Anything could happen

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Anything could happen

6 February 2013 | 0 Comments

There is real change afoot in East Africa’s biggest economy, with ambitious infrastructure plans and last year’s discovery of oil. That’s why so much is riding on the general election next month. Rod Sweet reports.

It’s the sort of news you’d expect to come from Saudi Arabia: a new, US$14.5bn “technology city”, built from scratch and starting right away, that will employ more than 200,000 people by 2030.

But it’s not Saudi Arabia, it’s Kenya.

“Silicon Savanah”, as the scheme has predictably been dubbed, is the flashiest part to date of the government’s ambitious Vision 2030 initiative, designed to turn East Africa’s best-performing economy into a middle-income nation within 18 years.

The IT business hub – real name, Konza Technology City – will be built on a grassy plain 60km from the capital, Nairobi. Planners hope more than 20,000 IT jobs will be created there by 2015, rising to 200,000 jobs by 2030.

Launching construction in January, Kenya’s president Mwai Kibaki called for investors, because the PPP financing model sees the government putting up only 5% of the total cost. Kenya will lease land to private investors to set up shop.

As well as ICT companies, the plan envisages a university campus, hotels, housing, schools and hospitals. The government has appointed the Konza Technopolis Development Authority to oversee building.

Some local media are sceptical of the plan, saying successful, state-seeded tech clusters are hard to find, but the scheme is just the latest evidence of a country on the move.

Oil was discovered last year. British explorer Tullow Oil and Toronto-listed Africa Oil found hydrocarbons in March 2012 in Kenya’s north-western Turkana region, and other discoveries followed throughout the year.

After the March find, President Kibaki said on live television that it could be three years before commercial production began, but he acknowledged the nation’s excitement when he said: “It is... the beginning of a long journey to make our country an oil producer.”

In the meantime the government has lost no time negotiating a big slice of the profits by seeking a 25% stake in the production activities. Kenya’s energy minister has proposed other measures to up the state’s take, including new capital gains tax rules, a more competitive licensing process and higher fees for petroleum explorers.

In the wider region, Tanzania, Mozambique and Uganda have also seen a hydrocarbon exploration boom.

More foreign investment

Kenya has been getting its act together in less flashy ways. Last year Kibaki allocated US$1.2bn for road sector projects, slightly up from $1bn the previous year. Deloitte expects this attention to basics, in a country where overland travel too often occurs at horse-and-cart speeds, will lead to higher competitiveness and more foreign direct investment.

Big electricity generating projects are underway, and Kenya has successfully piloted infrastructure bonds to raise funds for much-needed infrastructure development.

So the picture is promising. But it is also uncertain. The World Bank says Kenya’s economy could see 5% growth this year, but only if the general election due next month (March 2013) passes without the violence that killed some 1,200 people after a disputed result in the 2007 vote.

The Financial Times points out that elections are bad for business in Kenya. The newspaper said growth tends to drop 1.5 percentage points during election years, and plunged much further, from seven per cent to just 1.5%, after the turmoil of 2007.

In December Kofi Annan, former UN secretary general and now African Union envoy to Kenya, urged Kenyans not to vote for any politicians who may be facing trial at the International Criminal Court (ICC). He was referring to candidates Uhuru Kenyatta, currently Kenya’s deputy prime minister, and William Ruto, a former government minister. These two men used to be rivals but they have united to contest the March election.

The pair have been accused of crimes against humanity by the ICC and are due to stand trial after the election.

Aside from a peaceful election, the World Bank is anxious for Kenya to keep improving infrastructure, to deal with “pervasive corruption”, and to use tax and investment policies to create more jobs for its growing, young, educated population.

We wait and see. At the moment it seems anything could happen.