By PHILIP NGUNJIRI
DEG, one of Europe’s largest development finance institutions, is planning to enlarge its equity portfolio in East Africa, mainly in Kenya.
It will concentrate on acquiring equity in private infrastructure projects in which Industrial Promotion Services-Kenya (IPSK) will act as the local link, according to DEG regional director Eric Kaleja.
DEG is a member of the KfW banking group, which finances and structures investments of private companies in developing countries and emerging markets.
IPSK is owned by the Aga Khan Fund for Economic Development (Akfed), with which DEG has co-operated for over 20 years on various projects.
DEG capital has enabled IPSK to enlarge its equity portfolio in Kenya and expand into Tanzania and Uganda.
The bulk of DEG’s investment activity is in tailor-made long-term loans. The bank also engages in equity participation, typically taking up a 5-25 per cent shareholding in profitable projects and occasionally filling a seat on the board of directors.
He said that, in East Africa, besides the traditionally dominant agricultural sector, tourism and telecommunications have also gained importance.
“In most of these countries, high investment costs have prevented the establishment of a fixed-line nationwide telecommunications network,” he said.
He added, “Large parts of the population do not have access to modern forms of telecommunication. There is thus massive demand, and more and more effort must be geared towards the development of cellular telecommunication networks.
“This can boost communications and trade enormously, especially in rural areas, where large distances are involved,” he said.