Kenya freezes Tanzanian tycoon's cooking gas plant

Thursday July 21 2022
Rostam pic
By Business Daily Africa

Kenya has frozen plans by a Tanzanian billionaire to set up a gas plant and storage facilities at the Mombasa port, threatening a trade spat between the two neighbouring countries.

The Energy regulator has declined to clear the application by Taifa Gas, which is owned by tycoon Rostam Aziz, citing risks to the environment posed by the 30,000-ton gas handling facility.

The entry of the business magnate, who was ranked the first dollar billionaire in Tanzania by Forbes in 2013, promised a vicious battle for control of the Kenyan cooking gas market that remains under the tight leash of Mombasa-based tycoon, Mohamed Jaffer.

The entry of Taifa Gas into Kenya is part of a trade deal between the countries signed between Kenyan President Uhuru Kenyatta and Tanzania’s Samia Suluhu last year.

The regulatory licence freeze risks reigniting the trade spat between Kenya and Tanzania that saw Dar es Salaam block Kenyan goods from accessing its market.

The billionaires’ fight pitting Mr Jaffer and Mr Aziz, 57, was expected to cut the cost of handling and evacuating cooking gas from the ships to the mainland, allowing dealers to transfer the cost relief to consumers.

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Just like Mr Jaffer, Mr Aziz has invested in building political networks that saw him serve as MP and treasurer of the ruling party-- Chama Cha Mapinduzi (CCM).

Mr Aziz’s ambitions to establish a presence in Kenya’s retail cooking gas business looked set to trigger another market fight with oil dealers such as Vivo, Rubis and Total for control of the 2.87 million households (23.9 percent of Kenyan households) that use liquefied petroleum gas (LPG) for cooking.

“We did not clear their Environmental and Social Impact Assessment (ESIA) because of certain technical deficiencies. The EIA had some technical deficiencies which we want them to address before we consider their application further,” the Energy and Petroleum Regulatory Authority (Epra) said in a response to Business Daily queries.

The regulator did not disclose the technicalities linked to Taifa Gas, which is the largest gas retailer in Tanzania and has more than 30 LPG handling plants.

Taifa Gas wants to build the 30,000-ton Kenya facility at the Special Economic Zone in Dongo Kundu, near the Port of Mombasa.

It will join Jaffer’s firm, Africa Gas and Oil Ltd (AGOL), in the short list of firms that operate gas handling and storage at major entry ports in Africa.

AGOL has a storage capacity of 25,000 tonnes of LPG following an upgrade last year of the facility initially built in 2013.

The plant was built to allow for bulk imports of cooking gas to lower unit costs through economies of scale and curb shortages, which had been made difficult by the smaller import terminal at Shimanzi.

It had a storage capacity of 10,000 tonnes and the 25,000 tonnes unit is ranked among the largest terminals in sub-Saharan Africa.

The import handling and storage unit has helped relieve demand pressures through reduction of stock-outs, effectively easing pressure on LPG prices.

Previously, the oil marketers imported cooking gas individually in small quantities due to inadequate gas discharge facilities.

This led to cooking gas shortages and expensive LPG due to high import premiums and demurrage, which are penalties marketers pay shipping companies when tankers fail to offload in the stipulated time period.

The Shimanzi terminal has a capacity of just 1,400 metric tonnes.

The tankers would queue for up to two months, leaving the marketers with a daily fee of $20,000 (Sh1.7 million).

Private companies have been angling to benefit from the growing use of cooking gas in Kenya in the absence of investments by the government via import and storage facilities.

This is the reason the wealthy Mr Aziz is seeking a piece of Kenya’s gas market.

Mr Aziz facilitated Vodacom South Africa’s entry into Tanzania, and previously owned an estimated 35 percent stake in Vodacom Tanzania.

In 2019, he concluded the sale of the last tranche of his Vodacom Tanzania shares in deals that saw him pockets billions of shillings.

Apart from his shareholding in Vodacom Tanzania, he built a fortune from stakes in contract mining firm Caspian Mining, extensive real estate in Tanzania and the Middle East and investments in Tanzanian media.

He has been vocal about hurdles placed on his bid to enter the Kenyan market.

 “Tanzania and Kenya potentially can be much bigger than they are. Unfortunately, we’re bogged down by petty politics, protectionism, inward-looking and trivial issues that impede economic development,” Mr Aziz said at a conference in Nairobi last year.