By ALLAN OLINGO
In Summary
- The World Bank, the European Union and China are the region’s main infrastructure financiers.
- The bulk of the funds go to road construction, according to a new report.
- Kenya had initiated the highest number of projects, 11, followed by Ethiopia and Uganda, with nine projects each, and Tanzania with eight.
The discovery of oil, gas and mineral deposits in East
Africa has paved the way for ambitious infrastructure projects that have
attracted at least $3.4 billion from international lenders in the past
year.
The World Bank, the European Union and China are the region’s main infrastructure financiers.
According to the Deloitte African Construction Trends Report 2016,
Kenya had initiated the highest number of projects, 11, followed by
Ethiopia and Uganda, with nine projects each, and Tanzania with eight.
China and the EU have been the biggest financiers of Kenya’s
infrastructure projects, with roads taking the biggest share of the
funds. The EU, in partnership with other lenders — the
German Development Bank (KfW), the European Investment Bank (EIB) and
the African Development Bank — is funding key roads on the Northern
Corridor, including the $151.7 million Mombasa-South Sudan link road and
the $152.2 million Mombasa-Mariakani road.
Walter Tretton, head of infrastructure in the EU delegation to
Kenya, said the new link roads are a game-changer, in some places
cutting the journey from days to hours.
“The new roads will also help reduce congestion while improving the competitiveness of the port of Mombasa,” Mr Tretton said.
Northern Corridor
The EU, through the Africa Infrastructure Trust Fund (EU-ITF),
has given $22 million to fund the Mombasa-Mariakani road while KfW and
EIB have given $55.2 million each. Kenya is expected to inject $19.8
million.
The proposed Kitale-Morpus road in western Kenya, which is
expected to eventually link Tanzania and South Sudan through Kenya, will
be constructed through a $27.5 million grant by the EU-ITF and a $99.3
million loan from KfW. The government will put up $24.8 million.
The road is expected to branch from the Northern Corridor to
South Sudan in one direction and Tanzania in the other. The EU is also
partnering with the AfDB to finance the construction of a road from
Isebania to Tanzania.
But the report notes that the number of big projects dropped in
2016, compared with the previous year. It says that 43 big projects were
identified in the region, compared with 61 the previous year. The total
value of the projects fell from $57.5 billion in 2015 to $27.4 billion
last year.
In Tanzania, the drop in infrastructure project financing is
attributed to President John Magufuli’s austerity measures, which have
seen the government rationalise its big capital projects and cut state
spending in order to reduce the budget deficit.
“The suspension of the $11 billion Bagamoyo Port project has
seen a significant decrease in the value of ongoing projects. Bagamoyo,
which would have become the largest port in East Africa, was suspended
by Tanzania’s new government, which has chosen instead to focus on the
ports of Dar es Salaam and Mtwara,” the Deloitte report says.
Eurobond
Last month, Tanzania announced that it would use its $700
million Eurobond and concessional loans to fund the construction of its
standard gauge railway network.
Finance Minister Philip Mpango said they had initiated talks
with UK-based Credit Suisse for a $300 million loan to finance
infrastructure projects. They are also in talks with the Kuwait Fund for
Arab Economic Development, the Abu Dhabi state fund, Mubadala
Development, and the OPEC Fund for International Development for other
concessional loans to fund these projects.
Tanzania is looking to raise $936 million in the new financial
year for infrastructure projects. The World Bank remains Dar’s biggest
partner in infrastructure projects. In March, the Bank announced a $1.15
billion loan for projects in energy, water and transport.
In Uganda, the construction of the $476 million Kampala-Entebbe
Expressway, which is due for completion next year, stands out. The
country is also building the 600MW Karuma Dam at a cost of $1.65
billion.
Kampala has also seen a drop in infrastructure funding following
queries on the management of some of the projects. In September last
year, the Bank suspended new lending to Kampala, saying its projects
were “characterised by endemic delays in implementation, cost overruns,
and corruption.”
Rwanda has in the past year launched its second international
airport at Bugesera after the signing of a $418 million construction
agreement with Mota Engil Africa SA. It also unveiled its $300 million
Kigali Convention Centre. In May last year, it inaugurated the $140
million KivuWatt gas power plant.
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