With an estimated four trillion shillings needed each year to develop regional infrastructure, trading blocs will need to put in place a working formula of pooling resources together.
Speaking during the official opening of the Tripartite and IGAD Investment Conference, President Mwai Kibaki said with the kind of investment envisioned the trading blocs would need to pull resources together to achieve the common goal of connecting goods to a larger market.
“One of the ways of raising funds that we have not fully exploited is the development of national and regional financial instruments,” President Kibaki said.
The President said regional governments would need to utilise bonds, donor funds and development bank credits to raise money for key regional infrastructure projects.
He said diversifying the sources of funding, and methods of ownership and management of infrastructure assets, would hasten the pace at which the projects are put in place.
“The development of transport and energy infrastructure is a gradual process that involves investment of large sums of money. As we continue to develop more infrastructure projects, we shall need to be more innovative in how we raise funding,” President Kibaki said.
The projects are meant to connect 19 countries of Common Market for East and Southern Africa (COMESA), Southern Africa Development Community (SADC), Inter Governmental Authority on Development (IGAD) and the East African Community (EAC).
However, with 10 of these countries being landlocked, the opening of transport corridors is required to boost intra regional trade from the current 10 percent and boost economic growth.
The financing is also meant to address power generation and building of inter connectors to link the region’s power grids and engage in energy trade.
“Our region has one of the lowest per capita in energy production and consumption. We however have huge potential in terms of hydro, geothermal, gas, coal and wind. As a region our installed power generation capacity is inadequate to meet our needs for economic transformation of our countries,” the President said.
Two major multi country transmission projects are under discussion at the conference. The Kenya-Ethiopia connection is envisioned to link the power grids of the two countries, allowing up to 1000 megawatts of hydro power to flow from Ethiopia (currently with surplus capacity) to Kenya and the EAC.
Also in review will be the Zambia-Tanzania-Kenya link that will connect the east African power pool with the Southern Africa power pool bringing up to 400 megawatts to the EAC grid.
COMESA Secretary General Sindiso Ngwenya, said options available to countries include bonds, donor funds and development bank credits to raise money for key regional infrastructure projects.
“This will tap into our domestic savings and hence reduce our heavy reliance on external borrowing and grants,” Ngwenya said.