The announcement last week that construction of the Tanzania-Uganda crude oil pipleline would begin in August was received warmly by those who have the East African Community’s (EAC) best interests at heart.

As a factor of increasing greater regional integration, the pipeline, (like the proposed Standard Gauge railways), will also improve the EAC’s profile as an attractive investment destination.

The 1,403-kilometre pipeline will link oil fields in Uganda’s Lake Albert, Hoima region to Tanga port in Tanzania. According to senior Tanzania Petroleum Development Corporation officials, the construction of the crude oil pipeline will be carried out by three oil firms, namely: UK’s Tullow Oil PLC, France’s Total E&P and China’s Cnooc.

Once completed, the oil pipeline will be able to ferry up to 200,000 barrels per day. The project works will also lead to installations of 200km of permanent new roads and corresponding bridges, and upgrades to 150km of existing roads. Some 15,000 jobs are expected to be created.

These kind of projects inspire optimism among both local and foreign investors. This is because infrastructure projects are the foundations of modern economies. They have a huge multiplier effect.

For instance regional governments are currently on an aggressive move to build more power plants. Much of rural EAC lacks grid electiricity. When you put up a power plant, you not only generate employment directly through construction and operations at the power plant, but also create an industrial base around the plant who would want to tap the power. This is a way of opening up the rural areas and bringing more people into the monetary economy. These industries would get more entrepreneurs and employ more labour. The workers would then purchase more goods from the markets.

Similarly when you construct a road through a backward area, you bring them closer to employment opportunities, markets and better services. Put simply better and increased infrastructure is the key to reducing national poverty levels.

Some may wonder at the timing of this pipeline project when international prices for crude oil are still very low compared to three years ago. However, last week, the International Energy Agency said the continued fall of prices is likely to tail off by the end of this year. Members of the Organization of the Petroleum Exporting Countries want to meet Russian energy officials and other oil producers in April to agree on a freeze to limit output and consequently help lift prices.

It therefore makes sense to be prepared by getting the pipeline project underway. Sources also say the project will also increase the Foreign Direct Investment to Tanzania by more than 50%.

Improvements to infrastructure mean increased economic activities, especially in terms of employment and the supply of goods and services. Consider the positive difference the project will make for the people living inthe vicinity of the route. For example, the women can for a duration earn by providing food and beverages.

The New Partnership for Africa’s Development (NEPAD says there can be no meaningful development without trade and there can be no trade without adequate and reliable infrastructure. The proposed pipeline is a partnership between the governments of Tanzania and Uganda with the private sector. By being able to pump crude to take-off point of Tanga for export, Uganda will earn revenue. Just as Tanzania will also be paid for providing transit facilities.

The EAC is attracting renewed interest from international business leaders for the relatively rapid pace of economic integration. Cross-border infrastructure development in the energy, transportation and communication sectors binds countries together which tends to encourage stability which is a prerequisite of investor interest.Infrastructure creates demand that will bring compounded demand, which results in yet more demand.

Among the most unfortunate thing about colonialisation was that it spilt Africa into jigsaw pieces that cannot compete alone in today’s world, where economic clout is increasingly about size and output. The pipeline will wield the EAC closer together.

Source: EA Business Week

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