Fourth South-South Cooperation Workshop on Rural Development and Poverty Reduction - Eliud Salano...

An Overview of the Kenya Vision 2030 Flagship Projects

A PRESENTATION IN CHINA 4TH TO 11TH JULY 2012

6 KEY SECTORS IDENTIFIED AS HAVING THE GREATEST POTENTIAL

Att

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0

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200

300

400

500

600

700

0 50 100 150 200 250 300

Feasibility---- ++++

++++

Current size of GDP

• Plays a critical enabling role in the economy• Has experienced significant growth over past few years

(e.g., 50%+ p.a. growth of NSE)• Still ample room for further development across all areas –

Capital markets, Banking, Informal finance, and International capital

• Sizeable part of the economy (e.g., 30% of GDP and 50% of employment – formal and informal)

• Extremely fragmented and informal (e.g., 97% of employment, 70% of value is informal)

• Very inefficient supply chain• Significant opportunity to formalise the sector

• One of Kenya’s major economic pillars, enjoying significant growth (13% p.a.) over past few years

• Largest contributor to foreign exchange earnings (US$1 bn+)

• However, far underdeveloped compared to other top tourist destinations (e.g., number of tourists, yield, diversity of experience, etc)

• Stagnant at 10% of GDP over past 30 years

• Sector currently uncompetitive, e.g., expensive energy, heavy regulation, disjointed taxation

• Sizeable opportunity, in particular in domestic and regional markets

• Potential to develop global niches (e.g., agro-processed goods)

• Pillar of the Kenyan economy (25% of GDP)

• Productivity significantly lower (e.g., 2-3 x lower) than international benchmarks

• Additional opportunities to unlock potential of Kenyan land

• Strong need for institutional reform

• Small and nascent industry today (e.g., <1 000 seats total)

• Overall, cost competitive relative to other attractive destinations

• However, key areas for improvement, e.g., telecom/ energy cost and reliability, training)

• Significant niche opportunity for Kenya

Mining*

Bio-fuels*

Petroleum*

Wholesale and retailWholesale and retail

33

BPOBPO

55AgricultureAgriculture22

Manu-facturingManu-facturing

44

TourismTourism

11

Financial servicesFinancial services

66

*Although not a priority in the short term, these and other non-prioritised (sub)-sectors remain important for the Kenyan economySource:Team analysis

1. THE TOURISM SECTOR

High Level Strategy

• Vision

– Be a top 10 long haul tourist destination offering a high-end, diverse, and distinctive visitor experience

• Goals– Quadruple GDP contribution to ~KSh

80bn – Raise international visitors from 1.8 to 3

million, and raise average spend per visitor from ~KSh40,000 to ~KSh70,000

– Raise beds from ~40,000 to ~65,000

• Strategy

– Coast: Aggressively grow coast segment through resort cities initiative

– Safari: Migrate premium safari parks upscale; Extend facilities at other under-utilised parks

– Niche Products : Nurture nascent, high value products e.g., cultural, eco-, and water-based tourism

– Business: Revamp business visitor offering by attracting high-end international hotel chains and investing in conference facilities

Flagship projects

Economics and impact

• Build two high-end, multi-attraction resort cities on coast, and one at Isiolo

• Grow safari revenues by migrating premium parks upmarket, and extending bed capacity at under-utilized parks

• Grow nascent, high-end niche products (e.g. eco-, water-based-, cultural tourism) by attracting 3,000 beds of investment at key sites in Western, North; North Rift and Tana circuits

1.1.1.1.

1.2.1.2.

1.3.1.3.

1.4.1.4.

GDP KSh Billion*

78

3219

2007** 2012baseline*

Additional GDP withstrategy

+10.4%

+32.0%

2012 withVision 2030

46

CAGR

* Real GDP in 2001 prices ** Based on treasury projections before Vision 2030Source:Economic survey; Team analysis

Flagship projectsFlagship projects

Economics and impactEconomics and impact

2. THE AGRICULTURE SECTOR

• Vision – Innovative, commercially oriented and

modern agriculture sector

• Goals– Stimulate additional Ksh 80-90bn increase in

GDP by• Achieving benchmark yields in key crops • Increased smallholder specialisation (2-3

crops per plot)• Utilising 1 million hectares of idle lands• Cultivating up to 1.2m hectares of new

lands

• Strategy – Institutional reform: Transform key

institutions into complementary and high-performing entities that enable private sector agricultural growth

– Increase productivity: Increase productivity of crops and livestock

– Transform land use structure: Better utilisation of High and Medium Potential Lands

– Prepare new lands for cultivation: Strategically develop irrigable areas of Arid and Semi-Arid Lands (ASAL) for both crops and intensified livestock

– Increase access to markets: Improve market access to small holders by establishment of aggregators (addressed in retail sector)

• Prepare and ensure passage of consolidated agricultural reform legislation

• Develop and begin implementation of 3-tiered fertilizer cost reduction programme– purchasing and supply chain improvements; blending; manufacturing

• Plan and implement 4-5 Disease Free Zones and livestock processing facilities

• Create publicly accessible land registry• Using land registry, develop agriculture land use

master plan (e.g., crop specialisation plan)• Tana River Basin development scheme

2.1.2.1.

2.2.2.2.

2.3.2.3.

2.4.2.4.

2.5.2.5.

2.6.2.6.

CAGR

506420

324

2012baseline*


+5.3%

+9.3%

2007**

86


High Level Strategy


GDP KSh Billion*

THE FERTILISER COST REDUCTION INITIATIVE HAS ALREADY STARTED AND IS EXPECTED TO DELIVER KSH ~1.5 BN IN SAVINGS

* This is from the Kenya Tea Development Agency (KTDA), although KTDA imports are NPK, purchase cost is nearly identical to that of DAPSource:Kenya Tea Development Agency; MEA; NASS

Cost to farmer of 50kg bag of DAP fertilizer

1 314

1 721

Organised Kenyan farmer*

Unorganised Kenyan farmer

+11%

+31%

US Gulf Morocco port

945 945

1 180

Baltic Port

875

US Farmer

Procurement and supply Procurement and supply chain improvements following chain improvements following

KTDA model can decrease KTDA model can decrease cost to small holder by 30%, cost to small holder by 30%,

representing a potential quick representing a potential quick win cost savings to Kenya win cost savings to Kenya

of KSh 1.4-1.7 of KSh 1.4-1.7 billionbillion

Procurement and supply Procurement and supply chain improvements following chain improvements following

KTDA model can decrease KTDA model can decrease cost to small holder by 30%, cost to small holder by 30%,

representing a potential quick representing a potential quick win cost savings to Kenya win cost savings to Kenya

of KSh 1.4-1.7 of KSh 1.4-1.7 billionbillion



3. THE WHOLESALE AND RETAIL SECTOR

• Vision

– Move towards greater efficiency and at least a 30% formal market share (from 5%)

• Goals– Stimulate additional Ksh ~50bn increase in

GDP by• Creating ~10 district based wholesale

hubs• Establishing 1,000-1,500 producer

business groups (PBGs)• Building at least 10 formal ‘Tier 1’ district

based retail market places• Increasing formal share from 5 to 10% • Attracting at least 3 new retailers with

10+ stores each• Creating 1 free trade port in Mombasa

• Strategy

– Supply chain: Drive efficiencies through development of producer business groups and large wholesale hubs

– Semi-formal retail: Create “Tier 1” retail markets to locate informal players and help them grow

– Formal retail: Attract and develop large formal retails through JVs and standalone ventures (domestic and foreign)

• Build 'tier 1' retail markets starting with pilot in Nairobi (e.g., potentially Athi River)

• Create large formal wholesale hubs and connect them to producer business groups

• Develop Free Trade Port in Mombasa for Regional market

3.1.3.1.

3.2.3.2.

2005

CAGR

203154

120

2007* 2012baseline



+5.1%

+11.1%

41

High Level Strategy


3.3.3.3.

GDP KSh Billion*



4. THE MANUFACTURING SECTOR

• Vision

– To improve competitiveness in manufacturing in order to revolutionise the sector

• Goals– Stimulate additional Ksh ~30bn

increase in GDP by

• Reducing imports in key local industries by 25%

• Growing market share in regional market from 7 % to 15%

• Attracting at least 10 large strategic investors in key agro-processing industries

• Strategy

– Local Production: Defend and restructure key industries that have local raw material availability, but no competitive edge (e.g. sugar, paper)

– Regional Domination: Exploit opportunities to further process imports and capture the “last step” of value addition (e.g. metals, plastics)

– Global Niche: Strategically drive increased level of value addition in niche exports (e.g. agro-processing)

• Develop concept, pilot, and launch 1-2 Special Economic Clusters, focusing on select industries (e.g. agro-processing, building materials), target players, and incentive packages

• Develop concept, pilot, and create at least 5 Small & Medium Enterprise (SME) Industrial Parks

174132

201

2007** 2012 Baseline

27


2012 with Vision 2030

5.7%

+8.8%

CAGR

4.1.4.1.

4.2..4.2..


High Level Strategy

GDP KSh Billion*



5. THE BPO SECTOR

• Vision

– Quickly become one of the top 3 BPO destinations in Africa

• Goals– Create at least 7,500 direct BPO jobs with

an additional GDP contribution of Ksh ~10bn by• Attracting at least 5 major leading IT

suppliers • Attracting at least 10 large MNC

captives and/or global BPO players (creating at least 5,000 jobs)

• Targeting at least 5 large local players to develop as local champions through standalone operations or JVs

• Strategy

– International IT supplier base: Attract top international suppli-ers for scale and credibility

– MNC captives and foreign BPOs: Attract leading brands to establish at least 300 seat operations

– Local champions: Develop local champions through standalone operations and JVs

– Integrated value proposition: Use BPO park to concentrate marketing, training, incentives and infrastructure

• Design and develop 1 major BPO park in Nairobi that has world class infrastructure developed by top international IT suppliers, offers competitive incentive packages to locate in park, provides a one stop shop for administration and talent and serves as a ‘showcase’ park to attract top foreign companies

Number of jobs (000s) 1 5 7.5 12.5

5.1.5.1.

High Level Strategy


~1

2007**

~5-7~7-11


~12-18

2012 with Vision 2030

+43.1%+71.9%

2012 Baseline

CAGRGDP KSh Billion*



6. THE FINANCIAL SERVICES SECTOR

• Vision • A vibrant and globally competitive financial

sector driving high-levels of savings and financing Kenya’s investment needs

• Goals– Raise savings and investment rates from ~17%

to ~30% of GDP through• Increase bank deposits from ~44% to ~ 80%

of GDP and reduce cost of capital• Reduce share of population without access to

finance from 85% to 70%• Raise stock market capitalization from ~50%

to ~ 90% of GDP• Raise ~ 5% of GDP for investment from

remittances and ~ 5% of GDP from other external sources e.g. FDI, sovereign bond

• Strategy

– Banking: Facilitate transformation to larger, stronger banks, and extend credit referencing

– Informal finance: Formalize informal finance (e.g. pass SACCO bill) and extend access to microfinance

– Capital markets: Deepen capital markets by raising institutional capital through pension reform and expanding bond and equity markets

– International capital: Tap international sources of capital

• Facilitate transformation towards stronger, larger scale banks

• Develop and execute comprehensive model for pension reform

• Pursue comprehensive remittances strategy

• Issue sovereign benchmark bond

Savings (% of GDP)32

17

5

Total savings/ investments in 2012 with Vision 2030

Increase in Domestic Savings*

10

2007 Baseline Savings

International Capital**

* Composed of 4.8% from comprehensive pension reform to raise NSSF coverage and include an addition 0.6 million adults in contributory pensions, 1.3% from banking an additional 2 million customers, 1.3% from extending informal finance to an additional 2 million, 1.5% from efficiency gains in banking sector

**Composed of 2.5% each from additional FDI and remittances, and 0.8% from a sovereign benchmark bond.Source: Economic survey; Team analysis

6.1.6.1.

6.2.6.2.

6.3.6.3.

6.4.6.4.

High Level Strategy

10

• Education and Training Build at least one boarding school in each

constituency in the pastoral regions. Build and fully equip 560 new secondary schools. Implement a computer supply programme. Roll out a voucher system in five poorest

districts. Create centres of Excellence for key Vision 2030

sectors. Undertake a teachers recruitment programme.

FLAGSHIP PROJECTS IN SOCIAL SECTOR

11

HealthRevitilise and integrate Community Health centres to promote preventive health care.De-link the ministry of Heath from service delivery to allow independent operation of tiers 4, 5 and 6 (District, Provincial and National hospitals).Create a mandatory National Health Insurance Scheme (with contribution from employers and employees).Channel Health funds directly to health care centres ( i.e. to hospitals and CHCs).Scale up Output Based Approach (OBA) system.

FLAGSHIP PROJECTS IN SOCIAL SECTOR

12

FLAGSHIP PROJECTS IN SOCIAL SECTORS CONT.

• Environment, Water and Sanitation. Tana and lake Victoria catchment initiatives. Rehabilitate 600 hydro meteorological stations. Develop two multi purpose water conservation

structures along Nzoia and Nyando rivers. Develop 22 medium sized multi-purpose dams. Rehabilitate and augment Mzima pipeline. Implement Tana Delta initiatives. Expedite rehabilitation of the Bura irrigation

scheme. Implement sewage initiative. Water catchment management. Secure wildlife corridors and migratory routes. Relocating of Dandora dumping site. Land cover and land use mapping

13

FLAGSHIP PROJECTS IN SOCIAL SECTOR cont

• Gender, Vulnerable Groups and Youth. Provide Funds to Women Entrepreneurs. Increase women representation at executive level

in all branches of the government and the private sector.

Sports: International Academy for Sports and Sports Lottery.

Music: Establish International Centre for Arts and Culture and Programme to Identify, nature and Develop Music.

Expand the Youth Enterprise Development Fund. Establish social protection fund for cash transfer

to Orphans and Vulnerable Children (OVC), Persons With Disabilities (PWD) and elderly.

Full implementation of Disability Fund.

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PROJECTED PRODUCTION OF NEW URBAN HOUSING UNITS

High Income Houses

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

YEARS

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its

Pe

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Source: Min of Housing

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FLAGSHIP PROJECTS IN SOCIAL SECTOR cont

• Population, Urbanization and Housing To develop an integrated growth and development strategy

for six metropolitan regions, Nairobi, Mombasa,Kisumu, Kakamega,Eldoret,Wajir,Garissa,Mandera,Kitui,Mwingi,Meru.

To develop a National Land Use Plan. Enact the Housing Bill 2006. Establish secondary mortgage finance corporation. Produce 200,000 housing units annually. Install physical and social infrastructure in slums in 20

urban areas. Position the city of Nairobi as a 24 hour and all round

globally competitive city in business and tourism. Establish housing technology centres in each constituency

to increase access to decent housing

Establishment of forensic laboratory. Installation of surveillance cameras in Nairobi,

Mombasa, Nakuru and Kisumu.

Construction of six new prisons in Mwingi, Nyamira, Kwale, Rachuonyo, Vihiga and Kaloleni.

Establishment of a National Security Database.

JOH-KYA001-20070204-JvW-P1

FLAGSHIP PROJECTS IN SECURITY SECTOR

THANK YOU.THANK YOU.

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