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Kallanish Kallanish

Knowledge matters Knowledge matters

August, 25th 2019

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JUL 17
15:08

Private sector to support Kenya infrastructure investment

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Kenya’s infrastructure needs of almost $4 billion per annum will be supported by private sector investment, according to Moody’s. Activity will be spurred by a recent improvement in the business environment, a favourable growth outlook and deep financial sector, but challenges remain.

Kenya has improved the electricity access rate to around 75% in 2018 from 36% in 2014, while over 7,000km of paved roads were added between 2014 and 2018. Rail freight traffic more than tripled to 3,544 thousand tonnes in 2018, from 1,147 thousand tonnes in 2017, following the completion of Phase I of the Standard Gauge Railway (SGR) from Mombasa to Nairobi. The second phase is under construction. To enhance cargo handling and storage, the government is continuing to develop several commercial sea ports.

Universal access and diversification goals will drive electricity policy and require $15 billion investment through 2022, but investors face an evolving regulatory landscape and potential oversupply.

“Economic growth and demographic change will require more road and rail and investment, whereas investment in port infrastructure will help facilitate trade,” Moody’s says in a report sent to Kallanish.

However, “…persistent issues around corruption will be a concern for large, capital intensive infrastructure investment requiring years of planning, land negotiations, permits and regulatory approvals,” it adds.

Kenya also has an estimated $24 billion infrastructure spending gap through 2030. “More infrastructure investment from Kenya's $10 billion in pension funds would help fill the spending gap, but not eliminate it, suggesting a role for foreign capital,” Moody’s continues. “Developments in the green bonds framework and risk mitigation from multilateral development banks will encourage private sector investment.”

Kenya will seemingly need to source from abroad most of the steel required for the projected infrastructure development. The country produced an estimated 20,000 tonnes of crude steel in 2017, according to worldsteel’s statistical yearbook.

Imports of semi-finished and finished steel fell -9% that year to 1.36 million tonnes, of which 212,000t were semis, up from 119t in 2016. Imports of long products conversely dropped to 280,000t from 493,000t in 2017. Apparent finished steel use dropped -9% to 1.37mt.