Kenya is making a multibillion-dollar wager that an ambitious seaport project in its restive coastal region can trump the land disputes and terrorism that threaten its economy.
The construction of a deep-sea commercial port in the Lamu resort area aims to create a transport and trade corridor that includes oil-rich South Sudan, fast-growing Ethiopia and coastal Kenya—a mammoth undertaking boosters say will turn Lamu into a global economic hub.
By 2018, the Lamu Port and South Sudan-Ethiopia Transport Corridor, or Lapsset, is expected to include three deep-sea shipping berths, new roads and trains linking the port to neighboring countries and pipelines to transport oil from fields in Uganda and South Sudan. Kenya eventually plans to build an oil refinery and add 29 more berths.
But recent violence has turned Lamu into a no-go zone for tourists, and analysts warn that investor interest in the project is likely to wane as Kenyan authorities struggle with a worsening security situation. So far, the only international investors are a Chinese company building the first three berths and the African Development Bank.
“The security climate is foremost in people’s minds,” said Clare Allenson, an Africa analyst with Eurasia Group, who said she expects planners to reduce their ambitions for the port as a major shipping hub. “Lapsset is a real thing, but on a much smaller scale than what has been discussed.”
Peter Oremo, who has overseen the project’s first stages, said the Kenya Ports Authority has increased security in the area. A 6 p.m. curfew, he added, has improved the situation.
Consultants for China Communication Construction Co. 1800.HK +1.34% —a Chinese company that this month was awarded the 42 billion Kenyan shilling ($475.9 million) contract to build the first three berths—are proceeding following shootings in nearby Mpeketoni that killed 65 people in June, Kenyan officials said. The company didn’t immediately respond to questions about the project.
“These were minor occurrences. They were minor misunderstandings,” Silvester Kasuku, director of the Lapsset authority, said. “The government is equal to the task to deal with the issue of insecurity.”
But the Mpeketoni attacks, which stemmed from land disputes but cut along religious lines, were just the latest signs of Kenya’s unsettled security situation. Murders of radical Muslim clerics in the southern port town of Mombasa have stirred anger and fueled recruitment among militant groups. Last September’s assault by a handful of Somali militants on a Nairobi shopping mall turned into a four-day siege that left at least 67 people dead—before Kenyan security forces detonated a part of the mall where gunmen were hiding.
The Kenyan government says it is taking measures to increase security and fight terrorism, but broad sweeps to round up ethnic Somalis haven’t engendered confidence.
Kenya’s neighbors are grappling with security challenges as well. In the past year, conflict between South Sudan’s president and his former deputy has sparked violent conflict, complicating plans for a new oil pipeline to Lamu. Such a pipeline could also become an attractive target for Somali militants.
Meanwhile, residents have vowed to stop the project, saying it would expropriate ancestral land. Mr. Kasuku said plans to compensate displaced people were under way and opposition would likely cease once payments were made.
The Kenyan government this month ordered the repossession of 500,000 acres of land in the Lamu region it said was acquired fraudulently by 22 separate landowners. Local activists said the order would displace farmers and herders from lands they have worked for more than a century. Many people who have lived in the area for generations don’t have land titles and are being lumped in with more recent prospectors, said Ishaq Khatib Abubakar, a member of a group called Save Lamu. “They will demolish the minority tribes.”
The tensions are creating challenges to attracting foreign investors and expatriate project managers.
“You maybe can use some local labor, but you definitely will need foremen and others from your company to oversee the project,” said Mark Bohlund, a London-based economist on sub-Saharan Africa for IHS Inc. “If you feel you can’t guarantee the safety of these employees you’re deploying, you may reconsider.”
The ADB, which is funding some of the roads that will link the port to neighboring countries, said the project will move ahead regardless of security issues.
“Timelines will have to adjust some,” said Gabriel Negatu, the bank’s regional director. “Going forward, the government will have to strengthen security, not because of the projects but because of concern for the people there.”