East Africa Seeks $43b For Key Infrastructure Projects

East Africa Seeks $43b For Key Infrastructure Projects
East Africa’s planned LAPSSET project

AFRICANGLOBE – The East African Community is seeking at least $43 billion to fund key infrastructure projects for the next 10 years as it moves to address its current huge infrastructure gap.

The infrastructure projects include railway, energy, ports and harbours, inland waterways and information and communications technology (ICT). Some of these projects will be unveiled at the upcoming East African Heads of State Summit that will take place alongside the third infrastructure retreat of the region.

“We will be presenting a 10-year investment strategy (for infrastructure) to heads of state. We estimate that the gap for EAC priority infrastructure is about $43 billion. It could be more. We are prioritising projects and financing — for some of the infrastructure it is the engineering work, feasibility studies and pre-feasibility that need to be done. For others, it is putting together financing packages and for yet others it is gauging implementation,” Dr Richard Sezibera, the East African Community Secretary General, told reporters on the sidelines of the East African Business Summit in Kigali last week.

He said the EAC is currently involved in discussions with different development partners including the World Bank, the African Development Bank, the European Investment Bank as well as individual countries, particularly China and India.

However, the region also plans to raise resources on the domestic market. While the exact financial instrument is yet to be determined, the East African Development Bank (EADB) is expected to be the lead transaction adviser should the region decide to issue an infrastructure bond.

“The East African Development Bank is taking the lead in putting together an innovative special purpose vehicle for infrastructure financing in addition to the bilateral financing mechanisms that exist,” Dr Sezibera said.

East Africa’s current huge infrastructure gap, particularly in energy and transport continues to dampen private sector productivity and is a constraint to growth. High transport, water and power costs are a major obstacle to competitiveness.

“The closure of the British American Tobacco plant in Uganda and Eveready in Kenya among other pullouts should serve as a wake-up call for all us. For instance, we know that we compete with Egypt in many areas but the average cost of power in Egypt is about $0.03 while in East Africa it is $0.10 to $0.13,” observed Linus Gitahi, chief executive of Nation Media Group.

According to the United Nations Economic Commission for Africa (Uneca), while East African countries have recently launched massive projects in the power sector, delays in implementing them could push the region towards expensive alternatives.

Kenya, Rwanda, Burundi, Uganda and Tanzania are at various stages of ambitious energy expansion projects that could add some 10,000MW — or three times the current EAC installed capacity — to the power grid, offering a cheaper alternative to thermal power.
Kenya plans to add some 5,000MW to the national grid, Tanzania 3,000MW and Rwanda 500MW. It is now feared delays could have far-reaching effects.

“Delayed energy planning and investment in the face of growing demand for electricity is likely to drive the energy portfolio to thermal technology, choices that have lower gestation period but higher per unit costs of generation, undermining the ability to supply affordable, available and reliable electricity,” said Uneca in a report titled “Energy Access and Security in Eastern Africa.”

The region is especially keen to diversify from thermal power, with the four countries banking on renewable power sources such as hydro, geothermal, wind and natural gas. In April, the World Bank approved a $100 million loan to partly finance two hydropower plants in Rwanda that will jointly generate 48MW.

Currently, the country faces a daily shortage of 20-25MW of power. Tanzania meanwhile plans to add about 1,800MW of gas-fired electricity to the grid over the next three years, while Uganda has begun construction work on the Karuma dam.

 

By: Berna Namata