On energy, Tanzania is likely to dim Kenya soon

As ODM leader Raila Odinga was endorsing the Adani Group, an Indian company, to take over the management of Kenya’s aviation hub and electricity infrastructure for the next three decades, a Kenyan company, Dalbit, was pioneering a ground-breaking innovation in the energy and transport sectors in neighbouring Tanzania.

And where the entry of Adani has sparked a ruckus in the political arena, Dalbit, by contrast, has been welcomed with open arms, especially by taxi and ‘Bajaj’ operators in Dar es Salaam, who have seen their incomes grow after switching from petrol to natural gas. Since the company entered the market, it has introduced condensed natural gas (CNG), an innovative product that will have far-reaching benefits for Tanzania’s economy and, in a few short months to come, make it a case study for the rest of the continent to learn from.

Already, consumers are voting with their pockets, with long queues forming outside the first CNG station that Dalbit’s subsidiary, Dalbit Tanzania, has set up next to Julius Nyerere International Airport in partnership with Taqa Arabia, a Middle East company. As a result of the initial success, the two firms have embarked on setting up a second station to meet insatiable demand.

The two contrasting scenarios above are proof of the difference that the right (or wrong) policy approaches makes, with Tanzania inviting an African company to drive innovation in its energy sector while Kenya is courting an Asian firm whose defining characteristic is its controversial credentials. In two to three years from now, the difference in the two approaches will become evident and economists will start asking where the rain started beating Kenya yet the signs that Tanzania is approaching an economic tipping point are hidden in plain site as Kenya regresses politically and economically.

For instance, Dar has invested in an electric train with beautifully designed supporting structures, with Kenya settling for a diesel one supported by purely functional but non-aesthetic infrastructure. The Dar train can reach speeds of up to 160km per hour, compared with a maximum of 120km per hour for Kenya’s SGR, meaning that there will be faster turn-around times for its users compared with Kenya’s. Dar has also invested heavily in road network expansion while its port, though less efficient than Mombasa, routinely handles more cargo for Tanzania importers as well as for more than five neighbouring countries, including exports of ore from various mines in the region.

Now, Tanzania has started exploiting its clean and green natural gas reserves to power vehicles using CNG, while Kenya is still relying on imported fossil fuels to power both its industries and vehicles. That means where Kenya will continue to spend dollars on fuel imports, Tanzania will be benefiting from exploiting its vast gas reserves, which are only rivalled by deposits in Mozambique and Egypt.

Tanzania is also in the early stages of using gas to generate electricity, meaning that in the not-too-distant future, it will both improve reliability of supply, which remains erratic at present, while significantly bringing down end-user costs. The upshot is that this will bring down the cost of doing business significantly, not to mention that the expansion in infrastructure will ease movement of goods and people from the East African Community and the South African Development Community. Tanzania is a member of both. Put together, all these mean that in the final analysis, Tanzania will chalk up a competitive advantage, compared with Kenya, within three to five years. The option for Kenya is to either hit the ground running now or dither until it is too late to catch up.

It should not, therefore, come as a surprise when Kenya starts to show signs of struggling to retain its position as the regional hub, and given that in the countries where Adani has set up electricity infrastructure, costs have invariably gone up, manufacturers will more likely than not be paying more to keep the engines of the economy running.

And since Kenyan politicians have demonstrated their propensity to prioritise politics of attrition over growth and forward-looking economic policies, it will not be long before this takes a toll on economic expansion, especially with growing disaffection arising from the impeachment of Deputy President Rigathi Gachagua.

— The writer is the Editor-in-Chief of the Nairobi Law Monthly and Nairobi Business Monthly; Mbugua@nairobilawmonthly.com