Project Case Study
Promoting the sustainable development of Kenya’s extractive industries
Supporting DFID in designing an intervention to achieve sustainable growth in Kenya's extractives industry
Kenya’s economy has historically been dependent on low-value exports, but the country has an abundance of largely untapped natural resource wealth which has attracted considerable investor attention in recent years.
Flagship projects like Base Titanium’s Kwale Mineral Sands project, and the discovery in 2012 of over 300 million barrels worth of oil reserves announced by Tullow Oil and Africa Oil, signal the strong potential for growth in the sector with the possibility to create thousands of jobs for local people, which would generate extensive revenue.
According to government estimates, extractives currently contribute just 1% to Kenya’s GDP, which amounts to less than 2% of total export revenues. It is now estimated however that the sector may grow to provide 10% of GDP. The opportunity to use the sector to catalyse national development and economic growth requires careful planning at this critical stage.
To assist in this, on behalf of the Department for International Development (DFID), we were invited in 2013 to support Kenya in positioning itself as an attractive investment destination. This involved aligning regulation and governance of the sector with the devolved arrangements of the constitution adopted in 2010, and instituting requirements designed to make sure that the country derives value from the activities of its extractives industry. This urgency has been compounded by the need to position East Africa as an emerging hub for investment in the extractive sector, and the growing recognition that collaboration can create regional economies of scale. This is particularly important as Kenya will need to build a joint pipeline with Uganda if it wants to begin to export oil in the next few years.
Initially, we undertook a scoping study to assess the current status of the industry and outline the options for growth which Kenya could follow. After this 6-month initial stage, according to the recommendations of the survey, we designed a first phase of 18 months as a ‘fit for purpose’ intervention, which included several urgent measures and the scoping of a medium-term, 5 year programme. The over-arching objective of this intervention focuses on the benefits of the programme to local people, and is to create ‘a sustainable extractives sector which stimulates equitable wealth and job creation, moves Kenya towards middle-income status, and delivers to the large majority of Kenyans significant economic, health and social benefits now and in the future’.
In the short-term, this intervention will provide a solid basis for longer interventions by the Department for International Development and other development partners. It will begin implementing some of the most urgent work streams, including setting a country vision for the development of the extractive sector, rolling out a country-wide communications strategy and assessing the best models for community development frameworks in the next year. Over the next two years, the project will seek to promote, consolidate and manage the economic growth of the extractive industries, looking to strengthen the benefits for local people.