Donors postpone aid disbursement

Eleven months into the National Rainbow Coalition (Narc), investors are yet to make their first move. Whereas the government has elicited widespread goodwill because of it bold politico-economic reforms, it appears convincing the owners of capital to put money in the country in the short term was never going to be an easy job after all. The immediate causative factor has been the delayed clean bill of health from the Bretton Woods, viewed as crucial in guiding the investors. Early in November, the IMF board rescheduled a crucial meeting on Kenya that would have opened doors for programme aid from a raft of bilateral and multilateral donors. This followed demand of a fresh debt analyses on Kenya's external commercial and bilateral liability. True, IMF board just like that of the World Bank has laudatory remarks on the country. And it is expected to clear Kenya and provide quick disbursing aid. But the impression that things are not going as smoothly as should have been expected with the ouster of the Kanu regime is yet sending disconcerting vibes. It is clear though that investors are waiting for clear and concrete signals before they can put their money in East Africa's largest economy. With a 1.8 per cent growth in the economy, consumer purchasing power is not a pull factor for Kenya-indeed fear has struck the heart of the business community with independent survey indicating that sales for fast consumer goods hit an all-time low in August. Immediate dearth of consumer liquidity is attributed to suspension of procurement by the state and sealing of corruption loopholes, which used to fire heavy consumerism. This situation rather unfortunately has been juxtaposed against loud wrangles in the ruling coalition, which basically gummed together ethnically aligned parties to oust the corrupt Kanu regime: The question in many an investors mind is whether Narc can hold long enough to guarantee the much-needed stability. One of the major fundamental bottlenecks so far has been infrastructure-with the national power distributor Kenya Power & Lighting Company Ltd (KPLC) and telecom monopoly, Telkom Kenya topping the bill. Power in Kenya is more expensive than in competing Common Markets for Eastern and Southern Africa (Comesa) investment destinations of Egypt and, until recently, the crisis-wracked Zimbabwe. The problem with Kenya Power is that it losses a fifth of the power it pays for from suppliers through its rickety system while maintaining expensive Independent Power Producers. Announcement that it has struck a deal with state hydro-electricity power generator, KenGen, which capitalises its liability and reduces bulk tariffs by 25 per cent, is not expected to reduce the consumer cost any time soon. Telecom services are expensive due to the monopoly of the Telkom, blessed with antiquated equipment and overcharging for Internet backbone and international gateway services. Regulator communications Commission of Kenya (CCK) has advertised for expression of interests in a second national operator (SNO), which will probably spell death for the firm and usher in new efficient competitors. Another infrastructure cost factor is a tattered road network that received scant attention during the Moi Era. Major road transport arteries are in poor state and it is estimated that it will cost up to KES 80 billion ($1 billion) to beat them back to shape. Government has frozen the privatisation process awaiting legislation, dashing hopes of any quick-fix solutions for utility monopolies. Reemergence of sleaze allegations in the tendering process has also had many worried. This has featured names of prominent Narc politicians like Local Government Minister Karissa Maitha, Transport chief John Michuki, and Dr Mukhisa Kituyi of Trade and industry. Foreign investors will be keen to see how president Mwai Kibaki handles the reported wrongdoing. The purported sleaze has also hit the crucial Kenya Revenue Authority. A trend Kenya would wish to see halted though is increasing inflows of investment into neighboring Tanzania and Uganda at her expense. Both are powering on at a growth of average 6.2 per cent and appear to have a good measure of luck with natural resources. Tanzania has struck natural gas, diamond and gold while Uganda is expected drill oil. Tanzania' foreign investment from $192.8 million in 2000 jumped 16 per cent to $224 million last year. Kenya with exception of the $110 million invested by cellular firms in 2000 has seen little action. On the contrary, firms like South African Breweries international and other manufacturing firms have been pulling out due to poor demand and infrastructure. The only saving grace has been investment in the Export Processing Zones which have taken advantage of the African Growth and Opportunity Act (Agoa) which offers duty-free access for over 2,000 items to the US market. Positive signs are not completely absent though. Huge reduction in official corruption is likely to get the notice of foreign investors. Already, a good number of them have been making inquiries on investment. The purge on the judiciary is expected bear fruit, as arbitration on business disputes gets fairer. That said though, with the delay in awarding licence for the third mobile operator and the fact that an SNO is unlikely to be in place before June next year, it is clear that Kenya will close the first year of the new dawn with no major break. The Narc promise of creating 500,000 jobs annually rings in hollow in the country now experiencing more than 50 per cent adult unemployment. Lately, the influential East African Association enjoining British investors has asked the government to move with speed in removing the bottlenecks to investment.