Rail, energy give greatest multiplier effect on EAC economies

June 29, 2017 (4 weeks ago)
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According to the Asset managers, railway transport could reduce production costs by 10 percent by easing decongestion in the region hence enhance economic growth/FILE

, NAIROBI, Kenya, Jun 29 – Investments in the rail and energy sectors have the greatest multiplier effect on East African Community (EAC) economies.

This is according to a new report by Britam Asset Managers who continue to urge EAC governments to prioritise in these investments in a bid to open up regional trade.

According to the Asset Managers, railway transport could reduce production costs by 10 per cent by easing decongestion in the region hence enhance economic growth.

EAC electricity costs average 18-22 dollar cents per Kilowatt Hour, much higher than Ethiopia at 5 dollar cents per Kilowatt Hour.

EAC collaboration, according to the report, has the potential to reduce electricity costs by Sh200 billion per year.

Kenya, Tanzania, Uganda, Rwanda, South Sudan and Ethiopia are part of the East African Railway Master Plan to connect the cities of Mombasa, Nairobi, Kigali, Kampala and Juba by 2018 at a cost in excess of Sh3 trillion.

Kenya has so far finished the first phase of Standard Gauge Railway (Mombasa to Nairobi) that intends to reach Uganda, with construction works for phase two that connects Nairobi to Kisumu already underway.

Plans are also underway to build three oil pipelines between Kenya, South Sudan, Ethiopia, Uganda and Tanzania to transport both crude and processed oil.

Total costs are expected to exceed Sh800 billion; planned refineries in South Sudan and Uganda could cost up to Sh500 billion.

The infrastructure funding gap in both rail and energy sector in Kenya currently stands at Sh2.7 trillion.

“Private-Public Partnerships provide a good platform for private sector involvement in infrastructure projects. The banking sector in East Africa is relatively well developed, and could play a key role in financing infrastructure investments in the region,” the report states.

Poor infrastructure, poor access to financing and unfavourable tax rates are some of the reasons why East African countries are ranked lowly in terms of global competitiveness.

According to AfDB, the poor state of infrastructure in Sub-Saharan Africa cuts national economic growth by two percentage points every year and reduces productivity by as much as 40 per cent.

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