Nairobi: The African Development Bank (AfDB) has been cleared to triple its capital to $100 billion, raising hopes for investors seeking to implement key infrastructure projects in Kenya and in East Africa. 'This substantial increase allows the AfDB to sustain a higher level of lending, including to the private sector, in response to overwhelming demand in all countries,' the bank’s governors said in a brief after a meeting that coincided with the institution’s just ended annual general conference in Abijan.
The AfDB is a debt arranger for the private consortium, Lake Turkana Wind Power (LTWP), that seeks to raise close to Sh55 billion to finance a 300 megawatt (300Mw) wind power project in northern Kenya. The bank also seeks to finance sections of the planned new railway line for East Africa that would treble the current train speeds and boost intra-regional trade.
Besides, the AfDB is currently financing the ongoing construction of a key road linking Mombasa and Addis Ababa that is expected to open up trade in the in northern region. 'East Africa will be a key focus for us in arranging for infrastructure project finances,' Bobby Pittman, AfDB’s vice- president for infrastructure and private sector told Business Daily in an interview.
The bank plans to channel about 60 per cent of its new capital base towards financing of infrastructure projects with a bulk of the allocations going towards power projects. Sourcing of funds for the Turkana power project is already at an advanced stage and bank is optimistic of a deal soon.
'Excitement is high among lenders and we are sure of securing the needed funds. Everyone one wants to be part of this historic environmentally friendly power project,' Mr Pittman said.
The official said AfDB was also hoping to finance the planned new railway line for East Africa as part of investment projects. 'We have ongoing studies to see at what point of the railway project we would come and in what manner. Things are in the pipeline and we look to being part of the project,' he said.
Kenya Railways has invited fresh bids for a new railway to run between the port of Mombasa and Kampala, that would treble current train speeds and carry about 10 times as much freight. The railway, which will run on a standard gauge, is meant to supplement an existing metre gauge railway which was built by the British at the turn of the previous century.
'The ongoing construction of a road linking Mombasa to Ethiopia is also key to us and we eyeing financing another section,' Mr Pittman said. 'The road has a potential to grow trade between Kenya and Ethiopia by up to 500 per cent when completed'
Only last year, AfDB released about Sh25.4 billion to support the Mombasa-Ethiopia road project, raising hopes of improves trade in the northern border with better infrastructure. The loan was targeted at financing the second phase of the Mombasa-Nairobi-Addis Ababa road corridor project that involves the tarmacking of a 438 kilometre long road section.
One portion will include a 245 kilometre stretch linking Merille-Marsabit-Turbi on the Kenyan side while another stretch estimated at 193 kilometres will link Ageremariam-Yebelo-Mega on the Ethiopian side.
'On completion, the project is expected to reduce transport and shipping costs between Kenya and Ethiopia, reduce transit time for imports and exports; and increase the volume of Ethiopian goods transiting through the Mombasa Port in Kenya,' the bank said in a statement when it approved the loan.
Compared to other parts of the country, Northern Kenya has over the years lagged behind in terms of development because of poor roads, leaving huge business opportunities in the neighbouring Ethiopia and Somalia untapped. Criminal gangs have also taken advantage of the poor state of infrastructure in the region to engage in banditry and cattle rustling.
To reverse this trend, the government moved to line up several projects in the region including a planned construction of a second port in Lamu and tarmacking of roads through the area so as to improve cross border trade. 'By linking Kenya and Ethiopia, the project will affect the whole of eastern Africa,' AfDB said.
Ethiopia, as a landlocked country, relies on neighbouring states for its sea freight. The Ethiopian foreign trade flows currently depend on the Port Sudan Corridor in Sudan which is about 1,900 kilometres long.
The Mombasa port corridor in Kenya is 2,067 kilometres and the Assab Port - Massawa Port 882 km.