A Chinese worker at the Thika Road expansion project in Nairobi. China and the African Development Bank are solidifying their positions as major project financiers for development agencies in Kenya as Western countries gradually lose turf to the emerging giants.
China and the African Development Bank are solidifying their positions as major project financiers for development agencies in Kenya as Western countries gradually lose turf to the emerging giants.
The two financiers are in the coming financial year set to directly bankroll development to the tune of Sh44 billion. This brings their total contribution in two years to over Sh80 billion when added to the Sh36 billion in loans and grants given out last year.
Notable among their project financing this year is the Sh10 billion they will spend on the Thika superhighway after putting Sh11.4 billion in the same project last year. The funding is through the Ministry of Roads as opposed to Treasury injections.
Except for World Bank’s soft-term lender, the International Development Corporation (IDA), and French Development Agency (AFD), no other financiers are as nearly important to Kenya in direct financing.
Interestingly, the UK has slipped to the bottom of the chain despite its high profile in public discourse on the matter.
The Treasury has factored a measly Sh65 million grant in appropriation in aid (A-I-A) from DfID for the fiscal year 2011/12.
AfDB, through its financing arm African Development Fund (ADF), has in recent years amassed resources from non-traditional sources —China, India and Brazil — and has become a major complement to World Bank’s financing.
“Productive power has shifted to Asian and other emerging economies and what we are witnessing in Kenya is also happening elsewhere. Financing has shifted as output and earnings rise in these countries,” said macro-economist Mbui Wagacha. He was involved in drawing the current ADB programme on Kenya and said the current three-year cycle of project-financing heavily favoured infrastructure and the agricultural sectors.
Substantial business activity has so far been noted on the Thika and Athi River-Namanga-Arusha roads, he said.
China has become popular with developing economies due to the ease in releasing funds outside the rigid Breton Woods regime.
However, for IDA remains the most important donor overall when looked at in terms of financing through Treasury, which is factored in as revenue, as opposed to direct financing of government agencies accounted for under appropriation in aid (A-I-A).
Overall, through both means of financing, the government expects a total of Sh183 from external sources in the year, up from Sh143 billion last year. Sh53 billion of this will come from IDA. The AFD will dole out Sh27 billion with China providing Sh20.3 billion compared to Sh16.8 billion last year.
African Development Bank will fund Thika Highway Improvement Project through a Sh6 billion loan and sink another Sh2 billion into the Kenya-Ethiopia Highway. Other significant investments are the Sh1.4 billion in the Mombasa-Nairobi Power Line and Sh1 billion in the rehabilitation of Timboroa-Eldoret Rehabilitation Project.
Chinese funding this year, none of which is going through Treasury as revenue, will be put into the construction of the Nairobi Eastern Bypass project (Sh2.2 billion), Thika Highway (Sh4 billion), Kenya power and distribution modernisation, drilling of Ol Karia (Sh3.2 billion) while another Sh2.4 billion will go to upgrading universities and technical training institutes. The largest part of the balance, Sh3.9 billion will go to Enterprise Messaging and Collaboration System, an e-government platform.
France through AFD continues to be the single-most important financier in the Kenya energy sector with Sh4.2 billion of its Sh17.7 billion financing for government agencies going to ol Karia I and IV geothermal development. The largest share, however, at Sh5.3 billion will be used in renewable energy projects.
Another Sh2 billion will be put in the Mombasa-Nairobi transmission line, reflecting the growing importance of the power production units that have come up at the Coast including Kipevu I, II (Tsavo Power) and III. Coast Water and Sanitation project will take Sh2.3 billion.
IDA will finance Northern Transport Improvement Corridor Project through Sh5 billion loan to the Kenya National Highway Authority and another one to the Kenya Airports Authority of Sh1.2 billion. It will also inject Sh2 billion in Kenya Power & Lighting Company projects, Sh3 billion in KenGen expansion and Sh4 billion for Ol Karia I and IV.
Sh1.5 billion will go to rehabilitating the Webuye-Malava road.
