President Uhuru Kenyatta returned from the August 4-6 US-Africa Summit with a golden bag for the infrastructure sector. The just concluded Summit yielded USD 37 Billion in US Commitment. This money will go into various commitments across the African continent.
These are efforts seen as countering the influence of China in Africa. The USA was quick to offer the ‘goodies’ so as to keep their China at bay. As the battle of supremacy with China continues, local investors seem reluctant to invest in major infrastructural projects.
In Kenya, China will provide 90 % of the USD 3.8 billion (KES 314.2 billion) for the Standard Gauge Railway. The USA, on its end, will give USD 26B to Power Africa. This is an initiative, which Kenya is to share with other five African countries. Local investors are falling out of favor in financing projects. This has resulted in a void that foreign investors are filling. This maybe unglamorous yet their investments are vital for our economic growth.
Nigeria’s Aliko Dangote and India’s Mukesh Ambani, top the list of the tycoons whose companies have recently put billions of shillings in new investments or expansion of established projects in Kenya. The two have constituted more than 80% of the jobs created out of foreign investments from January 2013 to March 2014, yet they still do not have the muscles of the western investors.
Afraid of risks
Local investors are reluctant to take risks. They are also wary of making long-term investments. Many are willing to offer limited funds. They are still afraid of churning out large amounts for big projects as the Konza City. The immediate former government of Kenya had to affirm to investors that all their investments were safe to boost the investor confidence. “The constitution protects the rights of investors and also establishes strong governance structures, guaranteeing the security of both the investors and their investments in any part of Kenya,” former vice president, Kalonzo Musyoka said after he officially opened the Konza Techno City Investors’ Conference at the KICC in 2012.
The 2008 financial crisis has affected most of the Western investors who rely on financing from their banks. This has created a space for new entrants to invest in Africa. In Kenya, we have investors who are able to plough money into infrastructure projects. It observed that they only invest a fraction of their net worth in Kenyan infrastructure projects. In as much as we appreciate the little they have pumped in the sector, what they have done is still below expectations considering the long-term cash flows that come from these projects.
The government of Kenya too has not done enough in promoting local investors. With the springing of projects across the nation, our investors should be in the thick of these deals. If Kenya is indeed looking for growth, promoting the local investor could result in this and a lot more.