Attracting Private Sector Investment in Intermediary Municipalities: A Case Study from the Kenyan Coast Introduction Kenya is rapidly urbanising, with its intermediary municipalities growing the fastest; for example, Malindi, on Kenya’s North Coast, experienced 45% population growth between 2009-2019.1 These intermediary municipalities have struggled to expand their infrastructure, service delivery, and create the jobs necessary to support this rapidly growing population. For this reason, the Sustainable Urban Economic Development (SUED) Programme, funded by the UK government, was established to support twelve2 fast-growing intermediary municipalities across Kenya to attract investment for critical climate-smart value chain and infrastructure projects. After launching it in 2018, SUED supported the selected municipalities to develop sustainable urban economic plans3 to guide their economic growth, starting with the first set of municipalities, Isiolo, Kitui, and Malindi, followed by the remaining nine. In this article, we will examine what the experience of Malindi can teach future practitioners about how to successfully attract private investment into intermediary municipalities. Context From the urban economic planning process in Malindi, a long list of potential value chain and infrastructure projects emerged.4 The SUED team then worked with representatives of the county and municipality to narrow down to three high-potential projects to take forward to investment attraction, as an immediate step towards mobilising funding and attracting investments. In Malindi, the selected projects focused on fruit processing, the blue economy, and commercialisation of sewage sludge from a proposed faecal sludge treatment plant. The fruit processing project emerged as a front runner to attract private capital, as Malindi is well positioned for fruit farming and agro-processing because of its favourable climatic conditions, wide transport network, and substantial workforce. The SUED team reviewed the fruit processing landscape in Malindi during the pre-feasibility stage to identify opportunities to strengthen and diversify the sector. SUED discovered that local operators working in Malindi and the surrounding regions have good working relationships with farmers in the municipality and distinct operational knowledge of the fruit processing value chain in Malindi. Operators would also be able to leverage the abundant supply of mangoes, pineapples, and passion fruits harvested in Malindi and its environs to increase the income of farmers and create more local jobs. This provided an opportunity for potential investment in existing processors to effectively strengthen and diversify their supply chain and enable impact. Planned Approach Initially, the investment attraction process as defined and agreed by SUED and stakeholders involved a progression from urban economic planning to pre-feasibility studies, then immediately moving to a single due diligence stage (see Figure 1). This due diligence was intended to review a single operator, selected from among the range of potential operations identified as capable through the pre-feasibility studies. This process assumed that a high-potential operator within the municipality would be easily identifiable. Based on this assumption, the programme intended to support that operator with raising capital, including 1
Kenya National Bureau of Statistics. Retrieved from: https://www.citypopulation.de/en/kenya/cities/. Kitui, Malindi, Isiolo, Kathwana, Iten, Kisii, Eldoret, Kerugoya, Mandera, Lamu, Bungoma and Wote 3 The UEP is a plan that promotes economic growth and supports urban development in a sustainable and inclusive way through prioritised integrated projects 4 The urban economic plans can be accessed here: https://www.suedkenya.org/urban-economic-plans 2