Kenya has the largest, most diversified and innovative economy in East Africa. Its human capacity, entrepreneurial energy and available capital give it huge potential to create jobs and reduce poverty among Kenyans and other East Africans, and set trends for other African countries. It is also fragile, with significant risks that this economic potential is not realised if the political stability that nearly collapsed in 2008 cannot be maintained, and vulnerable to climate change. Donor help with new approaches to service delivery and governance will be needed if millions of poor Kenyans currently excluded from progress are to benefit.
DFID is one of the largest donors in Kenya and a core partner in the Kenya Joint Assistance Strategy (2007-2012)1, which brings together 13 bilateral and 4 multilateral partners with an increasingly effective division of labour, and a framework for mutual accountability with government. The strategy is aligned behind Kenya’s development priorities set out in Vision 20302, which aspires to promote political and macroeconomic stability, sustained economic growth and social development, underpinned by rapidly expanding infrastructure. The Vision aims for growth rates of 10% to reach upper middle income status (currently defined as a Gross National Income (GNI) per capita of $3,945). Kenya's GNI per capita was $760 in 2009. Economic growth in Kenya has been volatile, most notably slumping from 7% in 2007 to under 2% in 2008 following domestic and international shocks. Growth is forecast to rise to 6% in 2011, but higher sustained growth is needed to achieve Vision 2030’s aspirations, especially with a high and unsustainable rate of population growth (currently about 2.9%).
Progress towards these goals requires increased investment and significantly improved productivity. An increase in aid to 2015 could make this achievable more quickly, improving Kenya’s off-track performance on the Millennium Development Goals (notably child and maternal mortality) and reducing inequality. Aid could gradually be replaced by investment later in the decade, including from public finance such as the CDC Group.
DFID’s work is a core part of the overall UK Government strategy for Kenya, which includes engagement on a range of development, commercial, security and diplomatic issues. Staff in DFID and the Foreign and Commonwealth Office (FCO) have adopted a joint approach to promoting good governance and stability in Kenya, in particular in the lead up to the 2012 elections, which should lay the foundations for strong inward investment and growth. Recent internal assessments3,4 highlight the need to tackle underlying causes of conflict through political reforms. Such reforms need to deliver a more inclusive political settlement and promote accountability, without which economic investment and wealth creation will continue to remain vulnerable to insecurity and violence.
Kenya’s potentially rapid development is stubbornly constrained by high levels of corruption and impunity by political, government and business leaders. Kenya is ranked 154 out of 178 countries on Transparency International’s Corruption Perception Index: when using a public service over 37% of Kenyans expect or are asked for a bribe, and over half of these pay the bribe5. There have been no convictions of significant figures involved in economic crimes or organised political violence such as that seen in the 2008 post-election crisis. The involvement of the International Criminal Court in investigating post-election violence is domestically controversial. Recent fiduciary risk and public expenditure assessments for Kenya6 conclude that the current level of fiduciary risk is significant but improving. While central Public Financial Management systems compare reasonably with other sub-Saharan African countries (Kenya is in the top half of performers on Public Expenditure and Financial Accountability scores), the level of corruption is high and stable. As a result (reinforced by recent fraud in the Ministry of Education), DFID Kenya makes limited use of Government systems to distribute aid. We do not envisage changing this until well after the next Kenyan elections at the earliest.
Kenya is traditionally an important regional anchor for peace and stability in a volatile part of Africa: for trade, transport and communications; as a respected political voice in the African Union; and as a hub of innovation. It remains a responsible partner in most aspects of international relations, a driving force in the East African Community, and a potentially strong engine for regional growth and new ideas on development that sometimes spread across the continent.