Economist and governance advocate Bonnie Mwangi has questioned how Kenya’s proposed investment in the Sh2.2 trillion Dangote East Africa Petroleum Refinery was valued, raising concerns over the terms of the deal, use of public resources and whether the country will get value from its planned 10 per cent stake.
Mwangi said the government should provide more details on the investment, including how the refinery was valued, what Kenya will receive in return for its share and whether Parliament should have a role in approving the transaction.
Speaking on Radio Generation on Thursday, he said Kenyans should examine the project based on its economic details instead of supporting or opposing it simply because of their views about the government.
“I think as Kenyans we don't have to be always suspicious of deals. We don't always have to reject what's been done by the government, even though we don't like the government in general. But what we have to do is look at the details and look at the economics of it, and then try to make sense of what's happening,” he said.
His remarks came a day after President William Ruto and Dangote Group President Aliko Dangote broke ground for the refinery at Mokowe in Lamu County on September 30.
The Sh2.2 trillion, or about $16 billion, project is planned to process 700,000 barrels of crude oil per day. Once completed, it is expected to become the largest refinery in East and Central Africa and supply petroleum products to Kenya and other markets in the region.
The refinery is being developed along the Lamu Port-South Sudan-Ethiopia Transport (LAPSSET) corridor, with the location expected to benefit from access to Lamu Port and other planned industrial facilities.
The wider development is expected to include petrochemical facilities and a 1,000-megawatt power plant. Dangote has projected that the project could create about 60,000 jobs, while the government has presented the investment as a way of strengthening energy security and reducing reliance on imported refined petroleum products.
However, Mwangi questioned the figures attached to Kenya’s proposed ownership of the refinery.
Earlier reports indicated that Kenya had been offered a 10 per cent stake valued at about Sh64.74 billion, equivalent to $500 million, while East African countries had been offered a combined 30 per cent stake.
Mwangi said the later valuation of the entire project at Sh2.2 trillion raised questions over how Kenya’s contribution and share had been determined.
“Today, yesterday we found out that now it's worth 2.2 trillion. 10 percent of it is 220 billion. Correct. Okay. So now, the government says that this is a private deal, so we don't need to involve parliament. But we are buying 10%. They get 220 billion. Where is that money coming from? It's not like the president is investing his money. It's our money,” he stated.
He called for the terms of the transaction and the basis of the valuation to be made clearer, particularly because public resources will be involved in Kenya’s participation.
“What are we getting for 10%? Is that fair value for us, right? Where did the 2.2 trillion come from? That valuation, where did it come from?” he questioned.
Mwangi also raised questions about the amount of crude oil required to keep a refinery of that size operating and whether Kenya alone could provide enough feedstock.
“When you look at the amount of crude oil that needs to flow into that facility to make it viable economically, it needs about 600,000 barrels a day. Our country can only produce about 150,000.”
Kenya's crude production is below the planned capacity of the refinery, meaning the facility would need crude from other African producers and international sources. The project is planned to process crude from Kenya and other producers.
Mwangi consequently questioned whether the refinery would automatically result in lower fuel prices for Kenyan consumers, arguing that the country would still need to import crude oil to keep the facility running.
He also questioned the pace at which the investment has been developed and whether enough economic studies and information have been made available to the public.
“This is going to be the largest deal our country has ever done. It's a big deal, 2.2 trillion, close to $17 billion. Right? It's the biggest project ever in our history, and it's done in four months, and nobody has conducted a study to say whether or not we are actually going to benefit from it,” he said.
Mwangi said Kenyans should therefore be given access to key details of the investment, including its valuation, contractual commitments, expected economic benefits, employment projections and other financial information.
He said such information would allow the public to assess the proposed investment based on the value it is expected to deliver against the public resources committed to it.