Infrastructure investments of $55.6 billion anticipated

Kenya is set to become a hub for intra-regional trade in Africa, according to a new report from Frost & Sullivan. An estimated $55.6 billion in investments in infrastructure development for Kenya is planned, the majority of which will focus on telecommunications and power generation infrastructure, according to the report.

Mega infrastructure projects are also planned for elsewhere in East Africa and are set to create unique opportunities and open new markets in Kenya, Uganda, and Ethiopia, the report said. Industry sectors expected to benefit from the planned infrastructure developments include oil and gas, mining, agriculture, and retail.

“Transport infrastructure has undergone major upgrades over the past five years in order to support the high trade demand in the East African region,” said Craig Parker, senior economic consultant at Frost & Sullivan. “The Nairobi Southern bypass, for example, was commissioned in 2012 and is already 40 percent complete.”

Major road projects that are currently underway were established to alleviate the severe bottlenecks and traffic congestion. An estimated $5.14 billion has been dedicated to road project investment in Kenya.

The Nairobi Southern bypass, a freeway in Kenya’s capital, is meant to ease congestion and increase speeds on local roads. The project was 85 per cent funded by China’s EXIM Bank; the Kenyan government provided the remaining 15 per cent.

However, disputes and illegal occupation of land in areas where infrastructure projects are underway, or are about to take place, have resulted in high relocation costs. This will culminate in delays along with escalating project completion costs.

Furthermore, legislative changes to the tendering process in Kenya have placed limitations on the type of projects international firms can get involved in. In order to address these challenges, and be accepted for infrastructure project tenders, global firms will be required to form local partnerships or joint ventures with domestic firms.

“Although private participation in infrastructure development is growing and tender processes are becoming more transparent, forging local partnerships will remain crucial for entering the Kenyan market successfully,” said Parker. “This explains the emergence of high priority public-private partnership programs, which boost the prospects of local construction companies and financial institutions that can offer finance to companies.”

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Background

African Infrastructure Tracker: Kenya is part of the Financial Benchmarking in the Infrastructure Industry subscription, which will highlight planned logistics, transport, energy, ICT, water, health and education projects for Kenya and the East Africa region. This analysis will include investment values, planned project completion dates and a discussion on threats and challenges to project completion.

For complimentary access to more information on this research from Frost & Sullivan, please click here.