Kenya’s annual investment in infrastructure is expected to hit the $12 billion (Sh1.05 trillion) mark by 2025, a new report by consultancy firm PricewaterhouseCoopers (PwC) says.
That level of investment will put the country ahead of its neighbours in terms of capital investment in the next decade, with a broader balance in the key areas of transport, utilities and manufacturing, the extractive sector and social improvement.
“Kenya government is in the process of implementing an extensive infrastructure investment plan, spending about $60.4 billion (Sh5.3 trillion) in transportation, utilities, telecommunications, and social sectors between 2012 and 2020,” the report says.
PwC notes that higher spending on infrastructure should pay off in the long term, making Kenya a competitive producer with a lower cost of doing business and moving the country closer to achieving its ambition of becoming a middle-income economy by 2030.
PwC compiled the report in collaboration with Oxford Economics and incorporated investment by both the public and private sectors. The report says the money will mainly target improvement of transport infrastructure and utilities such as power,
Telecommunications and water supply
PwC expects Kenya’s annual infrastructure outlay to outstrip that of Ethiopia and Tanzania, which are expected to invest $10 billion (Sh875 billion) and $7 billion (Sh613 billion) respectively in similar projects annually by 2025.
The report says that one-third of Kenya’s total investment in infrastructure, or $2 billion (Sh175 billion) a year by 2020, would go towards power generation and distribution, rising to $3 billion (Sh262.5 billion) annually by 2025.
“Our assumption is that infrastructure spending grows in line with fixed capital formation in the wider economy,” PwC says.
Kenya is currently investing about $7 billion a year in infrastructure, compared to $5 billion for Ethiopia and $3.5 billion for Tanzania. Ethiopia is expected to spend half of its investment budget in railway transport and water supply, while Tanzania will spend big on the extractive sector.
Trillions of shillings are earmarked for Kenya’s Vision 2030 projects, including the standard gauge railway line that will connect the port of Mombasa with Malaba, the Lamu Port and South Sudan Ethiopia Transport (Lapsset) corridor and a 5,000 megawatt power generation plan. The government estimates that a total of Sh327 billion will be spent on the 609km Nairobi-Mombasa stretch of the SGR, due for completion in 2017.
“Once complete, the SGR and Lapsset would open up the region through Kenya, helping us to stay ahead of our neighbours economically,” said Joseph Kieyah, principal analyst and head of private sector division at the Kenya Institute for Public Policy Research and Analysis.
“It is unfortunate that the projects have been mired in unfair criticism and politics based on procedural matters such as procurement, while not looking at the bigger picture,” said Mr Kieyah.
The PwC report says investment in water supply and sanitation will likely double to $800 million (Sh70 billion) by 2025.
Spending on education infrastructure is expected to rise from $500 million (Sh44 billion) in 2012 to $1.3 billion (Sh113.8 billion) by 2025, mainly in setting up youth polytechnics and facilitating free secondary education.
PwC, however, warns that Kenya’s actual growth rate will be slowed by low investment in the extractive sector. The estimated annual investment in the mining sector is expected to stand at $45 million (Sh4 billion) in 2025, compared to $15 million (Sh1.3 billion) today.
Investment in heavy manufacturing, where Kenya currently spends about $596 million (Sh52 billion) a year, will rise to $1.2 billion (Sh106 billion) by 2025. The lower investment outlay for mining could however change depending on the quantities of oil discovered in Kenya.
Tanzania will on the other hand be investing about $3 billion per year to develop its mining and extractive sector, reflecting the country’s higher endowment in natural resources compared to Kenya.