Digital media company GlobalData has indicated that investments in the East African region continue to escalate and should dramatically rise in the next five years.
The London Stock Exchange (LSE) listed firm revealed the investments in the infrastructure sector should reach $98.8 billion by the year 2022. The report forecasts the infrastructure construction determination by the East African Community (EAC) countries.
Kenya, Tanzania, and Ethiopia, marking the three largest markets in the region look to expand the investments in the industry from $25.9 billion recorded in 2017, as they seek to lure more businesses and investors in their economies. The meteoric rise of Ethiopia has left the fellow competitors on shaky ground, as the country in the Horn of Africa continues to attract foreign firms.
In their 2018/19 fiscal budget planning, Kenya and Tanzania, as well as Uganda, prioritized the infrastructure sector, an industry that has a high potential to woo potential business investments. Investments in the infrastructure industry should steer trade among the countries and add impetus to the economic outlook of their economies. The upgrade and construction of better transport networks should aid in the effective and efficient movement of both goods and people to and from their destinations.
The mega infrastructure projects underway in the East African region are deemed to create unique business opportunities as well as open new markets for the respective countries. Among the sectors to benefit from the projects include oil and gas (O&G) sector, mining, and agriculture, with the latter being the backbone of most East African economies.
“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 mobilizing 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 the limited local capacity for project preparation and tender,” he observed.
According to the 2018 edition of the African Economic Outlook (AEO), poor infrastructure within the region continues to rob the bloc various investment and economic growth opportunities. An area observed that crippled the ability of African countries to experience growth was the level of external debt which has skyrocketed between 2013 to 2016.
Infrastructure investment platform such as Africa50 that has 25 member states seek to address the issue of infrastructure in the continent. The continent should gain at least $3 billion to finance the dream, with EAC needing over $100 billion to bridge the infrastructure gap in the next four years.