In a strategic move, the African Development Bank (AfDB) has announced a pivotal shift in its approach to funding Kenya’s infrastructure projects. Beginning this year and extending through 2028, the bank will streamline its financial support, channeling resources exclusively into transport and water projects, deeming them vital for economic productivity.
This recalibration of priorities comes at the expense of energy projects, which, until now, held a substantial share of the pan-African lender’s portfolio in Kenya. AfDB underscores the labor-intensive nature of transport and water initiatives, aligning this move with its commitment to fostering job creation and economic growth.
As of July last year, AfDB stood as Kenya’s second-largest multilateral lender, boasting 51 ongoing projects valued at Sh629.7 billion (UA 3 billion). The decision to focus on specific sectors signals the bank’s intention to adopt a more targeted and impactful investment strategy, moving away from broader infrastructure initiatives.
Transport projects currently dominate AfDB’s funding allocation to Kenya, constituting 37 percent, closely followed by water and sanitation at 20 percent. The energy sector, now affected by the shift, drops to third place at 17 percent, with finance and agriculture securing 13 percent and seven percent, respectively.
The disclosed projections highlight the anticipated impact of increased funding in the transport and water sectors. Transport improvements aim to enhance transit times for public service vehicles, targeting an increase from 40 km/hour in 2022 to an ambitious 60 km/hour by 2028. Concurrently, there’s an envisaged significant reduction in transport operating costs, from $0.85 (Sh135.06) to $0.50 (Sh79.74) per vehicle/km over the same period.
Simultaneously, heightened funding for water projects is expected to catalyze substantial growth in industrial water usage, projecting an increase to 16,000 cubic meters per day by 2028 from the current 1,500 cubic meters in 2022. Water treatment capacity is also set to rise to 6,000 cubic meters from 1,000 cubic meters within the same timeframe.
AfDB’s strategic realignment brings attention to notable projects it has previously supported in Kenya, including the Sh17.7 billion ($111.3 million) upgrade of the Kenol-Sagana-Marua Road and the Last Mile Electricity Connectivity program, focusing on providing electricity to low-income households.
Against the backdrop of Kenya grappling with high youth unemployment and navigating escalating debt servicing obligations, AfDB’s shift emphasizes the critical role of strategic infrastructure development in job creation and economic resilience. As Kenya strives to expand its public transport, water, and sewerage systems to meet the demands of rapid urbanization, AfDB’s refined focus marks a decisive step in shaping the nation’s infrastructure landscape.
By: Montel Kamau
Serrari Financial Analyst
15th January, 2024
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