Infrastructure enthusiasts in the East African region can look up to a boom, with investments likely to double in the coming years, in spite of fears around mounting debt.

An investment outlook for the construction industry, presented by the Afrexim Bank, shows that East Africa’s general investments in big-ticket projects have risen to $48.1 billion, 25 percent of the continent’s overall value.

By 2028, the value could reach $73 billion, buoyed by the expanding infrastructure and energy sectors across the region, shows an estimate by Afrexim’ s Industry Outlook for 2024 in the construction sector.

That trajectory could defy fears around mounting debt, with each of the countries in the region facing revenue constraints and a squeeze to repay their loans.

Yet each of these countries has pushed levers to expand infrastructure, be it be the standard gauge railway in Kenya, Tanzania and Uganda, new ports at Lamu and Tanga, a new airport in Bugesera in Rwanda or the ambitious Inga Dam complex in the Democratic Republic of Congo (DRC) or an economic zone in Ethiopia.

Yet the political stability and governance reforms could be more important in those years. At the African Investment Forum, where the Afrexim Bank publicised the figures from the construction industry across the continent, experts pored over the role of political stability and governance reform to create a proper investment environment.“Improving the overall business environment to attract investors will be crucial for African countries to raise sufficient capital,” said Dr Akinwumi Adesina at the start of the Forum in the Moroccan capital, Rabat on Wednesday, a platform for development lenders including Afrexim, AfDB, Africa50, the Development Bank of Southern Africa, the Islamic Development Bank, the European Investment Bank and the Trade and Development Bank. And Arab Bank for Economic Development in Africa to entice investors into the continent.

Dr Adesina was speaking generally of the means to raise capital needed to finance infrastructure across board, including in energy, transportation, data centres and mineral refineries, on the backdrop of constraints African countries have faced in borrowing abroad.

This year, African countries including Kenya, Ethiopia, Zambia, Ghana and Angola will repay $74 billion worth of loans. And the AfDB boss Africa has suffered paying costly loans because there is a “lack of understanding of the real situation in Africa.”“I am fully convinced that the accelerated development of Africa requires greater mobilisation of private capital,” he argued.

Credit rating“Africa is not as risky. Perception is not reality. Again, believe the data. Africa doesn’t have time for Mickey Mouse investments, we need investment at scale. We must make room for capital to be deployed to meet opportunities in Africa.”An assessment by Moody’s Analytics indicated the cumulative defaults on infrastructure over a 14-year period were lowest in Africa 1.9 percent for Africa; 6.6 percent for North America; 10.1percent for Latin America; 12.4percent for Eastern Europe; 4.6 percent for Western Europe and Asia.

The AfDB has proposed urgent establishment of an African Credit Rating Agency, an apolitical institution to give “a second opinion” on Africa’s creditworthiness. But the fears on Africa go beyond bias, suggesting political certainty could play a bigger role.

In the region, Tanzania is expected to be the most dynamic, with the infrastructure growth expected to rise by seven percent every year for the next decade, with investments in the SGR, residential and port constructions and mining sector as well as energy.

The country is also planning for a General Election next year which could provide continuity in policy, or a bump in the implementation.

In Kenya, a housing project touted by the government as part of the ‘bottom-up’ development model could attract investors, the report says, just as much as the nascent oil exploration, expansion of the SGR and roads network.

In the DRC, lack of proper infrastructure is also compounded by insecurity in eastern parts of the country where a war has raged for years.

Ethiopia, recovering from the recent Tigray war has also struggled to keep the peace in Amhara region where it imposed a state of emergency.

But its construction market value of $22 billion means it can still be a regional leader driven by foreign direct investment in public-private partnerships such as in industrial parks, the report says. “For example, Ethiopia’s Industrial Parks development corporation (IPDC) plans to construct more than 100 industrial parks.”But each of these countries will have to address some risks. In Ethiopia, “political instability is the main risk to continued foreign investment in Ethiopia’s manufacturing sector,” it says.“The conflict in the Tigray region dented the country’s reputation as an attractive destination for foreign investment.” Sudan, whose construction value was projected to reach $5.7 billion by 2028 is currently embroiled in a deadly conflict, which could destroy an estimated infrastructure value worth $1.3 billion by end of 2024.

The Biggest concern? Low participation of African contractors.“It is important that as the sector booms, the value attributed to African contractors also booms. This will enable us to allocate resources to other sectors of the economy,” the experts at Afrexim argued in the report.

Most of these countries will also find themselves playing catch-up to more established economies such as South Africa, Egypt and Morocco which may use the privileges of the Africa Continental Free Trade Area agreement (AfCTA) to push lower tariffs in emerging markets.

Such a move, the report argues, could “create significant competition for autos producers in Kenya,” where Nairobi has been pitching investors to set up shop.

In Rwanda, where a new airport worth $2 billion is coming up, competition from established hubs such as in the Middle east “could threaten the profitability of the Bugesera Airport development.”East Africa, just like peers elsewhere on the continent expect to boom in infrastructure largely due to rising population and hence demand for goods, houses, digital services, raising the investment need to $1.4 trillion, or at least $170 billion annually which could rise to $400 billion by 2028, an annual growth of 9 percent.

TFor Africa, however, it is not a question of bias against local contractors. Government agencies have argued local firms often have no money, no capacity to complete projects or just no expertise. So they just stay away.

One way to address that may be to collaborate with contractors from outside the continent. But that could also be subject to geopolitical trends where sanctions and home country policies may prevent efficient financial flows or just cut off supply chains.

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