: Kenya launches a $20M Holistic Productive Capacities Programme with UNCTAD to drive economic growth, boost diversification, industrialization, and private sector empowerment.

By Charles Wachira

Kenya held consultations with key development partners on October 3, 2024, to discuss the implementation of its ambitious Holistic Productive Capacities Development Programme (HPCDP), designed by the United Nations Conference on Trade and Development (UNCTAD). 

This initiative aims to reshape Kenya’s economic landscape and pave the way for long-term sustainable growth. 

Prime Cabinet Secretary Musalia Mudavadi, along with other senior government officials, led discussions with donors, UN representatives, the private sector, and key stakeholders.

 The dialogue opened a new chapter in Kenya’s drive toward economic transformation. 

“This programme is a turning point for Kenya’s future,” remarked Paul Akiwumi, UNCTAD’s Director for Africa, Least Developed Countries, and Special Programmes.

 “It’s about laying the groundwork for a stronger economy by empowering people, businesses, and institutions to innovate, compete, and thrive.”

 A New Economic Paradigm With Kenya’s past commodity-driven growth models proving insufficient to ensure inclusive and sustainable development, the HPCDP comes at a critical time.

 Despite achieving growth rates exceeding 5% over the 15 years leading up to the COVID-19 pandemic, the country continues to face challenges, with poverty and economic vulnerability still widespread. Kenya’s Vision 2030 hinges on bridging the country’s productive capacities gap.

 The consultations focused on how this programme will address core issues, such as underdeveloped industrialization and vulnerability to economic shocks, that have held back poverty reduction and job creation.

 The Holistic Productive Capacities Development Programme The HPCDP, a bold 10-year initiative set to launch in 2025, is designed to enhance economic diversification, industrialization, infrastructure, and private sector growth.

 The programme aims to transform Kenya from an economy reliant on low-productivity sectors to one driven by innovation and high-value industries.

 Five key pillars will drive the programme: 

Economic diversification and value addition Infrastructure development and environmental sustainability ICT for digital transformation Private sector growth and empowerment Skills development and policy coordination Securing Funding and Strategic Focus The consultations aimed to secure $20 million in funding over the next decade to support these transformative goals.

 Discussions centered on how Kenya can harness its strengths in agriculture, manufacturing, and technology while aligning with the African Continental Free Trade Area (AfCFTA) to enhance its global competitiveness.

 The Role of the Private Sector At the heart of the HPCDP is private sector empowerment. The programme focuses on supporting micro, small, and medium-sized enterprises (MSMEs), improving the business environment, and attracting both domestic and foreign investment.

 By leveraging Kenya’s rapid infrastructure developments in transport, logistics, and energy, the country aims to become a regional hub for manufacturing and value-added processing.

 A Collaborative Effort UNCTAD’s expertise in trade, investment, and technology for sustainable development will be central to the success of this initiative. A high-level steering committee and technical task force will oversee the programme’s implementation, ensuring seamless coordination and effective execution.

 Looking Forward The October 3, 2024, consultations mark a significant step forward in Kenya’s efforts to achieve its Vision 2030 goals and transform its economy into one that thrives on innovation and productivity. With robust international collaboration and a clear strategy, Kenya is positioning itself for a future of sustainable growth and prosperity. 

About UNCTAD: The United Nations Conference on Trade and Development (UNCTAD) is committed to promoting inclusive and sustainable development through trade and investment. With a broad membership, it empowers countries to use trade for economic growth and development.

Keywords:Kenya economic growth: Holistic Productive Capacities Programme: UNCTAD partnership Kenya: Industrialization and diversification: Private sector empowerment Kenya

:Senator Samson Cherargei, a key figure in the United Democratic Alliance (UDA) and a close ally of President Ruto, contends that the current five-year presidential term is inadequate for fully implementing a leader’s agenda, particularly given the electoral disputes that frequently disrupt governance stability.

 By Charles Wachira

Senator Samson Cherargei of Kenya is proposing a  bill, aimed at extending the presidential term from five to seven years and the idea has ignited controversy, with critics alleging it’s a ploy to prolong President William Ruto’s rule.

 Cherargei, a member of the United Democratic Alliance (UDA) closely aligned with Ruto, argues that the current five-year term isn’t sufficient for presidents to effectively implement their agendas, especially considering electoral disputes that often delay governance stability.

“Seven years will provide ample time for a president to deliver on their manifesto,” Cherargei defended during the bill’s Senate reading. He emphasized that frequent elections disrupt long-term development projects crucial for national growth.

This isn’t Cherargei’s first attempt at such reforms.

 Similar proposals were previously rejected by the public through the National Dialogue Committee co-led by Ruto and opposition leader Raila Odinga in 2023. Now reintroduced, the bill also seeks to extend terms for MPs and governors to seven years and introduces the role of a prime minister appointed by the president.

Francis Chege from the former ruling Jubilee Party views the bill as a maneuver to benefit the political elite rather than the public interest.

 “These proposals favour the political class and not the people,” Chege criticized.Adding that the move is “a plot to extend Ruto’s rule,” saying that the government may be “testing the waters” through such proposals to gauge public reaction. “This is about power consolidation, not the people,” Chege added, echoing the views of many who see the proposal as a threat to democratic accountability.

In contrast, Eugene Otieno, a history teacher, supports the concept but advocates for a single seven-year term to reduce political motivations.

 “A single term would make the presidency less about re-election and more about governance,” Otieno suggested, stressing the need for extensive public consultation on such constitutional changes.

. “A single term will make the presidency less attractive for those looking to stay in power for personal gain,” Otieno said. He believes that a one-term presidency could allow a leader to focus on governance without being distracted by re-election campaigns, but insists on thorough public consultations before any changes are made.

Many Kenyans have expressed strong opposition to the bill, fearing it could undermine the country’s democratic principles.

 Social media platforms and local talk shows have seen an outpouring of criticism, with citizens arguing that extending terms would likely lead to complacency, weakened checks on government performance, and potentially a rollback of democratic gains achieved over the past two decades. 

A common refrain among opponents is that Kenyan politicians are trying to “change the rules of the game” to suit their own interests once in power.

At the grassroots level, many Kenyans are also frustrated with the slow pace of governance, which they attribute more to political inefficiency and corruption than the length of the president’s term.

 Extending the term to seven years is seen by some as a distraction from addressing pressing issues such as unemployment, inflation, and the high cost of living.

Political analysts like Carol Situma argue that the timing of the proposal is highly suspect, especially given the economic challenges Kenya is facing. 

Situma calls it “a diversionary tactic” designed to shift public attention away from more pressing issues, such as rising public debt, ongoing disputes over privatization deals, and unfulfilled promises by the Ruto administration.

Overall, public sentiment reflects a deep skepticism of the bill. Many citizens view it as an unpopular attempt to manipulate the constitution for political gain, and the likelihood of widespread public protests or backlash is high if the proposal gains traction in Parliament. Moreover, the memory of Kenya’s long struggle for constitutional reform and democracy makes many wary of an

The timing and intent behind Cherargei’s bill have sparked skepticism among analysts.

 When reached for comment, UDA officials remained inaccessible. However, in previous statements, the party has distanced itself from Cherargei’s proposals, asserting their commitment to the existing constitutional framework.

“The UDA respects differing opinions, but these views do not reflect our party’s stance or that of our leader, President William Ruto,” a UDA spokesperson clarified in response to earlier similar attempts by Cherargei.

As the bill undergoes committee scrutiny in the Senate, its fate hinges on public feedback and legislative debate, with significant implications for Kenya’s political landscape if passed.

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What’s Ruto’s position?

President Ruto has so far remained officially non-committal on the bill However, through his party, the United Democratic Alliance (UDA), Ruto has distanced himself from previous attempts by Cherargei to amend the constitution for similar reasons. 

In 2023, Cleophas Malala, then Secretary General of UDA, made it clear that the party did not endorse such proposals. Malala emphasized that any changes to the presidential term would require a referendum, adding that President Ruto was committed to upholding the current five-year term limit as enshrined in the constitution.

“The president remains focused on delivering his development agenda within the mandate given by the people of Kenya, and he has no intention of pushing for constitutional amendments to extend his term,” Malala said at the time, addressing concerns that Cherargei’s proposal might represent the party’s position.

While Ruto has not publicly commented on Cherargei’s latest bill, the official stance of the UDA suggests the president is wary of being associated with proposals that may be seen as attempts to prolong his rule. Ruto has previously emphasized his commitment to constitutionalism and respecting democratic institutions, which include adhering to the two-term limit for the presidency.

If the bill passes, it could create a political storm. Extending the presidential term might embolden Ruto’s critics, who could accuse him of trying to entrench himself in power.

 It could also lead to widespread public opposition, similar to the backlash against earlier attempts at constitutional changes.

 Additionally, the introduction of a prime ministerial position could reshape Kenya’s governance structure and centralize more power within the presidency, potentially heightening tensions between the executive and other political forces.

For now, the bill is seen as Cherargei’s initiative, but its progress will undoubtedly place Ruto in a delicate position. He may be forced to publicly clarify his position if pressure mounts, especially as public consultations and Senate debates unfold.

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What do experts say?

Experts have weighed in on Senator Cherargei’s proposal to extend the presidential term from five to seven years, and their views reflect a deep concern over the potential impact on Kenya’s democratic system.

 Political analysts, constitutional scholars, and governance experts generally see the move as a threat to Kenya’s democratic principles and a shift toward consolidating power, rather than a genuine attempt to improve governance.

1. Threat to Democratic Gains: Many experts argue that extending the presidential term would undermine the democratic progress Kenya has made since the introduction of the 2010 Constitution, which set clear limits on presidential power. Constitutional law expert Dr. Duncan Ojwang highlights that term limits are designed to prevent the concentration of power and ensure regular, peaceful transitions of authority. “Term limits are essential for democracy. Extending the presidential term sets a dangerous precedent that could erode Kenya’s democratic culture,” he explained. According to Ojwang, removing or altering these limits could encourage future leaders to manipulate the system in their favor.
2. Power Consolidation Fears: Several analysts, including political scientist Dr. Peter Kagwanja, see Cherargei’s bill as a veiled attempt to consolidate power within the ruling party, potentially making it harder for opposition forces to compete in elections. Kagwanja argues that the introduction of a prime ministerial position in the bill could give the president more control over Parliament, which could weaken checks and balances in government. “The proposal, especially with the prime minister’s office, centralizes power within the executive, raising the risk of an autocratic system,” he stated.
3. A Diversion from Real Issues: Some analysts, such as Carol Situma, view the proposal as a political distraction. Situma describes the timing of the bill as suspicious, given that Kenya is currently grappling with major economic challenges, including inflation and high public debt. “This is a diversionary tactic by the ruling party to shift attention away from the real issues affecting Kenyans,” Situma observed. She adds that instead of focusing on electoral reforms, the government should prioritize addressing urgent concerns like unemployment, poverty, and governance inefficiencies. “The conversation should be about delivery of services, not extending terms.”
4. Governance Impact: Experts in governance, such as Professor Macharia Munene, believe that extending the term limit may not necessarily result in better governance or development outcomes. He points out that five years is a reasonable period for a president to lay the groundwork for major projects, and if progress is slow, it often reflects poor management rather than insufficient time. “It’s not the length of the term that determines success, but the effectiveness of leadership and implementation,” Munene said. He also raised concerns that longer terms could encourage complacency among elected officials, reducing the urgency to deliver on campaign promises.
5. Political Instability Risks: Constitutional lawyer Dr. Linda Musumba warns that changing the presidential term limit could spark political instability and lead to protests, as it might be seen as undermining the will of the people. “Attempts to alter key constitutional provisions without broad public support could lead to a political crisis,” Musumba cautioned. She emphasized that the Kenyan public is highly sensitive to any moves that could be interpreted as power grabs, particularly given the history of contested elections and street protests.
6. Public Participation and Referendum: Experts across the board agree that any attempt to amend the Constitution, especially regarding presidential terms, must involve extensive public participation and likely a referendum. Dr. Samuel Nyikal, a constitutional scholar, emphasized that constitutional amendments of this magnitude cannot be left to Parliament alone. “These are issues that directly affect the people, and they must have a say. A referendum would be the legitimate way to resolve such matters,” Nyikal stated, echoing sentiments expressed by many civil society groups and legal experts.

In summary, experts overwhelmingly caution against extending the presidential term, citing risks to democratic principles, political stability, and governance quality. They recommend that the government focus on addressing Kenya’s pressing socio-economic issues rather than pursuing controversial constitutional amendment

Keywords: Kenya presidential term extension:Samson Cherargei bill controversy:Ruto administration power consolidation:UDA stance on term limits:Kenyan public opposition to term extension

By Prof Odongo Kodongo

The proposal submitted early this year by Indian conglomerate Adani Group to Kenya Airports Authority to develop and renovate parts of Jomo Kenyatta International Airport has recently been made public.

To facilitate informed public engagement with the proposal, as a project finance student, I thought it would be useful to provide an expert view on its key technical aspects.

Adani exploits a provision in Kenya’s Public Private Partnerships Act of 2021 that allows private companies to initiate project proposals and channel them to the government for consideration.

Briefly, Adani seeks to run Jomo Kenyatta International Airport via a 30-year build, operate and transfer arrangement. Under this arrangement, ownership of the airport remains with Kenya Airports Authority, known as the deal sponsor. The airport business is handled by Adani’s subsidiary, Airports Infrastructure Plc, called the special purpose vehicle.

• Airports Infrastructure Plc, which was registered in Nairobi on 31 August 2024, is fully owned by the United Arab Emirates incorporated Global Airports Operator LLC.
• Global Airports Operator is a subsidiary of Adani Airports Holdings Limited of India, which in turn is fully owned by Adani Group.

The proposal omits information on Adani Airports Holdings Limited’s extent of ownership of Global Airports Operator. This leaves room for speculation about Global Airports Operator’s beneficial owners.

The proposal shows that the project requires a cash outlay of US$2.05 billion including capital expenditures, operating expenses and financing costs. This cost is spread over the project’s development period of about 25 years.

However, my examination identifies important flaws in the structure of the proposed deal.

Airport’s cash flows

The first flaw is that the Adani Group, the project operator, will have access to all of the airport’s cash flows. This should not be the case in a typical private public partnership deal like the one proposed.

In such deals, the project operator should only have access to cash flows generated by the new project – that is, the proposed new terminal building and runway and their associated infrastructure. It should not have access to cash flows from the existing assets and operations of the deal sponsor.

Secondly, the proposal shows that the proposed renovation of the existing terminal buildings will be financed from money generated from the airport’s existing operations. The renovations should therefore be undertaken by Kenyan Airports Authority and not included in Adani’s proposed deal. Including them in the deal would complicate cash flow separation and risk sharing.

To be sure, in instances where there are substantial risks associated with the new project’s capacity to generate cash flows, the project operator might require additional guarantees. In such cases, governments often provide guarantees limited to a small proportion of the required cash flows.

The third flaw is that Adani proposes that the government pay it for the developed assets when the partnership ends. This is wrong: the government must not buy assets that it already owns.

Guaranteed return on investment

There are other provisions that require further scrutiny, as well.

The revenue sharing model proposes a fixed concession fee of US$47 million to the government in 2025. Thereafter, the government would receive a fixed fee plus a variable component calculated to ensure that Adani earns an 18% internal rate of return on its capital investment in the project. Internal rate of return is the average annual profit earned by a project in its lifetime.

For Adani to achieve this enviable outcome, the Kenyan Airports Authority would have to take a higher risk by accepting a concession fee that fluctuates with the project’s performance while Adani’s cash flows are predetermined by its desired profit.

This is neither fair nor equitable risk-sharing. As the project operator and major equity capital provider, Adani must take responsibility for the project’s performance by accepting greater fluctuation in its cash flows.

Affordability of services

Fees for aeronautical services (what airlines pay Adani for using the airport) for the first three years will be determined by the need for Adani’s 18% profit. This is problematic.

The internal rate of return is derived from cash inflows and outflows over the project’s lifetime.

Therefore, to determine user charges for an isolated period of the contract such that the internal rate of return remains fixed would push those fees to very high levels.

Indeed, Adani’s own calculations show that the proposed user charges would make the Jomo Kenyatta International Airport more expensive than the Bole International Airport in Addis Ababa. For some transport corridors, the Nairobi airport’s charges as a proportion of airfares are more than double Bole’s.

Passenger traffic

Adani’s project proposal is flawed when it comes to passenger traffic too.

First, the agreement assumes what it calls a “meteoric surge” in passenger numbers based on an assumed constant annual growth rate of 4.5%. This is too optimistic relative to the airport’s historical performance.

Second, Adani’s projections assume full capacity use over the 30-year period. Any financial modeller knows that full capacity is difficult to achieve.

Overall, because of the long period of projections and optimistic stance, Adani’s forecasting assumptions should be subjected to rigorous stress testing (sensitivity analysis). This has not been done.

Tax holidays

Carefully tucked away in the project’s feasibility report is an unheralded pitch to the government for a tax holiday if Adani wins the tender.

Adani argues that, if granted, a tax holiday would lower the charges to airlines. In my view, this is the proposed project’s deal breaker.

Kenyan policy does allow for tax holidays of various kinds to incentivise capital formation and investments in critical but unattractive sectors. It’s doubtful that the airport business fits this description and therefore merits such an incentive.

Further, the evidence shows that such tax incentives hardly offer meaningful economic growth benefits to African countries. More importantly, an analysis of the proposed tax holiday’s effect on cash flows should be provided to aid its assessment. Adani omits such an analysis.

The land question

A component of Adani’s strategy involves developing and operating facilities, such as offices and convention centres. This is subject to confirmation of land availability. Adani does not propose to buy the land. Rather, it appears that Kenya Airports Authority would have to provide the land.

This begs several clarifications.

If the Kenya Airports Authority owns the land, the opportunity cost of the land utilisation by Adani needs to be incorporated in the cost-benefit analysis.

If the Kenya Airports Authority has to buy the land, the question becomes that of the source of the purchase money and whether land acquisition would be the best use of that money by an authority seeking to outsource tasks, such as renovations, due to cash flow constraints.

Final thoughts

The Public Private Partnerships Act requires a justification when an open tender approach is not used for a proposed project. That this has not been done is worrying, given that the consultant hired by the government to advise on this transaction recommended open tendering.

Adani’s argued benefits of its privately initiated proposal – quicker turnaround time, customisation, and risk mitigation – are not convincing. Such benefits are better realised through an open tender, which provides additional benefits such as competitive pricing and transparency.

Adani labelled its proposal “private and confidential”. It is reasonable to expect that it signed a non-disclosure agreement with Kenya Airports Authority to protect its submission from leaking to potential competitors. The proposal has now been released and its content is open knowledge.

If the government were to stop processing Adani’s proposal and open the tender to all interested investors, Adani might seek legal redress since its competitors would easily design their bids to beat its own. Any unbiased court will find that the “breach of confidentiality” violates Adani’s rights.

Adani will win the suit.

One way or the other, circumstances now make Adani the winner and Kenyans the loser in this fiasco.

Keywords:Public-Private Partnerships:Adani Group:Jomo Kenyatta International Airport:Build-Operate-Transfer:Tax Holiday

The story initially ran @ https://theconversation.com/kenyans-stand-to-lose-from-adani-airport-deal-finance-guru-explains-why-239848