Per the World Bank Doing Business Indicators 2019, Kenya rose from position 80 to 61, in ease of doing business rankings. Amongst the indicators were resolving insolvency, protecting minority investors and registering property. The business environment has been on the upward trend after experiencing a decline for the last several years.
At the same time, the country has been facing infrastructure constraints. According to the World Bank, Kenya faces a significant infrastructure financing deficit estimated at Sh218 billion annually or roughly half of the required expenditure of almost Sh416 billion (4.5 percent of GDP) per year. But, despite the constraints, Kenya still stands above other Sub-Sahara countries such as Nigeria, Uganda, and Ghana. In fact, according to the Global Competitiveness Report, ‘Infrastructure Sector Ranking 2018’, Kenya ranked 105 out of 140 countries while Ghana, Uganda, and Nigeria were in position 116, 121 and 124 respectively.
According to Moody’s credit rating agency, as a result of the improving business climate, Kenya’s private sector is in a position to help the country in terms of infrastructure. The sector can assist by playing a bigger role in improving infrastructure related to electricity, water, rail, and road. So far, the government has increased its efforts to improve infrastructure in these sectors. For instance, the government has improved the lives of many Kenyans by increasing access to electricity. from 2014 to 2018, the government has increased the rate of access to electricity from 36 percent to 75 percent. As a result, businesses have come up mainly in rural areas as well as hospitals and schools which were scarce before.
Additionally, the government has added more than 7,000km of paved roads in the same period. For example, in 2018 alone, 1,600km of roads were paved, which include Upendo Road, which connects to the Mathare Hospital ward. In terms of ports and rails, the government has also invested in various projects such as the Standard Gauge Railway (SGR), that connects Mombasa to Nairobi, and phase two which is underway, will extend it to Malaba. With the government already spending so much on the projects, fiscal pressures remain a constraint and this is where the private sector comes in to assist.
The government, through the Kenya National Electrification Strategy (KNES), has plans to ensure access to electricity to all Kenyans by 2022. In addition, according to Moody’s, the government seeks to increase household access to safe drinking water from 60 percent currently to 80 percent in 2022 as well as invest in irrigation to support agriculture, which accounts for 37 percent of the economy. By its ambitious roads PPP programme, the government also targets 10,000km of new roads to ease urban congestion and improve regional trade. To accomplish this, it requires support in terms of investment. This is where the private sector – besides foreign capital – comes in to fill the financing gap.
The private sector has also been focusing on improving the infrastructure, as is evident in the fact that independent power producers (IPPs) currently account for around 40 percent of installed capacity, with the remaining 60 percent owned by the majority state-owned Kenya Electricity Generating Company Limited (KenGen). Also, recently the president launched the new Lake Turkana Wind Power plant. The wind farm, the largest in Africa, is the largest private investment in the country. In fact, according to Mugo Kibati, Lake Turkana Wind Power (LTWP) project board chair, the project was undertaken through a public-private partnership.
“This will have wide-ranging benefits for the country,” he said.
Additionally, the private sector is also playing a role to increase the access of water throughout the country. For instance, K-Rep Bank and the world bank partnered up to pilot a program aimed at helping rural and peri-urban communities access loan financing for improving and expanding small piped-water systems. Infusing technology, the two were able to implement the policy smoothly and reach more people.
Despite the rising involvement of the private sector and willingness of the public sector as well, one factor has hindered better progress; corruption. Corruption in the country has risen rampantly. According to the Corruption Perceptions Index 2018 by Transparency International, Kenya is in position 144 out of 180 countries. Compared to Seychelles, the least corrupt country in Africa at position 28, Kenya has a lot of work to do. However, the government needs to take a firm stand against corruption or else our infrastructure will not improve.
The private sector has, to a large extent, avoided partnering with the public on account of corruption. It’s time the government tackled this menace to encourage public-private partnerships, which in turn will improve infrastructure in the country. With increased participation from the private sector, the financial gap in terms of infrastructure could be eliminated in less time than anticipated, thereby improving Kenya’s per capita growth rate. (