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February 19, 2019

Not all infrastructure is equal


The inefficiency of our public transport infrastructure, on which our neighbouring states of Uganda and Rwanda also depend, has long been a national embarrassment.

For many years now, we have been told that it took a much shorter time to ship goods to the Port of Mombasa from manufacturing centres in the Far East, than to deliver these goods by road from Mombasa to Malaba on the Kenya-Uganda border.

Now that “the trains have arrived”, which will run on the brand new standard gauge railway, all this embarrassment will supposedly soon end.

This SGR project, however, is not universally celebrated. Eminent critics insist that there has never been a greater white elephant in all of East and Central Africa. And that it is something of an economic crime to burden the country with such massive debt, when there will be so little direct economic benefits to be received from this SGR.

I have no strong opinion either way on this. But what I do know is that the ultimate value of giant infrastructure projects is to be found not so much in the project itself, but in the “multiplier effects” that should follow.

The Kenya-Uganda railway, for example, was built back in 1900 primarily to “open up the interior” of East Africa: to facilitate the establishment of a modern agricultural economy through the arrival of “White Settlers” who would carve out of the African Savannah large plantations for growing the valuable cash crops of the day.

This was very successful. Indeed a good part of the reason why Kenya continues to be economically dominant in this region is that we inherited at Independence, a fully functional modern agricultural economy. This would not have been possible without the railway.

More recently, we have two clear examples of infrastructure projects that had a huge multiplier effect.

First, was the building of key iconic bridges at the Coast – the Nyali Bridge, Mtwapa Bridge, and Kilifi Bridge – along with the expansion of the Moi International Airport in Mombasa, through the support of the Japanese International Cooperation Agency.

The ease of access to the North Coast beaches is what led to the establishment of the long string of beach hotels we have there now. These hotels are many more than the similar establishments on the South Coast. Although the South Coast actually has superior beach frontage, its potential is crippled by its unreliable access via the troubled Likoni Ferry.

And just as happened with the KUR, once the new Japanese-funded infrastructure was completed, private investment came in to create direct jobs (in this case in the hospitality sector) and other economic opportunities (eg supply of goods and services to the hotels and lodges).

Perhaps better known is the multiplier effect of the Thika Superhighway – built with Chinese loans and expertise, just like the SGR.

Once this crucial piece of public infrastructure was completed, it gave rise to a massive property boom in its surrounding areas, all the way to Thika and even Murang’a. All those dozens of gated compounds and apartment blocks that have since sprung up represent an investment of many billions of shillings by individual as well as corporate investors. And this is just the beginning. With time, even more real estate will be developed, and entire new townships will arise, given our accelerating trend towards urbanisation.

But none of this would have been possible without the guarantee of relatively swift access to the Nairobi CBD, through the Thika Superhighway.

That is what a multiplier effect looks like. What comes after the creation of the new public infrastructure creates even more jobs and other economic opportunities and also brings in additional new investment, which in time will far exceed what the new infrastructure cost.

And such is the test which we must now apply to the SGR. The fundamental question here is not really whether or not goods will henceforth move faster between Mombasa and Malaba.

Rather what will prove to us whether or not this was a wise investment is the multiplier effect that this SGR will have on our economy.

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