Kenya is significantly scaling up investments in agriculture, energy and water projects to hasten the nation's recovery from the global recession and a regional drought.
Finance Minister Uhuru Kenyatta's 997 billion Kenyan shilling ($12.2 billion) budget for the 2010/2011 fiscal year, which begins today, includes 182 billion Ksh for energy and transportation infrastructure projects -- a more than 20 percent increase over the previous fiscal year. The record budget also includes 32 billion Ksh for agriculture and rural development and 51 billion Ksh for environment, water and sanitation projects.
The robust commitments come as Kenya struggles with an increasingly volatile cycle of droughts and floods that is making electricity and agricultural production less predictable. Kenyan policymakers and scientists contend the changes are because of global climate change and pose long-term threats to the nation's energy and food security (Greenwire, May 3).
Kenya's economy grew 2.6 percent last year and 1.6 percent in 2008 as the collapse of Wall Street investment banks rippled through the global economy. The Kenyan government is projecting real gross domestic product growth of 4.5 percent in 2010 and 5.7 percent in 2011, driven in large part by big spending increases for domestic infrastructure.
"There are inherent risks that still prevail in the global financial and economic environment as evidenced by the current sovereign debt crisis in Europe," Kenyatta said in a June 10 speech to the National Assembly of Kenya. "Moreover, we continue to face serious challenges associated with climate change; unemployment, particularly among youth; and severe food poverty in certain parts of the country."
The new budget's 51 billion Ksh allocation for environment, water and sanitation projects is up 35 percent from the previous fiscal year. The money will be used to modernize meteorological services, clean rivers, build dams and other water-storage infrastructure, restore Kenya's highland forest "water towers," scale up irrigation systems to reduce dependence on rain-fed agriculture, and install infrastructure to transport water and waste in urban and rural areas.
The 2010/2011 budget does not show in detail which environment, water and sanitation projects would get funding, but a supplemental strategy paper published by the Finance Ministry projects that up to 1.7 percent of expenditures would support public health and sanitation, up from 1.4 percent in the prior fiscal year.
Noted Nairobi entrepreneur David Kuria, whose startup company Ecotact Ltd. builds water tap and toilet facilities in urban areas, called the budget a "great stride" but expects the lion's share of the money will be used to build dams and other water catchments.
Thirty-two of Kenya's 174 local sanitation authorities have sewage treatment and disposal facilities. A regional drought that stretched across two years ended last December with the onset of heavy rains across much of Kenya, but tens of millions of urban poor continue to face water shortages because of inadequate infrastructure. The dearth of water infrastructure in urban slums is the subject of increasing coverage in Nairobi newspaper articles and editorials.
There has been "little talk on sanitation to date, despite our poor performance," noted Kuria, who was named Africa's social entrepreneur of the year at the 2009 World Economic Forum.
Finance Ministry officials did not respond to requests for comment for this article.
Energy funding, carbon trading
The new budget also includes 34.1 billion Ksh for energy sector projects, including 15.6 billion Ksh to expand the national electricity transmission system, and 11.6 billion Ksh to exploit coal and geothermal resources.
The government will encourage the development of 500 megawatts of geothermal power capacity through a public-private partnership during the next four years, Kenyatta said.
Kenya currently gets about 60 percent of its electricity from hydropower dams and relies on comparatively expensive diesel-thermal power when river levels drop (Greenwire, May 10).
"While the ongoing rains have improved the hydro conditions and hence reduced the overall cost of power by about 40 percent since last September 2009, the government remains fully committed to expanding investment in cheaper and reliable energy sources as the only way to assure affordable power," Kenyatta said.
He announced before Parliament that government ministries will develop a carbon dioxide credit investment framework that outlines how to register emissions credits and share revenue. The government will also develop a regional "emissions-trading scheme" in the Kenyan capital of Nairobi.
The European Union has been operating its own emissions-trading system since 2005 to help E.U. member states meet emissions-reduction commitments under the Kyoto Protocol. More than 11,500 factories, power plants and other energy-intensive installations may buy and sell emissions allowances to comply with pollution caps set by their host countries.
Setting up such a system is complex, and it is unclear whether the Kenyan government has the will or resources that are necessary to develop and keep a regional market alive, contended Claudia Ringler, a senior fellow with the U.S.-based International Food Policy Research Institute.
Likely buyers of African emissions allowances will depend upon the market's efficiency, transparency and accountability, she surmised.
"I don't think that E.U. companies will jump into a Kenyan market right away," Ringler continued. "Thus, the hope would be that some strong African companies or foreign companies with large operations in Africa -- and there are many who should be interested in offsetting emissions for corporate social responsibility reasons -- would support the market."
Nairobi should negotiate support from such companies before launching the market to ensure its survival, she added.