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Kenya's prospects look good as AfDB boosts funding package

Kenya's prospects look good as AfDB boosts funding package Anthony Harrington

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Following Kenya's peaceful elections on 4 March 2013, which saw the former Deputy Prime Minister and erstwhile Finance Minister Uhuru Kenyatta sworn in as the new President, the country's prospects look bright. In February 2014, the African Development Bank (AfDB) issued a decidedly upbeat Country Strategy Paper (CSP) for Kenya, in which it made it clear that the country could do a lot better than the modest growth seen over the last decade. The CSP starts with a hard-headed look at Kenya's underperformance so far:

"While Kenya has the potential to be one of Africa's best performing economies, the country has been following, not spearheading, Africa's growth momentum: with around USD 840 (2012), Kenya’s average per capita income is still only about half of Africa’s average of USD 1,600. Africa’s growth momentum has already propelled 22 economies above the USD 1,000 middle-income threshold, yet Kenya is only ranked 24th continent-wide and remains in the low income group, with almost half of the people living below the poverty line and high unemployment, especially among the youth."

The way to increase the pace of Kenya's development, the AfDB says, is to stimulate private sector activity "through the establishment of a conducive business environment" while skilling up the workforce to respond to the employment opportunities that will follow from a developing economy. This is easy to say, but difficult to do. However, Kenya's prospects for success are at least promising, the AfDB argues, not least because of the recent oil and gas discoveries onshore in Northern Kenya. In mid-January 2014, the Canadian oil and gas exploration firm Africa Oil said that two exploration wells it had drilled resulted in the discovery of two new large oilfields, bringing to seven (out of seven) the number of successfully drilled wells in the South Lokichar Basin. The UK oil firm Tullow Oil found a 300 million barrel field two years ago in Turkana, which happens to be home to one of the poorest communities in Kenya. Tullow and Africa Oil are in partnership on a number of wells and fields.

On top of this, Kenya has huge mineral potential and has awarded a number of commercial licenses to companies to explore for gold, coal, geothermal potential and rare earths, in addition to oil. All of this should help to propel the country to middle income status over the next decade or so. Importantly, the AfDB points out that in March 2013, Kenya instituted a devolved system of governance, as set out in the country's 2010 constitution. This offers an opportunity to promote more balanced, socio-economic development across the country, according to the AfDB.

In 2013, Kenya adopted its second five-year Medium Term Plan to implement what the government calls its Vision 2030, a solid, strategic framework to turn the country into a newly industrialized, middle income nation by 2030. The AfDB says that its CSP for Kenya is well aligned with these goals. It does not provide that much by way of direct aid, but what it does provide is what it calls "high quality analytical work to underpin both its and the government's investments". It also engages with the private sector and overseas investors to leverage funding for projects, rather than acting as a sole financier. Nothing is going to be achieved easily, however; as the Bank points out, Kenya is grappling with high unemployment, with youth unemployment particularly worrying. On top of this, there is a need to upskill large numbers of workers and the country's infrastructure is decidedly poor.

There is much work to be done, but according to the AfDB, Kenya is definitely on the right path.

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Tags: Africa , Africa Oil , African Development Bank , kenya , Northern Kenya , per capita income , Tullow Oil , Turkana , youth unemployment
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