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Why AfDB is backing Kenya pipeline project

African Development Bank (AfDB) has thrown its weight behind the Turkana-Lamu Crude Pipeline project even as Uganda has bolted out of the project that was initially supposed to be a joint venture between Kampala and Nairobi.

People Daily writer GITAHI NGUNYI spoke to Gabriel Negatu, AfDB regional director for East Africa to find out, among other issues, why the development financier is so keen to finance the pipeline construction. Excerpts…

Q: There has been serious fallout over the planned Crude Oil Pipeline that was supposed to have been undertaken jointly by Uganda and Kenya. Uganda has pulled out and so has Total, one of the oil majors operating in Uganda. But you have thrown your weight behind the project on the Kenyan side. What is it that you see that others do not see?

A: This is a very important project to the government of Kenya. It is also a priority project. Kenya oil and gas sector is growing very fast. Oil is coming at a very crucial time when Kenya’s economy is doing well and therefore it can only increase the growth. The pipeline is going to open sections of the country that have traditionally lagged behind. It’s also going to create jobs.

In many respects this is a very good respect. The bottom line is, it makes economic sense. If you do the cost benefits and economic analysis, you find that Kenya oil reserves are increasing. Then the pipeline will have a connection with Ethiopia and Southern Sudan two countries that have not yet exploited their oil potential. When you put these factors together, this project makes perfect economic sense.

It opens up Lamu and the opportunities it creates both economic and social are very big. In a nutshell, we believe this is a project that makes business sense to us. We are not there. But we are very open to becoming financing partners.

Q: How does the pipeline project relate to the other projects you are involved in Kenya?

A: Financing is just a small part of what we do. We see ourselves as convening, connecting and catalysing development. Whenever Kenya has a development financing need, we convene the key stakeholders and partners, and then we connect them to make sure they are talking to one another about financing and technical support, and then we catalyse the project by putting in our money and encouraging other financiers to come on board.

Our money is not last in most cases. It’s the first but not necessarily the biggest. Once we come into a project, we build the confidence. We remove the risk so that others with bigger money can come in.

Q: In Kenya, just like in the rest of Africa, energy has continued to be underfunded even though the demand has always been ultrahigh. Why is it that apart from oil and gas, other energy projects such as electricity transmission or connection do not attract much lending from institutions like you?

A: You may need to check your facts on the work we do in energy. As AfDB, electricity is a key sector in the energy component of our infrastructure program. In Kenya we are currently helping the government meet the goal of taking power connection to the last mile.

The last mile power project is the most innovation power sector financing project in Africa. Kenya needs to be commended for coming up with such an innovatiove project. In the past, the situation is that if you are a small guy, you see power passing over your head, but it never gets to your house.

Now this project intends to take power from the national grid to the household. So if you want to run a small barber shop, hair salon or cyber café, this project will see to it that you get power.

As AfDB, we are happy to have been the first to finance the project. Today, every development financier is eager to finance it. Further, we are now in the process of funding electricity trading between Kenya and Ethiopia. We are also connecting Kenya and Tanzania. On the western side, we are connecting Kenya and Uganda.

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