The Computer Society of Kenya

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Jambo DorisThe push to have Kenya grow to a middle income country by 2030 would be accelerated if the government consistently spends Sh320 billion annually on infrastructural development.

The push to have Kenya grow to a middle income country by 2030 would be accelerated if the government consistently spends Sh320 billion annually on infrastructural development.

According to a report by the World Bank, this would help the country almost double the current pace of economic growth, pushing it closer to the desired annual growth rate of over 10 per cent per annum.

“Our analysis shows that Kenya’s per capita growth rate can be increased by three percentage points over the next decade if infrastructure financing is increased to the average of a middle income country,” said Johannes Zutt, World Bank Country Director for Kenya.

To meet the new funding requirement, Kenya would need to more than double its current expenditure.

According to the Africa Infrastructure Country Diagnostic Report 2010 produced jointly by the World Bank and the African Development Bank, Kenya spends about Sh135 billion a year on core infrastructure projects.

“Kenya faces a significant infrastructure financing deficit estimated at Sh176 billion annually, and this imposes a serious constraint to growth and doing business in Kenya,” says the World Bank.

The global institution has said that the recently approved Public-Private Partnership (PPP) policy will increase private sector participation in Kenya’s infrastructure market across sectors to support national economic growth and employment creation – cornerstones in the development of the economy.

However, the report notes that Kenya requires a sustained expenditure of about 20 per cent of its Gross Domestic Product (GDP) over the next decade to attain the intended growth.

Viable projects

According to the World Bank, the challenge is to strengthen government capacity to prepare and procure viable projects, provide the legal, regulatory and fiscal environment that gives private investment the confidence to take long-term debt and equity exposure in infrastructure investment.

“Kenya has a large and diversified capital market with promising prospects of becoming a sustainable source of financing for infrastructure project,” says Yira Mascaró, task team leader of the project.

“But it requires structural changes and an enabling legislation to develop a long-term debt market for financing infrastructure and other PPP projects,” said Mascaró.

Meanwhile, the capital markets authority also wants the harmonisation of the East Africa Capital markets approval framework to allow for facilities like infrastructure bonds to be issued easily.

“We have made submissions to the ministry of Finance in respect of a framework to allow companies to issue fixed income securities simultaneously across the East Africa region through a harmonised approval framework in all markets. If this is adopted, products like infrastructure bonds will be capable of being issued in the region,” said CMA chairman Kung’u Gatabaki.

Guarantee continuity

The National Economic and Social Council (NESC) says that at least 70 per cent of the budget for Vision 2030 projects has to come from the private sector – made up of both the local and foreign investors.

The council promulgates that the PPP law must be made to guarantee continuity and payment of investments undertaken by private sector players even after a political transition, ending past cases where incoming governments would nullify old contracts when they assume power.

According to NESC, Kenya faces an infrastructure financing gap of Sh3.4 trillion over the next eight years, with energy, roads, railways and ICT commanding a significant chunk.

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