Kenya: What impact will Dangote's new refinery have on the region?
Is Kenya Africa's next major energy hub? A plan from Dangote Industries to build a massive refinery off the country's coast could reshape fuel supply
Is Kenya Africa's next major energy hub? A plan from Dangote Industries to build a massive refinery off the country's coast could reshape fuel supply, trade and economic growth across East Africa. Nigerian billionaire and business tycoon Aliko Dangote last week confirmed the final location of his new oil refinery in East Africa: Lamu Island off the Kenyan coast. The facility is set to change not only Kenya but the entire region, with a projected refinery output of 700,000 barrels per day. Once operational, the facility is expected to become Africa's second-largest refinery. Oge Onubogu, a director and senior fellow at the Center for Strategic and International Studies in Washington, DC, told DW that "people on the ground [think] it's wonderful that this investment is coming into Kenya; just the potential about the jobs that could be created, not only for local Kenyan economies but more broadly for the region." "It's a massive project, but one that is needed in many ways on the continent and in the East Africa region," she said. Tanzania and Kenya competed for the refinery project for months before Dangote chose Lamu Island Image: Christophe Petit Tesson/picture alliance/dpa Dangote Industries Limited has not yet announced the projected cost of the ambitious undertaking. However, according to Bloomberg, building the proposed refinery could run up a bill of up to $17 billion (€15 billion), making it one of the largest privately funded industrial projects in the region to date. But what is in it for Dangote? Negotiations still ongoing Leo Kemboi, an economist at the Institute of Economic Affairs Kenya, highlights that little is known about the details of the agreement between the Kenyan government and Dangote. "We've not had pronouncements by the government of Kenya on what specific guarantees would be given, but since we've seen the many meetings between [Kenyan President William] Ruto and Dangote, we know that certainly there are negotiations that are still ongoing," he told DW.
"That confirms that there are specific incentives that are up for discussion." Dangote Industries intends to fund the project through a mix of internally generated revenue, bond issuances and proceeds from the planned initial public offering (IPO) of Dangote Petroleum Refinery, according to Reuters. However, Nigeria's Securities and Exchange Commission stated that it has neither received nor approved an IPO application, raising questions about the extent to which the financing process of the facility can be considered a done deal. According to media reports, Dangote has said that any East African refinery project would require anti-dumping protections to prevent cheaper imported fuels from undercutting local refining operations. That is a prospect that Kemboi worries could backfire. "If too many [tax] incentives are given to Dangote, it will not be acceptable to any Kenyan, which has happened with many other investments [before]," he said. "It's a Kenyan thing. We revolt, or we rebel, when people feel that either you are cheating, or you're cornering the market — anything that looks suspicious in Kenya is always something that will fail in the end." Fossil fuels versus green energy Geotechnical investigations are already well underway on Lamu Island despite such reservations, with media reports confirming that engineering and design work has also begun, and that construction is expected to take between three and five years, according to Reuters. Africa's fuel crisis: Is Dangote the answer? To view this video please enable JavaScript, and consider upgrading to a web browser that supports HTML5 video However, there are concerns about the impact that the massive project will have on Lamu, a UNESCO-protected World Heritage Site. Squaring the potential ecological impact of the refinery with environmental concerns seems to be a tightrope that authorities will have to walk in the coming years. Kemboi believes that Kenya is well on its way to embracing greener and more sustainable technologies.
The BriefWire