Donors announce $2b in new funding for regional infrastructure projects

Saturday March 14 2015

Workers construct Berth 20 at the Mombasa port. Kenya has signed a $270 million loan with Japan to help expand the port. PHOTO | FILE

International donors have announced more than $2 billion worth of financing to East African governments to undertake infrastructure projects.

The World Bank, European Union, Japan and China have announced new partnerships with several East African governments and development partners to improve infrastructure in the region.

But, even with increased funding, huge capital infrastructure projects in the region dropped significantly in 2014. According to the Deloitte African Construction Trends Report 2014, only 51 projects were identified in the region, compared with 93 recorded the previous year, representing a 55 per cent drop. The total value of the projects also dropped from $67 billion to $60 billion.

Mark Smith, head of infrastructure and capital projects at Deloitte East Africa, noted that there are many projects in the planning phase.

Kenya hosted the bulk of large capital infrastructure projects implemented in East Africa in 2014, followed by Uganda, Ethiopia, Tanzania and Rwanda.

The transport sector accounted for 59 per cent of all the projects in Kenya, representing a growth of 17 per cent. About 37 per cent of projects were in energy.


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Now, the oil and gas sector in the region requires $60-$70 billion. In January, the World Bank announced a $1.2 billion loan for the revival of the region’s inland waterways on Lakes Victoria and Tanganyika and enhancing the capacity and efficiency of the two main Indian Ocean ports of Dar es Salaam and Mombasa.

In September last year, the World Bank, the UK’s Department for International Development (DfID), TradeMark East Africa and Tanzania signed a $565 million deal for the improvement of the port of Dar es Salaam. Tanzania has also been working on a plan to making the Dar es Salaam port more efficient, with another container terminal. The port serves Burundi and the Democratic Republic of Congo.

“The Dar es Salaam Maritime Gateway Project is intended to increase the handling capacity of the port to 28 million tonnes by 2020, from the current 14.6 million tonnes handled in 2013/14 financial year,” said the World Bank statement.

Tanzania also plans to construct the China-funded Bagamoyo port and a special economic zone worth $10 billion beginning July.

In Mombasa, an upsurge in cargo volumes, coupled with rapid increase in ship sizes, has put pressure on the port to expand. Nduva Muli, Kenya’s Principal Secretary for Transport, said the capital expenditure to cope with these challenges is estimated at $1.3 billion. This includes the development of the Lamu port.

According to figures from the Ministry of Transport and Infrastructure, the cost of construction of the Lamu port and procurement of the requisite equipment is estimated at $533 million while the cost of the short-term plan, including the development of the first three berths, is $664 million. The construction of the second container terminal will cost $900 million.

READ: Work on $3.3bn Lamu port to start next month

The development of a free port at Dongo Kundu is estimated at $6.5 billion while the Kipevu oil terminal is expected to cost $120 million.

“Most of the infrastructure development will be financed through public-private partnerships or concessional funding from development partners,” the PS said.

Two weeks ago, Kenya signed a $270 million loan deal with Japan to help expand the Mombasa port, which handles fuel, consumer goods and other imports for Uganda, Burundi, Rwanda, South Sudan, Democratic Republic of Congo and Somalia, as well as regional tea and coffee exports.

Treasury officials said the loan would help purchase cargo handling equipment and finance a new container terminal.
“The World Bank support for reforms anticipates the boom in the extractive sector in the region and will facilitate easier movement of people, goods and capital,” the Bank said.

Philippe Dongier, World Bank country director for Burundi, Tanzania and Uganda, said they are partnering with the EAC governments and the private sector to help deepen policy integration and reduce barriers to trade in the region.

“We will also invest in specific transport links to better connect landlocked countries — Burundi, Rwanda, Uganda and South Sudan — to the Northern and Central Corridors, this way improving these countries’ access to the ports of Mombasa and Dar es Salaam,” Mr Dongier said.

Through the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (Miga), the World Bank said it will provide additional resources for regional infrastructure through market-driven private sector financing and guarantees.

The European Union’s head of delegation in Tanzania and EAC Filiberto Sebregondi said the EU was ready to give $750 million to support projects in the region.

Support extractives

“These investments will support the growing extractives industry and improve road, rail and air transport, which will ease the movement of people and goods,” Mr Sebregondi said.

IFC director for East and Southern Africa Oumar Seydi said the lender intends to do more to finance ports, power, rail and other key infrastructure projects in the EAC.

The bloc said in its 2015-2025 strategy paper that it needs at least $68 billion, and possibly up to $100 billion, over the next decade to develop roads, ports, railways, transmission lines and oil and gas infrastructure.

“We estimate that the financing gap for EAC priority infrastructure projects is $43 billion,” said Richard Sezibera, the EAC Secretary-General.

Mid last year, the World Bank approved $300 million from the International Development Association (IDA) to support Tanzania’s efforts to build a reliable open access railway on the Dar es Saalam-Isaka section of the Central Corridor.

In May 2013, the EU gave 18.5 million euros ($19.6 million) for the construction of a 143km Rwanda–Burundi 220kV interconnector, as part of a larger ongoing multinational project to interconnect Kenya, Uganda, Rwanda, Burundi and the Democratic Republic of Congo.

By Allan Olingo and James Anyanzwa