Africa in the news: East Africa continues to integrate, Ethiopian Airlines scales up, and AIIB expands

Regional integration makes strides in East Africa

On Wednesday, May 9, President Ismail Omar Guelleh of Djibouti and President Uhuru Kenyatta of Kenya signed four agreements designed to boost trade and deepen bilateral linkages, taking further steps in integrating countries in the East African region. Indeed, as the presidents discussed their countries’ growing relationship, Kenyatta remarked that the recently signed Continental Free Trade Agreement is already opening doors. The four agreements signed touch on various aspects of the two countries’ relationship. In addition to a trade agreement giving each other Most Favored Nation status, the two heads of state signed a “Memorandum of Understanding on Bilateral Cooperation in the Livestock Sector” and an “Agreement on Reciprocal Promotion and Protection of Investments.” They also signed an agreement that exempts holders of diplomatic passports from visas.

Just the day before, Kenyatta met with newly named Ethiopian prime minister, Abiy Ahmed, to discuss the jump-start of long-planned joint infrastructure projects whose implementations have languished. The two leaders focused on the $24.5-billion Lamu Port-South Sudan-Ethiopia Transport (LAPSSET) project. LAPSSET, which spans Kenya, Ethiopia, and South Sudan, includes a number of interregional highways, an interregional standard gauge railway, three new airports, three resort cities, a product oil pipeline, a new port at Lamu (Kenya), and a dam on the Tana River. The project had been launched in 2012 and, although Kenya and Ethiopia attempted to revive it in 2016, financial constraints continue to impede its construction. During their meeting, according to a joint statement, the leaders “committed to the development of LAPSSET, the Northern Corridor including road network between Isiolo, Moyale through to Addis Ababa and the railway from Addis Ababa to Nairobi,” as well as other portions of the project.

Ethiopian airlines scales up expansion plans

This week, Ethiopian Airlines announced that it would scale up its expansion plans and will increase its fleet to 150 aircrafts by 2025 from the earlier target of 120. The airline also confirmed an order for 10 Bombardier Q400 aircraft last week and intends to place orders for 13 additional Boeing 787s and 6 Airbus A350s soon. Ethiopian Airlines currently has 100 planes in its fleet and is the largest African carrier by revenue and profit. In the last few years, the airline has grown rapidly, tripling the number of passengers it flew between 2008 and 2017.

Ethiopian airlines has also invested in other African carriers as part of its growth strategy, buying a minority stake in Malawi Airlines in 2013 and announcing a deal with the Zambian government to relaunch Zambia Airways in January. According to its CEO, Tewolde Gebremariam, the airline is negotiating with governments in Chad, Djibouti, Equatorial Guinea, and Guinea to set up new national carriers through joint ventures.

Asian Infrastructure Investment Bank aims to expand projects in Africa

Last week, Kenya joined the ranks of Egypt, Ethiopia, Madagascar, South Africa, and Sudan as African countries that have joined or have been approved to join the Asian Infrastructure Investment Bank (AIIB). The AIIB—a China-led multilateral development bank that launched its operations in January 2016—invests in infrastructure projects predominantly in Asia. In joining the AIIB, the Kenyan government hopes to unlock more highly concessional financing for domestic infrastructure projects. Quartz Africa notes that the AIIB aims to rival the Bretton Woods Institutions, such as the World Bank and International Monetary Fund, and become one of the most prominent global lenders. While the AIIB’s membership has risen from 57 signatories in January 2016 to 86 members on six continents today, still, some major economies, such as the U.S. and Japan, have opted not to join the institution due to their concerns over its governance and lending practices.

Recently, the AIIB signed a memorandum of understanding with the African Development Bank (AfDB), which will enable the AIIB to extend financing operations throughout Africa. This follows an agreement that the AIIB signed with the Inter-American Development Bank (IDB) last year to outline a framework for co-financing infrastructure projects in the IDB’s member countries. The AIIB’s portfolio in Africa currently includes only one project on solar power generation capacity in Egypt co-financed with the International Finance Corporation. Thus, the recent agreement with the AfDB aims to boost investments in new projects across the continent.