Lamu Port and Lamu-Southern Sudan-Ethiopia Transport Corridor

In March 2013, the LAPSSET Corridor Development Authority (LCDA) was established through the Presidential Order Kenya Gazette Supplement No. 51, Legal Notice No. 58, The LAPSSET Corridor Development Authority Order 2013 to plan, coordinate and manage the implementation of the Lamu Port-South Sudan-Ethiopia Transport Corridor Project.[13] The Authority is domiciled in The Presidency in accordance with the Constitution of Kenya 2010. The LCDA is headed by Mr. Silvester Kasuku, MBS, CMILT, Director General/ Chief Executive Officer and Amb, Dr. Francis Muthaura, EGH, Chairman of the Board of the Authority. The functions of the Authority are as follows:

• i. Plan, coordinate and sequence LAPSSET Corridor projects in collaboration with implementing ministries and agencies;[14]
• ii. Coordinate implementation of LAPSSET Corridor projects across implementing ministries and agencies;[15]
• iii. Provide leadership, direction and guidance in operations and implementation of the LAPSSET Corridor;[16]
• iv. Ensure implementation of all decisions and resolutions of the government;[17]
• v. Mobilize funds to project components using a variety of resources including budgetary resources from government, donor loans, infrastructure bonds and private finance;[18]
• vi. In collaboration with National and County government department, build the capacity of LAPSSET Corridor towns to manage urban growth resulting from LAPSSET Corridor investments;[19]
• vii. Promote the competitiveness and use of the LAPSSET Corridor for the transport of goods and people;[20] and
• viii. Provide a forum for all stakeholders of the LAPSSET Corridor.[21]

The LAPSSET Corridor Development Authority is the policy, implementation, operational coordination and technical oversight organ for the LAPSSET Corridor Project. The LAPSSET Corridor Development Authority has the inter-ministerial coordination committees composed of relevant ministries.

The Corporation is mandated to manage the development of the following infrastructure project components which are key Transport, Energy and Communication investments;[22]

• 1.Lamu Port at Manda Bay (32 Berths including Associated Infrastructure)[23]
• 2.Standard Gauge Railway Line from Lamu – Isiolo - South Sudan (Juba) – Ethiopia (Addis Ababa)[24]
• 3. Highways from Lamu – Isiolo - South Sudan (Juba) – Ethiopia (Addis Ababa)
• 4.Crude Oil Pipeline from Lamu – Isiolo – Nakodok/Nadapal (South Sudan), and Product Oil Pipeline from Isiolo – Moyale – Addis Ababa (Ethiopia)[25]
• 5. International Airports at Lamu, Isiolo, and Turkana (Lokichogio);[26]
• 6.Resort Cities at Lamu, Isiolo and Lake Turkana[27]
• 7.Merchant Oil Refinery at Isiolo.
• 8. Services related infrastructure Project Components namely;
  • a. Malindi – Garsen Road
  • b. High Grand Falls Multipurpose Dam
    • i. Water Supply
    • ii. Power Supply; and
  • c. Fibre Optic Cable / Communication
  • d. Other generated and attracted investments in commercial and manufacturing sectors along the LAPSSET Corridor.

In addition to this the project is also spearheading the development of associated infrastructure sub projects in particular the High Grand Falls that is envisaged to produce 500MW of power and provide water to Lamu city, Lamu Port and metropolis and irrigation of mega farms planned for the Tana Delta among other areas within the Corridor. The High Grand falls will be used to create a manmade Lake at its dam with a view to controlling perennial flooding within the lower Tana Basin. More importantly the LAPSSET Corridor infrastructure is being developed as a critical enabler meant to spur growth of other sectors of the economy within the Corridor. Of great significance is the rich agricultural value chain spanning over ten different economic crops whose implementation has begun with the establishment of mega irrigation schemes.

Already both local and international agricultural investors are keen on taking investment opportunities in this area and respective County Governments within the corridor have started receiving enquiries from some of the interested investors.

The LAPSSET Program therefore presents an investment opportunity that may be considered by the private sector investors including Pension, Insurance and saving Funds among other investors.

Project studies that were completed in 2011 on the LAPSSET Corridor project components showed great economic viability with most of the project components registering High Economic Internal Rates of Return of between 17% and 23.4% compared to acceptable industry minimum standard of 10% for infrastructure projects as shown in Table 1 below.

Table 1: LAPSSET Corridor Project Components with accompanying cost implications

Services

Note 1: Both all and each project components are judged as viable in view of national economy as EIRRs computed are more than 12%, which is opportunity cost.

Note 2: Cargoes are generated by the Corridor itself. Higher figures than the above table can be realized.

From the statistics provided, it is therefore evident that if the government structured the projects into bankable bundles, it would attract private sector investors to participate and invest in the projects.

The seven key infrastructure project components of the LAPSSET Corridor Program require substantial amounts of resources with a budget estimate of US$24.5 billion, equivalent to KES 2 trillion at current exchange rates in construction costs. It is estimated that Lamu Port with its 22 berths alone will cost approximately US$3.1 billion, the Railway US$7.1 billion while the crude oil pipeline will cost a further estimate of US$3 billion for Lamu to Lokichar trunk line alone.

Indeed, the figures indicated above are of no mean task and cannot be left to the Government’s limited resources alone. The Government has prioritised the participation of private sector in the development of LAPSSET Corridor infrastructure through infrastructure bonds and equity participation among other money market instruments. There is already significant private sector interest being registered towards the implementation of these project components hence the need has arisen for the government to structure and package bankable projects that are investor ready for uptake by private sector.

LAPSSET Corridor Project is on course and so far construction activities for various facities at Lamu Port site are ongoing with progress for Lamu Port Building and Port Police and security facilities having achieved a completion rate of 95%.

• i) Port Building: 95% complete.
• ii) Police Station: 95% complete.
• iii) Design review ongoing for the first three berths, with construction to begin in July 2014
• iv) The physical development plan and survey for the Port area has been completed.

The Government has so far allocated KES 4.2 billion in preparation for the commencement of construction works for the first three berths. The government is also in the process of mobilising more resources from its own revenue resources as well as from private sector investors through equity and debt including bonds while mobilisation of more funds through equity and debt participation by investor for the construction of the first three berths and its associated infrastructure. These three berths are being constructed by China Communications Construction Company at a cost of nearly $480 million, and will reportedly be opened by 2020.

The LAPSSET highway component has been categorized in sections as indicated below:[28]

• Lamu – Garissa (D568) - 250 km
• Garissa – Isiolo (C81,D586,B9) - 423 km
• Isiolo – Moyale (A2) - 505 km
• Isiolo–Nadapal - 721 km

It is important to note that significant progress has been made on the ongoing construction of LAPSSET Highway component, particularly the 505 km Isiolo-Moyale A2 Road costing approximately KES 46 billion and being funded jointly by the African Development Bank, European Union and the Government of Kenya. Indeed, Kenyans and Ethiopians will soon be able to enjoy improved transport and logistics services and transact business between Addis Ababa, Lamu and Nairobi.

The Isiolo – Merille River Road, constitutes the first section of the 505 km road from Isiolo to Moyale which is part of the road linking Tunduma in Southern Tanzania with Addis Ababa in Ethiopia.

The project construction works are complete. This project was funded by the African Development Bank at a cost of KES 6,318,130,428.27.

This road constitutes the second section of the 505 km road from Isiolo to Moyale and Addis Ababa in Ethiopia. The road begins at Merille River and runs in a northerly direction and terminates at Marsabit. The construction works for this section has progressed at 10% having commenced in January 2013 and is scheduled for completion by January 2016 and is being funded by the European Union. The project will cost a total sum of KES 13.73 billion.

The road begins in Marsabit at the junction with the road C82 and runs in a northerly direction and terminates in Turbi constituting the third section of the 505 km road from Isiolo to Moyale and Addis Ababa in Ethiopia. The construction works for this section has progressed to 47.4% having commenced in April 2011 and is being funded by the African Development Bank and is expected to be completed by March 2014. The project will cost a total sum of KES 13 billion.

Construction works have progressed to 11.5% completion having commenced in October 2012 for a period of 36 months. This section is being funded by the African Development Bank and is expected to be completed in December 2015.

In addition to the above the Government of Kenya and the Government of South Sudan, working together with the World Bank recently completed feasibility studies and detailed engineering designs for the Lokichar - Nadapal – Torit - Juba Road whose construction works will begin soon once finances are mobilised. This road project does present an opportunity for private sector participation.

Furthermore, the Government of Kenya is currently considering mechanisms for participation by private sector investors to deliver the Lokichar - Isiolo - Garissa - Lamu Road and Lamu - Garsen Road through Engineering, Procurement, Finance and Construct (EPC). Delivery of the road provides immediate road connection between Lamu Port and Juba and Addis Ababa.

• i. Lamu – Garissa (D568) 250 km), Garissa – Isiolo (C81,D586,B9) (423 km) and Isiolo - Ginyang for EPC mode
• ii. Isiolo – Moyale (A2) (505 km): Construction work is ongoing with;
  • Isiolo – Merile (136 km) section at 100% completion.
  • Merille – River Marsabit (123 km) Construction works ongoing at an advanced stage
  • Marsabit – Turbi (126 km) Construction works ongoing at an advanced stage
  • Turbi – Moyale (128 km) Construction works ongoing at an advanced stage
• iii. Kitale – Lodwar – Nadapal Road (623 km): Designs are 95% complete.
• iv. Garsen – Lamu Road (115 km): Design reviews complete. Awaiting mobilization of resources for construction.

Continued discovery of oil resources with the region has emboldened plans by regional Governments that are connected by the LAPSSET Corridor to build a crude oil pipeline between Lamu Port and Kenya’s oil fields in Turkana Basin and Uganda’s oil fields at Lake Albert’s Basin and South Sudan oil fields.[29] The Government of Kenya is soon putting up an Expression of Interest to competitively select the appropriate investors for the development of the crude oil pipeline.

In addition to the above the Government has prioritised the provision of appropriate infrastructural service aimed at supporting the massive investments planned for the LAPSSET Corridor. The Government has just completed the electric power connection for the Lamu Port of 220 kV transmission line from Rabai through Malindi and Garsen to Lamu.

Construction of electric power transmission line has commenced to deliver electric power connection to key LAPSSET Corridor areas such as Garissa, Isiolo and Turkana. Already construction of 132 kV transmission line from Seven Folks/Kindaruma to Garissa is ongoing; construction of 132 kV transmission line from Mount Kenya region to Isiolo is ongoing. Plans for the construction of 400 kV transmission line from Lake Turkana to Suswa are at an advanced stage while plans are ongoing for the construction of 220 kV line from Garsen to Garissa.

• Rabai – Lamu 220 kV Transmission Line completed
• Garsen 220 kV Transmission Line to commence soon
• Lake Turkana – Suswa 400 kV Transmission Line to commence
• Lamu – Garissa – Isiolo – Lokichar 220 kV Transmission Line planned
• Kindaruma – Garissa 132 kV Transmission line to complete construction by Dec 2014
• Masinga – Isiolo 132 kV Transmission line to complete construction by Dec 2014
• Kamburu – Isiolo 220 kV Transmission Line to complete Construction by Dec 2014

The government has embarked on improving facilities at the three airports to provide for air travel services in the interim to enhance accessibility to the corridor.[30] Improvement works on Lokichogio Airport were completed in the recent past and is already operational with scheduled flights landing at the airport.

Provision of airport facilities will strengthen buildup of air transport and logistics services along the corridor in readiness for the construction of the three international airports at the three locations in the future.

Kenya Civil Aviation Authority has already made plans to establish air transport safety, security and surveillance facilities and services to strengthen air transport and logistics in northern Kenya.

The government recently completed lengthening of Lamu Manda Island Airport runway from 1.1 km to 2.3 km. Improvement works are already complete for the airport terminal building. Preparations are at an advanced stage towards the construction of a parallel taxiway and aircraft apron area to improve capacity of the airport. These improvements will enhance the capacity of Manda Lamu Airport that already has a strong scheduled flights clientele.

The Government has completed construction works on the 1.2 km Isiolo Airport runway. Construction works are currently ongoing for Airport Terminal Building which is scheduled for completion by end of 2014. Kenya Airports Authority has made plans to operationalise the airport once facilities are in place by mid 2014.

In addition to the ongoing physical works in to planned projects along the LAPSSET Corridor, the Government has commenced a comprehensive plan for the provision of social infrastructure and services so as to give LAPSSET Project a deserving human face. Panning for these social infrastructure and services will ensure that schools, health centres, towns, water and sanitation services, security services and other social amenities are provided at an optimal level to make LAPSSET Corridor areas secure, desirable, liveable and working environment and a place to nurture Kenya’s future generations.

Construction and upgrading of the 136 kilometres (85 mi)[35] Isiolo – Merille road which is part of LAPSSET commenced in 2007 and the road was finished in 2011. The road was upgraded into a two-lane tarmac road. Construction of the Marsabit – Turbi road, also part of LAPSSET, commenced 29 August 2011, with an expected delivery date of 4 April 2014.[36]

Construction of the 193 km Ageremariam-Yabelo-Mega already began.

The Isiolo resort city is to be established under a public private partnership at a cost of KES 18.9 billion. In 2012, the Isiolo County Council was asked to set 6,500 acres of land aside for establishment of the resort city. The site is located at Kipsing Gap, 20 kilometres west of Isiolo town.[38]

The site was identified by Japanese Port Consultants after a nine-month feasibility study. The consultants also developed a conceptual design for the resort city with more than 10 preliminary models of the city. The plans include rules on land usage and guidance on private sector and local community involvement. The plans also cater for growth and development of the city for the next 20 to 30 years.[38]

Under Kenya's new constitution, it will be mandatory for the government to get consent from the locals before commencing with the project. Residents will be compensated for the acquisition. The local council will then acquire the land title and make money from leasing out the land and charging rates.[38]

The city will be situated between Katim hill and Oldonyo Degishu hill. Neighbouring game parks and national reserves include Lewa Wildlife Conservancy in the south, Buffalo Springs and Shaba National Reserve to the North, Samburu Game Reserve and Ewaso Ng'iro River to the West. The area also boasts a wide variety of plants and animals, including the big five, leading to it also being known as the Jewel in the crown.[38]

Kipsing Gap was picked in preference of Kulamawe and Archers Post due to security, accessibility, cultural diversity, natural diversity, wildlife, water availability, electricity, sewer system among other factors.[38]

In January 2012, 32 councillors led by chairman Adan Ali and Town Clerk Morris Ogolla and legislators, professionals, women group leaders were briefed by government officials on the importance of the resort city.[38]

Attractions will include three star to six star hotels, a local art and craft museum, theatres, conference centres and cultural events.[38]