East Africa Regional Cooperation in Oil and Gas | KPMG | KE

East Africa Regional Cooperation in Oil and Gas

East Africa Regional Cooperation in Oil and Gas

The history of regional cooperation in East Africa is quite long and fascinating. As early as 1917, Uganda and Kenya had a customs union arrangement which Tanzania (then Tanganyika) joined in 1927. Over time, regional integration efforts in East Africa have changed form –for instance, there was a time when integration took the form of a common service organization where Kenya, Uganda, and Tanzania shared a common banking regulator, railway, postal service, airline, university system, and other services.

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Today, regional integration is governed by a treaty signed by member states which include Kenya, Uganda, Tanzania, Rwanda, Burundi, and most recently South Sudan. According to the treaty, the objective of the East Africa Community (EAC) is “...to develop policies and programmesaimed at widening and deepening co-operation among the Partner States in political, economic, social and cultural fields, research and technology, defence, security and legal and judicial affairs, for their mutual benefit.” It makes sense for economic cooperation to drive regional integration because together, the EAC member states together with Ethiopia represent a single market of nearly 280 million people and have a combined GDP of nearly USD 220B with an average GDP growth rate of 5.3% in 2014.

The EAC allows member states to plan together and leverage the power of collaborative action to bring economic development to the region. Perhaps one of the most visible areas of collaboration is the transport corridor programs which seek to provide improved physical access to markets among member states. For the infrastructure sector, the EAC prioritizes interventions for road, rail, maritime, air transport and oil pipeline systems that will “attract investment into the region, improving competitiveness, and promoting trade.” Infrastructure projects are expensive and it makes sense for member states to collaborate and make the economics more manageable. However, in the oil and gas sector, cooperation remains elusive and it has recently become an arena for classic zero sum games. In this scenario, the potential for mutual benefit is not optimized, and often cooperation does not deliver better outcomes for involved parties. In the long run, this dynamic is self-affirming and may undermine the very ideals it seeks to build up.

© 2017 KPMG Kenya, a registered partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

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