By JAMES ANYANZWA

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Eastern African countries cut $68.3 billion spending on infrastructure projects last year, the largest decline in number of projects and value of projects in sub-Saharan Africa in a year.

This is as a result of the economic fallout from the Covid-19 pandemic sweeping across the region, hitting public finances and pushing governments into massive indebtedness.

The Africa Construction Trends Report (2020) by consultancy firm Deloitte released last week shows that the number of infrastructure projects in the region covering Burundi, Comoros, Djibouti, Eritrea, Ethiopia, Kenya, Rwanda, Seychelles, Somalia, Tanzania and Uganda dropped by 35 per cent to 118 in 2020 from 182 in 2019 while the total value of the projects declined by 47 per cent to $77.7 billion from $146 billion in the same period.

Infrastructure projects in the transport sector accounted for 51.5 per cent ($40 billion) of the region’s total projects, followed by energy and power (23.5 per cent) and the shipping and ports (21.5 per cent) sectors.

According to the report, the sizable drop in the number of projects and project value largely resulted from the region’s inability to meet financing costs due to the effects of Covid-19 pandemic resulting in the suspension of several projects.

For instance, the Ethiopian government’s interest in renegotiating payment schedules for the Addis Ababa-Djibouti Railway and Addis Ababa-Sebeta-Mieso-Dewale Road Project, led to thinned financing for smaller projects.

The report notes that the completion of several big projects in the region, such as the Grand Renaissance Dam in Ethiopia ($4.8 billion) also contributed to the drop in the number and value of projects in the region.

“The economic slowdown as a result of the Covid-19 pandemic is expected to affect infrastructure projects in the region going forward,” says report.

“Governments’ infrastructure projects could stall due to a shortfall in revenue collections, as well as the reallocation of development expenditure towards the Covid-19 response.

The report shows that China, which has predominantly financed the region’s infrastructure projects reduced its funding to 13.6 per cent of the total projects in 2020 from 20.9 per cent in 2019 after the world’s second largest economy began to rethink the debt repayment prospects of African countries, which have accumulated huge foreign debts in light of the Covid-19 pandemic.

“Arguably, there has also been increased scrutiny of China-funded infrastructure projects in the region, given a greater focus by African governments on financial sustainability. This too has contributed to a decline in China’s funding involvement in East African infrastructure projects,” says report.

“This too has contributed to a decline in China’s funding involvement in East African infrastructure projects.”

Other factors, according to the report, which affected Chinese funding for EA projects and which are likely to continue affecting China’s funding activity in the region include its own growth outlook, which could hamper investment in Belt and Road Initiative projects — a number of which link to East Africa

But even as EA faces funding challenges for its infrastructure projects the report shows that Tanzania’s Bagamoyo mega port remains the most valuable project in the region priced at $10 billion.

This is followed by Kenya’s Kenya-Uganda-Rwanda-South Sudan Rail Project ($9.8 billion), Tanzania’s Tanzania-Rwanda-Burundi Railway Project ($7.6 billion), Tanzania’s Dar es Salaam-Mwanza Standard Gauge Railway Line ($7.5 billion) and Kenya’s Lamu Port Project ($5 billion).

Tanzania’s Bagamoyo Mega Port project is expected to be one of the largest government infrastructure projects in the country and the largest port in East Africa.

Investor conditions

The project has, however, been delayed due to unfavourable investor conditions and demands including a 99-year lease of the port as opposed to government’s offer of a 33-year lease, tax-free operations, special rates for water and electricity and no government approval required when China decides to start running any new business within the port’s facilities.

Deloitte’s 2020 edition of the Africa Construction Trends Report includes 385 projects with a total project value of $399 billion.

EA accounted for 30.6 per cent of projects across the African continent and 19.5 percent of the value in 2020, with Uganda recording 27 projects, the highest number of construction projects, followed by Kenya with 26 projects, Ethiopia with 25 projects and Tanzania with 23 projects.

Although the number of projects in Tanzania was lower than in other EA countries the country contributed 43.1 per cent towards the region’s total project value ($77.7 billion in 2020 — the largest share in the region, largely due to mega projects such as the Bagamoyo Mega port and the Tanzania, Rwanda-Burundi Railway Project.

Kenya recorded the second largest project value in the region with a share of 27.9 per cent, followed by Ethiopia with 13 per cent.

East Africa’s top 10 projects contributed 66.5 per cent ($51.7 billion) towards the region’s overall project value of $77.7 billion, with Tanzania registering four projects in the top 10 projects, amounting to 55.5 per cent ($28.7 billion) of the top 10 projects.

These projects included Bagamoyo Mega Port ($10 billion), Tanzania-Rwanda-Burundi Railway Project ($7.6 billion), Dar es Salaam-Mwanza Standard Gauge Railway Line ($7.5 billion) and Stiegler’s Gorge/Rufiji Hydropower Project ($3.6 billion).

All EA’s top 10 projects are either transport or energy and power sector projects.