Connect with us

Op-Eds

A Place Under the Sun: Solar Energy and the Struggle for a Billion-Dollar Invisible Market

15 min read. Unserved by policy makers whose grand energy priorities lay elsewhere, 600 million rural Africans for decades lay off-grid. When new technologies and global investment arrived, this emerging market became the site of competition and fantasy between indigenous solar technology traders and a white saviour industry backed by billionaire philanthropy investors.

Published

on

A Place Under the Sun: Solar Energy and the Struggle for a Billion-Dollar Invisible Market
Download PDFPrint Article

The truth of the hunt, it is said, will never be fully known until the lion tells its story. This is particularly useful in the context of international development; the stories that get told tend to focus on the deeds of the “hunters” – in this case, the international do-gooders — that led to whatever outcomes they desire to highlight. The saying certainly holds true for the development of solar energy in Africa, because the coverage too often tells of expat social entrepreneur efforts to spread the technology. Intentionally or not, these Western actors ignore the work done by local players — the “lions”, who actually built the sector.

To better understand both sides of the story of solar in Africa, a global perspective of solar and the forces that drive demand is useful. Today, the worldwide solar energy sector is valued at more than $100 billion annually. In 2018, over 100 GW of solar power systems were installed. Yet despite enormous resources on the continent, less than two percent of this solar capacity was installed in sub-Saharan Africa. Africa is, in fact, a backwater for solar investments.

Today, the worldwide solar energy sector is valued at more than $100 billion annually. In 2018, over 100 GW of solar power systems were installed…less than two percent of this solar capacity was installed in sub-Saharan Africa.

Globally, solar electricity’s growth spurt came after 2000 when the German government supported the energiewinde program and Chinese production of solar modules ramped up in response to sharp spikes in demand. Since the late `90s, solar power projects in developed countries have mostly been grid connected and large scale. Early on-grid developments occurred in Germany and California, where today millions of homes have rooftops covered with solar panels. All over the developed world and in China and India, fields of modules produce gigawatts of power on sunny days. However, though production is over 100 GW per year today, it wasn’t until 2003 that global production surpassed 1 GW per year.

While millions of modules were installed in the global North, on-grid solar’s potential was almost entirely ignored by African governments. It was seen to be too expensive, unsuited for grids plagued by instability, a novelty without a real future. Africa’s power sectors were not ready to experiment with solar, so the line went. But after 1995, in order to placate post-Rio environmentalists, a number of World Bank and UN Global Environment Facility solar projects were set up to fund off-grid rural electrification. If the inattention delayed progress in African on-grid solar by decades, these small projects play an important, if largely undocumented, role in the global solar energy story: they stimulated the use of solar by rural people.

It wasn’t until 2003 that global production surpassed 1 GW per year.

Africa’s different solar path: Solar for Access

Well before grid connected programs were launched in the North, African entrepreneurs were selling off-grid and small-scale solar systems targeted at rural projects and consumers. This goes all the way back to the early days of solar, long before the technology was financially viable or available for grid power.

Today, in Kenya, Uganda and Tanzania, if measurements are made by percentage of households with solar power systems, many rural parts of these countries have a much higher absolute penetration of solar products than Northern countries. Surveys of Kenya and Tanzania populations show that penetration rates surpass 20 percent of all rural households. But the systems in Africa are much smaller and, until recently, of much less interest to the mega green investors that today drive the industry. Depending on who is telling the story, there are different versions of how such high penetration rates among rural populations have been achieved.

Well before grid connected programs were launched in the global North, African entrepreneurs were selling off-grid and small-scale solar systems targeted at rural projects and consumers.

All of the industry actors would agree on a few fundamentals. First, 600 million people lack access to electricity in sub-Saharan Africa. For the small amounts of energy these populations use — in the form of kerosene, dry cells and cell phone chargers — they thus pay a disproportionately high portion of their incomes.

Secondly, the massive funds to roll out rural grid investments for un-electrified populations are neither available to African governments nor the multilateral groups that support grid electricity development. Conservatively estimating grid connection at $500 per household, it would cost in the order of $50 billion dollars to distribute grid electricity to the continent’s unconnected rural population. And this does not include the generation and transmission infrastructure.

Because of these costs, and the lowered costs and technological improvements made in off-grid solar over the past decade, the World Bank, investors, donor partners and the private sector agree that off-grid solar energy is the best way to quickly cover a large portion of un-connected dispersed African populations. Nevertheless, governments still focus their budgetary outlays on grid-based electrification. Their spending has largely ignored the viability of off-grid solar power for rural electrification.

Conservatively estimating grid connection at $500 per household, it would cost in the order of $50 billion dollars to distribute grid electricity to the continent’s unconnected rural population.

Finally, as more and more investors line up to finance the solar electrification of off-grid Africa, all players agree that it is the private sector that has done and will continue to do the heavy lifting to provide solar electricity to rural consumers.

It is here that the story diverges. Who should be given the credit for the widespread use of rural solar in Africa? And, more importantly, how should future investments be made in the sector? The answer depends on who you ask.

The African Pioneers

Off-grid systems were a critical part of worldwide solar sales early on and many ended up in Sub Saharan Africa.

But these days, this remarkable story of the early players is not often told.

In the 1970s, though still expensive, solar became cost-effective for terrestrial applications (as opposed to NASA satellites). In Africa, national telecoms and international development players began using solar to power off-grid applications such as repeater stations, WHO vaccine refrigerators, communication radios in refugee camps and later, lighting in off-grid projects. Solar panels and batteries replaced generators — and the need to expensively truck fuel to remote sites. Because of this demand, traders in cities such as Nairobi began to stock and sell solar systems for these specialized high-end clients.

In the 1970s… on the back of pioneer demand, a lucrative market opened up when television signals spread across cash-crop growing regions of East Africa.

On the back of pioneer demand, a much more lucrative market opened up when television signals spread across cash-crop growing regions of East Africa. Rural people with coffee and tea incomes realized that they could power black-and-white “Great Wall” TVs with lead acid car batteries. Especially in Kenya, traders selling DC TVs quickly realized that car batteries could be charged with solar panels. Since they already had strong rural distribution networks, they added solar to their rural lines and a new industry selling, solar systems, TVs, lights and music systems was born. In the 1990s, East Africa’s off-grid solar market was a small but important slice of global solar demand.

After 1995, when Nairobi traders such as Animatics, NAPS, Telesales, Chloride Solar and Latema Road shops introduced lower cost 10-watt modules and 12-volt lights to the market, demand increased exponentially. Hundreds of technicians were selling systems to rural farmers and teachers. By the turn of the century, this market pioneered by African traders was selling — and even financing — tens of thousands of single panel solar systems per year in off-grid areas of Kenya, Tanzania and Uganda.

These established businesses exploded with the emergence of cell phone markets in the mid-2000s. Suddenly, millions of rural cell phone owners needed a cheap, convenient way to charge their phones. Distribution chains, with over-the-counter sales of solar electric systems already in place, simply added the required kit for charging phones to the wares they offered. Cell phone charging, a business worth tens of millions of dollars per year, tied into the groundwork laid by small retail indigenous companies and businesses. By 2005, enterprises had sprung up in rural areas all over East Africa that were selling these systems — and village SMEs were charging cell phones, video-cinemas and kiosk refrigerators with solar.

Business exploded with the emergence of cell phone markets in the mid-2000s.

Difficulties arose as demand grew. Competition brought poor quality and counterfeit products. Dodgy traders, a lack of skilled technicians and insufficient consumer awareness began to spoil the market. Without standards or regulatory systems in place to police the industry, the reputation of off-grid solar suffered. In those early days, uneducated consumers bought poorly-designed systems and were discouraged. The reputation of solar, especially among policy makers whose energy priorities lay elsewhere, was badly tarnished.

Enter the international development community

Recognizing a market of over 600 million off-grid people, multilateral and national aid agencies (World Bank, DFID, GIZ) realized the potential of solar to support energy access. They saw that rapid changes in technology were making off-grid solar more viable. Prices of solar modules were falling. Super-efficient LED lights were becoming available. Solid state-of-the-art electronic controls, inverters, dc appliances, lithium-ion batteries and well-designed products were coming into the market. These changes, together with rising awareness, did much to improve the choices of consumers.

In 2008, the World Bank and its investment arm, the International Finance Corporation, set up Lighting Africa to support the development of off-grid solar. Lighting Africa raised awareness of solar among African policy makers, developed quality standards and laid the groundwork for corporate investment in solar companies. It stimulated a transition of the sector from NGO/donor domination to foreign investor-based models. By developing a platform that recognized the enormous opportunities for solar businesses, Lighting Africa helped roll out standards for the sector, grew in-country awareness and stimulated investment in a new generation of off-grid solar companies that designed truly innovative products. It also helped set up a trade group — the Amsterdam-based Global Off-Grid Lighting Association, GOGLA — for companies selling approved solar products.

In 2008, the World Bank and the IFC, set up Lighting Africa to support the development of off-grid solar. Lighting Africa raised awareness of solar among African policy makers, developed quality standards and laid the groundwork for corporate investment in solar companies. It stimulated a transition…from NGO/donor to investor-based models…and stimulated investment in a new generation of off-grid solar companies that designed truly innovative products.

Lighting Africa did much to bring on board local policy makers, to help improve equipment quality and to increase market size. With the involvement of the donor partners, investment flooded in and new players, predominantly Western, entered the market. Companies such as D.Light, Greenlight Planet (owner of the Sun King brand), Solar Now, Bright Life, fosera, Mobisol and Solar Kiosk brought innovative high-quality products and services. The new generation of companies revolutionized consumer choice by using professional product designers, manufactured in China and elsewhere in South East Asia, sophisticated business models and Silicon Valley investment to roll out. An industry that had largely been indigenous and self-financed had become an opportunity for big money international investors.

The disruptions accompanying the arrival of Lighting Africa were felt almost immediately. Newly agreed quality standards mostly worked for manufacturing companies with deep pockets. Companies located further down the supply pyramid — the ones near the consumers, and which had built the markets — were by and large shut out as the big money began to flow in. As far as the donors and impact investors were concerned, there were two categories of players; their money would target the first, the international manufacturers. These were the established disruptors, represented by GOGLA members and led by savvy expat social entrepreneurs from Europe and the USA.

The other category, which GOGLA now described as the “grey market”, is composed of “thousands of small businesses and technicians in Africa”: local traders, rural wholesale dukas, small-scale integrators, technicians, import-exporters, ambitious lone wolf entrepreneurs. This group, grappling with the day-to-day of basic survival and incapable of preparing grant proposals for donors or business plans for impact investors, is largely unrepresented in the international conversation. It was this group, rightly or wrongly, that was held responsible for market quality problems that, according to the new narrative, the GOGLA members would solve.

The disruptions accompanying the arrival of Lighting Africa were felt almost immediately. Newly agreed quality standards mostly worked for manufacturing companies with deep pockets. Companies located further down the supply pyramid — the ones near the consumers, and which had built the markets — were shut out as the big money began to flow in.

If the positive product and marketing innovations of Lighting Africa and GOGLA members demonstrably benefitted millions of rural consumers, their market disruption also affected the ‘grey market’ players. In donor-supported conferences, convened mostly in the West, where energy access is discussed, the narrative is that the African solar industry passed from locals to international social entrepreneurs. Even if the international social entrepreneurs had the best intentions of serving African consumers, they were also strategically positioning themselves to win the hundreds of millions of dollars of grant and impact investment finance that was coming to the sector. And everything changed with Pay As You Go.

The Birth of PAYG

Pay As You Go (PAYG) was developed on the back of mobile money. Simply put, PAYG systems are small off-grid solar systems with embedded SIM cards that enable companies to remotely collect incremental payments from consumers. The embedded SIM card can accept payments, monitor the solar system and switch it off if payments are not made. The spending history of each PAYG customer can also be tracked online, much in the same way that credit card customers are tracked.

This group, faced with day-to-day survival and incapable of preparing grant proposals for donors or business plans for impact investors, is largely unrepresented in the international conversation.

When Nick Hughes, one of the developers of M-Pesa for Vodacom, Safaricom’s UK parent company, looked to the future he saw how mobile credit among poor consumers would enable them to access a variety of products. He recognised that solar electricity for phone charging, TV and lighting would be the most sought after rural product. With Jesse Moore, he established M-Kopa Solar. Once they tested their product, M-Kopa launched outlets in Kenya, Tanzania and Uganda, where solar demand was already well-developed.

The difference between PAYG and over-the-counter sales is that PAYG can reach a lower strata of customers and, importantly, the business can be scaled. PAYG enables companies to collect payments from thousands of Base of the Pyramid (BoP) customers — and it enables consumers in turn to finance systems over much longer time periods.

When Nick Hughes, one of the developers of M-Pesa for Vodacom, Safaricom’s UK parent company, looked to the future he saw how mobile credit among poor consumers would enable them to access a variety of products.

Before PAYG, virtually all transactions in solar were cash over the counter. The PAYG business model had the potential to disrupt the old model in the way that cell phones invalidated landlines. Payments could be tracked on-line in real time. Once PAYG technology was in place and investible models established, hundreds of millions of dollars of investment flowed into off-grid companies.

Donors had funded the pilot experiences and multilaterals had established the financial and policy framework for off-grid energy access. Now international patent capital could be enthusiastically invested in PAYG solar. Indeed, since 2015, on the order of a billion dollars of impact investment has been placed in PAYG companies in Africa. M-Kopa Solar alone has attracted well over $100M in venture capital and grant money. They are not alone. Others include Off-Grid Electric (now Zola, in Tanzania, Rwanda, Ghana and Ivory Coast), Fenix (Uganda, Zambia), Mobisol (Tanzania, Rwanda, Kenya), Azuri and others.

The PAYG business model had the potential to disrupt the old model in the way that cell phones invalidated landlines.

Taken together, these PAYG companies have connected millions of customers and brought much needed resources to the energy access sector. The point of this article is not to belittle their accomplishments. In fact, building PAYG companies can only be done with deep pockets, good planning and strong teams. To succeed, companies must build market share quickly and raise multiple rounds of investment. Though PAYG players start as technology and marketing companies, they quickly become finance providers. Snowballing cash demands force PAYG companies to pass through what some call a financial “Valley of Death”. Before they have enough revenue to support a viable business, they have to spend millions on equipment and sales staff to expand their base. It is a risky, high-roller business.

Competition is stiff. Many consumers are unwilling to pay the extra costs of branded PAYG products and will regularly privilege price over international standards. In fact, most products being bought in Africa are not from GOGLA members. Shops operating in “Buy-em-Sell-em” trading streets stock a large array of equipment, much of it substandard. Moreover, PAYG companies that finance Base of Pyramid customers can lose them at any time. Drought, political disturbance or economic downturn will shut down income streams. When there is no money in the economy, vulnerable populations simply stop paying bills for solar gadgets.

Since 2015, on the order of a billion dollars of impact investment has been placed in PAYG companies in Africa.

A further problem faced by PAYG companies is that their products provide electricity services unsuited to the elastic needs of rural families. A typical PAYG solar kit comes in a neat box with a 20W module, a few lights, a charger and a battery. A consumer might be happy with such basic light and cellphone charging service initially, but consumer needs and aspirations evolve quickly. A consumer that wants a 20W system one month might desire a system twice that size six months later. The boxed set units sold by PAYG companies struggle to grow with the aspirations and needs of much of their customer base.

Today, despite the potential of the PAYG model to scale, many of the first generation of companies are in trouble, languishing in the face of ruthless competition and the challenges described earlier. In 2017, Off Grid Electric, a company that pledged to electrify one million Tanzanians, virtually pulled out of their foundation country and rebranded to attract more rounds of desperately needed finance. In Kenya, M-Kopa had to downsize and restructure its business in late 2017. Smaller companies in less lucrative markets also struggle to scale. Fenix, the largest player in Uganda, was able to avoid financial issues by selling majority shares to the global utility company Engie.

Few if any investors are making financial returns on their investments.

Despite the potential of the PAYG model to scale, many of the first generation of companies are in trouble…

In a way, the PAYG players want to have their cake and eat it too. They claim that they offer quality products and they like to say that their data-based business model is best able to deploy resources to the 600 million ‘base of the pyramid’ consumers unserved by the mainstream energy market. Their complaints, mostly to do with quality, are directed at the ‘grey market’. But they are the first in line for Western grant money and super easy-term financing to grow their companies. At international conferences, almost exclusively convened in the West, it is their polite, white faces that own the conversation.

African Traders in the Over the Counter Market Still Dominate

PAYG entrepreneurs do not acknowledge a self-evident truth: the so-called “grey market” is the market. In Africa, for bicycles, sofas, consumer electronics, dishware and roofing tiles, there has always been a range of products for consumers to choose from. Providing consumers with choice is what drives capitalism — those companies that provide the best choices for consumers at the best prices win out. The market for off-grid products was never being ruined by poor quality products any more than the market for cell phones was. Consumers learn, traders improve their product offering and manufacturers innovate.

PAYG entrepreneurs do not acknowledge a harsh truth: the so-called “grey market” is the market.

Today, the same local traders that built the supply chains in the 1980s and `90s still dominate the consumer off-grid solar market. But they do not feature in the international solar discussion. Their sales are invisible to consultants and undercounted in global reports (The GOGLA annual report, now the sectors’ bible, does not count the “grey market” and off-handedly considers it a threat to the “quality” market).

Rural people buy most of their solar from grey market traders. I’ve followed markets and conducted field research in Africa for 20 years and have the data to back it up. In Tanzania, a 2016 national census indicated that over 25 percent of the rural population own some type of solar device – this is more than a million PV systems installed almost exclusively by “grey market” traders. Recently, when conducting demand surveys in Uganda’s Lake Victoria islands, I found that 80 percent of the island populations had purchased solar systems from over-the-counter traders — virtually none had PAYG systems. In Zambia, I conducted surveys of 20 off-grid villages and found that upwards of 60% of households had grey market solar systems. In Kenya, Somalia and Ethiopia, the story is the same.

Of course, Chinese solar modules and batteries dominate over-the-counter trade. But local manufacturing also plays a major role. Kenyan battery manufacturer Chloride sells on the order of 100,000 lead acid batteries per year to the off-grid market. Its partner Solinc, which manufactures 6MW of solar modules per year in Naivasha, provides its modules to Kenyan, Ugandan, Tanzanian and Rwandan over-the-counter players in the region. This commerce, of course, is driven by hundreds of traders and solar technicians.

The driving force for the success of local traders is rural consumers. Rather than being “manipulated” by unsavoury traders, consumers have absorbed lessons; they have become more shrewd. Over decades, they have learnt about solar products and, in true do-it-yourself fashion, they have become better able to put solar systems together. They value price and short-term functionality over quality. They understand that when they want larger systems, over-the-counter players are more responsive to their needs than PAYG sellers. OTC traders can provide larger systems for growing households at a lower cost. In short, rural retailers and their largely Chinese suppliers are still more responsive to consumer needs than PAYG companies. And they are lighter on their feet.

In 2019, solar is holding its own against grid-based rural electrification. Off-grid solar is growing because the technology has numerous advantages over grid extension. If governments have been slow to invest in solar for rural households, rural consumers are voting with their pocketbooks. Solar systems work, there is an infrastructure to supply and rural consumers understand the technology.

Expat social entrepreneurs, using impact investment and international aid assistance, advanced the international agenda for off-grid solar, raised financing, developed new technology and innovated new business models. But despite hundreds of millions of dollars of investment and grant aid, PAYG companies are still losing to local players. Why? Rural traders move more product because they inhabit the markets they work in.

In a market of 600 million consumers, there is plenty of room for different business models and players across the supply chain. But the untold story of local solar traders raises a number of questions about how we should build the coming solar industry.

First, is the issue of ownership and funding opportunities. Many here are uncomfortable with the idea of an industry predominantly owned and controlled by foreigners, even if they are well-intentioned social entrepreneurs. For each successful expat social entrepreneur, there are 20 local entrepreneurs equally capable but lacking support to finance even a modest start-up. Much more can be done to level the playing field for local start-ups if these budding players are given the opportunities that have been handed to PAYG pioneers.

Second is business size. Decentralized and off-grid power is exciting because it democratizes opportunity and lowers entry costs for small players. East Africa is a region where small and medium sized entrepreneurs create the biggest opportunities and drive dynamic economies. Investor interest in scalable businesses worth hundreds of millions of dollars is driven by greed, not by common sense. Smaller players would make for a more exciting and lively solar sector. There is no reason why scores of million-dollar companies shouldn’t be supported in a healthy sector, instead of one or two behemoths.

Finally, planners should reconsider the policy focus which has thus far trained the solar market on poverty alleviation and energy access. Base of the Pyramid off-grid electrification is a race to the bottom. Unless the same subsidies that underwrite most grid-based rural electrification is made available, off-grid BoP solar will remain too risky for real finance. In Africa people are moving into cities and looking for urban-based opportunities. Many who are concerned about climate change know that getting solar on-grid and into urban energy planning will do far more to fight climate change than off-grid solar. These small-scale on-grid opportunities are where the real long-term future for solar is in Africa.

Avatar
By

Mark Hankins is a writer, consultant and green energy engineer based in Nairobi Kenya.

Op-Eds

Who Is Afraid of Commuter Ride-Hailing Apps? Tech Meets Matatu, and Why Nairobi Does Not Need State-Run Public Transport

8 min read. DAVID NDII explores the disruptive power of ride-hailing apps on public transportation in Nairobi and why both the government and the matatu industry should be embracing the commuter ride-hailing apps instead of fighting them.

Published

on

Who Is Afraid of Commuter Ride-Hailing Apps? Tech Meets Matatu, and Why Nairobi Does Not Need State-Run Public Transport
Download PDFPrint Article

Technology platforms have become disruptors in unexpected places. They have over the years disrupted the music distribution business, the book trade, and even the hospitality industry, but none has been as turbulent as Uber’s disruption of public transportation.

A couple of days ago, the commuter ride-hailing app services Little Shuttle and SWVL announced that they were suspending their operations. Little Shuttle and Little Cab ride-hailing apps are products of technology company Craft Silicon. SWVL is an Egyptian start-up that has invested in the country to do this specific business. Launched seven months ago, SWVL is reported to have 150 buses serving 100 routes, and has raised Sh1.5 billion from investors to expand its operations.

The National Transport and Safety Authority (NTSA) subsequently issued a statement giving its reasons for the suspensions. The agency explained that the two companies had obtained the “wrong” licence—known as a Tour Service Licence (TSL)—which it deemed to be a violation of Passenger Service Vehicle (PSV) regulations. NTSA also accused the operators of failing to register their vehicles with the authority as required by Section 26 of the Transport and Safety Act No. 33 of 2012. “The two companies have never contacted the Authority to show any intention to operate as commuter service providers”, the NTSA avers.

Technology platforms have become disruptors in unexpected places. They have over the years disrupted the music distribution business, the book trade, and even the hospitality industry, but none has been as turbulent as Uber’s disruption of public transportation.

Section 26 of the Transport and Safety Act, the provision that NTSA claims has been violated, states that “[a] person shall not operate a motor vehicle whose tare weight exceeds three thousand and forty-eight kilogrammes for the carriage of goods or passengers for hire or reward unless the vehicle is licensed by the Authority in accordance with this Part and in such manner as the Cabinet Secretary may prescribe. Violating the provisions, i.e., operating a commercial vehicle without a prescribed licence is a criminal offence that can attract a fine of Ksh. 300,000 or imprisonment for a term of five years.”

The other ground for suspension is that the two operators have violated PSV regulations. To be licensed under these regulations, the operator is required to be a corporate body which may be a company, a cooperative society (SACCO) or other collective registered under the Societies Act, and have a minimum of 30 vehicles owned by the operator or under a franchise arrangement with the owners.

Regulation 7 (f) requires passengers to be “issued with receipts for fares paid, and as from 1st July 2014, operate a cashless fare system.” Another regulation requires “a transport safety management system based on ISO3900.” Obviously, these regulations are not enforced—and therein lies the paradox. The shuttle services that the NTSA has suspended were the closest thing to compliance with the spirit of these regulations that we have seen since the collapse of the Kenya Bus Service (KBS) franchise several years ago. It is in fact not apparent from my reading of these regulations that Little Shuttle and SWVL have violated these regulations in any substantive way.

The NTSA is disingenuous. Investors do not determine for themselves what licences they need. They go to the government and say, look, I want to run a business of the following nature, what do I need? The government then makes the determination and advises the investor accordingly. In the statement announcing the suspension of operations, Little Shuttle’s Chief Executive Officer disclosed that they were operating on the basis of a national Transport Licensing Board (TLB) licence—also issued by the NTSA—which does not restrict them to specific routes. Someone at the NTSA must have determined that a national TLB licence is what they required. Moreover, if it was deemed that there was no suitable licence, the Transport and Safety Act gives the Cabinet Secretary the power to “exempt any person or class of persons or any motor vehicle or class of motor vehicles from all or any of the provisions of this Act.” The NTSA could have advised the investors to apply for exemption.

In his statement, the Little Shuttle CEO alludes to cartels: “I am not sure if the decision to stop us was from the authorities or they were under pressure from the public transport cartels.” There is a whole range of actors that this could apply to, either working independently or in concert. There are the investors, that is, the vehicle owners, the crew who operate the vehicles and control the revenue, route cartels who control access to particular routes and the police extortion racket. The industry has also been associated with money-laundering syndicates. As one of the biggest cash businesses around, it is as close to the ideal laundromat as you can get.

A key challenge that bona fide investors in the matatu industry face is that they are hostage to crew and route cartels. Precisely because PSVs do not issue receipts as required by law, the owners have no way of keeping tabs on revenue. Moreover, even if they could do so, they would still be compelled to give the crew leeway to pay bribes. Students of economics may recognise this as a principal-agent problem. 

The principal-agent problem arises in contractual relationships where the principal (the vehicle owner) cannot observe whether poor performance by the agent (the crew) is because of external factors (e.g. poor market conditions) or lack of effort or dishonesty on the part of the agent. We say that the interests of the principal (maximum effort by the agent) and the incentives of the agent (maximum income for least effort) are not compatible.

To mitigate this problem the industry has come up with a fixed daily revenue target, which in essence changes the contract between the owner and crew from a wage to a vehicle lease. In economic theory, we call this the incentive-compatible contract. An incentive-compatible contract seeks to motivate the parties to achieve mutually beneficial outcomes. This particular incentive-compatible contract has an extremely high social cost. 

Because the crew gets to keep the revenue above the daily target, they are motivated to maximise the number of passengers, and this they do at the expense of road and passenger safety. The cashless system the government sought to enforce would have gone some way towards resolving this problem, which is probably partly why it was resisted—not to mention the resistance by those others with vested interests in a cash business, notably the money-laundering syndicates and the police extortion cartel.

The ride-hailing apps portend a more robust solution to this problem; because of the ubiquity of mobile payments, they can easily combine revenue tracking and cashless payments. And since the revenue is tracked electronically, this makes it possible to enter into a wage contract between the owner and the crew. Crew on a wage contract have no incentive to compromise safety in order to maximise revenue.

That said, it is not evident that the commuter ride-hailing services are an immediate threat to the matatu industry. The two suspended services appear to be more of an alternative to personal cars than direct competitors for matatus. This can only be a good thing in terms of reducing congestion on the roads. Still, the development has caused sufficient concern somewhere, perhaps because the reputation of the disruption caused to the conventional taxi industry precedes Little Shuttle and SWVL. But it is also the case that sometimes these regulatory hurdles are extortion rackets that are intended to extract bribes or a share of the business.

The principal-agent problem arises in contractual relationships where the principal (the vehicle owner) cannot observe whether poor performance by the agent (the crew) is because of external factors (e.g. poor market conditions) or lack of effort or dishonesty on the part of the agent.

There is another vested-interest candidate—the government itself. It is now one and a half years since the government hastily painted some red lines on some of Nairobi’s thoroughfares and declared the lanes thus demarcated dedicated Bus Rapid Transit (BRT) lanes. The red paint has since faded. It is said that the buses are being assembled in South Africa, after local samples failed to make the grade. But other than the now faded lines, there is no evidence of actual BRT infrastructure being built. A BRT system is a metro light rail on the cheap but it also costs. The first phase of the Dar es Salaam system covering 21 kilometres took three years to build at a cost of $140 million (Sh14 billion) while the second phase covering another 19 kilometres will cost $160 million (Sh16 billion).

Nairobi is one of several African cities that do not have municipal public transport. For all their notoriety, matatus, dala dala and tro tros manage to move the cities quite efficiently. They are accessible, responsive, affordable, flexible as well as colourful and entertaining. A number of surveys conducted in Nairobi over the last decade or so indicate that public transport—predominantly matatus—accounts for between 50 and 55 per cent of commutes in the city; 40 per cent of commuters walk, while between 8 and 12 per cent use private cars.

By way of comparison, London’s elaborate public transport system comprising of buses covers 35 per cent of the commutes. The iconic underground moves 10 per cent. For all the congestion hullabaloo, a recent paper titled Commuting in Urban Kenya: Unpacking Travel Demands in Large and Small Kenyan Cities, published in the academic journal Sustainability, observes that average commuting journeys in Nairobi are comparable to those of major cities in the United States such as New York and Los Angeles.

This data is telling us that Nairobi is none the worse for lack of a municipal public transport system. Municipal systems are hugely expensive to build and to run, requiring operational subsidies. At £17.6 billion (Sh2.3 trillion) and counting, CrossRail—London’s new train system which has been under construction since 2009—is billed as the most expensive public infrastructure project in Europe. As observed, the Dar es Salaam BRT has already cost $300 million (Sh30 billion) and is nowhere near solving the city’s congestion problem.

There is, in fact, a parallel between what the commuter ride-hailing apps are trying to do and the story of mobile telephony in Africa. The phenomenal growth of mobile telephony in Africa is, to a large extent, a leapfrogging of the largely non-existent landline telephony. The same applies to the innovations around mobile telephony, notably mobile money, reflecting the poor reach of financial services referred to nowadays as financial exclusion. Mobile telephony systems and services are estimated to account for close to 9 per cent of Africa’s GDP, only marginally below manufacturing at 10 per cent, which is remarkable for a sector that is only two decades old.

To mitigate this problem the industry has come up with a fixed daily revenue target, which in essence changes the contract between the owner and crew from a wage to a vehicle lease. In economic theory, we call this the incentive-compatible contract

Like landline telephony, public urban transport systems are characterised by rigidity. Customers must go to the bus or train and follow fixed routes and timetables, just as in the old days when we used to have to go—sometimes for miles—to reach a telephone. To send money urgently, you went to the Post Office to send a telegraphic money order which was physically delivered to the recipient who in turn physically went to cash it at the Post Office.

The disruptive power of ride-hailing apps is what the Little Shuttle CEO refers to in his memo as “supply and demand software technology.” In plain English, this is about using customer ride request data—how many customers want to travel, when and where—to provide services that are responsive to demand in terms of capacity, routes, scheduling and pricing. But this is not entirely new; one of the reasons why matatus eclipsed scheduled bus services is precisely because they were more responsive.

As observed, between 8 and 12 per cent of Nairobi’s estimated three million commuters use private vehicles This works out to something in the order of 300,000 commuters and, assuming two people per car, 150,000 vehicles that spend eight hours or more hogging parking spaces—Sh150 billion worth of idle capital, over and above fuel, pollution and congestion costs.

Nairobi’s public transport imperative is to put more of these people on matatus and this seems to be precisely what the suspended ride-hailing services had set out to do. A smart government would be doing its best to make commuting by private vehicles costly. How so? For starters, the Nairobi County government needs to go back to a time tariff for street parking. Leaving a private car in a street parking all day should be extremely punitive. I would propose a rate of Sh100 per hour. We may also want to think about applying congestion charges on the city’s main arteries: Mombasa Road, Waiyaki Way, Thika Road, Jogoo Road, Ngong Road and Langata Road.

Assuming that each of the minibuses serves 40 commuters who would otherwise travel in private cars, we are talking of each bus displacing 20 private vehicles on the road. If only 20 per cent of driving commuters take to these services, we are talking of replacing 30,000 cars with only 1,500 minibuses. This would certainly have a discernible impact on de-congesting the roads. And the less congested the roads become, the faster the trips, the more attractive using public transportation becomes, and the more profitable the entire industry becomes. Far from fighting them, both the government and the matatu industry should be embracing the commuter ride-hailing apps.

Continue Reading

Op-Eds

Should Africa’s Tallest Skyscraper Be Built in a Kenyan Village?

10 min read. The proposed construction of a 61-storey building in Watamu has generated both hopes and fears among local residents, who view the project as either a white elephant with serious environmental consequences or a godsend that will bring much-needed jobs and prosperity to the coastal area. RASNA WARAH examines the pros and cons of this multi-million-dollar project.

Published

on

Should Africa’s Tallest Skyscraper Be Built in a Kenyan Village?
Download PDFPrint Article

If all goes according to plan, construction work on a 61-storey skyscraper – which is being mooted as the tallest structure in the whole of Africa – will soon start in Watamu, a sleepy fishing village and tourist resort about 20 kilometres south of Malindi along Kenya’s coastline.

But lack of clarity on how the developer managed to get approval for the Sh28 billion ($280 million) project is raising concerns about whether this is another white elephant or phantom project. Questions are also being raised about whether the building is economically feasible and environmentally sustainable.

On its website, Palm Exotjca is marketed as an exclusive development with “chic residential suites, premium commercial space, eclectic restaurants and a vibrant casino”. Three Italians are said to be managing the project: The chairman Giuseppe Moscarino is a veterinarian and neurosurgeon from Rome whose passions are “art, architecture and Africa’s extraordinary beauty”; the managing director is Oliver Nepomuceno, who is described as the manager of several commercial and investment companies and joint ventures; and Lorenzo Pagnini is listed as the lead architect.

The main investors in the project are said to be the Italian billionaire Franco Rosso, along with investors from Switzerland, Dubai and South Africa. According to the developers, an engineering firm in India will handle the structural design aspects of the building while a Chinese company will undertake the construction work. Local engineering and architectural firms will also contribute to various aspects of the construction phase.

When completed, the 370-metre-high building, whose shiny artistic exterior will resemble the trunk of a palm tree, will comprise 270 hotel rooms, 189 luxury suites and apartments and social amenities, such as a shopping mall, a business centre, a theatre, a cinema, a nightclub, a fitness centre, a wellness spa, a children’s play area and four swimming pools – all of which invoke images of Dubai or Las Vegas.

The problem is that Watamu is not Dubai or Las Vegas. This fishing village and beach resort with a population of 14,000 barely has the infrastructure to service a level 4 hospital, let alone a skyscraper of this size. MAWASCO, the water utility company, already has problems meeting the water demand in Watamu and there are no signs that it intends to increase supply during the construction phase of the project or when it is completed. The Kenya Power and Lighting Company has promised to upgrade the Kakuyuni sub-station with a 23 MVA transformer and 25 kilometres of an overhead line, but only on the condition that the developer pays for the upgrade, which will cost Sh161 million.

Moreover, Watamu is hardly a vibrant tourist destination and commercial hub along the lines of Rio de Janeiro or Miami. What were the developers thinking when they came up with the idea and how do they expect to fill up all these hotel rooms and apartments?

Other such projects, such as Flavio Briatore’s Billionaire Club in Malindi – which was marketed as “a club for the world’s richest” – also had ambitions to attract the wealthy from around the world, but Malindians have yet to see Bill Gates or the Saudi Prince Mohamed bin Salman check in. On the contrary, Briatore has threatened to sell his other hotel, Lion in the Sun, in Malindi because he says that the unattractive business environment and poor infrastructure in the town are keeping foreign tourists and investors away.

In an article published in Coastal Guide, Issue 20, July 2019, Damian Davies, the general manager of the Turtle Bay hotel in Watamu, questioned the viability of the Palm Exojca project and whether the investors will get a profitable return on their investment. “There are lots of properties for sale in Watamu that aren’t selling; who will buy an apartment in a tower some distance from the beach when no one is buying beautiful beach properties?” he asked. “We don’t want a start-up that for economic reasons isn’t finished: a partially completed skyscraper.”

Red flags

Malindi and Watamu are currently experiencing a slump in tourism. Hotels are either shutting down or scaling down.

Many Italian residents are selling their villas to go back to Europe or to move elsewhere. But there is simply no market for these properties. Those that do manage to sell their houses often do so at below-market rates, mainly to Kenyans from Nairobi looking for a holiday home.

Italian and other tourists are flocking to other destinations in East Africa, such as Zanzibar, which have not been tainted by the threat of terrorism, and which have more superior amenities and infrastructure. The idea that this luxury development will be the magnet that will pull in tourists and foreign investors could simply be wishful thinking.

At a public participation meeting organised by NEMA at the site of the building on 3 October, Mr Moscarino, the chairman of Palm Exojca, explained that this exclusive development will bring another type of high-end visitor to the area and is not competing with the hotels in the vicinity. He added that he was very proud to be associated with the tallest building in Africa.

However, let us say that the project is viable and there is a market for it, this question still remains: Why build such a tall structure in a village that is not a commercial hub and where most buildings are just one-storey tall? Wouldn’t it be incongruous with its surroundings? Wouldn’t it be like building a skyscraper in the middle of a desert? If you have to build the structure, why not build a scaled-down version?

The answer perhaps lies in the fact that skyscrapers are more about ego and prestige than about economics. Very tall structures, such as the Petronas Towers in in Kuala Lumpur and the Burj Khalifa in Dubai, are a kind of phallic symbol representing strength and virility. The skyscraper is to the modern world what the obelisk was to the ancient Egyptians – a monument that projects mystical power and status. But is this what Watamu needs?

Kilifi County has given the go-ahead to the project perhaps in the belief that it will generate jobs and stimulate the local economy, but Najib Balala, the Cabinet Secretary for Tourism, is not convinced that this is the kind of project that Watamu requires. He feels that a more suitable location for the project might have been Mombasa or Nairobi. He has also advised the National Environmental Management Authority (NEMA) not to approve the project. “That 61-storey skyscraper on a small plot in Watamu must not be built,” he is reported to have said.

What raises a red flag is the fact that the Palm Exotjca website lists its address as One World Trade Centre, Suite 8500, New York, but that address seems to be a virtual one intended to impress high-end clients. The other address is a plot number and P.O. Box number in Mombasa, but there is no email or phone number provided. The phone number listed on the website is a Washington DC number that goes unanswered. One concerned resident who has been following up on the matter said: “When we call the phone number listed on the website, no one answers it and has not for over a year. So why is it so difficult to find the real phone number if Palm Exotjca really wants to sell high-end apartments?”

According to residents’ associations and other concerned groups in and around Watamu who have raised their objections regarding the project with NEMA, Vitamefin Limited, the company that is listed as the owner of one of Palm Exojca’s plots in Watamu, was previously registered in the US Virgin Islands. However, the Virgin Islands Official Gazette, Volume XLIX, Number 78, shows that this company was struck off the register of companies on 1 May 2015 for non-payment of annual fees.

NEMA says that it has conducted an Environmental and Social Impact Assessment (ESIA) that shows no adverse environmental or social impacts related to the project. But Augustine K. Masinde, the National Director of Physical Planning in the Ministry of Lands and Physical Planning, disagrees. In a letter to the Director-General of NEMA dated 12 July 2019, he raised concerns about the conformity of the proposed development with physical planning laws and zoning regulations. He also said that certain issues, such as the environmental suitability of the parcel of land for the proposed development and availability and adequacy of requisite infrastructure and services, needed to be clarified. “In view of the foregoing, we advise that you suspend the approval of the proposed development to allow proper review and audit to establish its sustainability,” stated the letter.

A memo to NEMA – submitted on 21 July this year on behalf of the Watamu Association, the Kilifi Residents Association, the Kilifi County Alliance, Watamu Hoteliers, Local Ocean Trust, Watamu Marine Association, A Rocha Kenya, Watamu Against Crime, Watamu Property Managers and the Jiwe Leupe Community Association – lists several problems with the project, including:

  • The project is disproportionate in scope and scale, both technically and financially. The substrata along the Kenyan coast is highly unsuitable for very tall buildings.
  • There has been lack of meaningful public participation by the developers and the ESIA team.
  • Watamu lacks the skilled labour force to put up such a structure. The immigration of a large, well-paid skilled workers into Watamu has the potential for significant social, cultural, economic and moral hazards.
  • The area lacks the required infrastructure, including water and electricity supply, for such a large-scale project.

Lack of sufficient and meaningful public participation is of particular concern to the residents, as it was with the proposed coal-fired plant in Lamu. In the case of Lamu, lack of public participation was a key consideration in the National Environment Tribunal (NET)’s ruling. In its 26 June 2019 jugement, NET ordered Amu Power, the key player in the proposed Lamu coal project, to halt construction of the plant and to undertake a fresh ESIA for the project. It noted that the ESIA carried out for Amu Power was flawed in one key aspect: it did not involve public participation, which is a constitutional requirement. It noted that lack of public participation was “contemptuous of the people of Lamu”.

Mike Norton-Griffiths, the chairman of the Watamu Association, says that the major flaw in the project is in the planning. He says that nine completely independent projects are buried in the ESIA, each requiring an ESIA and planning permission, and each needing to be completed before the main project. Yet this has not been done.

There are also serious environmental concerns. Watamu is home to the Arabuko Sokoke Forest, the famous Gede ruins and a marine park that is the breeding ground for turtles and other marine life. There are concerns that improper handling of wastewater and sewage from the project – both during the construction phase and when it is completed – could negatively impact the biodiversity in the region.

Simmering tensions

The above concerns were partially addressed on 3 October at the public participation meeting organised by NEMA, which I attended. A Kenyan engineer recruited by Palm Exojca made a detailed slide presentation explaining how the development will deal issues such as wastewater and even birds who could die accidentally by crashing into the tall shiny structure. (Much of this presentation was lost on the local communities attending the meeting, but that did not deter him from going on with the hour-long presentation.)

The meeting, which was attended by NEMA, county government officials, some representatives of residents associations, and a large group of people from the community, at times appeared stage-managed and intended to allay any fears that the project was unviable or environmentally unsustainable.

But what also came out loud and clear at the meeting was that the local residents view the project as a contest between the national government and the county government of Kilifi and between the (mostly British) expatriate community and the Italian investors. Speakers at the meeting emphasised that this was a project supported by the county government and that the national government should not interfere with it. “Those opposed to this project are enemies of devolution and enemies of the people,” said one very vocal community leader, whose statement was met with roaring applause from the audience.

Supporters of the project, including the governor of Kilifi County, Amoson Kingi, believe that the project will bring in much-needed jobs to the area and will boost tourism. Community members at the meeting repeatedly cited employment as the main benefit of the project. (The majority of the local residents will neither be able to afford the amenities offered at Palm Exojca, but they do hope to find low-paid and semi-skilled jobs in the luxury development.)

It is hard to argue with the sentiments of the majority of the local people, who have been marginalised for decades and who suffer from high levels of poverty and underdevelopment. (Kilfi County is among the six poorest counties in the country.) A project like this could change their fortunes in significant ways by generating hundreds of jobs both directly and indirectly. When you have not seen any real development in your area for years, despite the presence of a large numbers of beach hotels, a project like is hard to resist, even amid environmental concerns. As one speaker at the meeting pointed out, “Nobody talked about how the beach hotels in Watamu would affect turtles. So why should this development, which is not even on the beach (it is 366 metres from the ocean) be of concern?”

The project has also unveiled simmering tensions between the indigenous local residents and the largely British expatriate residents. Kilifi North MP Owen Baya, a vocal supporter of the project, claims that the British people living in Watamu are opposed to the project because it will “block their view of the ocean”. But he does not say how the influx of wealthy foreigners into Watamu when the building is completed will affect the local population. Will it give rise to other types of tensions?

There is also the issue of double standards. Someone I spoke with who did not want to be named told me that the Europeans living in Watamu live there only half the year; they spend the rest of the year in Europe. “These people can enjoy First World amenities, like theatres and nice roads and pavements, whenever they want to. But they want Watamu to remain a backwater whose unspoilt natural environment they can enjoy whenever it is convenient for them. But what about the locals who have never been to a cinema or even travelled outside their county? Don’t they deserve a taste of modernity?”

The locals clearly view the Italian investors as a godsend that will bring much-needed employment and development to the area. One MCA even referred to Mr. Moscarino as “our small God”.

“Even London began as a small village,” said another speaker. “We want Watamu to become a city like Dubai.”

Owen Baya, the Kilifi North MP, told the audience that until a hundred years ago even Nairobi was just a swamp, and wondered why there was so much resistance to this particular project.

At the meeting, Mr. Moscarino gained additional points with the locals when he sold the development as a social responsibility project. He told the cheering crowds that the developers will build a hospitality school and a secondary school in Watamu and that up to 2,000 local people will be hired as drivers, carpenters, construction workers and the like during the construction phase. It was obvious that he was exploiting the fact the majority of residents are too poor and illiterate to refuse such a generous offer. His statement was met with loud cheers.

As I left the NEMA meeting, I did wonder whether if, for any reason, the project is not completed – and the promised jobs and schools never materialise – what effect this will have on the local people. Will dashed hopes lead to even more resentment?

We can only wait and see if indeed the local people’s dreams will be realised in five years when the construction of Palm Exojca is expected to be completed. Palm Exojca could either be the catalyst that spurs development in Watamu or the Trojan horse that introduces vices that threaten to destroy a way of life. It could also be a case study in how economic opportunities often trump environmental concerns when it comes to “development”, especially in areas that are poor and marginalised.

Continue Reading

Op-Eds

That Sinking Feeling 2.0: Who Is to Blame for Tanzanian’s Ferry Disasters?

5 min read. Systematic overloading of poorly maintained state-owned vessels, compounded by human error, explains why Tanzanian marine transport is so dangerous, but who is answerable for mass deaths on Tanzania’s lakes? nobody, it would appear writes BRIAN COOKSEY

Published

on

THAT SINKING FEELING: Who is to blame for the MV Nyerere ferry disaster?
Download PDFPrint Article

On the 20th of September 2018, the ferry MV Nyerere capsized in shallow water at the tiny port of Ukara Island on Lake Victoria. Nearly 230 men, women and children drowned, most of them trapped inside the upturned hull. About 40 people were rescued by small boats. The vessel had a capacity of 100 passengers. Many of the dead were buried on the lakeshore, identities unknown, victims of Tanzania’s shoddy, state-run ferry services. President John Pombe Magufuli immediately declared four days of national mourning and flags flew at half-mast on public buildings. “Negligence has cost us so many lives . . . children, mothers, students, old people”, he lamented, ordering the arrest of “all those involved in the ferry.” Three days later, Prime Minister Kassim Majaliwa set up a seven-person Commission of Enquiry led by the former Chief of the Defence Forces, General George Waitara, to establish the cause of the accident and bring those responsible to book. The commission was given a month to report. That was the last the public heard of it, for the commission has shown no signs of life in the twelve months since the accident, during which period the political opposition, media and civil society organisations have kept quiet on the issue of state accountability for the accident. For who else can be held accountable when a state-owned and state-managed boat capsizes? There was no stormy weather to blame. A few commentators, including the state-owned Daily News and commentator Nkwezi Mhango, went so far as to blame the victims for knowingly, recklessly, boarding an overloaded craft. Writing in The Nation, Professor Austin Bukenya recommended “discipline” among passengers who should know better than to clamber onto overcrowded ferries. Presumably, they should wait for the next (uncrowded?) one. . .

Systematic overloading of poorly maintained state-owned vessels, compounded by human error, explains why Tanzanian marine transport is so dangerous. Unknown numbers die when small private vessels—mitumbwi (dug-out canoes) and ngalawa (canoes with sails and outriggers)—capsize. But the large steel boats run by the state are supposed to be orders of magnitude safer than the traditional modes of water transport.

Since the MV Bukoba capsized and sank in 1996, with the loss of an estimated 1,000 lives, Tanzanians have continued to die in large numbers in further ferry disasters, including two in Zanzibar waters within less than a year of each other claiming more than 1,800 lives. To date, no government official or private operator (the Zanzibar ferries were privately owned) has been held responsible for any of these disasters.

Accidents Waiting to Happen

Overcrowding ferries is systematic and intentional. A 200-passenger ferry is allowed to carry, for example, 400 passengers. The 200 “official” passengers are recorded on the vessel’s manifest, the 200 “unofficial” ones are not recorded and their fare is pocketed by the officials responsible for the management and the safety of the ship. Income that should be used for maintenance and repairs is similarly pocketed, leading to regular breakdowns and the suspension of services, thus increasing the overcrowding problem. Those anonymous corpses buried on the beach at Ukara are the “collateral damage” caused by rent-seeking government officials. A ferry service that is privately-owned and managed would deprive these officials of their rents; that is why ferry services remain a state monopoly.

Large-scale accidents on Lake Victoria are therefore arguably the result of a state monopoly of formal ferry services which dates back to the colonial period when the East African Harbours Corporation provided ferry services for the three East African countries. President Magufuli is committed to the improvement of lake transport, but it is taken for granted that the state will run the show. Magufuli has commissioned four new ferries and ordered the rehabilitation of old ones.

Marine Services Company Ltd (MSCL) and Tanzania Electrical, Mechanical and Electronics Services Agency (TEMESA) are the two official agencies responsible for running cargo ship and ferry services on Tanzanian waters. Prior to its incorporation in 1997, MSCL was the marine division of Tanzania Railways Corporation (TRC). The rationale for restructuring MSCL was to make it and other parts of TRC semi-independent “business units” to increase efficiency and profitability. According to its website, MSCL “operates ferries, cargo ships and tankers on Lake Victoria, Lake Tanganyika and Lake Nyasa. It provides services to neighbouring Burundi, DR Congo, Zambia and Malawi.” Over the years, these services have steadily dwindled. While MSCL used to run nine sizeable passenger and cargo vessels, breakdowns and lack of maintenance have left the company with only two. Laid up since 2014, the MV Victoria and MV Butiama are finally being rehabilitated at a cost of Sh26 billion, or $11.4 million, but will not be operational before March 2020 according to MSCL project manager Abel Gwanafyo, quoted by the Citizen newspaper on 8 August. Since the “rehabilitation” is only partially complete (22.5 per cent in the case of MV Butiama) further delays may be expected. The rehabilitation is part of a Sh152 billion ($67 million) shipbuilding and infrastructure development project launched by the President in August last year. At the launching ceremony, Magufuli revealed that he once considered disbanding MSCL but changed his mind because of the “exemplary performance” of the company’s new CEO, Eric Hamissi, in beginning to turn the company around.

While MSCL runs larger ships over longer routes, TEMESA—which is an executive agency under the Ministry of Works—serves short river crossings as part of the road network. Established in 2005, TEMESA operates double- and single-ended Roll on-Roll Off (‘ro-ro’) car ferries, mainly in remote locations where traffic volumes do not justify the construction of bridges. TEMESA’s “mission” involves “running safe and reliable ferry services”, including the ill-fated MV Nyerere. As a result of last September’s disaster, the President summarily suspended TEMESA’s Director General Dr Musa Mgwatu and its advisory board.

Finally, after the MV Nyerere disaster Magufuli took to task the country’s transport regulator, the Surface and Marine Transport Regulatory Authority (SUMATRA), summarily suspending its board of directors. In November 2017, the president signed the Tanzania Shipping Agencies Act which established the Tanzania Shipping Agencies Corporation (TSAC) to take over SUMATRA’s responsibility for marine transport regulation. According to lawyers Clyde and Company, TSAC was to become operational in February 2018. With a narrower scope than SUMATRA, it was hoped that the new agency would operate with greater efficiency and bring increased transparency to Tanzania mainland’s marine transport sector. The appointment of board members from the private sector as well as from government should, according to Clyde and Company, allow TSAC “to operate with an effective commercial approach.” It is unclear why SUMATRA rather than TSAC, was taken to task over the MV Nyerere accident.

The ferries the government commissions for service on Tanzanian lakes are mostly built by Songoro Marine Transport Ltd, owned by Mr Saleh Songoro and Sons of Mwanza. Mr Songoro bought the company—which was set up with aid from the Netherlands—when it was privatised in 1998. Songoro has a good working relationship with Dutch firm Damen Shipyards, one of the world’s largest builders of small ships. But a private shipbuilding monopoly serving monopoly state agencies is not going to solve the problem of inadequate and accident-prone transport services on Lake Victoria. The chronic shortage of lake transport is the maritime equivalent of poor urban public transport, which Dar es Salaam suffered during the days of the Usafiri Dar es Salaam (UDA) public transport monopoly. Private minibuses (daladala) were permitted in 1985, much to the relief of Dar es Salaam’s long-suffering citizens. The inhabitants of Lake Victoria’s shores are still waiting for their maritime daladala to come on stream.

Would Private Ferry Services Reduce the Death Toll?

Would privately owned, privately run ferry services be safer and more efficient than what we have now? It is possible that private services would be equally prone to rent-seeking and inefficiency in the absence of transparent and accountable contracting and regulation. On the other hand, private operators are more likely to maintain their vessels in order to maximise profit than state-run services, where all income flows are potentially vulnerable to self-destructive rent-seeking. They are also more likely to take safety issues more seriously than a state-run service, since private operators are more likely than civil servants to be held accountable in the event of a major accident. Since the ruling elite includes those who have little belief in or respect for the private sector, we could expect a more determined search for culprits and sanctions, especially if the boat-owners were Asians, Arabs or Caucasians.

President Magufuli has been widely praised for instilling discipline in government offices, hospitals and schools and sacking top officials deemed not to be performing and promoting those who are. But accountability is personal, not institutional, and the president clearly does not want to challenge all agencies equally. Since there is no public debate over privatising lake transport, we can expect Lake Victoria ferry passengers to continue being the potential victims of overcrowded and dangerous ferry services.

Continue Reading

Trending