Fishermen in Bagamoyo. The port would dwarf neighbouring Kenya’s port at Mombasa. FILE PHOTO | NMG
Eastern Africa countries have increased investment in
infrastructure projects in the past five years with Tanzania leading in
terms of the value and number of projects that broke ground by June last
year, helped by the new Likong’o-Mchinga Liquefied Natural Gas plant,
the most valuable project in the region, according to a new report.
The Africa Construction Trends Report (2019)
by Consultancy firm Deloitte released in January, shows that in the
past five years Burundi, Comoros, Djibouti, Eritrea, Ethiopia, Kenya,
Rwanda, Seychelles, Somalia, Tanzania and Uganda have almost tripled the
number of infrastructure projects to 182 valued at $146.5 billion from
61 valued at $57.5 billion in the previous five years.
According
to the report, the region’s top 10 projects make up 51.7 per cent
($75.5 billion) of the total value of projects in the region, thus
accounting for a large proportion of expenditure on infrastructure
projects.
Tanzanian, Ethiopian and
Kenyan infrastructure projects make up the top 10 projects in the region
valued at $43 billion, $19.7 billion and $12.8 billion respectively,
with the transport and energy and power sectors recording four and three
projects in the top 10 respectively.
OIL, GAS AND ENERGY
The
report says Tanzania has caught up with Kenya in terms of
infrastructure projects, both recording 51 projects in 2019. But it’s
total share of projects by value stands at 41.2 per cent ($60.3
billion), making it the largest contributor towards East Africa’s total
project value.
Tanzania’s new Likong’o-Mchinga Liquefied
Natural Gas plant worth $30 billion has become the most valuable project
in the region. Once completed, the LNG plant, is expected to contribute
about seven per cent towards the country’s economic growth.
Although
Kenya has one of the most valuable infrastructure projects in the
pipeline, the country accounts for only 24.6 per cent ($36 billion) of
the region’s total project value.
In
the transport sector the top projects included Bagamoyo Mega port
(Tanzania), Kenya-Uganda-Rwanda-South Sudan rail project (Kenya),
Nairobi-Mombasa highway expansion project (Kenya) and new Addis Ababa
International Airport (Ethiopia).
The
energy and power sectors included projects such as Grand Ethiopian
Renaissance Dam project (Ethiopia), Tams Hydropower Project (Ethiopia)
and Koysha Hydroelectric Dam (Ethiopia).
Other
projects making the top 10 list are Tanzania’s Likong’o-Mchinga
Liquefied Natural Gas plant (oil and gas), Ethiopian Fairfax Oil
Refinery (oil and gas) and Tanzania’s Mtwara Fertiliser plant
(Industrial Construction).
Kenya’s
rail project is expected to contribute towards boosting trading
activities in Kenya, thus, placing the country at the centre of East
Africa’s rail network.
The East
Africa region accounted for 40.3 per cent of the 452 projects sampled in
the entire African continent and 29.5 per cent of the total value of
these projects estimated at $497 billion.
East
Africa’s total value of construction projects increased by 67.6 per
cent to $146 billion in 2019 from $87 billion in 2018 buoyed by
increased investments in large infrastructure projects within the
transport and oil and gas sectors, such as Phase II of the Kenya
Standard Gauge Railway and Tanzania’s new Likong’o-Mchinga Liquefied
Natural Gas plant.
The transport
sector continues to take the lead in terms of investments accounting for
30 per cent ($44 billion) of the region’s total projects by value,
followed by oil and gas (27.5 per cent) and then the energy & power
(20.9 per cent) sectors.
The report
says the region prioritised investment in transport infrastructure to
ensure reliable transportation network and boost intraregional trade and
strengthen the regional integration agenda.
As
a result, the sector recorded the highest number of projects (69
projects out of 182), followed by the energy and power sector with 40
projects (22 per cent) and real estate with 35 projects (19.2 per cent).
The increased number of transport projects came from investments in rail, road and airport projects.
CHINESE DOMINANCE
According
to the report numerous East African-based airports have launched
expansion projects to cater for the rapidly growing passenger and cargo
traffic volumes.
For instance, the
Bole International Airport Expansion project in Ethiopia, seeks to
transform Africa’s second most populous nation into the largest aviation
hub in Africa.
“Such cross-border
infrastructure projects demonstrate East Africa’s commitment to boost
regional integration,” according to the report.
According
to the report projects in East Africa are mainly owned by Government
(79.1 per cent), while private domestic companies own 6.6 per cent.
Various East African governments have played a significant role in boosting infrastructure development in the region.
For
instance, the East African Community Development Strategy that aims to
support the region in becoming a competitive and sustainable
lower-middle income region by 2021, and also highlights infrastructure
development as one of its regional priorities.
The
report notes that East Africa relies on external funding for most
infrastructure projects, with the region’s project funding being
dominated by China (20.9 per cent) while Governments account for 13.7
per cent of total funding.
International
and African development finance institutions also play a significant
role in East Africa’s project funding, accounting for 13.2 per cent and
12.6 per cent, respectively.
The
ongoing and upcoming regional infrastructure projects have also
attracted various development financiers such as the African Development
Bank.
Construction activities in the
region are also dominated by China, who is responsible for building 40
per cent of the projects. Both private domestic companies and European
Union countries construct 14.8 per cent of projects.
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