The South Sudan civil war has resulted in the delay, and possible termination, of the largest investment opportunity in Africa to date. Prior to hostilities, South Sudan was seeking alternative routes for its crude oil exports; the current pipeline from the landlocked country runs through its hostile northern neighbour, Sudan. It was therefore imperative that South Sudan find an alternative avenue for its exports. Enter the Lamu Port, South Sudan, Ethiopia Transport Corridor, or LAPSSET. But the conflict in South Sudan is now slowing the project and, potentially, preventing future oil exports from north-western Kenya and Uganda, which were also to use the pipeline.  

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The LAPSSET project is designed to link Lamu, on the Kenyan coast, to Juba in South Sudan. When completed, it will allow for the undisturbed transportation of South Sudanese crude oil, while also developing the infrastructure of the East African Region.

The current project consists of: a railway line to Juba and Addis Abba; road networks extending into Ethiopia; oil pipeline linking South Sudan and Kenya; an oil refinery; three airports; and three resort cities. A new port is under construction at Lamu, to relieve congestion at Mombasa. It will also help to extend trade into the Indian Ocean, particularly trade with the Middle East and India.

Several states have a special interest in the success of this plan. China has been commissioned to construct three berths at the new Lamu port, which will be important for the importation of construction materials. The Japanese firm Toyota has accepted an offer to construct the pipeline to Lamu, at an estimated cost of US$4 billion. 

The Kenyan Government will devote approximately six per cent of its annual Gross Domestic Product to the project during the first five years of construction, and then subsequently three or four per cent of annual GDP.

But what does this all mean for East Africa? While there are concerns about the impact that the construction of the new port will have on the environment, the project has the potential to drastically lift the economies of Kenya and Ethiopia. The LAPSSET project aims to transform the Kenyan economy to achieve 10 per cent annual growth by 2030 and to raise Ethiopian employment levels. Kenya is dependent on imported oil and petroleum products to meet its energy requirements. For a country such as Kenya, which can currently only provide electricity to sixteen per cent of its people, this development is very important.

For South Sudan, this was a golden opportunity to expand its trade. Unfortunately, though, the country erupted into violence on 15 December 2013, with the staging of a coup by rebels loyal to ousted Vice-President Riek Machar. A ceasefire was signed in January 2014, but reports of further killings are still emerging.

It is in this turbulent environment that President Uhuru Kenyatta of Kenya recently visited Ethiopia. In addition to making a bid to increase their bilateral relations, President Kenyatta also chaired the Inter-Governmental Authority on Development (IGAD) summit on 14 March. At the summit he voiced his support for a quick resolution to the South Sudanese crisis.

Aside from the humanitarian aspect, the crisis has delayed the construction of the LAPSSET oil pipeline. Construction has begun on road networks within Kenya and Ethiopia, in conjunction with the new port at Lamu and an airport at Isiolo, but an oil pipeline without South Sudanese crude to flow through it does not seem viable. The lack of a pipeline may also have an impact on the planned transport arrangements for the oil that has been found in north-western Kenya and Uganda. South Sudan was expected to deliver 46 per cent of the total oil volume to the pipeline but, if the conflict continues, it will result in decreased revenue for all the countries involved and a large reduction in the expected crude oil exports from the region.