing of optic fiber cable.
Development Items
• Issue a bill that will enable ICT infrastructure to be incorporated in the Northern Corridor Integration
Projects.
• Construction the ducts which runs along the Northern Corridor
• The typical duct is showed in figuge 6.5.3

Source: Guidelines for Installation and Maintenance Of external Communication

Infrastructure
Figure 6.5.4: Typical Duct

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CHAPTER 7 : ORGANIZATIONS

7.1 Organizations Related to Northern Economic Corridor

7.1.1 Overview

Though government ministries and organizations, private sector, communities of various sectors are related
to Northern Corridor development, description here is focused on 3 essential sectors: transport, industry and
logistics/customs.

(1) Organizations in Kenya

Below are the list of major stakeholders in transport sector, industry sector and logistic sector in Kenya.

Transport

Ministry of Transport and Infrastructure (MoTI): consists of two State Departments: Transport Services and
Infrastructure; its key task is to position Kenya as the logistics hub of the East African region by creating a
modern and efficient transport system for goods and services within the country and also with other countries
in the region. (See Figure 7.1.1 for the organizational structure.)

Source: Ministry of Transport and Infrastructure, Kenya

Figure 7.1.1: Organizational Structure of Ministry of Transport and Infrastructure, Kenya

Kenya Roads Board (KRB): established to control the Road Maintenance Levy Fund; its main objective is to
oversee the road network in Kenya and thereby coordinate its development, rehabilitation and maintenance
and to be the principal adviser to the Government on all matters related thereto.

Kenya National Highway Authority (KeNHA): autonomous road agency, responsible for the management,
development, rehabilitation and maintenance of international trunk roads linking centres of international
importance and crossing international boundaries or terminating at international ports (Class A roads),

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national trunk roads linking internationally important centres (Class B roads), and primarily roads linking
provincially important centres to each other or two higher-class roads (Class C roads).

Kenya Urban Roads Authority (KURA): mandated to manage, develop, rehabilitate and maintenance all
public roads in the cities and municipalities in Kenya except national roads.

Kenya Rural Roads Authority (KeRRA): mandated to offer guidance in the construction, rehabilitation,
maintenance and management of the rural roads (Class D, E and Others) network in the country.

Kenya Port Authority (KPA): manage and operate Mombasa Port and Inland Container Depots (ICD)/Dry
Ports.

Kenya Aviation Authority (KAA; construct, control and manage aerodromes and relative facilities), Kenya
Railways Corporation (KRC; provide railways service) are also key players besides above organizations.

Industry

Ministry of Industrialization and Enterprise Development (MoIED): mandates to formulate the appropriate
policy, legal and regulatory framework to create an enabling environment for a globally competitive,
sustainable Industrial, enterprise and co-operative sector.

Ministry of Agriculture, Livestock and Fisheries (MALF): regulates some key agro-processing sectors which
require licensing for processing and trading.

Agriculture, Fisheries and Food Authority (AFFA): mandated to regulate, develop and promote agricultural
and aquatic products. They collect and collate related data, maintain a database, and also advise the national
and county governments on agricultural and aquatic levies.

Logistics/ Customs

Kenya Revenue Authority (KRA): charged with the responsibility of collecting revenue on behalf of the
Government of Kenya. Focusing at the Mombasa Port, it manages the customs procedure and bonded
warehouse/area as well as CFS.

Kenya Bureau of Standard (KEBS): mandated to provide standardization and conformity assessment services
through promotion of standardization in commerce and industry, product and system certification, and so on.

(2) Organizations in Uganda

Below are the list of major stakeholders in transport sector, industry sector and logistic sector in Uganda.

Transport

Ministry of Works and Transport: responsible for planning, developing and maintaining transport
infrastructure and engineering works in Uganda. They engage in the monitoring and provision of transport
infrastructure support functions, regulatory functions and research activities related to roads, rail, water or air
transport and other engineering works. (See Figure 7.1.2 for the organizational structure.)

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Source: Ministry of Works and Transport, Uganda

Figure 7.1.2: Organizational Structure of Ministry of Works and Transport, Uganda

Uganda National Roads Authority (UNRA): develop and maintain a national roads network that is
responsive to the economic development needs of Uganda, to the safety of all road users, and to the
environmental sustainability of the national roads corridors.

Uganda Road Fund (URF): provide adequate financing for maintenance of public roads

Civil Aviation Authority (CAA; construct, control and manage aerodromes and relative facilities), Uganda
Railways Corporation (URC; provide railways service) are also key players besides above organizations.

Industry

Ministry of Trade, Industry and Cooperatives (MoTIC): mandated to formulate, review and support policies,
strategies, plans and programs that promote and ensure expansion and diversification of trade, cooperatives,
environmentally sustainable industrialization, appropriate technology development and transfer to generate
wealth for poverty eradication and benefit the country socially and economically.

Uganda Industrial Research Institute (UIRI): undertake applied research and develop and/or acquire
appropriate technology to create a strong, effective and competitive industrial sector in Uganda.

Management Training and Advisory Centre (MTAC): establishment having a range of different diploma and
certificate courses, which are instrumental in the industry and other economic sectors in improving
management practices and assisting Ugandans become entrepreneurs and job creators.

Logistics/ Customs

Uganda Revenue Authority (URA): asses and collect specified revenue, enforce the related laws and provide
for related matters.

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(3) Organizations for NEC Regional Areas

Several organizations have been established in order to cover NEC regional area. Below are the key
stakeholders.

Northern Corridor Transport and

Transit Coordination Authority
(NCTTCA): formed by 6 member
countries (Kenya, Uganda, Rwanda,
Burundi, DR Congo and South
Sudan) and established under the
legal framework of NCTTCA to
coordinate the implementation of
the Agreement and to carry out
decisions and resolutions reached Source: NCTTCA
by policy organs of the Authority. Table 7.1.3: Organizational Structure of NCTTCA
There are 11 protocols such as road,
railway, inland waterways, custom, port, etc. The Authority’s three key organs comprise the Council of
Ministers, the Executive Board and the Executive Secretariat. In addition there are Specialized Technical
Committees as illustrated in Figure 7.1.3.

Their budget being limited, they get the budget through the tax for the exported cargos at Mombasa Port and
the budget by state countries. Their activities are therefore, more concentrated to the role of coordination
than to one of the project implementation organization.

Northern Corridor Integration Project (NCIP): initiative led by the Presidents of three countries (Uganda,
Rwanda, and Kenya), which was established in June 2013 in order to cooperate and speed-up the
development in the region. South Sudan became a member in October 2013, and each country established a
special office to coordinate the initiative. The NCIP is to implement a fast-track project with the leadership
from the Heads of the State. Their vision is Northern Corridor being fully integrated to facilitate the
competitiveness of the region in the global market.

While the NCIP facilitates the fast-track projects, the NCTTCA works closely with NCIP in planning,
monitoring, and evaluating the transport, trade and other projects along the NEC.

East African Community (EAC): a regional international organization, officially established under Article 2
of the Treaty for the Establishment of the EAC in 2000. Member countries are Uganda, Kenya, Tanzania,
Burundi and Rwanda. The Article 3 of the Treaty stipulates the objectives of the Partner States to undertake
the establishment of “a Custom Union (CU), a Common Market, subsequently a Monetary Union and
ultimately a Political Federation in order to strengthen and regulate the industrial, commercial, infrastructural,
cultural, social, political and other relations of the Partner State”. The implementation of CU has started
since January 2005. Another milestone is the establishment of the EAC Common Market (EAC CM). The
Protocol on its establishment entered into effective in 2010.

TradeMark East Africa (TMEA): funded by a range of development agencies with the aim of growing
prosperity in East Africa through trade. TMEA works closely with EAC institutions, national governments,
the private sector and civil society organizations to increase trade by unlocking economic potential through
(i) increased physical access to markets, (ii) enhanced trade environment, and (iii) improved business

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competitiveness. Considering their mission, it is likely to say TMEA put more emphasis on private sectors’
activities.

(4) Private Sectors

A considerable number of companies are involved in transport, logistics, and industry sectors and they are
the key drivers as the realization of policies, objectives, and earnings is relied on how they can maximize
their performance. Therefore, it is crucial to arrange an environment in order to enable them to participate in
policy making and implementation, to enhance their participation in investments along the Northern
Corridor.

Both in Kenya and Uganda, private associations have been formulated such as Kenya Ships Agents
Association, Uganda Commercial Truck Owners Associations, in the aim of consolidating collaboration
among them, better communication with public sectors, and so on. These associations or companies have
taken part into public-private organizations/projects such as PPP Committee, but these have been not yet
fully mobilized to make useful contribution to policy/project formulation and implementation.

Relations within overall organizations shall be shown as in Figure 7.1.4.

Source: JICA Study Team

Figure 7.1.4: Organizational Structure of Major Stakeholders Related to NEC

7.1.2 Preliminary Organizational Assessment

Preliminary organizational assessment shall be defined as below:

Regional organization for NEC have already been discussed in its function

According to NCTTCA, coordination and working relationship with Ministries of Transport and
Infrastructure in Member states is good. Actually they are coordinating various projects on behalf of member
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states such as the Road Side Stations Project, Transport Observatory and Transport Monitoring,
Implementations of the Northern Corridor Infrastructure Master Plan to mention but few.

On the other hand, one of the major challenges in terms of coordination of programs and mobilizing
stakeholders in Northern Corridor is lack of enough financing for programs for effective coordination. There
is also lack of proper constituted organizations of stakeholders in the countries such as the National Logistics
associations which can form an umbrella regional organization. There is need to form apex organizations for
promoting dialogue between government and Private sector associations such as the Northern Corridor
Public Private Stakeholder Forum which is currently being planned by NCTTCA.

There is no authority/unit in the Ministries of Transport with the aim of implementation and monitoring
future MP projects

Presently, neither MoTI nor MoWT have a dedicated unit for NEC Development (though MoTI has one for
LAPSSET Corridor in MoTI). There is not an umbrella organization which straddles related sectors
(transport, industry, ICT, water, and so on.)

There is an on-going action to formulate a kind of platform

TradeMark East Africa seeks to formulate a logistic platform called “Freight Logistic Platform (FLP)” in
Uganda. It is expected to enhance and then consolidate the country’s logistics level by reducing the cost of
logistics while enhancing the quality of logistics services, so as to the country becomes competitive in EAC
countries and further in international market.

FLP has 3 key areas:

(1) Policy: As Uganda hasn’t yet had strategies on logistics at national level, its formulation is one of the
objectives for FLP. To realize this, the database development of research papers as well as the
advocacy is also taken in consideration.

(2) Capacity development: FLP will work as, for stakeholders, a linkage of international standards,
catching-up new information. To realize this, the operation of platform itself is also one of the target
areas.

(3) Increasing awareness: Drivers’ training is also a key area, because having technique/knowledge of EAC
level is indispensable for them, practitioners of policies, strategies.

Below are detailed purposes (Table 4.1.1) and structure (Figure 4.1.5) of proposed FLP.

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Table 7.1.1: Purpose for FLP

Coherently articulate logistics challenges from the perspectives of the shippers, freight forwarders and
1.
transporters;
2. Creating a logistics environment that encourages investment in the logistics industry;
3. Develop FLP strategy and associated annual work plans;
4. Development of a coherent and unified advocacy agenda in logistics;
5. Devise communication strategies to different target groups
6. Finding lasting solutions to the extraordinarily high logistics costs in East Africa;
Fostering strong partnerships and cooperation between the logistics industry the EAC, corridor authorities and
7.
government.
8. Highlight to logistics stakeholders emerging issues and trends relevant to stakeholders
9. Identify priorities, challenges faced by the logistics industry;
10. Monitor progress towards resolving challenges facing the industry;
11. Promote the sharing and adoption of best practices in logistics;
12. Provide feedback on the impact of FLP action plans
13. Strengthen the regional collective bargaining of shippers, freight forwarders and transporters;
14. Where appropriate, act as a pre-policy development ‘sounding board
15. Other relevant issues as they arise.
Source: Uganda National Logistics Platform Workshop, April 2015

Source: Uganda National Logistics Platform Workshop, April 2015

Figure 7.1.5: Structure of FLP

According to TMEA Uganda office, FLP is currently during the final internal process of approval and
expected to start up from January 2016. A similar plan has been raised also in Rwanda as well as Burundi
though detailed discussion hasn’t been recognized. TMEA haven’t seen specific challenges regarding public
procurement process because of the support from URA or the Public Procurement and Disposal of Public
Assets Authority (PPDA).

The existing coordination mechanisms are limited

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Organizations such as EAC, NCTTCA, NCIP have intergovernmental character. As mentioned, there is no
umbrella regional organization which offers permanent opportunities of communication between government
and private sectors, though it seems difficult to manage in terms of coverage area.

There is no mechanism to promote community participation in the NEC regional development.

Such a mechanism will become important especially when it comes to the implementation stage. Mechanism
such as SHM being held parallel to this MP Study as a part of SEA might be an option.

7.1.3 Capacity Development Plan

NEC development will become a large scale and multi-sector initiative involving all kinds of stakeholders
such as the private sector, central government ministries and organizations, provincial and district
governments, donors, communities and neighboring countries such as Rwanda, DR Congo, South Sudan,
Burundi and Tanzania. Therefore, effective and efficient coordination is essential to promote integrated
development across the areas. Recommendations for organizational development will be divided into two
areas.

Spatial Level Coordination System

Regional level: As mentioned before, NCTTCA has a character of monitoring, and covering regional area
involving related key stakeholders as members. Therefore it is suitable that they will be in charge of
coordinating and monitoring the whole Corridor after the implementation of the MP. Thus, it is necessary to
have an agreement with NCTTCA regarding the use of monitoring indicators which will be proposed by this
MP Project. These monitoring results should be shared to public.

National Level: Once the MP will be established and implemented, there must be a monitoring and
implementation mechanism. Therefore, it is essential for MoTI as well as MoWT to establish a dedicated
authority/unit for the future proposed projects through this MP Study.

Sector Level: Since the MP covers a range of sectors, it seems difficult that the above authority/unit covers
all the projects into the detailed level. Therefore, projects should be supervised by the responsible ministries,
and necessary information should be shared with the national coordinator-unit. Decision on jurisdiction of
project will be according to its scale.

Appropriate Role Distribution to Public and Private Sectors

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Appropriating the right roles to both public and private sectors and differentiating those are essential to give
the resposibility to both sectors in
order to mazimize their capacities, then
further for sectors development.

The role of public organizations are

maily classified into three: (1)
arrangement of environment to
business: establish the laws,regulations,
implement the industrial infrastructure;
(2) follow-up and monitoring the
projects, if necessary correction; (3)
coordinating between countries.

In response to this provided

environment, the private sector have
three roles: (1) implementing/operating
the projects; (2) reporting comments as
practitioners side; (3) own capacity Source: JICA Study Team
development. Figure7.1.6: Roles of Private and Public Sectors

Though their roles will be independently identified, their communication must have been be kept in constant.
FLP will be a model type where private sectors are concerned not only the implementation side but also the
policy establishment side in effect.

Consequently, the coordination skill and capability between sectors, regional, national and provincial level,
development partners, private sectors, communities should be enhanced through a Training Institute.

Source: JICA Study Team

Figure 7.1.7: Image of Future Organizational Coordination
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7.2 Financial Capacity in Kenya

7.2.1 Legal Framework and Organization

The legal framework governing the budget and expenditure of the government in Kenya is stipulated in the
Financial Management Act 2013. The Minister for Cabinet Secretary

Finance is responsible for managing the consolidated Permanent Secretary

PPP Unit

fund and all matters relating to public financial affairs.

The budget process begins with a Budget Outlook Budget, Fiscal and
Accounting Services
Public Debt
Portfolio Management
Economic Affairs Management
Paper, which determines indicative ministerial ceiling Macroeconomic
Resource
and Policy Accounting services Investment
for the proposed budget year and the medium term. Analysis
Mobilization

The line Ministries then prepares the detailed budget Budgetary

Debt Policy, National Assets
Internal Auditor Strategy and and Liabilities
Department
with the technical guidance from the National Treasury. Risk Management

Inter- Integrated financial

The departments responsible for budget preparation Governmental management
Debt Recording
Pensions
and Settlement
Fiscal Relations information system
within the National Treasury are the Budgetary
National Sub-county
Department, and Inter-Government of Fiscal Relations Financial Sector
treasuries

under the Directory of Budget, Fiscal and Economic Public

Affairs, which are highlighted in Figure 7.3.1. The Procurement

Policy Department

Department of Inter-government of Fiscal Relations Source: JICA Study Team based on the website and interview
with National Treasury
liaises with line ministries on the preparation of
Figure 7.2.1: Organizational Structure in the
sectoral budgets. The Department of Resource National Treasury
Mobilization under the Directory of Public Debt
Management is responsible for mobilizing and managing external resources. The PPP Unit was established in
2013 under the National Treasury, whose mandate is to serve as a secretariat and technical arm of the PPP
Committee, which is authorized to assess and approve PPP projects in Kenya.

The proposed budget is submitted to the Parliament by a budget speech of the Minister for Finance and by
the Budget Policy Statement (BPS). The BPS applies a policy based budgeting, which sets out broad based
strategic priorities and policy goals that guide the preparation of their budget for the following year and over
the medium term.

7.2.2 Reviews of Budget and Expenditure in Kenya

The budget and expenditure for the medium term are presented as follows:

Table 7.2.1: Budget and Expenditure for the Medium Term in Kenya (Ksh billion)
2012/13 2013/14 2014/15 2015/16 2016/17 2017/18
Item
Act Prel Proj Proj Proj Proj
Revenue 812.5 991.9 1,176.2 1,347.7 1,594.6 1,845.3
% of GDP 19.1% 21.0% 22.0% 20.7% 21.5% 21.8%
Expenditure 1,107.3 1,300.6 1,669.0 1,880.8 2,052.6 2,251.4
% of GDP 21.8% 24.8% 25.9% 28.8% 27.6% 26.6%
Recurrent expenditure 808.3 787.9 900.2 987.0 1,194.4 1,244.3
Development and Net Lending 298.9 319.3 534.6 627.1 654.5 683.4
Public Debt (% of GDP) 42.0% 48.0% 47.3% 46.6% 45.2% 43.6%
Source: Data from Economic Survey 2015, Budget Policy Statement 2015

The revenue in Kenya reached to over 1 trillion in 2014/15, and is expected to increase to 1,348 billion in
2015/16, which accounts for around 20% of GDP. The Kenyan government has a fiscal policy to maintain
the revenue at the level of 21.8% of GDP over the medium term and containing growth of expenditure.
However, the expenditure has been increasing and is projected to expand from 26.0% of GDP in 2012/13 to

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28.8% of GDP in 2015/16, which will then slightly decline to 26.6% by 2017/18. The government committed
a policy of reducing the recurrent expenditure and allocating a minimum of 30% of the national budget to
development expenditure. The development expenditure is expected to attain more than 30% of the total
expenditure by 2014/15, while the recurrent expenditure will be increasing by the average growth of 9.3%
for the medium term. This expansionary expenditure is driven by increased development expenditure for
infrastructure, energy, and ICT projects, as well as budget allocation to county governments.

The Kenya Economic Update (June 2015, the World Bank) warned the increasing fiscal deficit driven by
development projects in priority areas of infrastructure, energy, and ICT, and evaluated that Kenya’s fiscal
position is not sustainable in the medium term. Although the government’s policy of increasing the share of
development expenditure and containing recurrent expenditure would contribute to economic development
and reduce the dependence on external financing for development projects, more prudent fiscal policy such
the phased implementation of development projects and streamlining the national government’s expenditure
for non-prioritized area could be considered in order to reduce a fiscal deficit.

7.2.3 Financing for the Transport and Logistic

Sector

As for self-generated revenues, there are currently

several funding mechanism in the transport sector as
follows:

(1) Taxes and levies on fuel such as Road

Maintenance Fuel Levy
(2) Taxes and levies on vehicle and parts such as Source: Data from BPS 2015
import duties, excise duties and VAT Figure 7.2.2: Projection for Railway Development
(3) Railway Development Levy Levy (2013/14-2017/18)
(4) Revenues from port operation such as cargo handling charge (KPA)
(5) Passenger Service Charge for airport operation (KAA)
(6) Revenue from pipeline operation (KPC)

The above first three revenues are transferred to the Treasury Account, which are then allocated to Ministry
of Transport and Infrastructure for road maintenance and railway development projects. The Railway
Development Levy (RDL) is to be used solely for financing the Standard Gauge Railway. The government
established a Railway Development Fund, which collects 1.5% of RDL on all import. It is projected that the
RDL will increase from Ksh 19.7 billion in 2013/14 to Ksh 32.3 billion in 2017/18, as shown in Figure 7.3.2.

The Semi-Autonomous Government Agencies (SAGAs) are the parastatal government organizations that
receive transfers from their parent ministries and/or collect and spend some earmarked tax and non-tax
revenues. There are four SAGAs in the road sectors, namely, (1) Kenya National Highway Authority
(KeNHA), (2) Kenya Rural Roads Authority (KeRRA), (3) Kenya Urban Road Authority (KURA), and (4)
Kenya Road Board, which implement and maintain the road projects in Kenya. In the transport sector, there
are seven SAGAs, that is, 1) Kenya Civil Aviation Authority (KCAA), 2) Kenya Airport Authority, 3) Kenya
Port Authority (KPA), 4) Kenya Ferry Services (KFS), 5) Kenya National Shipping Line (KNSL), 6) Kenya
Railway Corporation, and 7) Kenya Maritime Authority (KMA). Each SAGA submits a proposed budget and
expenditure each year.

The medium term ceiling for transport and industrial expenditure are shown in Table 7.3.2 and Figure 7.3.3.
The transport sector stands at 26% of the total capital expenditure, which will be increased to 41% in
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2015/16 mainly due to the increased expenditure for the railway sub-sector. The construction of Standard
Gauge Railway has been prioritized in the transport and logistic sector over the medium term, and the SGR
section between Nairobi and Mombasa is expected to complete by 2017. The expenditure for the railway
sub-sector will increase rapidly by more than five times, from Ksh26.2 billion in 2014/15 to Ksh144.4 billion
in 2015/16. In addition to the SGR, the modernization of urban mass transit system will be implemented in
2015/16 through PPP. The road sector is also expected to increase steadily by the annual average growth of
15%. The government undertook a policy of devolution of rural road development to country governments,
and the expenditure pressure for the road sector remains strong, despite the recent emphasis on a shift from
truck to railway for freight cargo. The expenditure for marine transport and air transport are allocated for Ksh
5.7 billion and Ksh 8.8 billion in 2015/16 respectively. This accounts for 2.2% and 3.4% of the total transport
expenditure. The modernization of Mombasa Port plans to mobilize private investment and revenues from
port operation, which may be the reason for the small allocation for the marine transport.

Table 7.2.2: Medium Term Ceiling for the Transport Sector

(Capital Expenditure, Ksh billion shilling)
2014/15 2015/16 2016/17 2017/18
(Proj) (Proj) (Proj) (Proj)
Total Transport 138.8 261.5 251.9 252.8
State Department of
99.0 102.2 112.8 150.0
Infrastructure (Road)
State Department of
39.8 159.3 139.1 102.8
Transport

Rail transport 26.2 144.4 123.2 86.1

Marine transport 5.6 5.7 7.7 8.7
Air transport 7.6 8.8 7.9 7.9
Industrial
development and 7.4 5.4 5.5 5.5
investment
Source: Data from Budget Policy Statement 2015
Source: Data from Budget Policy Statement 2015 Figure 7.2.3: Ceiling for the Transport Sector
(billion shilling)

7.2.4 Private Sector Financing in Kenya

In the transport and logistic sector, the private sector’s financing is limited to the railway sector and the issue
of infrastructure bond in 2014. All railway operations for freight in Kenya and Uganda were conceded to a
private operator, that is, Rift Valley Railways (RVR) in 2006 for the concession period of 25 years. In 2014,
the Kenyan government issued its first sovereign Eurobond, which attracted USD 2 billion and improved the
foreign reserve and current account in Kenya. The proceeds of Eurobond were used to repay a USD600
million syndicated loan and to finance energy and infrastructure project. In addition, the PPP Unit was
established in 2014 under the National Treasury, and 71 PPP projects were approved as a pipeline project, of
which 18 projects were identified in the transport sector.

Under the industrialization and Enterprise Development sector, Special Economic Zone (SEZ) was identified
as a pipeline PPP. Commercial financial banks play a key role in promoting industrial development through
the provision of loans and credit. The total value of manufacturing projects approved by industrial financial
institutions increased from Ksh 182.6 billion in 2013 to Ksh237.9 billion in2014. Industrial Development
Bank (IDB) Capital Limited financed three manufacturing projects worth Ksh 74.2 million 2014, while
Development Bank of Kenya (DBK) approved two projects worth Ksh 66.6 million in 2014. Kenya
Industrial Estates (KIE) supports indigenous entrepreneurship by financing small scale and micro enterprises
in Kenya, and approved 543 projects worth Ksh 194.3 million in2014, of which a third of the total
disbursement was destined to the manufacture of food processing. Industrial and Commercial Development
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Corporation (ICDC) supported one project for mango processing in 2014, which amounted to Ksh 230
million.

One of the major challenges of private sector

financing for infrastructure is the relative high
borrowing costs from commercial banks. A
typical project life of infrastructure projects is
the long term ranging from 20 years to 30 years,
which normally requires a concessional loan to
pay back to the investors. In Kenya, Central
Bank Rate has been stabilized by less 10%
during the past few years, but due to the
deterioration of Kenyan Shilling, CBR was
raised to 11.5% in 2015. Subsequently, the Source: Economic Survey 2015, East African Newspaper
borrowing cost from commercial banks soured Figure 7.2.4:Central Bank Rate and Interest Rate from
significantly to a maximum of 27% as of Commercial Bank in Kenya (2010-2015)
October 2015. With the interest rate of more than 10%, financing costs in infrastructure project would
diminish the financial benefits and financial viability of the project.

7.3 Financial Capacity in Uganda

7.3.1 Legal Framework and Organization

The Public Finance Management

Minister for Finance
Act (PFMA) 2015 was enacted
Minister of State: Minister of States: Minister of State: Minister of State: Minister of State:
by the Parliament, which General Duties Planning Investment Privatization Micro Finance
and Enterprise
provides the framework for the Parmanent Secretary/
Secretary to the Treasury
annual and medium-term budget
and expenditure as well as the Directory of Economic D. of Accountant D. of Debt and
Directory of Budget
Affairs General Office Cash Management
management of petroleum
Budget Policy and Macroeconomic Technical and Development
revenues. The PFMA 2015 Evaluation Policy Advisry Service Aid
legislates the Minister for
Infrastructure and Treasury
Tax Policy
Finance to prepare a Budget Social Services Services

Framework Paper (BFP), which Econoic Financial

Public
includes the medium term Administration
Development
Policy and
Management
Services
macroeconomic framework, Project Analysis Inspectorate and
medium term fiscal framework and PPP Internal Audit

including non-petroleum and

petroleum revenues, and the Source: JICA Study Team based on the website and interview with
statement for the annual budget MFPED
for the next financial year. The
Figure 7.3.1: Organizational Structure of Ministry of Finance, Planning
PFMA 2015 applies a and Economic Development in Uganda
policy-based budgeting in which
the annual budget shall be prepared in consistent with the National Development Plan and the BFP. The
Department of Macroeconomic Policy under the Directory of Economic Affairs in Ministry of Finance,
Planning and Economic Development (MFPED) is responsible for the preparation of macroeconomic
framework, and the Department of Budget Policy and
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Evaluation under the Directory of Budget is in charge of formulating the annual and medium term fiscal
framework. The Department of Infrastructure and Social Services under the Directory of Budget works
together for the preparation of the fiscal framework in the transport sector. In terms of external sources, a
newly established Directory of Debt and Cash Management is responsible for the management of external
sources and public debt.

7.3.2 Reviews of Budget and Expenditure in Uganda

The government of Uganda has a policy to ensure the continued stability of tax system and increase the
revenue through the improved measures for tax collection such as the establishment of business registration
database in URA. The projected revenue in 2015/16 is Ush 111,227 billion, which is around 13.4% of GDP.
The percentage of revenue to GDP is expected to increase to 15.5% by 2019/20. The projected revenue over
the medium term does not include petroleum revenues, since the required infrastructure for oil production
has not been in place.

Table 7.3.1: Budget and Expenditure for the Medium Term in Uganda (Ush billion)
2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20
Item Act Act Proj Proj Proj Proj Proj Proj
Revenue 7,352 8,168 9,766 11,227 12,846 14,735 16,872 19,355
% of GDP 13.2% 13.5% 13.0% 13.4% 13.9% 14.5% 15.0% 15.5%
External Grant 936 703 934 839 456 452 432 440
Expenditure and Lending 10,522 11,513 14,919 17,766 19,536 22,191 24,037 26,106
% of GDP 18.9% 19.0% 19.9% 21.2% 21.2% 21.8% 20.9% 20.9%
Recurrent Expenditure 5,812 6,706 7,426 8,572 8,600 9,715 11,147 13,121
Development Expenditure 4,237 4,768 5,098 6,559 8,637 11,133 12,169 12,298
Net Lending & Investment 409 19 2,290 2,455 1,999 913 320 0
Overall balance (exc, grants) -3,170 -3,346 -5,153 -6,539 -6,689 -7,457 -7,165 -6,751
Public Debt (% of GDP) 26.2% 28.9% 31.9% 36.0% 39.7% 43.0% 45.5% 46.0%
Source: Data from 2nd National Development Plan, BPF 2015, IMF Article IV Consultation 2015

External grants accounts for around 7% of the total revenue in 2015/16, which is projected to reduce to 2.2%
of the total revenue by 2019/20. Due to the difficulty of projecting external resources for more than 3 years,
the estimated amount is provisional and likely to change in future. External loans mobilized in 2014/15 was
increased significantly from USD 689.1 million in 2013/14to USD2,714.9 million in 2014/15, most of which
will be the funding for flagship projects in Karuma Hydro Power Project and Isimba Hydropower Project.

The overall expenditure and net lending is projected to rise to Ush 17,766 billion in 2015/2016. The
percentage of expenditure to GDP is 21.2% in 2015/16, which is well above the government revenue
(13.4%), and widening a fiscal deficit to Ush 6,539 billion or 7.8% of GDP. The Government of Uganda,
however, plans to consolidate the spending by the end of the 2nd National Plan, to the total deficit of 5.4% of
GDP in 2019/2020. Compared to Kenya, development expenditure is relatively larger, accounting for around

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37% of the total expenditure. The percentage of

net lending and investment is projected to rise to
10% to 15% of the total expenditure between
2014/15 and 2016/17. The net lending in
2015/16 is projected to be

Ush 2,455 billion, which will be spent mostly on

infrastructure development. The fiscal deficit
will be financed by domestic and external
sources, and public debt to GDP in Uganda is
projected to increase to 46% by 2019/2020.
With the increase of revenue from petroleum Source: National Budget Framework Paper 2015/16, Uganda
production, the fiscal balance and public debt Figure 7.3.2: Revenue, Expenditure and Fiscal Balance in
are expected to improve for the long term. The Uganda (FY2012/13 – 2019/20)
Economic Update (September 2015) predicts a dramatic change of fiscal balance by oil production, which
would double the value of country’s current fiscal revenue. The PFMA 2015 established the Petroleum Fund,
into which the petroleum revenues accrued to the government will be paid. The Petroleum Revenue
maintained in the Petroleum Fund shall be appropriated to the Petroleum Revenue Investment Reserve,
which will be invested in accordance with the petroleum revenue investment policy issued by the Minister
for Finance and managed by the Bank of Uganda.

7.3.3 Reviews of Budget and Expenditure in the Transport and Logistic Sector

The self-funding and direct user charges in the transport sector are mainly limited to the operation and
maintenance of roads in Uganda, and most of development costs are procured by either government grant or
external sources.

In terms of the revenues directly collected from users, there are currently several funding mechanism in the
transport sector as follows:

(1) Taxes and levies on Road User Charges appropriated by the Uganda Road Fund (URF): Sources of RUC
includes fuel levy, transit fees, road license, axle load fines, tolls, weight/distance charges, and traffic
and road safety charge, which are to finance routine and periodic maintenance of public roads in Uganda
(2) Revenues from railway and port operation such as cargo handling charge (RVR)
(3) Passenger Service Charge and other airport handling charge for airport operation (UCAA)

The budget for URF in 2014/15 amounted to Ush 428.1 billion, of which 274.4 billion or 64.1% of URF was
allocated to the National Road Maintenance Program and Ush 146.4 billion was allocated to the road
network in District, Urban and Community Access Road (DUCAR) and Kampala Capital City Authority
(KCCA). The Railway in Uganda has been operated by a private company, Rift Valley Railway (RVR), and
as of June 2013, RVR invested USD 6.7 million in conceded assets, but it can be said that rehabilitation and
maintenance for the railway network has not been sufficient for efficient operation.

The 2nd National Development Plan 2015/16-2019/20 adopted an expenditure strategy to focus on
infrastructure development and human capital development. The Works and Transport Sector received the
largest share in the Ugandan budget from 18.2% to 23.4% of the budget between 2015/16 and 2018/19. The
major infrastructure projects in the 2nd NDP are the Standard Gauge Railway (USD 1,926 million), Hoima
Oil Refinery (USD536 million), and Kampala-Jinja Highway (USD300 million) as shown in Table 7.3.3. The
total costs in the Work and Transport sector is estimated at Ush 42,557.6 billion during the 2015/16- 2019/20
period, of which 50% of total costs is planned to be financed by the private sector.
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Table 7.3.2: Key Infrastructure Projects in the 2nd National Development Plan (USD million)
Infrastructure Projects 2015/16 2016/17 2017/18 2019/20 2020/21 Total
Entebbe Airport Rehabilitation 81 31 40 40 10 203
Standard Gauge Railway 570 454 452 450 1,926
Kampala - Jinja Highway 90 179 31 300
Kampala – Mpigi Expressway 33 66 99 99 297
Other road projects 130 47 55 113 121 466
Hoima Oil Refinery 202 167 167 536
Other oil related infrastructure 100 100 121 230 137 688
Markets and Farm Income Enhancement 9 26 43 51 129
Source: 2nd National Development Plan 2015/16-2019/20, Uganda

According to the BFP 2015/16, Ush1,836 billion was approved for development expenditure in the Work and
Transport sector in 2015/16, which is around 74% of the total expenditure in the Sector. As shown in Figure
7.4.3, the projected expenditure in the transport
sector is expected to have a peak in FY 2016/17, in
which a total of Ush3,419 billion will be spent on
recurrent and development expenditures in the
Sector. A majority of the budget will be allocated to
the road sector, and the Uganda National Road
Authority is expected to receive the largest share,
around 70% of the sector’s budget, which is
followed by Uganda Road Fund (Ush 428.1 billion)
and Kampala Capital City Authority (Ush 170
billion) in 2015/16.

The BFP 2015/16 does not include the construction Source: National Budget Framework Paper 2015/16, Uganda
cost for SGR over the medium term, and the total Figure 7.3.3: Expenditure in the Transport Sector in
expenditure for the railway sub-sector remains to be Uganda (FY2013/14 – 2017/18)
very low, Ush4.5 billion in2015/16 for engineering
design of SGR. In terms of the inland water
sub-sector, around Ush 4.9 billion will be spent on
the purchase of new ferry in Port Bell and Jinja, and
other development of inland water transport in
2015/16. The rehabilitation of Entebbe Airport will
be financed by Chinese fund for 252.9 billion in
2015/16. The construction and rehabilitation of
inland container depot is allocated for Ush 0.45
billion in 2015/16, and border post rehabilitation and
construction of OBSP facilities is allocated for Ush
8 billion in 2015/16. It can be said that a transport
Source: Article IV Consultation, 2015, IMF
policy of shifting from truck to railway and inland
Figure 7.3.4: Central Bank Rate and Interest Rate
waterway has not been materialized yet in the BFP from Commercial Banks (2011 – 2015)
2015/16.

7.3.4 Private Sector Financing in Uganda

Except for the railway sector, there has been no private sector financing for infrastructure in Uganda. As of
June 2013, RVR had invested USD 6.7 million for the conceded assets. The amount of capital investment,
however, is not sufficient to improve the railway operation. The PPP Unit was established under the Ministry

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of Finance, Planning and Economic Cooperation in 2015 and several transport projects such as
Kampala-Jinja Expressway were proposed to be finance by the PPP framework.

Similar to Kenya, the relative high cost of lending is one of the major impediment for the private sector
financing for infrastructure. Compared to Kenya, the lending rate from commercial banks in Uganda is
higher, with the average interest rate of 22.7% during the past 5 years, as shown in Figure 7.4.4.

The headquarter of East African Development Bank (EADB) is located in Kampala, with a branch in each
member country (Kenya, Rwanda, and Tanzania). EADB financed in commercial projects and the investment
of railway wagon in Tanzania, and plans to raise over USD520 million to improve the financing capacity.
The maturity of investment projects by EADB are normally for 10 years with a grace period of 2 years, and
seeks tax exemption to enable the bank to provide more concessional loans.

7.4 Way forward and Scope of Work

This Study will provide a financial strategy for the Master Plan on Logistics in Northern Economic Corridor,
which consists of a strategy for cost recovery and diversifying financial sources in the transport and logistic
sector. The Study will provide the investment costs for roads, railways, ports, inland waterway, airports, and
pipelines as well as logistic infrastructure and services for the establishment of Logistic Hub. In the road
sub-sector, Trade Mark East Africa has been implementing a consultancy service for development and
implementation of national transport funding policy in Kenya, and the detailed cost projections and
evaluation will be carried out. In the pipeline sub-sector, a private sector financing is more likely to be
materialized, and the needs for funding from the government may be limited. Regional financing mechanism
has been increasingly important for regional infrastructure and projects.

This Study will examine a financial strategy for the proposed investment program that includes road, railway,
port, waterway, pipeline, airport, multimodal facilities such as ICD, and border post, but more focusing on
railway, inland waterway, and multimodal facilities, which may play a key role for the Master Plan on
logistics in Northern Economic Corridor because of the proposed modal shift. The Study will undertake an
analysis of cost recovery and diversified funding sources, including financing for regional projects and
multimodal facilities. The followings will be provided as a financing strategy for the Master Plan:

- Initial investment Cost and O&M cost for the proposed investment program
- Current government capacity for financing (base scenario)
- Diversified funding mechanism and cost recovery (master plan scenario)
- Preliminary financial analysis
- Financing Plan

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CHAPTER 8 : PROPOSED DEVELOPMENT STRATEGIES

Five strategies were proposed and three strategies (Transport, Industrial, and Regional) will be strengthened
by other two strategies (Financial, and Organizational & Policy). The details are desctrbed below.

8.1 Transport Strategy: Efficient and Integrated Multimodal Transportation

System
(1) Modal shift from truck to rail and pipeline

In Kenya and Uganda, around 95% of cargo freight are transported by truck, while other transport modes
such as railway and inland waterway are used less; less than 5% of total freight. Currently, trucks carry all
types of goods from bulk cargo to mineral resources and liquid fuels. However, it is more efficient to
transport large amounts of heavy freight moving long distances such as coal, cement, and construction
material by railway. Both Kenyan and Uganda governments plan to construct Standard Gauge Railway
(SGR) to encourage a modal shift from truck to railway, as envisaged in the Vision. It is planned that
Kampala and Malaba will be connected by SGR by 2020, which will be extended to Gulu-Nimule route for
South Sudan and Gulu-Pakwach route for DRC, Kampala- Kasese route to DRC, and Bihanga-Mirama Hills
route to Rwanda. Therefore, railway should be used more for cargo transport through SGR project.
According to result of preliminary freight traffic demand forecasting, the transit cost of SGR becomes almost
50% of truck’s transit cost, total railway demand of MGR and SGR can be nearly 40% of all freight tonnage
via Mombasa port. It means that the service level of SGR including cargo transport charge is key success
factor to realize modal the shift from truck to rail.

In Kenya, 5.2million m2 of oil products are transported by pipeline from Mombasa to Eldoret, while the rest
of 1.5million m2 are transported by truck. In Uganda, all oil products are transported by truck. Government
of Kenya planned replacement of old pipelines and establishment of new ones with expanded capacity to
meet increasing demand of petroleum products in future. It is, therefore, important that the pipeline should
be constructed and operated as planned.

(2) Reduction of bottlenecks of freight traffic and logistics

Based on the Origin and Destination (OD) survey and traffic survey for cross border traffic on the roads,
bottlenecks caused by cargo traffic are identified in the sections around Mombasa and Malaba border. In
Kampala and Nairobi, it is necessary to expand capacity of road network by road widening, bypass, ring road,
over/under pass etc. The Development Vision aims at providing efficient transportation system in terms of
time, cost, and reliability in comparison with other corridors. Considering the development vision and the
current bottlenecks, five targets are set in this study, as shown below.

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Table 8.1.1: Future Target for Reduction of Bottlenecks

Bottlenecks Current situation Future target
Currently it requires around 4.0-6.0 days for Within 1.0-2.0 day for transit or 1.0 day at CFS
Custom clearance in
port discharge and custom clearance in in addition to less than 2.0 days for port
Mombasa
Mombasa for transit. discharge.
Access road to Mombasa It takes around 12 hours to reach to Mombasa
Shorten the time by infrastructure development
(8km) Port due to the congestion
Shorten within 12-24 hours by multi-lane border
One Stop Border Post in
It requires 1.5 day for border passing for petro cargo, etc. under full implementation of
Malaba
SCT scheme
Services in ICD are limited and no empty Develop modal shift function, empty container
Inland Container Depot (ICD)
container depot is functioning depot, etc.
Shorten the time by introduction of registration
Export of goods at port It takes 2 days for waiting for scanning
of Authorized Economic Operators(AEO), etc.
Source: JICA Study Team

8.2 Industrial Strategy: Effective and Efficient Logistical System for Industry
and Trade
(1) Establishment of logistic hubs with ICD and Logistic Center

A logistic hub can be defined as a center or specific area designated to deal with activities related to
transportation, collection, distribution, Component 1 Component 2
and storage of goods for national and （ICD: Modal shift + empty Container Deport) ( Logistics Center)

international transit where traffic is Initiated by public sector (Basic infrastructure should be Initiated by private sector or PPP
developed by public sector) Providing delivery service with dedicated
inventory function
exchanged across several modes of
transport. A potential logistic hub
ICD(modal shift) Logistics Center
could have multi-modal facilities such
as ICD that connect railway to road, Loading/
Customer

Unloading
inland water, and airport. In addition Rail transport
Truck
Container delivery
to multi-modal facilities, a logistic storage
Inventory management

hub provides logistics center with (Customs

clearance)

facilities and services such as

Container
warehouse, distribution center, and Container
delivery

delivery Customer
one stop shop. Therefore, Logistics
Hub connects international through Customer Customer

ICD to domestic “door” delivery Source: JICA Study Team

through logistics center. Logistic hubs Figure 8.2.1: Image of Logistic Hub with ICD and Logistics Center
with ICDs and logistics center are
designed to connect with industrial parks, mineral resource areas, and agricultural zones to facilitate
economic activities and investment opportunities.

Logistics center should provide accurate and cost-effective inventory operation for handling large
variety/small lot commodities while achieving cost reduction. On the other hand, customers (especially
manufactures) will more focus on their core business and logistics services will be outsourced. In this regard,
logistics service providers carry out inventory and processing operation on behalf of the costumers. In
future, Logistics center can leads to providing “Just In Time (JIT)” delivery by small-medium sized trucks,
since the road capacity for access road to customers will be insufficient for large trucks except primary road
like NEC.

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(2) Connecting industrial areas to logistic hubs through Cargo Oriented Development (COD)

Logistic hubs can be constructed at a strategic location such as SGR station, strategic cities, key industrial
areas, and so on. The harmonization with industrial plan,
Candidate of
mineral resource development, and agricultural development logistics Hub
Catchment Area
can be a key for transport and logistics planning. Such Radius of 200km

developments can be called as Cargo-Orienetd Development

(COD).

SEZs (Mombasa, Naivasha, Eldoret, and Kisumu), industrial

parks (Voi, Athi River) and ICT city (Konza City) are planned to
be built along the NEC in Kenya. Currently, ICDs are
operational in Embakasi (Nairobi), Kisumu, and Eldoret. The
SGR station will be constructed in Mombasa, Mariakani, Voi,
Mtito Andei, Sultan Hamud, Athi River, Nairobi, Longonot,
Narok, Bomet, Sondu, Ahero, Kisumu, Yala, Mumiasand
Malaba and will be significant for transport and logistics
activities in future.

The location of logistic hubs will be duly analyzed at a later Source: JICA Study Team
Figure 8.2.2: Image and Candidates of
stage with traffic demand forecast and transport network Logistic Hub in Kenya
analysis, but if the catchment area of logistic hubs is assumed to
be 200km, which requires around 3 hours and day trip can be done, it becomes inevitable to install logistic
hubs in at least 3 locations (Nairobi,
Kisumu and Voi/Mombasa) in Kenya.

In Uganda, 7 economic areas (Gulu,

Moroto, Kabale, Mohondwe, Kampala,
Candidate of
Nakasongolaa, Hoima) and 3 trade zones logistics Hub
Catchment Area
are proposed in the Vision 2040. In Radius of 200km

addition, 4 regional cities (Gulu, Arua,

Mbale, and Mbarara) and 5 strategic
cities (Jinja, Moroto, Fort Portal, Hoima,
and Nakasongola) are identified in the
Vision 2040. Cross border markets are
proposed in 5 border cities (Nimule,
Mphondwe, Kabale, Busia, Bubulo) and
ICDs are located in Mukono, Jinja, and
Tororo. Gulu will be a strategic and
Source: JICA Study Team
regional location for transportation to
South Sudan and Northern Uganda, and Figure 8.2.3: Image and Candidates of Logistic Hub in Uganda
Mbarara can be served as a strategic location to link with mining area and border trade with Rwanda and
DRC. Pakwach can be a strategic and regional location to link DRC and inland waterway and connecting to
oil and gas area in Lake Albert. Soroto or Tororo/Mbale can be a strategic location for mineral resource
transport from Moroto. If the catchment areas for the logistic hub is 200km and requires around 3 hours
and a day trip can be done, it is inevitable to install a logistic hub in at least 4 locations (Kampala
(Mukono), Tororo, Gulu, and Mbarara) in Uganda.
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(3) Promotion of growth drivers to increase export, reduce import, and economic development

From viewpoint of industrial development in NEC region, 38 growth drivers consisting of manufacture,
agricultural and livestock, and energy and mining products etc. are nominated. JICA Study Team judged
that growth drivers have large potentials for: i) increasing the export to East African region or international
market, ii) decreasing the import through expansion of domestic production, and iii) large contribution to add
value to the local economy, as shown below.

Table 8.2.1: Candidates of Growth Driver in Kenya and Uganda

Category Kenya Uganda
Tea, Coffee, Cut Flower, Processed Fruits
and Vegetable, Crude Oil, Niobium and Coffee, Oil Seeds, Crude Oil, Phosphate,
Rare Earth Elements, Construction Other Minerals (e.g., gold, iron ore,
Materials (e.g., iron and steel, glass), wolfram, tin, tantalite, copper etc),
Expansion of Export Consumer Goods (e.g., soaps and Leather, Construction Materials (e.g., iron
detergents, processed foods), Plastics and steel), Consumer Goods (e.g., soaps
Packaging, Textile and Apparel, Leather, and detergents, processed foods), Plastics
Pharmaceuticals and chemicals, Commodities
automobiles
Reduction of Import Rice, Soda Ash Palm Oil, Rice, Petroleum
Meat Production, Coal, Natural Gas, Meat Production, Coal, Cement, Leather
Value Addition to Local Economy
Tourism, Logistic Service articles, Tourism, Logistic Service
Total 20 Drivers 18 Drivers
Source: JICA Study Team

The above growth drivers will have more competitive advantage through effective and efficient logistical
system including improved border post, logistic hubs etc. It is also noted that industrial infrastructures in
terms of power supply, water supply and ICT should be developed as scheduled to support those growth
drivers.

8.3 Regional Strategy: Linking Corridor and Feeder Road

(1) Linking agricultural productive areas and mineral resources

Major cities and economic activities have been developed along the NEC, and it is essential to link potential
agricultural productive areas and mineral resources through feeder roads. It is therefore important to link the
potential agricultural zones and mineral resources areas to the NEC. In this regard, JICA Study team
proposes, as spatial structure of the NEC, development of multi-center with regional development
(Distributing urban function with regional industries system) considering distribution of growth drivers.
The proposed spatial structure plan has the following characteristics: i) balanced growth and efficient
logistics in the NEC region through promoting urban functions of “18 Secondary Cities including 6
Secondary cum Regional Cities”, and ii) Secondary Cities that serve as regional urban center which supply
urban services and logistic hub which connects Regional Production Center and Primary Cities as
consumption areas.

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Source: JICA Study Team

Figure 8.3.1: Proposed Spatial Structure Plan for NEC

Please note that progress report No.2 proposed 3 alternative spatial structure plans including above.
Therefore, spatial structure plan will be finalized through discussion with technical working group, steering
committee, and stakeholder meetings.

(2) Linking with LAPSSET and Central Corridor

With the introduction of common market and custom union, trade with East African countries became more
important for both Kenya and Uganda. In East Africa, Central Corridor and LAPSSET are closely related
to the NEC, in the sense that inter-regional trade between strategic locations will be promoted. For instance,
Voi (Northern Corridor) can be connected to the Central Corridor through Taveta/Holili –Arusha –Dodoma,
which would promote regional trade between Kenya and Tanzania and is important for economic and
industrial activities in the Northern Tanzania. Inland waterway on the Lake Victoria would be a center of
regional trade due to its location, and the Ring Road around the Lake Victoria would serve as an alternative
option for the lake transport and facilitate regional trade within East Africa. Linking to LAPSSET from
Eldoret, which is one of our target routes, would serve as an alternative for the route to South Sudan. For
landlocked countries, it is important to have multiple options to the ocean since only one option is a risky
and the congestion is accelerated. The coastal corridor to connect Mombasa to Lamu would be important to
reduce a risk and congestion. The following figure illustrates a potential linkage with the Central Corridor
and LAPSSET. As shown by this figure, the linkage with Central Corridor and LAPSSET (yellow line)
would accelerate regional trade and integration in East Africa.

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Source: JICA Study Team

Figure 8.3.2: Potential Linkage with Central Corridor and LAPSSET

8.4 Financial Strategy: Cost Recovery and Diversifying Financial Sources

(1) Diversifying the financial sources

Currently, financing for infrastructure is largely limited to government grants and external sources.
Regional projects such as One Stop Border Post (OSBP) and regional infrastructure are all handled by each
country, which increased the transaction costs in the preparation, implementation and monitoring of regional
projects.

It is therefore important to diversify the funding sources, especially from the private sector for more
commercially oriented projects through PPP arrangement and by issuing infrastructure bonds. To minimize
the transaction costs and duplication, regional financing mechanism can be sought after for regional projects.
A draft law for the establishment of the East African Development Fund (EADF) has been prepared, which
could provide finance for the preparation of regional infrastructure projects and funding for OSBP.
Regional banks such as East African Development Bank and AfDB could play a key role for regional
projects and it can be analyzed if the funding base for regional banks could be enhanced. For logistic
financing, a cost of borrowing from commercial bank is a heavy burden for the private operators and
investors in both Kenya and Uganda, and the diversification of financing sources for logistics need to be
elaborated.

(2) Expanding the revenue sources of the governments for cost recovery

Related to the above, internally generated sources, or cost recovery from users, are currently limited to road
maintenance and airport operation in the transport sector. Cost recovery from users shall be expanded to
the extent possible, in order to respond to the increasing financing needs and for financial sustainability.

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The largest financing needs for the Northern Corridor is the SGR investment in the medium-long term, and a
principle of cost recovery shall be analyzed to the extent possible for the SGR investment. A Railway
Development Levy has been introduced in Kenya in 2014, which is one of the measures for cost recovery
and will be reviewed in this study. Another potential means for cost recovery can be through mineral
resources revenues, since the SGR intends to transport mineral resources.

8.5 Organizational and Policy Strategy: Appropriate Institutional Framework

for Transport and Logistics
(1) Role of the government for logistics and multi-modal transport

Although the institutional framework for transportation system has been developed at the national and
regional levels, institutional setting and regulatory framework for logistic activities have been under
developed in the study area. It is therefore necessary to define the role of the government as a regulator for
logistic activities. In addition to designing a standard for transport, service standard for logistic services can
be considered, in order to encourage the incentives for efficient logistical services.

(2) Regional coordination for logistic improvement

The organizational and regulatory framework for logistics and multi-modal transportation needs to be
established at the regional level. Regional coordination for planning and monitoring for the NEC has been
implemented by NCTTCA. For instance, Northern Corridor Infrastructure Master Plan was formulated and
monitored by NCTTCA. The funcition of NCTTCA with coordination of Ministiries concnerned in Kenya
and Ugada should be maintained. EAC provides a harmonization of regional standard and trade facilitation.
The following figure demonstrates a possible national and regional institutional framework for logistic
promotion and multimodal transportation system.

Source: JICA Study Team

Figure 8.5.1: Possible Institutional Framework for Logistic Promotion and Multimodal Transport

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CHAPTER 9 : ENVIRONMENTAL AND SOCIAL

CONSIDERATION FOR MASTER PLAN

9.1 Strategic Environmental Assessment Approach in Kenya

9.1.1 Overview

In Kenya, there exists a Strategic Environmental Assessment (SEA) guideline titled “National Guideline for
Strategic Environmental Assessment 2012” (hereinafter referred as SEA Guideline in Kenya) developed by
the National Environment Management Authority (NEMA) which is the body mandated, by Environmental
Management and Coordination Act (EMCA) number 8 of 1999, as the principal instrument of the
Government for the implementation of all policies relating to environment.

The 74 pages guideline indicates 1) Outline of SEA, 2) Stages and Steps for Undertaking SEA at Policy, Plan
and Program Level, 3) Stage 1: Establish the Need and Context for the SEA, 4) Stage 2: Implementing the
SEA, 5) Stage 3: Informing and Influencing Decision Making, and 6) Stage 4: Monitoring and Evaluation.

So far more than 10 SEAs have been conducted in Kenya, according to NEMA.

NEMA was established based on “The Environmental Management and Co-ordination Act, 1999” (the Act
has since been amended. The act states “The object and purpose for which the Authority is established which
is to exercise general supervision and co-ordination over all matters relating to the environment and to be the
principal instrument of Government in the implementation of all policies relating to the environment.” (in
Article 9 (1)).

MEWNR has Finance and Administration Department, Directorate of Environment and Directorate of
Natural Resources and Kenya Meteorological Department. Apart from the departments, the ministry also has
semi autonomous agencies under it. These include National Environment Management Authority (NEMA),
Kenya Water Towers Agency (KWTA), Kenya Wildlife Service (KWS), Kenya Forest Service (KFS) and
Kenya Forest Research Institute (KEFRI).

Regarding SEA, “The Environmental (Impact Assessment and Audit) Regulation, 2003”, states:

- “strategic environment assessment” means the process of subjecting public policy, programmes and
plans to tests for compliance with sound environmental management; (Article 2, in Part I)
- Lead agencies shall in consultation with the Authority Strategic subject all proposals for public policy,
plans and programmes for environmental implementation to a strategic environmental assessment to
determine which ones are the most environmentally friendly and cost effective when implemented
individually or in combination with others. (Article 42(1) in Part VI)
- The Government and all the lead agencies shall in the development of sector or national policy,
incorporate principles of strategic environmental assessment. (Article 42(3) in Part VI)

The SEA Guideline in Kenya was established in 2012.

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NEMA will issue an approval for SEA only when such SEA studies have been done by a consultant
registered and licensed by NEMA as provided by the Environmental (Impact Assessment and Audit)
Regulation, 2003. There are three categories of licenses, namely;

- Associate Expert
- Lead Expert
- Firm of Experts

Both “Associate Expert” and “Lead Expert” are licenses for individual persons with “Lead Expert” only
authorized to undertake SEA. An Associate expert can only work under a lead expert. “Firm of Experts” on
the other hand is a license for the consulting firms.

In order to carry out SEA in Kenya, a consulting firm must be registered as Firm of Experts and the team
leader of the firm must hold and licensed as a ‘Lead Expert’.

9.1.2 Progress of SEA

The schedule for SEA approval is expected as shown below:

November 2015: First Stakeholder Meetings

November 2015: Submission of Scoping Report
November 2015: Submission of Scoping Report
November 2015 to May 2016: Detailed Study and Preparation of Draft SEA Report
April or May 2016: Second Stakeholder Meetings
June 2016: Approval of Draft SEA Report by NEMA
June 2016: Validation Workshop
September 2016: Approval of SEA Final Report by NEMA

Draft SEA Report is expected to be an input of Interim Report of this master plan study, and SEA Final
Report is expected to form part of a Draft Final Report of this master plan study.

Actual progress for SEA approval is shown below.

- October 2015: Contract with SEA Consultant (Local Consultant)

- October 2015: Kick Off Meeting of SEA in Nairobi
- November 2015: First Stakeholder Meetings (5 places)

9.1.3 Environmental Scoping

Following “Japan International Cooperation Agency (JICA) Guidelines for Environmental and Social
Considerations” (April 2010) and“National Guidelines for Strategic Environment Assessment (SEA) in
Kenya” (NEMA, 2012), now the SEA consultant (local consultant) is preparing Scoping Report of the SEA.
The views and opinions from stakeholders at the first round stakeholder meetings are to be input for this
preparation. The Scoping Report will be submitted to NEMA soon for the approval of NEMA.

In the JICA’s guideline, following impacts are listed as examples of impact regard to environmental and
social considerations:

- Human health and safety

- Natural environment (air, water, soil, waste, accidents, water usage, climate change, ecosystems, fauna
and flora) including trans-boundary or global scale impacts
- Social impacts (migration of population and involuntary resettlement, local economy such as
employment and livelihood, utilization of land and local resources, social institutions such as social
capital and local decision-making institutions, existing social infrastructures and services, vulnerable
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social groups such as poor and indigenous peoples, equality of benefits and losses and equality in the
development process, gender, children’s rights, cultural heritage, local conflicts of interest, infectious
diseases such as HIV/AIDS, and working conditions including occupational safety)
- The derivative, secondary, and cumulative impacts

For each aspect of environmental impact, degree of impact and expected to be affected will be evaluated
through further Detailed SEA Study.

Since this master plan is for “multi-modal” corridor and the target area is so extensive, so various impacts are
expected. Therefore especially following aspect shall be carefully examined through Detailed SEA Study.

- Land acquisition / Involuntary resettlement

- Public health and safety (during construction and after completion)
- Traffic safety issue
- Positive and negative impact on local economy and business (especially road side business)
- Security issue (crime and border security)
- Natural environment (during construction and after completion)
- Global scale impact e.g. green house gas

9.1.4 Baseline Information

“National Guidelines for Strategic Environment Assessment (SEA) in Kenya” (NEMA, 2012) gives
examples of baseline information as shown below:

Table 9.1.1: Baseline Environmental and Social Conditions

1. Physical environment
including PPP-relevant aspects of:
Climate, air quality, water resources and water quality, noise, topography, soils, geology, hydrology, and risks of natural
disasters
2. Biological environment
including PPP-relevant aspects of:
Biodiversity, ecology and nature conservation (including endangered species, protected ecosystems, habitats, species of
commercial importance, and invasive species and their impacts).
3. Socio-cultural and socio-economic conditions and human health
including PPP-relevant aspects of:
Archeology, cultural heritage, landscape, recreational activities, human health, social-economic aspects, resource use
(including land and water use), transportation, infrastructure, agricultural development, and tourism.
Source: NEMA (Kenya), 2012

Baseline information collection will be conducted at the beginning stage of Detailed SEA Study, which will
be started after the approval of Scoping Report of SEA. Baseline information will be submitted with Progress
Report of SEA to JST from SEA Consultant.

9.1.5 Assessment of Past and Current Environmental Issues

Following issues are currently identified through surveys, views/opinions at stakeholder meetings and
observation. Some of issues are relevant issues to this master plan, therefore such issues shall be considered
in the Detailed Study of SEA and the master plan itself.

- Road infrastructure
• Traffic jam (in both city area and trunk road)
• Road safety / Traffic accident
• Exhaust gas (vehicle movement and parking/waiting cargo vehicle)
• Health issues for road side people
• Too much rely on road transport (Importance of modal shift)
- Land acquisition

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• Required duration of land compensation

• Proper compensation to proper person(s)
- Urban planning and construction
• No proper physical planning
• Sanitation
• Design of infrastructure (water drainage etc.)
- Social impact
• Impact to road side business (both negative and positive)
• Infectious diseases such as HIV/AIDS
- Border security
• Border control
• Movement of stolen goods beyond the border
- Natural environment
• Air
• Water
• Flood water management
• Illegal collection of sand (to be carried by empty container from Malaba to Nairobi or Mombasa)

9.1.6 Result of First Stakeholder Meetings

The first round of stakeholder meetings were conducted in November 2015, and more than 150 participants
attended the meetings. Animated discussions were held at the all meetings even at lunch time. However the
attendance at some meetings was not impressive.

The summary of date and venues, and example of time schedule of the meeting is shown below.

Table 9.1.2: Summary of Date and Venue of 1st Round of Stakeholder Meetings in Kenya
Date Venue
November 2, 2015 (Monday) Nairobi (Silver Springs Hotel)
November 4, 2015 (Wednesday) Mombasa (Best Western Plus Creekside Hotel)
November 6, 2015 (Friday) Nakuru (Merica Hotel)
November 9, 2015 (Monday) Kisumu (Imperial Hotel)
November 11, 2015 (Wednesday) Malaba (Levantes Hotel)
Note: Beside these meeting, the Study Team and SEA consultant had several meetings at the various stakeholders’ offices to explain
the project and ask for their comments and further cooperation.
Source: JICA Study Team

Table 9.1.3: Example of Time Table of 1st Round of Stakeholder Meetings in Kenya
Time Activity Facilitated By
8.00 am – 8.30 am Registration SEA Consultant
8.30 am – 9.00 am Welcome Address and Self-Introductions MOTI (or SEA Consultant)
9.00 am – 9.30 am Overview of the Master Plan MOTI (or JICA Study Team)
9.30 am – 10.15 pm Q&A session MOTI (or JICA Study Team)
10.15 am – 10.45 am Tea Break
10.45 am – 11.30 am SEA Presentation SEA Consultant
11.30 am – 12.30 pm Q&A session SEA Consultant
12.30 pm – 12.50 pm Wrap up /way forward SEA Consultant
12.50 pm – 1.00 pm Closing SEA Consultant
1.00 pm – 2.00 pm Lunch and Collection of opinion surveys SEA Consultant
Note: Actual schedules were varied depending on the situation of each meeting.SEA Consultant and JICA Study Team
facilitated some of session instead of MOTI at some meetings those MOTI could not attend.
Source: JICA Study Team

Following interest were mainly raised by the participants.

- Current bottleneck, especially road

- Importance of modal shift
- Importance of proper zoning and physical planning
- Synchronization to development plan of other infrastructure
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- Relationship with existing plans to be implemented by local county government

- Issue of land acquisition at the time of project implementation
- Funding issue for project implementation stage
- Consideration of negative social and environmental impact (border security and safety)
- Protection of nature (e.g. empty trucks carry sand collected without proper environment consideration)
- Civic education and sensitization of this master plan to local people
- Involvement of other sector to this master plan formulation
- Additional stakeholder to be involved
- Harmonization and providing information to other country than Kenya and Uganda
- Technical / legal issue of SEA implementation
- Difference between EIA and SEA

Detailed record of discussions is currently under preparation by the SEA consultant (local consultant).
Following are issues for the second round meetings.
- More stakeholder involvement is necessary both from public sector and private sector, and preferably
higher level officials.
- Involvement of top level official is essential even he/she is not available at the timing of the
stakeholder meeting, since he/she can instruct proper person to attend the meeting.
- Early distribution of input for attendance e.g. Interim Report of this master plan is necessary.
- Early notification on meeting schedules is important in order for organizations to arrange for proper
attendance.
- Involvement of relevant sector and sensitization of public is important. Early notification and
utilization of website (to be published soon) is keys to success.
- Attendance from MOTI is essential as the owner of this master plan, and can properly answer
questionnaires from the attendances regarding policy issues.

Presentation by MOTI Presentation by SEA Consultant

(The First Stakeholder Meeting in Nairobi) (The First Stakeholder Meeting in Nairobi)

The First Stakeholder Meeting (Mombasa) The First Stakeholder Meeting (Malaba)
Source: JICA Study Team
Figure 9.1.1: Photographs on the First Round Stakeholder Meetings in Kenya
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9.2 Strategic Environmental Assessment Approach in Uganda

9.2.1 Overview

In Uganda, there is currently no established guideline for SEA. According to National Environment
Management Authority (NEMA) “the National Environment Act” is under review to include a mandatory
provision for SEA and it will probably be enacted by next year. NEMA is in the process of hiring a
consultant to finalize the draft SEA guideline. This is as of November 2015.

NEMA is established based on “The National Environment Act, 1995”. Article 5 of the act states that “The
authority shall be the principal agency in Uganda for the management of the environment and shall
coordinate, monitor and supervise all activities in the field of the environment.”

NEMA is a semi-autonomous institution under Ministry of Water and Environment (MOWE).

Organization chart of MOWE is shown below:

Ministry of Water and E nvironment

Authorities and Agencies
(reporting to the Minister)
•National Forestry Authority (NFA)
Wat er Policy
•National Water and Sewage
Committee to assist and advise the Corporation (NWSC)
Minister •National Environmental Management
Authority (NEMA)
DWRM provides
secretariat services

Directorate of Water Directorate of Water Directorate of

Res ources Management Department (DWD) E nv ironment Affairs

Department, Divisions and Units:

(reporting to the PS)
Departments: Departments: Departments:
•Finance and Administration Department
•Water Resources Monitoring •Urban Water Supply and •Environmental Support
•Procurement Unit
and Assessment Sewerage •Wetlands Management
•Internal Audit Unit
•Water Resources Planning •Rural Water Supply and •Forestry Support
•Personnel and Accounts Unit
and Regulation Sanitation •Meteorology
•Planning Division
•Water for Production
•Policy Analysis Unit
•Climate Change Unit
Accountability
Advice and Facilitation
Source: Prepared by JICA Study Team based on the website of MOWE
Figure 9.2.1: Organization Chart of MOWE

Since there is no legal provision for SEA at the moment, SEA can be implemented by utilizing the guideline
of donor agency or common practice accepted internationally. As such therefore NEMA is not in a position
to review and approve the SEA.

SEA guidelines will only be ready after review and publication of “the National Environment Act” with
mandatory provision for SEA. This will provide a legal framework on SEA.

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NEMA acknowledges that two (02) SEAs have been implemented in Uganda so far. The SEAs were for oil
and gas sector and also road sector (National Road Master Plan).

For the sake this master plan formulation, NEMA advised that the SEA shall be follow common practice of
SEA and the guidelines of international donor agency. In this case NEMA’s participation will only be as a
key stakeholder and not an authorizing agency because of the limitation on the current legal provision.

There is however a well established legal frame work of Environmental Impact Assessment (EIA) including
sector wise guidelines. “Environmental Impact Assessment Regulations (1998)” and “Environmental Impact
Assessment Public Hearing Guidelines (1999)” issued by NEMA are the two regulation/guideline for EIA.
The Ministry of Works and Transport for instance has an EIA guideline titled “Environmental Impact
Assessment Guideline for Road Project, June 2008”. Such EIA regulation/guidelines shall form part of
reference documents for baseline data collection and implementation procedure of the assessment.

NEMA has three categories of license for environmental consultants. These license systems of environmental
consultants. There are three kinds of license namely;

- Environment Impact Assessor (EIA)

- Environment Auditor (EA)
- Environment Partner (EP)

Both of EIA and EA are licenses for individual persons. EIA is for impact assessment and EA is for
assessment after the completion of project. According to NEMA, most of environment consultants in Uganda
hold both EIA and EA license. In the list of license EIA & EA license holders are either listed as “ Team
Leader/Member” or as “Team Member”. EP on the other hand is a license for partnership or consortium of
firms, and not for individual persons.

For the sake of implementation of SEA in Uganda by Ugandan local consulting firm, although there is no
legal framework for SEA implementation, the team leader of the local consulting team shall hold an EIA
license with condition of “Team Leader/Member” as a requisite for selection for selection of such consulting
firm.

9.2.2 Progress of SEA

Since there is no legal framework for NEMA in Uganda be an approving authority for SEA at the moment,
NEMA will only be involved as one of the key stakeholders. As such therefore, the approval of the outcomes
of SEA consultant (local consultant) will be done by MOWT and JST as the project owner and the employer
of SEA consultant respectively.

The schedule for SEA approval is expected to be as shown below:

- August to September 2015: Selection of SEA Consultant

- November 2015: First Stakeholder Meetings
- November 2015: Submission of Scoping Report
- November 2015 to May 2016: Detailed Study and Preparation of Draft SEA Report
- April or May 2016: Second Stakeholder Meetings
- June 2016: Approval of Draft SEA Report by MOWT/JST
- June 2016: Validation Workshop
- September 2016: Approval of SEA Final Report by MOWT/JST

Actual progress for SEA approval is shown below.

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• October 2015: Contract with SEA Consultant

• October 2015: Kick Off Meeting of SEA in Kampala
• November 2015: First Stakeholder Meetings (3 places)

Beside the schedule above, the SEA Consultant together with JST will provide short training program of
SEA to the officials of MOWT to deepen the understanding of SEA itself and SEA for this master plan. The
training program consists of two times of one day program.

9.2.3 Environmental Scoping

Following “Japan International Cooperation Agency (JICA) Guidelines for Environmental and Social
Considerations” (April 2010) and other common practice of SEA, now the SEA consultant is preparing
Scoping Report of the SEA. The views and opinions from stakeholders at the first round stakeholder
meetings are to be input for this preparation. “National Guidelines for Strategic Environment Assessment
(SEA) in Kenya” (NEMA, 2012) is considered as reference document for implementation of SEA since this
master plan study covers both Uganda and Kenya. The Scoping Report will be submitted to MOWT/JST
soon for the approval of MOWT/JST.

In the JICA’s guideline, following impacts are listed as examples of impact regard to environmental and
social considerations:

- Human health and safety

- Natural environment (air, water, soil, waste, accidents, water usage, climate change, ecosystems, fauna
and flora) including trans-boundary or global scale impacts
- Social impacts (migration of population and involuntary resettlement, local economy such as
employment and livelihood, utilization of land and local resources, social institutions such as social
capital and local decision-making institutions, existing social infrastructures and services, vulnerable
social groups such as poor and indigenous peoples, equality of benefits and losses and equality in the
development process, gender, children’s rights, cultural heritage, local conflicts of interest, infectious
diseases such as HIV/AIDS, and working conditions including occupational safety)
- The derivative, secondary, and cumulative impacts

For each aspect of environmental impact, degree of impact and expected to be affected will be evaluated
through further Detailed SEA Study.

Since this master plan is for “multi-modal” corridor and the target area is so extensive, so various impacts are
expected. Therefore especially following aspect shall be carefully examined through Detailed SEA Study.

- Land acquisition / Involuntary resettlement

- Public health and safety (during construction and after completion)
- Traffic safety issue
- Positive and negative impact on local economy and business (especially road side business)
- Security issue (crime and border security)
- Natural environment (during construction and after completion)
- Global scale impact e.g. green house gas

9.2.4 Baseline Information

Baseline information collection will be conducted at the beginning stage of Detailed SEA Study, which will
be started after the approval of Scoping Report of SEA. Baseline information will be submitted with Progress
Report of SEA to JST from SEA Consultant.

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For reference, “National Guidelines for Strategic Environment Assessment (SEA) in Kenya” (NEMA, 2012)
gives examples of baseline information as shown below:

Table 9.2.1: Baseline Environmental and Social Conditions

1. Physical environment
including PPP-relevant aspects of:
Climate, air quality, water resources and water quality, noise, topography, soils, geology, hydrology, and risks of natural
disasters

2. Biological environment
including PPP-relevant aspects of:
Biodiversity, ecology and nature conservation (including endangered species, protected ecosystems, habitats, species of
commercial importance, and invasive species and their impacts).

3. Socio-cultural and socio-economic conditions and human health

including PPP-relevant aspects of:
Archeology, cultural heritage, landscape, recreational activities, human health, social-economic aspects, resource use
(including land and water use), transportation, infrastructure, agricultural development, and tourism.

Source: NEMA (Kenya), 2012

9.2.5 Assessment of Past and Current Environmental Issues

Following issues are currently identified through surveys, views/opinions at stakeholder meetings and
observation. Some of issues are relevant issues to this master plan, therefore such issues shall be considered
in the Detailed Study of SEA and the master plan itself.

- Road infrastructure
• Traffic jam (mainly trunk road)
• Road safety / Traffic accident
• Road condition (especially road to northern part and branch road)
• Exhaust gas (vehicle movement and parking/waiting cargo vehicle)
• Health issues for road side people
• Too much rely on road transport (Importance of modal shift)
- Land acquisition
• Required duration of land compensation
• Proper compensation to proper person(s)
- Urban planning and construction
• No proper physical planning
• Sanitation
• Design of infrastructure (water drainage etc.)
- Social impact
• Impact to road side business (both negative and positive)
• Infectious diseases such as HIV/AIDS
- Border security
• Border control
• Movement of stolen goods beyond the border
- Natural environment
• Air
• Flood water management

9.2.6 Result of First Stakeholder Meetings

The first round of stakeholder meetings have been completed and more than 100 participants attended the
meetings. MOWT, as the project owner, chaired all meetings and animated discussions were held. The
summary of date and venues, and example of time schedule of the meetings is shown below.
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Table 9.2.2: Summary of Date and Venue of 1st Round of Stakeholder Meetings in Uganda
Date Venue
November 16, 2015 (Monday) Kampala (Hotel Africana)
November 18, 2015 (Wednesday) Mbarara (Lake View Hotel)
November 20, 2015 (Friday) Tororo (Rock Classic Hotel)
Source: JICA Study Team

Table 9.2.3: Example of Time Table of 1st Round of Stakeholder Meetings in Uganda
Time Activity Facilitated By
8.30 am – 9.00 am Registration SEA Consultant
9.00 am – 9.15 am Self-Introductions and Opening Remarks MOWT
9.15 am – 9.45 am Overview of the Master Plan JICA Study Team
9.45 am – 10.30 am SEA Presentation SEA Consultant
10.30 am – 11.00 am Tea Break
11.00 am – 12.30 am Q&A Session
12.30 pm – 12.50 pm Wrap up / Way forward SEA Consultant
12.50 pm – 1.00 pm Closing SEA Consultant
1.00 pm – 2.00 pm Lunch and Collection of Opinion Surveys
Note:
Actual schedules were varied depending on the situation of each meeting.
Source: JICA Study Team

Following interests are mainly raised by the participants.

- Current bottleneck, especially road

- Importance of modal shift
- Importance of proper zoning and physical planning
- Synchronization to development plan of other infrastructure
- Relationship with existing plan to be implemented by local government
- Issue of land acquisition at the time of project implementation
- Consideration of negative social and environmental impact (border security and safety)
- Protection of nature
- Civic education and sensitization of this master plan to local people
- Involvement of other sector to this master plan formulation
- Additional stakeholder to be involved
- Harmonization and providing information to other country than Kenya and Uganda
- Technical / legal issue of SEA implementation
- Difference between EIA and SEA

Detail record of discussion is currently under preparation by the SEA consultant (local consultant).

Following are issues for the second round meetings.

- More stakeholder involvement is necessary from private sector.

- Involvement of top level official is essential even he/she is not available at the timing of the
stakeholder meeting, since he/she can instruct proper person to attend the meeting.
- Early distribution of input for attendance e.g. Interim Report of this master plan is necessary.
- Early notification on meeting schedules is important in order for organizations to arrange for proper
attendance.
- Involvement of relevant sector and sensitization of public is important. Early notification and
utilization of website (to be published soon) is keys to success.
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- It was so good that MOWT hosted the meeting since the attendances really felt the ownership of this
master plan and got proper reply regarding policy issues.

The First Stakeholder Meeting (Mbarara) The First Stakeholder Meeting (Tororo)
Source: JICA Study Team
Figure 9.2.2: Photographs on the First Round Stakeholder Meetings in Uganda

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CHAPTER 10 : WAY FORWARD

The following works will be done by the end of February 2016.

• Further analysis of freight traffic demand forecasting in terms of:

- Verification of current and future LOS data which are the transit time and cost of truck and MGR and
verification of future LOS data of SGR.
- Model tuning and forecasting for the multiple scenarios with the NEC MP Projects.

• Formulation of development plan for port, airport, and waterway;

• Implementation of additional Marketing and Value Chain Survey;

• Formulation of promotion plan of growth drivers identified;

• Identification of priority projects/programs for transport and logistics development as well as industry
development;

• Formulation of financial strategy for the proposed investment that includes road, railway, port, waterway,
pipeline, airport, multimodal facilities, but more focusing on railway, inland waterway, and multimodal
facilities;

• Implmentation of SEA (To be continued by June 2016)

• Implementation of Study Tour to Mozambique in January 2016; and

• Preparation of Interim Report in February 2016.

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