Whichever way one looks at it, the groundbreaking of the Dangote Refinery and Petrochemical Complex in Lamu is a huge deal, not just for Kenya but for East Africa.
For unflinching environmental purists, it might be their worst nightmare, but it is still a major turning point for the region's industrial future.
At an estimated cost of $17 billion (about Sh2.2 trillion), and up to $20 billion (Sh2.6 trillion) including downstream petrochemical and port infrastructure, the 700,000 barrels per day (bpd) refinery towers over every capital project ever attempted in this corner of the world. It is also expected to create 60,000 direct and indirect jobs during construction and operations.
For comparison, Kenya's previous record holder, the entire Standard Gauge Railway (SGR) from Mombasa, cost about $3.2 billion (Sh413 billion) and had many people tearing their hair out. Another recent heavyweight, Tanzania's Julius Nyerere Hydroelectric Dam, cost roughly $3.3 billion. Even bigger, the East African Crude Oil Pipeline (EACOP) from western Uganda to Tanzania's port of Tanga, which is about 90 per cent complete, will cost an estimated $5 billion.
The 1,443-kilometre EACOP pipeline, the world's longest heated crude pipeline, is projected to create 10,000-15,000 construction jobs.
For decades, economic debate in East Africa has focused on what Uganda's politically incorrect President Yoweri Museveni outrageously called "pygmies arguing about which of them was taller": largely unhelpful arguments over which is the leading economy in the region, and how soon the rest would catch up and surpass it.
No doubt, Kenya has long been the largest economy in the East African Community. With a nominal Gross Domestic Product of nearly $120 billion, it is 1.3 times larger than Tanzania's, 1.6 times larger than DR Congo's, 2.2 times larger than Uganda's, 8.4 times larger than Rwanda's, 10.7 times larger than Somalia's, 16.8 times larger than South Sudan's and 29.5 times larger than Burundi's. With the refinery, Kenya could pull away dramatically and leave the club of short-statured countries by a country mile.
But there is a more good-neighbourly alternative. Can the refinery be the honey that attracts other industrial bees to the sub-region, the tide that lifts all East African boats? Or, to put it in more down-to-earth African fashion, how can the rest (and Kenyans too) eat the pipeline?
The answer must start with a caution. To appreciate the strategic value of the Dangote Lamu complex, we need to shelve some misconceptions about fuel costs. Of the top 20 countries with the cheapest fuel at the pump, only one (Lebanon) is not an oil producer.
And even if a country is an oil producer, as Dangote's Nigerian refinery shows, local refining does not automatically result in cheap fuel at the pump. Refineries buy crude on the world market (whether imported or sourced locally) and operate as commercial ventures set up to recover capital investments. In short, Lamu will not bring much cheaper fuel to Kenyan motorists, if at all.
Where it will really change the game is in providing certainty and enabling better regional risk management. Currently, before the relatively modest Ugandan oil begins to flow, East Africa depends on long, vulnerable supply lines, often passing through war-disrupted corridors like the Strait of Hormuz or the Bab al-Mandeb Strait, the global chokepoint between Yemen on the Arabian Peninsula and Djibouti and Eritrea in the Horn of Africa, connecting the Red Sea to the Gulf of Aden and the Indian Ocean.
These geopolitical disruptions lead to tanker delays and unpredictable price rises, and too often create foreign exchange panics. A world-class refinery on the Kenyan coast will secure quick access to refined products and cut delivery times from weeks to days, insulating landlocked countries like Uganda, Rwanda and South Sudan, and regions like eastern DR Congo, from physical energy cut-offs.
Additionally, modern refining produces materials that can be used for local manufacturing of plastics, fertilisers and industrial solvents. At the same time, bitumen (asphalt) for tarmac roads becomes much cheaper to produce domestically than to import at finished-good tariffs. But perhaps the biggest gain for the hinterland countries is that sourcing energy inside the EAC trade bloc allows Uganda to negotiate bilateral energy settlements or local clearing arrangements in shillings, and Rwanda in the Rwandan franc, relieving extreme pressure on their national foreign exchange reserves.
So, while a project of Dangote's scale could give Kenya a chokehold on the status of East Africa's primary industrial engine, it still creates mutually beneficial interdependence: Lamu's processing capacity will rely partly on inland regional markets to absorb its massive output. And if and when the Uganda-Tanzania refinery comes to be at Tanga, there will be more beer at the regional party, and fuel prices in East Africa might finally tumble in the competition.
At this point, the only thing that will make sense for this trade is an East African shilling, and an East African monetary union, even a shallow one to start with, to midwife it. Refineries could bring what East African politicians and bureaucrats have failed to deliver for over two decades.
The author is a writer, journalist and curator of the Wall of Great Africans. X: @cobbo3
