A look at Kenya’s ambitious infrastructural projects and the impact on the economy
BY PETER KIMANI
Kenya’s infrastructure map is set for a major redraw in the coming years, with a series of mega projects lined up. These projects could drastically change Nairobi’s global appeal.
While focus over the past few months has been on the country’s ability to finance the projects which include ports, highways, railways and airports — attention is also shifting on the impact this would have on the economy.
The ambitious upgrade of Kenya’s infrastructure has gained more traction following President Uhuru Kenyatta’s recent international trips to China and the United States as well as the visit to Kenya by United Kingdom Prime Minister Theresa May — all in one month.
The Belt and Road initiative
Early September, after a meeting between China and African leaders, the Asian giant pledged USD60 billion in new development financing on the Continent. A sizeable chunk of this funding will go to Kenya — the regional hub. The funding which is being channeled through the Belt and Road initiative is in addition to another USD60 billion Beijing offered in 2015.
So, what is at play as far as Kenya’s infrastructure plan goes? What are the major projects on the pipeline?
Of all the proposed projects, the multi-billion-shilling Mombasa-Nairobi expressway has elicited growing interest. Kenya is in discussions with Bechtel Corporation a US construction firm, to finance the project, which is estimated to cost at least KSh300 billion.
The four lane 473-kilometre road, expected to be rolled out via a Public Private Partnership (PPP) arrangement is meant to ease traffic on the corridor that links Mombasa to Nairobi. It is anticipated that there will be uninterrupted movement of vehicles at a speed of up to 120 kilometres/hour.
Secondly, the planned expansion of the Nairobi-Nakuru-Mau Summit highway is taking shape and is expected to cost over KSh100 billion. This has attracted interest from 10 international companies to implement under a design, finance, construct, operate, maintain and transfer model spanning a period of 30 years.
Thirdly, Kenya is seeking a deal with China to finance the KSh380 billion Naivasha – Kisumu Standard Gauge Railway (SGR) line. China is currently financing Section 2A SGR line from Nairobi to Naivasha that is currently under construction and valued at KSh150 billion.
Fourthly, the country is considering building a second runway at the Jomo Kenyatta International Airport (JKIA), whose viability remained a key point of contention within the government and financiers. The African Development Fund (AfDB), which is funding the project had approved a KSh16 billion loan in November last year with the government required to top up 20 per cent of the total cost.
But perhaps the most awaited project in Kenya and beyond is the KSh2.5 trillion Lamu Port South Sudan Ethiopia Transport (Lapsset) corridor project. This will see the establishment of nine major cities of Lamu, Garissa, Isiolo, Marsabit, Moyale, Lodwar, Maralal, Wajir and Mandera following the ongoing construction.
According to government documents, the Lamu Port project plan includes a 32-berth port, transportation hubs for rail, highway and international airports in Lamu, Isiolo and Lodwar; oil pipelines from South Sudan, Uganda and Ethiopia to Lamu Port; an oil refinery and three resort cities in Isiolo, Lamu and Turkana.
In July 2018, the government said designs are complete for the 537 kilometre Lamu-Garissa-Isiolo road. Construction of the 738 kilometre Isiolo–Lokichar–Nakodok road has already started.
Worrying level of debt
Building of the 530 kilometre Lamu-Isiolo road is expected to begin this year. This follows the securing of KSh62 billion funding from the Development Bank of South Africa.
However, there are concerns that the projects will significantly increase Kenya’s level of debt, which is already worrying.
Latest government statistics for the period ending June 2018 released early July showed that Kenya’s stock of public debt was about KSh4.959 trillion. This is made up of a domestic debt of KSh2.447 trillion which is close to KSh500 billion, more than a year earlier and an external debt of KSh2.512 trillion.
The 2018-2019 financial year budget unveiled mid-June showed that the country would go deeper into borrowing. Of the budget of KSh3 trillion, only 76.2 per cent or KSh 1,949.2 billion will be funded from tax revenues. The balance of slightly above KSh1 trillion is to be sourced from lenders both locally and internationally.
For the period ending December 2017, the government said the accumulation of external debt was as a result of disbursements to settle the bilateral debt from China taken to finance phase II of the SGR project.
Peter Kimani is a freelance writer based in Nairobi. Email: firstname.lastname@example.org