Sustainable Urban Economic Development Programme
Unlocking Investment in Intermediary Municipalities in Kenya Introduction The Sustainable Urban Economic Development (SUED) Programme is a £70 million, six-year programme supported by the UK Government. SUED is supporting selected municipalities in Kenya to attract investment for climate-resilient infrastructure and value chain projects. The programme is working with county governments, municipality leadership and the private sector to improve urban economic planning and raise investment for bankable, climate-resilient infrastructure and value chain projects with the aim of helping to create the right conditions for these emerging urban areas to grow in an inclusive and sustainable way. Urbanisation in Kenya has not translated into high rates of economic growth that are sustainable due to lack of economic planning and an unfavourable business environment in municipalities and cities to sustain industrialisation. 1 Urbanisation is a driver of economic growth through expanded access to jobs, markets, services and infrastructure for the urban population and businesses. Small and mid-sized cities can deliver many of the benefits of urbanisation that larger cities provide,2 implying that investing in intermediary cities and municipalities can deliver economic development for the urban populations as well as surrounding rural communities. These lessons are based on SUED’s provision of investment attraction and management support to three municipalities, Kisii, Iten and Kathwana (Group Two municipalities). SUED’s activities included: project screening assessments based on selected criteria to shortlist potential projects; feasibility studies; market sounding and investor outreach; screening of prospective investors; due diligence for preferred investors; and transaction support. SUED’s engagement with Kathwana Municipality did not progress beyond the project screening stage. In addition, SUED carried out capacity building of county and municipal staff on the investment attraction process. This included customised training workshops on investment attraction and aspects that investors consider in determining the bankability of a project such as feasibility studies, market size, operating model, enabling environment, innovation and additionality, project economics, investment readiness and project risk. SUED identified bankable investment projects in selected agricultural value chains and infrastructure that have the potential to attract investors to the municipalities. Agroprocessing projects identified spanned the following value chains; avocados and bananas fibre in Kisii, and groundnuts and Irish potatoes in Iten. Infrastructure projects included an integrated sports hub and sports medicine centre in Iten and an integrated waste management project in Kisii. This article focuses on learnings from working with Kisii and Iten municipalities to attract investment in value chain and infrastructure projects. It includes the challenges and successes and provides key lessons to inform future engagements with municipalities/counties and investors. SUED’s experience of successfully attracting investment in two projects in Kisii and Iten municipalities is used as an illustration, as well as other projects which had not reached financial close by the end of the Group Two phase. A conclusion and recommendations are also provided. The case studies highlight the two successful projects, the avocado oil processing project by Avofresh Processors Limited in Kisii Municipality, Kisii County, and the Irish and sweet potatoes project by Select Fresh Produce Kenya Limited in Iten Municipality, Elgeyo Marakwet County. Context SUED aimed to promote well-planned, market-driven economic growth in the municipalities under the programme. The general approach that SUED followed is described below. I. Development of Urban Economic Plans Counties need to embrace better local economic planning to drive economic development. Sound economic development plans can help to attract investors by demonstrating the county’s priorities and progress in supporting the
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SUED Business Case OECD/UN ECA/AfDB. 2022. Africa’s Urbanisation Dynamics 2022: The Economic Power of Africa’s Cities.