Private Sector Investment in East African Digital Infrastructure
Access to reliable digital infrastructure is essential for economic growth, yet millions in East Africa remain disconnected. While private telecom investments have expanded networks in urban areas, extending connectivity to rural and underserved regions remains a challenge. High deployment costs, low consumer purchasing power, and climate-related infrastructure risks continue to hinder progress.
To address these barriers, the Public-Private Infrastructure Advisory Facility (PPIAF), in collaboration with the World Bank’s Kenya Digital Economy Acceleration Project (KDEAP), the East Africa Regional Digital Integration Program (EARDIP), and the Digital and Energy Connectivity for Inclusion in Madagascar (DECIM), conducted a study on financing models to attract private investment and improve digital infrastructure sustainability.
The study identified significant obstacles to universal digital access. In rural areas, uncertain financial returns discourage private investment without external support. Traditional funding models, such as government subsidies and public-private partnerships (PPPs), have had mixed success due to regulatory complexities and inefficient procurement processes. In some markets, dominant telecom players stifle competition, limiting opportunities for innovation and investment. Climate risks further complicate infrastructure expansion. Extreme weather events—floods, landslides, and storms—threaten fiber networks and mobile towers, particularly in Madagascar, Somalia, and South Sudan. Without climate-resilient infrastructure, expansion efforts risk financial and physical unsustainability.
The study proposed shifting from traditional subsidies to risk-sharing mechanisms that make telecom investments more attractive, helping
unlock private-sector financing. One promising approach is matching investments, where public funds leverage private capital, reducing financial risk for telecom operators. Competitive reverse auctions can also improve efficiency, ensuring that subsidies go to providers offering services at the lowest cost. A technology-neutral procurement process would allow diverse solutions—fiber, satellite, and fixed wireless—to compete based on efficiency rather than regulatory preference.
Strengthening regulatory safeguards is also essential to prevent dominant market players from limiting competition and restricting new entrants. Additionally, long-term service agreements should be incorporated to ensure ongoing maintenance and service provision beyond the initial funding cycle.
Given the increasing impact of climate change, the study also emphasized the need for climate resilience in digital infrastructure planning. Key recommendations include disaster-proof designs, such as elevated telecom towers, underground fiber reinforcement, and early warning systems to minimize service disruptions. Proactive investment in high-risk regions would ensure network reliability during extreme weather events, reducing long-term costs and infrastructure failures.
Public-private partnerships (PPPs) emerged as a crucial mechanism for balancing public oversight with private sector efficiency. The study recommended flexible PPP models, such as Build-Operate-Transfer (BOT) and Build-Own-Operate (BOO) agreements, which allow governments to de-risk initial investments while ensuring long-term infrastructure management.
Furthermore, financing models must prioritize equitable access to digital services, particularly for women, persons with disabilities (PWDs), and rural communities. Under KDEAP and DECIM, millions of previously unconnected individuals are expected to gain internet access, explicitly focusing on gender-sensitive digital inclusion initiatives.
Commercial Transactions Manuals (CTMs) are being developed under KDEAP, EARDIP, and DECIM to translate these findings into action, guiding government procurement and private sector engagement. Policymakers will also receive support in adapting financing models for IDA-funded projects, ensuring that future investments in digital infrastructure are both financially viable and climate-resilient. Additionally, stakeholder consultations and capacity-building workshops will equip government officials and private sector players with the tools to implement competitive financing mechanisms and climate-smart investments.
By leveraging innovative financing models, strengthening regulatory frameworks, and fostering strategic public-private partnerships, Eastern Africa is well-positioned to bridge the digital divide. With a concerted effort from governments, private investors, and development partners, the region can create a sustainable, inclusive, , and resilient digital future, ensuring that connectivity is not a privilege but a shared opportunity for all.