Kenya's road development program is in extreme need of a steady bitumen supply·
Kenya’s request for bitumen products is going to go up with new budget allotment for the construction of new ports, roads, and airports and also to maintain the already existing transport infrastructure.
The growth of the economy of the country rose to 5.5% in 2015 from 5.3% in 2014, and it is projected to reach 6% and 6.4% in 2016 and 2017 commonly following the African Development Bank, creating demand for better and more developed infrastructure and in the transport sector in particular.
For instance, National Treasury Cabinet Secretary Henry Rotich proposed constructing 1,138km of low volume seal roads (LVSR) to advance rural connectedness, 1,768km of newly paved roads, and rehabilitate a further 224km.
Rehabilitation, maintenance, and road construction are expected to make the most significant share of bitumen in Kenya following representatives in the Road Infrastructure and Investment Congress 2017, that took place in Nairobi. This is a platform that enables stakeholders in the bitumen and asphalt industries to connect.
“there is a direct connection between the need for bitumen, and the need for paving of more roads with the low volume sealed technology,” said Charles Langat, chief executive officer Asphalt Institute of East Africa.
Kenya intends to advance up to 3,010km of roads with the low volume seal technology which can be “ a cost-effective solution for rural road development” according to the Kenya Roads Board, one State agency that is responsible for funding, overseeing and coordinating the country’s maintenance, road development, and rehabilitation.
Langat stated research by the Asphalt Institute of East Africa implies that a kilometer of LVSR will need an estimated 21.175tonnes of bitumen. He said for the planned 3,000km, the potential suppliers' bitumen will have the opportunity to supply at least 211,000 tones of asphalt in five years.
He also mentioned that the grade 80/100 in the market in Kenya and other subs Saharan Africa “is becoming a lower performer for use.”
There is a rising trend for the use of PG with more significant penetration grades such as 40/50, although Langat said PG 60/70 could also be an appropriate ideal in tropical regions.
Although no one was instantly available on the last annual bitumen consumption in Kenya, they estimate that East Africa for a region consumed an average of 100,000tonnes every year by 2015.
Construction or development of essential highways in Kenya is also expected to enhance the need for bitumen, as Stanley Kamau said, the administer of the public-private partnership (PPPs) of the National Treasury.
The Fact that development financial partners participated and also the embracing of the PPP model in road sector development are vital in deciphering financing for the projects that can cause in developing the growth of the bitumen market.
He said the three-stage 485km Nairobi-Mombasa road is now prepared for procurement when the 184km Nairobi-Nakuru-Mau Summit road has already been into procurement stage. Both will progress under a PPP.
Natasha Johnson, the Bitumen Exchange Director, said PPP projects are the impetus for growth in the bitumen market. Still, the manufacturers and suppliers should partner with other stakeholders in the road sector in Africa.
“For the African bitumen industry to grow, it requires to develop a better understanding of what drives inbound road investment decisions,” she said.
“Forging new steep relationships directly with the investor will let them make informed decisions on quality and security of the product and pushes the industry forward,” said Johnson.
Johnson said the African bitumen industry is capable of only developing if it taps into the financial growth institutions, which she said: “Importantly improve the bankability of road projects and raise the flow of private funding for infrastructures.”
Kenya, just like the rest of East Africa, relies on countries such as Iran, India, Kuwait, Saudi Arabia, and the United Arab Emirates to satisfy local demand for bitumen.
With the closure of East Africa’s only and largest refinery, Kenya Petroleum Refineries, Kenya will continue to rely on bitumen imports to meet demand.
Additional demand for bitumen is expected from the ongoing rehabilitation of many airports.
However, there are challenges to the growth of the bitumen market in Kenya, such as the unregulated nature of the industry.
Participants at the Congress in Nairobi asked the East African governments to ensure taxes are not prohibitive because high taxation increases the price of bitumen and could distort the cost of bitumen and road projects.
Kenya’s investment opportunities in the bitumen industry include bitumen-containers, leasing, and hiring of bitumen processing and discharge equipment, the supply of environmentally sustainable emulsion products, and also the establishment of bonded storage reserves, especially at the port of Mombasa.