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Building the future on a $20bn bet

By Parselelo Kantai in Nairobi
Posted on Thursday, 17 March 2011 11:29

A daring redevelopment plan, which will include a new regional port at Lamu, is being tested ?by Kenya’s new constitutional order and a nation wary of government infrastructure projects

Read more on tourism and telecoms in our Country Focus on Kenya.

The row over the government’s ambitious plans for a new regional port on the island of Lamu shows the benefits and the problems of the devolution provisions in Kenya’s new constitution. Plans for the port are part of a $20bn development that includes an oil refinery, new highways and railways that will link the area to Southern Sudan and Ethiopia. It would be one of the biggest regional integration initiatives in East Africa.

From the point of view of government and business interests in Nairobi, the project is essential for the development of the region. The government forecasts that Kenya’s GDP growth will rise to 5.7% in 2011 according to finance minister Uhuru Kenyatta – at least 1% higher than last year – and that the country’s fast-expanding service sector will continue to make up more than 60% of national income. The Lamu project is crucial to keeping that momentum going, according to the business lobby.

Local people, especially fishermen, see it differently. They complain that they were not consulted about the project’s environmental impact, and worry that outsiders will benefit most from the promised jobs. They hope to use some of the powers in the new constitution to get their case across to county authorities and central government, some 450km away in Nairobi.

Under the old order, the government’s development agenda was unquestioned. Administrators and planners routinely expropriated land for what they deemed to be essential infrastructure investments. Now, at least, citizens have right of redress. Entire communities have previously been victims of such developments: from the Endorois in the Rift Valley – who after 30 years of campaigning won a court victory last year to receive compensation for land taken to set up a wildlife park – to the Bajun in Lamu, whose soil was used to settle landless up-country Kenyans without any consultation.

This has become a major cause of political friction. The new constitution promises to curtail the exigencies of “big government”. Part of the devolution plan was to redraw provincial boundaries so they cut across ethnic fault lines, making the new elected county administrations both multi-ethnic and accountable.

In practical politics, it will still prove immensely difficult to balance the interests of marginalised minorities against the central government’s grand development plans.

A two-thirds majority approved the new constitution last August, and the promoters of the new fundamental law promised checks and balances, a genuine distinction of powers held by the three arms of government, and the devolution of powers from the centre to 47 elected county governments, which are due to receive about 15% of the national budget.

There will be also be a new upper house of parliament, the senate, to oversee county affairs. All these measures are to be implemented over the next five years: the current parliament still needs to pass some 50 pieces of legislation required by the new constitution. The new bicameral legislature will not be established until after the next elections, which are due in 2012.

How the Lamu development is managed will be a critical test of the new constitution. For Nairobi policymakers, the idea of a second port that has a far greater capacity than Mombasa’s Kilindini port is a timely one.

Kilindini has become a bottleneck for the region. Its annual maximum capacity is 25m tonnes of cargo, but increasing demand from Kenya, Uganda, Rwanda and the eastern Democratic Republic of Congo is estimated at 35m tonnes a year. The Lamu port, which will cost $3.5bn, will by contrast have a new refinery and three berths, compared to Kilindini’s one.

The new port is also designed to be the terminal for the planned oil pipelines from Southern Sudan and Uganda, while serving as a massive junction for highways and railways linking Kenya to Southern Sudan and Ethiopia, a project as grandiose as the Kenya-Uganda railway was in its time, a century ago.

The $20bn Lamu Port-Southern Sudan-Ethiopia Transport Corridor (LAPSSET) could help to rapidly modernise the East African economies. Both China and Japan are enthusiastic about the plan: China is offering to finance the construction of the port.

But there are problems with getting the people of Lamu to accept the port. They were not consulted during the planning and so regard the plan as yet another imposition from officials in Nairobi that may at the same time threaten their livelihoods.

Secrecy provokes indigene suspicion

The Lamu port project is a test case of how tensions between central government imperatives and community expectations are to be managed under the new constitution. However, the planners could learn from previous confrontations over Maasai and Kalenjin land in the Rift Valley.

The people of Lamu still feel the effects of previous politically convenient land resettlements, and suspect the Nairobi government’s motives. It does not help that the proposed port project has been shrouded in secrecy since the government announced it three years ago.

Land prices around the proposed port site are soaring, and there are rumours circulating about potentially forced relocation of local communities. The forest area in the Manda Bay is central to the livelihoods of the 5,000-strong Boni community, but fears are growing that they will be forced off their ancestral lands. Other Lamu indigenes can find only the most rudimentary information about the port project and its social implications.

The site of the proposed port, in Manda Bay, serves as the main fishing grounds for 25,000 fishermen. The inlet creeks within the bay are the only spawning grounds for prawns and lobsters along the Kenyan coast. Dredging up of the coral reef will, say environmentalists, destroy the delicate ecosystem on which the fishermen and their communities depend.

Although the building of the port, highways and railways will create new jobs and economic growth, many in Lamu fear it will be at the cost of destroying the local fishing industry and some of the tourism industry, which are currently the key providers of jobs.

Few would argue against improving the infrastructure in the area: the questions are where and how. With an East African regional population of close to 125m and a market heading towards closer integration, governments are determined to modernise roads and railways – many of which have not been substantially improved over the last 50 years.

In Kenya, the government plans to build 64,000km of new roads at a cost of some $4.5bn. It plans to raise money through bond issuances and use finance from Chinese companies, which are already building the eight-lane Nairobi-Thika highway.

In the new dispensation, it will be the local politics of development that will provide the bigger dilemma. Investors – both local and foreign – are puzzling over a future with new devolved government structures. Soon after the passing of the new constitution, there was talk of counties formulating independent tax systems and imposing new taxes on goods in transit.

The fears proved unfounded and were sparked by a misreading of the provisions for devolution, which allow counties to raise funds through property taxes and county levies but not via income or value-added taxes, which remain the preserve of the central government.

Economist David Ndii, who helped draft the clauses on revenue allocation and finance in the new constitution, says that many businesses have misinterpreted the real objectives of devolution. He added that many Kenyans wrongly regard the new constitution as federalism, not just devolution.

“It is a decentralisation of service delivery rather than of raising revenue,” he explains. “Many investors have not read the constitution. That’s what is creating all the confusion.”?Aside from such misunderstandings, the new county authorities will still provide an important channel of communication to central government, and will even have substantial funds of their own to launch new development projects. For both the counties and the government in Nairobi, the Lamu project will be one of the first high-stakes tests of the new system.

This article was first published in the February 2011 edition of The Africa Report.

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