Impact of Infrastructure Projects in East Africa

Kenya has been at the forefront of infrastructure-related investments in East Africa, yet the country faces a significant funding gap from public-private partnerships estimated at $41 billion between 2012 and 2020. The region's funding needs amount to $35 billion annually up to 2020, with a major portion of the capital relying on government borrowing due to low levels of savings at 16.8 percent of the GDP. Kenneth Canew, the CEO of BTM Asset Managers, emphasized the importance of addressing this gap through various strategies, including involving the private sector in public-private partnerships and mobilizing local institutional pools of capital like pension funds and insurance companies. These efforts are crucial in bridging the funding deficit and driving the much-needed infrastructure development in the region. One of the key challenges highlighted is the low savings rate in East Africa, which stands at 16.8% of the GDP. This figure falls short compared to other emerging market economies where savings rates often exceed 30%. To boost savings and reduce reliance on debt for infrastructure funding, there is a need to diversify the savings portfolio and encourage investments in formal financial channels like bank accounts, treasury bills, and mutual funds. By enhancing financial literacy and promoting savings culture, East Africa can tap into a pool of resources that can be directed towards vital infrastructure projects. Another critical aspect discussed is the delayed impact of infrastructure investments on the economy. While infrastructure projects have the potential to improve efficiency and reduce costs in various sectors, the tangible benefits may take time to materialize. Government initiatives to enhance transport infrastructure or reduce electricity costs can have long-term positive effects on businesses and citizens. However, the exact timeline for realizing these benefits remains uncertain, requiring a strategic approach to project planning and implementation. Overcoming infrastructure bottlenecks and investing in key sectors like transportation and energy are essential for driving economic growth and creating a conducive environment for business development. Despite the challenges and complexities associated with infrastructure financing, strategic partnerships between the public and private sectors, coupled with effective utilization of local capital resources, can pave the way for sustainable infrastructure development in East Africa. With a concerted effort to improve savings mobilization, diversify investment portfolios, and prioritize long-term economic benefits, East Africa can address its infrastructure funding gap and unlock new opportunities for growth and prosperity in the region.