GlobalData has found that investments in East African infrastructure construction are set to expand rapidly. Total infrastructure construction output in the region’s three largest markets of Ethiopia, Kenya, and Tanzania, is expected to grow from US$25.9 billion in 2017, to US$98.8 billion in 2022.
GlobalData is in the process of tracking 287 large scale public and private sector infrastructure projects in East Africa. These projects are together worth US$209.1 billion. A large proportion of the project pipeline is accounted for by the transport (rail and road) and energy sectors, contributing US$77.5 billion (or 37.1%) and US$94.6 billion (or 45.2%) respectively.
“Investment rates in transport infrastructure have been increasing, thanks to major continental initiatives, such as the Programme for Infrastructure Development in Africa – a strategic continental initiative for mobilising resources across African countries to transform Africa through modern infrastructure,” said Yasmine Ghozzi, Construction Analyst at GlobalData. “There are various factors that hinder infrastructure financing in East Africa, including higher transaction costs, inadequate availability of bankable projects, permits, and licenses required, as well as the multi-governmental agencies and institutions that investors must deal with in typical capital projects. There are also obstacles related to limited local capacity for project preparation and tender.”
East Africa is one of the least competitive global regions, despite its fast growing economy. GlobalData suggests that this is mainly due to poor infrastructure, constituting significant challenges to the achievement of sustainable development goals. The region’s government has allocated around a third of its individual budgets towards financing infrastructure development in the new financial year.
According to the East Africa Community, over US$100 billion will be needed to plug the region’s infrastructure gap over the next four years. The gap is thought to have kept the cost of doing business in the region high. Of the required US$100 billion, US$78 billion would be used for railways, roads, and energy projects in an attempt to ease transportation and boost manufacturing.