Kenya Economic Report 2020

KENYA ECONOMIC
REPORT 2020
Creating an Enabling Environment

for Inclusive Growth in Kenya
To create a globally competitive and prosperous nation with a high quality of life by 2030
KENYA ECONOMIC REPORT 2020
© 2020 Kenya Institute for Public Policy Research and Analysis (KIPPRA)
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ISBN 978 9966 817 32 7
Other Available Kenya Economic Reports
2019: Resource Mobilization for Sustainable Development of Kenya
2018: Boosting Investments for Delivery of the Kenya Vision 2030
2017: Sustaining Kenya’s Economic Development by Deepening and Expanding Economic Integration in
the Region
2016: Fiscal Decentralization in Support of Devolution
2015: Empowering Youth through Decent and Productive Employment
2014: Navigating Global Challenges While Exploiting Opportunities for Sustainable Growth
2013: Creating an Enabling Environment for Stimulating Investment for Competitive and Sustainable
Counties
2012: Imperatives for Reducing the Cost of Living in Kenya
2011: Transformative Institutions for Delivering Kenya Vision 2030
2010: Enhancing Sectoral Contribution towards Reducing Poverty, Unemployment
ii
C CONTENTS
Statement By Cabinet Secretary, the National Treasury and Planning........................................................... xi

Foreword....................................................................................................................................................... xii
Preface...........................................................................................................................................................xiii
Acknowledgements.......................................................................................................................................xiv
Abbreviations and Acronyms........................................................................................................................ xv
Executive Summary.......................................................................................................................................xix
1. Introduction............................................................................................................................................. 1
2. Macroeconomic Performance ................................................................................................................. 3
3. Growth And Inclusivity in a Devolved System of Government ............................................................. 38
4. Medium-Term Economic Prospects for Kenya....................................................................................... 53
5. Enhancing Financial Inclusion for Inclusive Growth............................................................................... 64
6. Inclusivity and Trade.............................................................................................................................. 82
7. Contribution of Agriculture to Food and Nutrition Security and Inclusive Growth............................... 96
8. Enabling Inclusive Growth through Access to Affordable, Reliable,
Sustainable and Modern Energy Sources............................................................................................ 121
9. Promoting Social Mobility and Inclusive Growth: The Role Of Social Protection................................ 146
10. Governance In Inclusive Growth.......................................................................................................... 166
11. Partnerships for Inclusive Growth........................................................................................................ 200
12. Conclusions and Recommendations................................................................................................... 217
References................................................................................................................................................... 224
Annex.......................................................................................................................................................... 230
iii
F FIGURES AND TABLES
Figures
Figure 2.1: Annual real GDP and real GDP per capita growth and poverty rates............................................ 4
Figure 2.2: Overall poverty at national level and by residence, 1997/98-2015/16.......................................... 5
Figure 2.3: Trends in hardcore poverty at national and residence level........................................................... 5
Figure 2.4: Poverty by age groups: 2015/16.................................................................................................... 6
Figure 2.5: Overall poverty by sex of household head.................................................................................... 6
Figure 2.6: Consumption expenditure share by quintiles (%)........................................................................... 7
Figure 2.7: Employment and real GDP growth................................................................................................ 8
Figure 2.8: Employment to population ratio (%).............................................................................................. 9
Figure 2.9: Share of employment by sector..................................................................................................... 9
Figure 2.10: Share of wage employment by industry, 2019 (%)..................................................................... 10
Figure 2.11: Wage employment by industry and gender, 2019 (%)............................................................... 10
Figure 2.12: Labour productivity growth........................................................................................................ 11
Figure 2.13: Kenya labour productivity gap analysis: 2000-2018.................................................................. 12
Figure 2.14: Unemployment by age category, and by gender and residence, 2015/16............................... 13
Figure 2.15: Quarterly economic growth rates (%)......................................................................................... 14
Figure 2.16: Kenya’s supply side growth analysis........................................................................................... 15
Figure 2.17: Sectoral quarterly growth rates (%), 2018-2019......................................................................... 16
Figure 2.18: Contribution of demand side to growth (%) (2-year averages).................................................. 17
Figure 2.19: CFC Stanbic Purchasing Managers’ Index, Kenya..................................................................... 18
Figure 2.20: Monthly inflation rates, 2018-2019............................................................................................ 20
Figure 2.21: Inflation trends across income groups in Nairobi (%)................................................................. 21
Figure 2.22: Inflation trends by region........................................................................................................... 22
Figure 2.23: National Government expenditure by selected functions (% of total expenditure)................... 24
iv
Figure 2.24: Social protection spending by categories, 2013/14-2018/19.................................................... 25

Figure 2.25: Debt service and social spending, 2014/15-2018/19................................................................ 27
Figure 2.26: Trade in goods and services, US$ millions................................................................................. 29
Figure 2.27: Kenya’s major exports and remittances...................................................................................... 29
Figure 2.28: Kenya’s major exports and remittances (% of GDP)................................................................... 30
Figure 2.29: Balance of payment cumulative flows (US$ millions)................................................................. 31
Figure 2.30: Trends in months of import cover and official reserves (US$ millions)....................................... 32
Figure 2.31: Trend of interbank rate and CBR (%), 2015-2020....................................................................... 33
Figure 2.32: Trend in commercial banks’ interest rates.................................................................................. 33
Figure 2.33: Annual growth rate of credit (%)................................................................................................ 34
Figure 3.1: Average real GCP growth rate, 2014-2017 (%)............................................................................ 39

Figure 3.2: County real GCP, 2017 (Ksh millions)........................................................................................... 39
Figure 3.3: County average contribution to GDP, 2014-2017 (%).................................................................. 40
Figure 3.4: Average real GCP per capita growth rate, 2014-2017 (%)........................................................... 40
Figure 3.5: Real GCP per capita, 2017 (Ksh).................................................................................................. 41
Figure 3.6: Economic activities at county level (% share), 2017..................................................................... 42
Figure 3.7: Population size by county............................................................................................................ 42
Figure 3.8: County population growth rates.................................................................................................. 43
Figure 3.9: Household size by county, 2019................................................................................................... 43
Figure 3.10: County population proportion by gender (%)............................................................................ 44
Figure 3.11: Overall poverty headcount across counties, 2015/16................................................................ 45
Figure 3.12: Food poverty by county 2015/16............................................................................................... 45
Figure 3.13: Hardcore poverty rate by county, 2015/16................................................................................ 46
Figure 3.14: Actual number of hardcore poor by county (‘000)..................................................................... 46
Figure 3.15: County share of equitable transfers (%), 2013/14-2018/19........................................................ 47
Figure 3.16: County share of conditional grants to total transfers (%), 2013/14-2018/19............................. 48
Figure 3.17: County own source revenue share............................................................................................. 48
Figure 3.18: Share of county spending by economic classification (%), 2013/14-2018/19............................ 49
Figure 3.19: County Government expenditure by function (% of total expenditure)..................................... 50
Figure 3.20: County and National Government spending (% of GDP)....................................................... 50
v
Figure 4.1: County average growth rates, 2014-2017............................................................................... 58

Figure 4.2: County annual growth rates, 2015-2017................................................................................. 59
Figure 4.3: County growth projections...................................................................................................... 61
Figure 5.1: Financial access by gender, youth and counties..................................................................... 69

Figure 5.2: Nearest financial institution..................................................................................................... 73
Figure 5.3: Banks branch network per county as at December 2018........................................................ 74
Figure 5.4: Distribution of micro-finance institutions................................................................................ 75
Figure 5.5: Distribution of savings and credit cooperative societies......................................................... 75
Figure 5.6: Most trusted financial provider............................................................................................... 76
Figure 5.7: Financial literacy...................................................................................................................... 77
Figure 5.8: Average cost to the nearest financial provider, bank, and mobile money agent.................... 78
Figure 6.1: Kenya’s balance of trade, 2014-2019...................................................................................... 83

Figure 6.2: Trade in services, 2018-2019................................................................................................... 84
Figure 6.3: Modern sector employment by gender (%)............................................................................ 86
Figure 6.4: Wage employment by industry and gender, 2019 (%)............................................................ 87
Figure 6.5: Wage employment in wholesale and retail trade by gender, 2010-2019............................... 87
Figure 6.6: Wage employment in the agriculture sector by gender, 2010-2019...................................... 88
Figure 6.7: Wage employment in the manufacturing sector by gender, 2010-2019................................ 88
Figure 7.1: Real agricultural growth rate, 2014-2019................................................................................ 98

Figure 7.2: Trend of growth agricultural output, 2015-2019..................................................................... 99
Figure 7.3: Proportion of input use, 2011-2019...................................................................................... 100
Figure 7.5: Amount of pesticide use in agriculture................................................................................. 103
Figure 7.6: Proportion of crop pesticides use by type, 2011-2018......................................................... 103
Figure 7.7: Manufactured feeds, 2011-2018........................................................................................... 105
Figure 7.8: Proportion of animal pesticide use by type, 2011-2018....................................................... 105
Figure 7.9: Marketed agricultural production at current prices, 2014-2018........................................... 111
Figure 7.10: Food poverty estimates by county....................................................................................... 118
Figure 7.11: County poverty head count (%) and GCP per capita............................................................ 118
Figure 8.1: Map of targeted counties under Kenya Off-grid Solar Access Programme (K-OSAP).......... 123
Figure 8.2: Percentage share of electricity generated capacity, 2008-2019 (GWh)................................ 125
vi
Figure 8.3: Percentage share of electricity installed capacity, 2008-2019 (MW)..................................... 125
Figure 8.4: Percentage share of electricity effective capacity, 2010-2019 (MW)..................................... 126
Figure 8.5: Transmission and distribution losses, 2008-2019 (GWh)....................................................... 127
Figure 8.6: Transmission and distribution losses as a percentage of generated capacity (GWh)........... 128
Figure 8.7: Power outages and related losses across firms in Kenya with comparators......................... 128
Figure 8.8: Electricity demand across various end-user categories, 2008-2018..................................... 131
Figure 8.9: Share of total physical energy use at household level for various sources, 2019................. 132
Figure 8.10: Quantity of fuelwood and charcoal sold, 2014-2018 (‘000 stacked cubic metres)............... 133
Figure 8.11: Percentage distribution of households by primary energy source for
lighting at national level........................................................................................................ 134
lighting in urban areas........................................................................................................... 134
lighting in rural areas............................................................................................................. 135
Figure 8.14: Percentage distribution of households with access to electricity
as the primary energy source for lighting across counties.................................................... 135
Figure 8.15: Percentage distribution of households with usage of kerosene as the
main source for lighting across counties............................................................................... 136
cooking at national level....................................................................................................... 137
cooking in rural areas............................................................................................................ 137
cooking in urban areas.......................................................................................................... 138
Figure 8.19: Percentage distribution of households using firewood as the primary
source for cooking across counties....................................................................................... 138
Figure 8.20: Percentage distribution of households with using charcoal as the primary
resource for cooking across counties.................................................................................... 139
Figure 8.21: Percentage distribution of households with using kerosene as the primary
Figure 8.22: Percentage distribution of households with using LPG as the primary
Figure 8.23: Mean monthly per adult equivalent energy consumption expenditure
by income groups (quantiles) across rural and urban areas (%)............................................ 141
Figure 8.24: Mean weekly time spent in acquiring various energy sources by
women, men and children..................................................................................................... 143
vii
Figure 9.1: Percentage of individuals aged 3 to 24 years who have ever attended
school by household income quintile................................................................................... 147
Figure 9.2: Percentage of individuals aged 3 to 24 years who ever attended school
for the highest and lowest quintile by county....................................................................... 147
Figure 9.3: Educational attainment of 15-year-olds by parent educational background........................ 148
Figure 9.4: Educational attainment of 19-year-old young adults by parents’
educational background....................................................................................................... 149
Figure 9.5: Proportion of 15-year olds having KCPE qualification by parents’ education...................... 149
Figure 9.6: Education status for young adults aged 21-23 years by income group of
households (low, middle and high)....................................................................................... 151
Figure 9.7: Percentage of young adults aged 21-22 years not attending school or
academic institution by income group of household (low, middle and high)....................... 151
Figure 9.8: Percentage of individuals working for a wage, salary or in internship by
age and income (low, middle and high) of household.......................................................... 152
Figure 9.9: Proportion of individuals self-reported to be able to read and write in
any language by county........................................................................................................ 153
Figure 9.10: Proportion of individuals sick or injured in the last four weeks and place
of diagnosis–by income group (quintile)............................................................................... 154
Figure 9.11: Proportion of individuals reporting illness/injury covered by
health insurance and proportion that received free medical care
in the last 12 months by income group................................................................................ 155
Figure 9.12: Proportion of individuals covered by health insurance in the last
12 months by county............................................................................................................. 155
Figure 9.13: Proportion of individuals that received free medical care in the last
12 months by county and income status.............................................................................. 156
Figure 9.14: Proportion of extremely poor households and other households by
number of orphans................................................................................................................ 159
Figure 9.15: Proportion of extremely poor households and other households with
OVC receiving cash transfers to OVC from the Government............................................... 160
Figure 9.16: Overall poverty and food poor households by age group of household head.................... 161
Figure 9.17: Distribution of the number of elderly in households............................................................ 161
Figure 10.1: Total CDF allocations by county, 2013-2018......................................................................... 175

Figure 10.2: Status of representation of PWDs by Job Grade, 2018-2019 .............................................. 191
Figure 10.3: Gender representation by service sector and level, 2016/17............................................... 194
Figure 10.4: Gender representation at various job group levels, 2018/19............................................... 1 9 4
Figure 11.1: Disentangling partnerships................................................................................................... 206
viii
Tables
Table 2.1: Kenya’s key macroeconomic and inclusive growth indicators...................................................... 3
Table 2.2: Gini index for select countries (%)................................................................................................ 7
Table 2.3: Total investments and savings, current prices (Ksh millions)....................................................... 18
Table 2.4: Overall PPI and inflation rates..................................................................................................... 22
Table 2.5: Government revenue for 2017/18 and 2018/19 (Ksh millions)................................................... 23
Table 2.6: Government expenditure for 2016/17-2018/19 (Ksh millions)................................................... 24
Table 2.7: Kenya’s public debt, 2017/18-2018/19....................................................................................... 26
Table 2.8: Kenya’s debt by holder............................................................................................................... 26
Table 2.9: Debt sustainability indicators (%)................................................................................................ 28
Table 4.1: Economic projections for 2019-2022.......................................................................................... 55
Table 4.2: Economic projections for 2019-2022 (with risks materializing)................................................... 57

Table 4.3: Projections for GCP 2018-2022.................................................................................................. 60
Table 4.4: County sectors with high value added, 2017............................................................................. 61
Table 5.1: Access to savings........................................................................................................................ 70

Table 5.2: Access to credit/loans................................................................................................................. 71
Table 5.3: Access to insurance.................................................................................................................... 72
Table 5.4: National Government initiatives................................................................................................. 78
Table 5.5: County Government initiatives................................................................................................... 79
Table 6.1: Contribution of wholesale and retail trade to GDP and employment, 2014-2018..................... 86
Table 6.2: Females with disability by economic activity and domain.......................................................... 89
Table 6.3: Males with disability by economic activity and domain.............................................................. 90
Table 6.4: Women-owned or managed exporting firms (%), by country, 2010-2014.................................. 92
Table 6.5: Women-owned or managed exporting firms, by country, 2010-2014........................................ 92
Table 6.6: Priority services liberalization in various RECs............................................................................ 93
Table 7.1: ASTGS focus areas and mid-term targets................................................................................... 97

Table 7.2: Source of fertilizer at household level by type (%).................................................................... 101
Table 7.3: Source of fertilizer at household level by type for smallholders (0-5 ha) (%)............................ 101
ix
Table 7.4: Source of seed used by households by type of smallholder (0-5ha) (%).................................. 102
Table 7.5: Farm structure in the country.................................................................................................... 106
Table 7.6: Proportion of farm structure by county..................................................................................... 107
Table 7.8: Gross marketed production from large and small farms, 2012-2018....................................... 110
Table 7.9: Membership of cooperative societies by type of society, 2013-2018 (%)................................ 112
Table 7.10: Trends in food availability per capita, 2014-2018..................................................................... 114
Table 7.11: Food losses............................................................................................................................... 115
Table 7.12: Causes of food losses at household level (%) by county.......................................................... 116
Table 7.13: Causes of food losses during storage at household level (%) by county.................................. 117
Table 8.1: Components of K-OSAP programme....................................................................................... 124

Table 8.2: Tracking progress in inclusivity of the retail electricity tariff structures for
domestic and small commercial consumers, 2013-2019.......................................................... 129
Table 8.3: Number of customers connected to electricity, 2008-2018..................................................... 131
Table 8.4: Mean monthly per adult equivalent energy consumption
expenditure among poor and non-poor across counties......................................................... 141
Table 9.1: Type, objective, eligibility criteria, eligible population and

coverage of the main social protection programmes in Kenya................................................ 157
Table 9.2: Mean cash transfers received from the National Government by
extremely poor households and other households in the last 12 months................................ 162
Table 10.1: County budget estimates, 2015-2018...................................................................................... 171
Table 10.2: NGAAF funds disbursed since inception, 2014-2017 (Ksh millions) ........................................ 177
Table 10.3: Policies and legislation on inclusivity and representation within the public service................. 179
Table 10.4: Institutional frameworks on representation and inclusivity....................................................... 181
Table 10.5: Ethnic representation in the public service............................................................................... 182
Table 10.6: Counties that complied with the County Governments Act in
new recruitments, 2013-2016................................................................................................... 185
Table 10.7: Counties that contravened the County Governments Act in
new appointments, 2013-2016................................................................................................. 185
Table 10.8: Ethnic composition in County Governments............................................................................ 186
Table 10.9: Representation of PWDs in the Public Service by service sector, 2016-2018........................... 190
Table 10.9: Gender representation by service sector in the Public Service, 2016-2018 ............................ 193
Table 11.1: Private sector associations in Kenya.......................................................................................... 209
x
STATEMENT BY CABINET SECRETARY, THE NATIONAL

TREASURY AND PLANNING
T
he Kenya Economic Report (KER) 2020 is the Additionally, Kenya has made notable progress
twelfth in a series of the Kenyan economy in poverty reduction in the last two decades, with
annual reports prepared by the Kenya poverty rate dropping from 52.3 per cent in 1997/98
Institute for Public Policy Research and to 36.1 per cent in 2015/16. This has been driven by
Analysis (KIPPRA), pursuant to the KIPPRA Act No. a robust growth averaging 3.9 per cent during that
15 of 2006. The theme of the KER 2020 is “Creating period. Despite the good progress, inequality levels
an Enabling Environment for Inclusive Growth in remain high across gender and regional dimensions.
Kenya”. The overriding objective of the Report is Females face higher unemployment and poverty
motivated by the Government’s quest for a strong rates than their male counterparts. Poverty is more
foundation for broad-based economic growth and pronounced in rural areas than in urban settings.
development, as envisioned in the Constitution of The country cannot attain sustained growth without
Kenya, the Kenya Vision 2030, the Third Medium- structural transformation to create productive
Term Plan and the “Big Four” agenda. The emphasis employment opportunities in the economy, which is
on inclusive growth is reflected in Kenya’s global crucial for poverty reduction.
and regional development commitments, namely:
the Sustainable Development Goals (SDGs), the With devolution, County Governments will continue
Africa Union Agenda 2063, and the East African to play a critical role in enhancing inclusion. Some
Community (EAC) Vision 2050. of the devolved functions such as health, early
childhood education and agriculture are important
Kenya has been experiencing a strong and stable for inclusive growth. It is, therefore, important
economic growth in the recent past. The country that County Governments increase spending in
registered an economic growth rate averaging these sectors. However, counties still face revenue
5.6 per cent for the period 2014 to 2019. This mobilization challenges and depend heavily on
is a strong recovery from the 1.5 per cent growth exchequer releases. In 2018/19, only seven (7)
recorded in 2008. This recovery is a result of a sound counties managed to collect more than Ksh 1 billion,
macroeconomic environment, political stability, implying that own source revenue collections are low.
heavy infrastructural public investments and growth To ensure adequate revenue collection by counties,
in domestic demand. Growth in the last four years it is important to ensure full automation of revenue
was 5.9 per cent in 2016, 4.9 per cent in 2017, collections systems to seal revenue leakages.
6.3 per cent in 2018 and 5.4 per cent in 2019. To
cushion the economy against major shocks arising From the foregoing, it is evident that the Government
from uncertain weather, desert locusts and other requires to take deliberate actions to deliver inclusive
global challenges such as coronavirus pandemic, it is and sustainable growth. It is my hope that this Report
imperative to strengthen efforts towards maintaining will contribute to policy discourse in the country and
macroeconomic stability, fiscal prudency, and beyond.
political stability.
Hon. (Amb.) Ukur Yatani, EGH

Cabinet Secretary
National Treasury and Planning
xi
FOREWORD
E
very year, KIPPRA assesses the country’s Agenda 2063 and the East African Community Vision
economic performance and provides medium- 2050.
term prospects for the next three-years. To
ensure quality control while conducting this On behalf of KIPPRA Board of Directors and on
exercise, KIPPRA engages stakeholders at various my own behalf, I wish to sincerely commend
stages of drafting the Kenya Economic Report. In the Executive Director and KIPPRA staff for their
addition, the Report is shared with both statutory devotion, dedication and timely production of this
and other stakeholders to capture their views and report. It is evident that time and resources have been
validate the report. spent towards this process. I also wish to express our
gratitude to all the stakeholders who participated in
The Kenya Economic Report 2020 centres on any stage of the development of this report for their
“Creating an Enabling Environment for Inclusive treasured comments and suggestions, which went a
Growth in Kenya”. The theme of the Report is long way in enriching the report.
motivated by the Government’s quest for a wide
shared economic growth, as envisioned in the Lastly, I wish to take this opportunity to more sincerely
Constitution of Kenya, Kenya Vision 2030, Third thank the Government of Kenya and the National
Medium-Term Plan and the “Big Four” agenda. Treasury and Planning for their continued financial
The report also takes into consideration global support to KIPPRA. This has enabled the Institute
and regional development frameworks such as to fulfil its mandate as stipulated in the KIPPRA Act
Sustainable Development Goals, the African Union 2006.
Dr Linda Musumba Chairperson

KIPPRA Board of Directors
xii
PREFACE
T
he KIPPRA Act 2006, under Part V Section 23 since independence. However, this growth has not
(3), requires the Institute to produce an annual resulted in reduced inequality; instead, there has
Kenya Economic Report that analyses Kenya’s been growing inequality, with the gap between the
economic performance and the country’s poor and rich increasing. Labour underutilization is
economic prospects for the next three financial now a growing concern particularly among the youth
years. Annually, the Kenya Economic Report revolves compared to other age cohorts. This is compounded
around a central theme aligned to the Government’s by the increasing rural-urban divide, gender and
development agenda and analyzed from various social inequalities, and regional disparities. This
sectoral focal points. The report provides evidence- calls for Government action to make deliberate,
based policy proposals to the Government to targeted, resolute and systematic interventions that
support it in addressing the development issues at will deliver the desired growth, which is inclusive and
national and county level and provide input into sustainable. A conducive environment is important
evidence-based decision making. as it provides the foundation and structures for the
realization of the Government’s agenda for inclusive
The theme of the Kenya Economic Report 2020 is growth.
“Creating an Enabling Environment for Inclusive
Growth”. The objective is to provide insights into the In considering the totality of aspects that are critical
foundations for broad-based economic growth and to the realization of inclusive growth, the report
development. Inclusive growth aims at advancing assesses inclusivity in economic growth and in a
equal economic opportunities to all stakeholders devolved system of government. It delves into the
in development processes, thus promoting pro- role of financial inclusivity in promoting inclusive
poor approaches anchored on participation and growth, and inclusivity in domestic and international
contribution of all members of society. The theme trade. The report also looks at how social protection
of the Kenya Economic Report 2020 is motivated interventions can be used to enhance social
by the Government’s quest for shared prosperity, mobility, equity and inclusivity. Further, it analyses
as envisioned in the Kenya Vision 2030, which how access to affordable, reliable, sustainable and
promotes implementation of policies that promote modern energy sources can be harnessed as a key
broad-based inclusive growth. This is further stated infrastructural input for economic growth, and the
in the Third Medium-Term Plan (MTP III) and the “Big contribution of agriculture and food security. Lastly,
Four” agenda. The emphasis of inclusive growth is the report reviews the importance of governance as a
reflected in the global and regional development prerequisite for inclusive growth, and the contribution
commitments, namely: the Sustainable Development of partnerships for economic development.
Goals (SDGs), Africa Agenda 2063 and the EAC
Vision 2050. The report recommends that Government efforts
be supported by an enabling policy environment
Kenya has made notable progress in poverty through appropriate sectoral policies, laws and
reduction in the last two decades, indicating that regulations, and strong institutional frameworks that
the country’s economy has continued to grow create a conducive environment for shared growth.
Dr Rose W. Ngugi
Executive Director KIPPRA
xiii
ACKNOWLEDGEMENTS
A ACKNOWLEDGEMENTS
T
he preparation and publication of the Kenya report, and for actively participating in quality control
Economic Report (KER) 2020 benefited seminars. Appreciation also goes to the Finance,
from inputs of different individuals and key Human Resources, Supply Chain Management
institutions. and Knowledge Management and Transport
Departments for providing valuable support to
We acknowledge the KIPPRA Board of Directors, and
ensure timely completion of the report.
the Executive Director Dr Rose Ngugi, for providing
the overall leadership and oversight in preparation KIPPRA also wishes to extend, most sincerely, special
of this report. appreciation to all Ministries, State Departments
and Government Agencies that availed the data and
The Kenya Economic Report 2020 report was
information used in this report. We are particularly
prepared by a Technical Committee comprising
grateful for the expert advice by statutory partners
Mr James Ochieng’ (Chairman), Ms Beverly Musili
including The National Treasury and Planning, Central
(Secretary), Mr Muleli Mutuku, Mr Boaz Munga, Ms
Bank of Kenya, Kenya Revenue Authority, and Kenya
Nancy Laibuni, Ms Charity Mbaka and Dr Eliud Moyi.
National Bureau of Statistics. To all other stakeholders
The committee was supported by Dr Christopher
who participated in the various workshops and in
Onyango and Mr Benson Kiriga who drafted two of
different capacities, your contributions are highly
the chapters at the initial stages. Special thanks go
appreciated. The preparation of this report was made
to KIPPRA researchers from all research departments
possible through financial support to KIPPRA by the
for their contributions to various chapters of the
Government of Kenya and development partners.
xiv
ABBREVIATIONS AND ACRONYMS
ABBREVIATIONS AND
A ACRONYMS
ACP-EU African Caribbean Pacific - European CPI Consumer Price Index

Union
CPSBs County Public Service Boards
ADF African Development Fund
CRA Commission for Revenue Allocation
AfCFTA African Continental Free Trade Area
CSO Civil Society Organizations
AfDB African Development Bank
CT-OVC Cash Transfers to Orphans and
AGOA African Growth and Opportunity Act Vulnerable Children
AGPO Access to Government Procurement CT-PwSD Cash Transfers to Persons with Severe
Opportunities Disabilities
AIA Appropriations-in-Aid DFRD District Focus for Rural Development
AIDS Acquired Immune Deficiency Syndrome DFS Digital Financial Services
AMISOM African Union Mission in Somalia EAC East Africa Community
APRM African Peer Review Mechanism ENNDA Ewaso Ng’iro North Development
Authority
ASAL Arid and Semi-Arid Land
ENSDA Ewaso Ng’iro South Development
ASDS Agricultural Sector Development
Authority
Strategy
EPA Economic Partnership Agreement
ASTGS Agriculture Sector Transformation and
Growth Strategy EPRA Energy and Petroleum Regulatory
Authority
AU African Union
EPZ Export Processing Zone
BoP Balance of Payment
ERS Economic Recovery Strategy
CARE Care International Kenya
EU European Union
CBK Central Bank of Kenya
FAO Food and Agriculture Organization
CBR Central Bank Rate
FAOSTAT FAO Statistics
CDA Coast Development Authority
FBO Faith-Based Organizations
CDD Community-Driven Development
FDI Foreign Direct Investment
CDF Constituency Development Fund
FEC Fuel Energy Cost
CED Community Economic Development
FKE Federation of Kenya Employers
CoG Council of Governors
GCP Gross County Product
COMESA Common Market for Eastern and
Southern Africa GDP Gross Domestic Product
xv
GNI Gross National Income K-OSAP Kenya Off-grid Solar Access

Programme
GoK Government of Kenya
KPLC Kenya Power and Lighting Company
Ksh Kenya Shilling
HIV Human Immunodeficiency Virus
KTMM KIPPRA Treasury Macroeconomic
IBEC Inter-Governmental Budget Economic
Model
Council
KVDA Kerio Valley Development Authority
ICDC Industrial and Commercial
Development Corporation LASDAP Local Authority Service Delivery Action
Plan
ICT Information and Communication
Technology LATF Local Authority Transfer Fund
IDA International Development Association LBDA Lake Basin Development Authority
IFAD International Fund for Agricultural LED Light-Emitting Diode
Development LMCP Last Mile Connectivity Project
IGAD Inter-Governmental Authority on LPG Liquified Petroleum Gas
Development
MDA Ministries, Departments and Agencies
IGRTC Inter-Governmental Relations Technical
Committee MFI Micro Finance Institution
ILO International Labour Organization MoALF Ministry of Agriculture, Livestock and

Fisheries
ILOSTAT ILO Statistics
MPs Members of Parliament
IMF International Monetary Fund
MSMEs Micro, Small and Medium Enterprises
IOR-ARC Indian Ocean Rim-Association of
Regional Cooperation MTP Medium-Term Plan
IPP Independent Power Producers NCCK National Council of Churches of Kenya
IRCK Inter-Religious Council of Kenya NCIC National Cohesion and Integration

Commission
ISFM Integrated Soil Fertility Management
NCPWD National Council for Persons with
KAINET Kenya Agricultural Information Network Disability
KCPE Kenya Certificate of Primary Education NEPAD New Partnership for Africas
KCSE Kenya Certificate of Secondary Development
Education NES National Electrification Strategy
KDF Kenya Defense Forces NGAAF National Government Affirmative
KEEP Kenya Electricity Expansion Project Action Fund
KEPOFA Kenya Poultry Farmers Association NG-CDF National Government Constituencies
Development Fund
KEPSA Kenya Private Sector Alliance
NGEC National Gender and Equality
KER Kenya Economic Report
Commission
KIHBS Kenya Integrated Household Budget
NGO Non-Governmental Organization
Survey
NHIF National Hospital Insurance Fund
KIPPRA Kenya Institute for Public Policy
Research and Analysis NIB National Irrigation Board
KNBS Kenya National Bureau of Statistics
xvi
NSSF National Social Security Fund Community

ODA Overseas Development Assistance SDGs Sustainable Development Goals
OECD Organization for Economic Co- SEZ Special Economic Zone
operation and Development
SFR Strategic Food Reserve
OPCT Older Persons Cash Transfer
SHS Solar Home Systems
OSR Own Source Revenue
SMEs Small and Medium Enterprises
OVCs Orphaned and Vulnerable Children
SRDP Special Rural Development Programme
PBO Public Benefit Organizations
SUPKEM Supreme Council of Muslims of Kenya
PFM Public Finance Management
TARDA Tana and Athi River Development
PMI Purchasing Managers Index Authority
POPs Persistent Organic Pollutants TB Tuberculosis
PPD Public-Private Dialogue UFA Universal Financial Access
PPI Producer Price Index UHDR Universal Declaration of Human Rights
PPPs Public-Private Partnerships UK United Kingdom
PPRA Public Procurement Regulatory UN United Nations
Authority
UNCRPD United Nations Convention on the
PSC Public Service Commission Rights of Persons with Disability
PWDs Persons with Disabilities UNDP United Nations Development
RDAs Regional Development Authorities Programme
RDF Rural Development Fund UNSC United Nations Security Council
RECs Regional Economic Communities USA United States of America
REP Rural Electrification Programme VAT Value Added Tax
REREC Rural Electrification and Renewable WARMA Water Resource Management Authority
Energy Corporation WEF Women Enterprise Fund
RISE Regulatory Indicators for Sustainable WGB World Bank Group
Energy
WSSD World Summit on Sustainable
SACCOs Savings and Credit Cooperative Development
Societies
WTO World Trade Organization
SADC Southern African Development
YEDF Youth Enterprise Development Fund
xvii
xviii
E EXECUTIVE SUMMARY
Macroeconomic Performance Inequality in household consumption is higher in

peri-urban areas. According to the Basic Report
Kenya has made remarkable progress in poverty on Well-Being in Kenya 2015/16, the richest
reduction in the last two decades. However, there households consume 159 times more than the
is need to accelerate the pace of poverty reduction poorest households. At national level, the richest
in achieving inclusivity. The economy experienced a households’ consumption expenditure is 17 times
robust growth averaging 3.9 per cent between 1997 higher than the poorest households. However,
and 2016. Poverty rate dropped from 52.3 per cent in inequality in household consumption is less severe
1997/98 to 46.8 per cent in 2005/06 and eventually in rural households, where the share of consumption
to 36.1 per cent in 2015/16. Thus, poverty reduction of the richest households is just 4 times that of the
rate averaged 0.8 per cent per year as compared to poorest. With a Gini index of 40.8 per cent, Kenya
3.9 per cent growth rate realized between 1997 and ranks lower than other low middle-income countries
2016. in terms of income distribution. High inequality
levels in a country may slow the growth momentum.
Rural poverty level remains higher, with poverty
reduction pace slower than in peri-urban and core Labour is concentrated in sectors with low
urban areas. As of 2015/16, rural poverty was 40.0 productivity. For instance, with the agricultural sector,
per cent compared to the national average of 36.1 which exhibited declining productivity between year
per cent, and poverty in peri-urban and core urban 2000 and 2019, employing the largest proportion.
areas was at 27.5 and 29.4 per cent, respectively. The share of agricultural labour productivity in
Between 1997/98 and 2015/16, rural poverty total factor productivity decelerated from 64.0 per
dropped by 12.8 percentage points compared to cent in 2000 to 41.0 per cent in 2019, while its
21.5 and 19.8 percentage points for peri-urban and employment share increased from 49.0 per cent in
core urban areas, respectively, implying that poverty 2000 to 55.0 per cent in 2019. The industrial and
reduction in rural areas is slow. Nationally, child services sectors, whose productivity grew from 169.0
poverty is higher than any other age cohort and and 124.0 per cent, in 2000 to 249.0 and 156.0 per
more pronounced in rural areas. In 2015/16, national cent, respectively, in 2019, had a significant fall in
child poverty rate was 41.5 per cent, and higher than employment levels. As such, structural economic
the youth and the non-youth categories with poverty transformation is necessary to lift workers from the
rates of 29.1 per cent and 32.5 per cent, respectively. less-productive agricultural sector to the more-
In rural areas, child poverty was 43.9 per cent, which productive industrial sector.
is above the national average of 41.5 per cent and
higher than in peri-urban and core urban areas at Domestic revenue mobilization remained a challenge
30.2 per cent and 37.9 per cent, respectively. The to adequately finance the growing development
high poverty level in rural areas is mainly driven needs. In 2018/19, the deviation from the targeted
by over-reliance on agriculture, compounded by revenue collection was 7.6 per cent. Further, actual
low productivity. As such, there is need to improve collections as a share of Gross Domestic Product
agricultural productivity to fast-track the pace of (GDP) dropped from 18.2 per cent in 2017/18 to 17.8
rural-and national- poverty reduction. per cent in 2018/19. The deviation from the targeted
xix
revenue was partially attributed to shortfalls in other Ksh 28,602, Ksh 38,021 and Ksh 38,592, respectively.
income taxes, which dropped by 12.3 per cent. These counties are in arid and semi-arid lands with
Measures to enhance domestic revenue collections minimal economic activities.
are crucial to minimize shortfalls in the budget.
Slow pace of structural transformation is reflected at
There was significant improvement in Government’s the county level, with agriculture being the dominant
share of pro-poor spending between 2015/16 economic activity. Most counties are heavily
and 2018/19. However, high debt servicing costs reliant on agriculture, with only 7 counties having
could crowd-out pro-poor spending. The share significant manufacturing activities. It is important
of education and social protection spending in for the counties to deepen structural transformation
total national spending increased from 15.3 and by creating an enabling environment to attract
3.7 per cent in 2015/16 to 21.5 and 6.7 per cent, investments in manufacturing.
respectively, in 2018/19 while debt servicing costs
rose from 21.5 per cent of Government revenue in Huge disparities exist in county Own Source Revenue
2015/16 to 42.8 per cent in 2018/19. Additionally, (OSR) collections, counties with significant share of
debt servicing costs accounted for 24.9 per cent of industry and service sectors collect more revenue
Government spending in 2018/19, more than the compared to counties that are heavily reliant on
combined spending on health, social protection agriculture. A total of Ksh 200.5 billion was collected
and housing. More concessional borrowing and by counties between 2013/14 and 2018/19, 32.2 per
leveraging on public private partnerships is critical in cent of this was collected by Nairobi County. Further,
reversing the debt servicing costs. the top 4 counties in OSR collections account for
more than half of the total OSR collections annually.
Kenya’s public debt stock has been on an upward This implies that some counties have well established
trajectory, rising by 4 percentage points in 2017/18 revenue streams than others, hence collecting more.
to stand at 61.1 per cent of GDP in 2018/19. The
gross public debt stock increased by Ksh 761.8 Overall poverty incidence varies widely among
billion to stand at Ksh 5.8 trillion in 2018/19. This counties, from as low as 16.7 per cent in Nairobi
was reflected in increases in stock of both domestic County, to a high of 79.0 per cent in Turkana County.
and external debt stocks, which stood at 29.3 and It is also evident that counties with the lowest GCP
31.8 per cent of GDP in 2018/19, from 28.0 and per capita have the highest poverty rates and are
29.0 per cent of GDP in 2017/18, respectively. The mostly in arid and semi-arid lands. Poverty is also
increase in stock of debt is mainly driven by increased aggravated by large household sizes among
public spending on infrastructure, compounded the poorest counties. For example, the largest
by inadequate domestic resource mobilization. To households are in Mandera (6.9), Wajir (6.1) and
contain the path of the debt, fiscal consolidation Garissa (5.9), where poverty rates are 77.6, 62.6 and
momentum needs to be maintained and sustained 65.5 per cent respectively.
in the medium-term. The Government has made some significant effort
to address inequalities across the counties through
Growth and Inclusivity in the Counties the budget. The poorest counties have received
the largest shares of equitable transfers, mainly
Counties recorded a robust growth between 2014 driven by the poverty factor in the Commission
and 2017 with real Gross County Product (GCP) and on Revenue Allocation (CRA) formula, accounting
real GCP per capita growing at an average of 5.6 for 18 per cent of the revenue allocations through
and 2.8 per cent respectively. During the period, 22 equitable transfers. Turkana and Mandera received,
counties had their real GCP per capita growing at 3.9 per cent and 3.4 per cent respectively between
a faster pace than the county average. As of 2017, 2013/14 and 2018/19. It is also notable that most
10 counties had their real GCP per capita above the of the poor counties allocated significant share of
national GDP per capita of Ksh 96,799.8. These are their spending on development. However, 60.0 per
counties with relatively well-established industrial cent of the counties did not meet the PFM Act 2012
sectors. While counties such as Mandera, West requirement that counties should spend at least
Pokot and Turkana had the least GCP per capita of 30.0 per cent of their total budget on development.
xx
EXECUTIVE SUMMARY
Increased spending on development is critical for

2006, when it was at 12 percentage points - (Males at
accelerating growth and pace of poverty reduction.
33.0%) and (females at 21.0%). This means that over
time, females have been gaining more in terms of
Medium Term Prospects financial access compared to males. For the youth,
a significant proportion of them (23.5% male) and
The medium-term prospects depict an economy (25.4% female) did not have formal financial access
growing at a rate below that recorded in 2019. This especially in insurance and credit aspects.
implies that more strategic efforts are required for
The main barriers to greater financial inclusion
the country to spring back to the desired growth
include: proximity to financial providers, level of trust
trajectories and retain the already acquired lower
of financial providers, excessive documentation,
middle-income status. However, several risks factors
financial literacy and the cost of accessing financial
threaten this forecast, including the desert locusts,
services. It is noted, however, that while these barriers
fiscal pressures from high budgetary demands
have persisted over the last decade, the advent of
particularly implementation of the Building Bridges
mobile-based financial services has transformed
Initiative (BBI) and high public debt, security
financial systems in Kenya, helping more people to
concerns, commodity prices, and the coronavirus
access financial services.
pandemic. These risks without timely and adequate
interventions will reduce economic growth to an The National Government and some County
average of 4.0 per cent in the medium-term. Governments have initiated interventions to deepen
financial inclusion among the population. The
Counties have the potential of upscaling the
initiatives offering financial and capacity support to
economic growth to the desired levels and improve
women and youth could be scaled up, in addition to
inclusivity significantly. In all the counties, three
addressing their challenges to ensure sustainability.
sectors are most significant given their size of the
Additionally, establishment of the proposed Biashara
value added. These are agriculture, manufacturing
Fund encompassing the - Uwezo Fund, Youth
and wholesale and retail trade. Although agriculture
Enterprise Development Fund and the Women
is the highest in size, the other two have at least 10.0
Enterprise Fund - can play a key role in enhancing
per cent of total value added. It is important that
self-sustaining and appropriate targeting. This would
more budget is allocated to these three sectors and
ensure the challenges facing the individual Funds
their respective value chain systems enhanced to
are adequately addressed and necessary impetus
deliver the desired outcomes.
gained to provide financial and capacity support
to the women and youth and thus deepen financial
Enhancing Financial Inclusion for Inclusive access.
Growth Moreover, mobile money agents present a potential
solution for many of the barriers to closing the
Access to financial products and services, including financial inclusion gap and reaching the excluded.
savings, payment for services, and loans, has the This is because they employ mobile phones and
potential to contribute to inclusive growth. Overall, agents to deliver financial services, without the high
national access to financial inclusion is at 82.9 per costs of construction and bank staff that underlie
cent, an improvement from 26.7 per cent over the traditional brick-and-mortar banking institutions,
past decade. This means about 17 per cent of the improving accessibility to existing customers and
population is still excluded from access to formal new ones.
financial services and therefore cannot participate
effectively in the economic activity. Disaggregation
of data by counties shows that counties with most Contribution of Agriculture to Food and
access to finances, either credit, savings or insurance, Nutrition Security and Inclusive Growth
are mainly counties with big urban areas. A further
disaggregation of data by gender shows a wide Smallholder farmers constitute a huge portion of the
gender disparity between males (85.6%) and females population therefore, are important stakeholders to
(80.3%). However, this gap has been reducing since consider in realizing the broader goals of food and
xxi
nutrition security and inclusive growth. The land area country is a major boost towards inclusivity. However,
in the country is finite and therefore the potential to the sector has witnessed substantial increase of
realize increased agricultural productivity lies in the transmission and distribution losses which impact
adoption of appropriate technology and innovation negatively on the end-user’s prices. Reduction in
which will increase output and bringing down costs losses by incorporating innovative measures such as
of food. The adoption of technology, however, grid modernization through inclusive smart metering
should be coupled with complementary investments programme for all end-users across and monitoring
in training for farmers such as agronomic practices, solutions is crucial in establishing a stable and
soil fertility, efficient use of fertilizer, integrated pest efficient energy supply system.
management, post-harvest handling to enhance
productivity and competitiveness. Despite the high number of electricity connections
for domestic and small consumers, the demand
Smallholders are not fully integrated into value is still low. Besides, using electricity for lighting,
chains, which negates their opportunities for households need to be sensitized on productive uses
value addition and marketing. Encouraging their of electricity whereby, energy access programmes
participation in farmer organisations could foster can incorporate strategies for boosting income
economic inclusion and increase their market power- generating activities that are unique across counties.
thereby raising their incomes and productivity.
Wide disparities are evident in access to clean
It is evident that a huge proportion of Kenyan energy sources for lighting and cooking at national
population suffer from food poverty though with level, rural/ urban areas and across the counties.
varying intensities across and within counties. At All regions registered a high dependency on non-
household level, reduction of food losses is critical clean energy sources for cooking and low reliance
in maintaining food supply and therefore reducing on clean and efficient fuels for cooking purposes. To
food poverty. This can be achieved by investing in enable scale-up of
storage facilities at household level supported by
training on the management of produce in storage. clean cooking solutions, awareness campaigns on
the benefits of clean energy solutions should be
The agriculture sector has significant potential incorporated in the energy access programmes.
to contribute to inclusive growth because it is the There is also need to enhance affordability of clean
main economic activity for most households living energy through inclusive approaches such as pay
in the rural areas. For this to be achieved, enhanced as you go model and subsidy for the upfront cost
use of all factors of production (land, labour and of Liquefied Petroleum Gas (LPG), bioethanol and
capital) are required in addition to an enabling biogas.
policy environment. This should be supported by
complementary investments to support provision of Women play a significant role in energy systems
extension services, provision of market infrastructure as part of their subsistence and productive tasks.
and use of information and communication However, they are disproportionately affected by
technology. lack of access to clean energy sources, as searching
for firewood consumes considerable time; limits
other productive activities; and its use enhances their
Enabling Inclusive Growth through Access risk to respiratory illness due to indoor pollution. For
to Affordable, Reliable, Sustainable and this reason, engendering energy projects, programs,
Modern Energy Sources and policies through gender mainstreaming will
ensure that women and men participate and benefit
Access to affordable, reliable, sustainable and from access to clean energy sources.
modern energy sources is recognized as a key input for
economic growth as well as inclusive growth. Inclusive
growth is premised on the multidimensional aspects Social Mobility and Inclusive Growth: The
of stable energy supply systems, equity in access and Role of Social Protection
affordability for all. Significant progress registered in
increasing the share of renewable energy in the total Upward social mobility, the movement of individuals,
energy mix and electricity connectivity across the families, households, or other categories of people
xxii
EXECUTIVE SUMMARY
within or between social strata, is important for programmes. Other challenges include possibility of
sustainable development and inclusive growth. ghost beneficiaries, and lack of an integrated system
Upward social mobility can enhance social cohesion, that links all social assistance programmes across
create feelings of inclusion among disadvantaged Ministries, Departments and Agencies (MDAs) in
groups and diffuse extremism. In a progressive one easily accessible online portal.
society, access to education, health, and social
protection and employment should not hinge on To address the problems associated with social
endowments of parents - such as parental income, protection interventions, it is important to
health, education and employment. incrementally develop a more integrated social
assistance system that transfers all the dispersed
For Kenya, there are a set of findings that indicate social assistance programmes and processes to an
that access to education and health by individuals electronic platform - that is shared across MDAs. Such
hinges on the income and education of the parents. a system can effectively manage all steps associated
Individuals with more educated parents and those in with the social assistance processes; for instance
the highest income group enjoy greater access to all application, assessment of eligibility, registration,
levels of education. Access to health services seems investigation, payment, auditing, reporting and
to be lower for the lowest income group who are monitoring. Such system has the potential to: get
less likely to be diagnosed in a health facility relative rid of duplication of benefits, efficiently manage
to the higher income groups. Coverage of health targeting, save on time and resources in delivery
insurance for the highest income quintile at 42.5 of social assistance, and economies of scale in all
per cent is ten times greater than that of the lowest services including payments. Other interventions
income quintile. With respect to the labour market, include expanding the programme coverage,
individuals from the high-income households aged appropriate registration of targeted persons, a shift
20 through 29 years are more likely to work for a in focus on beneficiaries to individuals rather than
wage or a salary (including internship opportunities). households and enhance resource allocation to the
The labour market disadvantage for the lower sector by strengthening partnerships and linkages
income groups are most likely linked to their prior with development partners, County Governments,
inferior outcomes in education and a possible lack of civil society and private sector players among other
information and relevant networks. The disadvantage stakeholders.
is likely to translate into lower productivity, lower
incomes and supressed social mobility.
Governance in Inclusive Growth
Despite these disparities, the lowest income
quintile may not be receiving larger forms of social The Constitution introduced major reforms in
protection/assistance in education, health and governance, resource allocation and the structure of
other social services. As examples, the lowest and the public service with the intention of redressing the
highest income groups are equally likely to benefit regional socio-economic inequalities and skewed
from education bursaries and the proportion who resource distribution that were inherent in the
received free medical care was about equal across centralized system that existed prior to devolution.
the groups at just about 13.0 per cent. The lack In fostering inclusivity in governance, the objectives
of positive discrimination implies that the lowest of devolution include to ensure equitable sharing
income groups may face greater risks of downward of national and local resources throughout Kenya,
inter-generational mobility. to give powers of self-governance to the people
and enhance the participation of the people in the
Despite progressive policy and institutional reforms,
exercise of the powers of the State and in making
the role of the social protection sector in enhancing
decisions affecting them. In addition, for inclusivity
social mobility and a more inclusive growth process
to be attained the representation of diverse groups,
is curtailed by several challenges. These include
communities and individuals of society in the public
weak targeting systems and outcomes, lack of
service is key. This is to ensure the public service is a
adequate coordination, low programme coverage,
representation of individuals of various backgrounds,
and duplication of benefits which have lowered
ethnic communities, genders and Persons with
the expected impact of the social protection
Disabilities (PWDs).
xxiii
The equitable revenue sharing formula is aimed at ought to be reviewed to align it to the entitlements
ensuring equitable resource allocation to County in the Constitution.
Governments. To facilitate effective budget
implementation and delivery of public services, Despite an existing legal framework requiring public
timely disbursement is important in addition to participation in policy making processes, public
prudent utilization of these resources. This should participation initiatives are conducted in a haphazard
be complemented by concerted efforts by counties manner, and there is lack of consensus on what
to improve on Own Source Revenue (OSR) collection amounts to sufficient public participation. To clarify
and reduce on revenue leakages. In addition, the process on public participation, clear guidelines
capacity building is crucial in entrenching prudent should be established through enactment of the
public finance management. Public Participation Bill.
The ideals of ethnic diversity and inclusivity are yet

to be realized both at national and county levels. For Partnerships for Inclusive Growth
example, while the Constitution requires the State
to ensure that at least 5 per cent of the members Partnerships are voluntary agreements between
of the public in elective and appointive bodies are government, private sector and civil society actors.
Persons with Disabilities, in 2018/19, the Public At the global level, the concept of “partnership
Service Commission (PSC) reported that only 1.2 per for development” has been reinforced since the
cent of officers in the public service were Persons 2000 Millennium Summit of the United Nations
with Disabilities (PWDs). Also, the PSC reported that (UN) which adopted Agenda 2015 containing the
although the principle of not more than two-thirds of 8 Millennium Development Goals. This concept
either gender had been met at the ratio of 63.2 per was also popularised by the 2002 World Summit on
cent male to 36.8 per cent female, the male gender Sustainable Development (or the Earth Summit) and
still dominates positions in the public service with the 2002 International Conference on Financing for
gender inequality more pronounced at higher job Development. In 2015, the UN General Assembly
grade levels. coalesced around the “leave-no-one-behind”
principle in adopting Agenda 2030 containing 17
Some of the issues in achieving and realizing the Sustainable Development Goals with Goal 17 stating
statutory quotas imposed on public institutions that partnerships will be required to facilitate the
on representation include weak oversight and achievement of the other 16 goals.
enforcement mechanisms for non-compliance, weak
institutional frameworks in institutions mandated Following in the steps of the global community,
to oversee matters concerning representation, Kenya has embraced partnerships at both the local,
cohesion, values and diversity, lack of sanctions for regional and global levels as one of the keys to unlock
non-compliance, and lack of incentives to diversify. sustainable development. Locally, the policy and
To enhance inclusivity and representation within legal frameworks affecting partnerships include the
both levels of government, stronger sanctions and Sessional Paper No. 1 of 2006 on NGOs, Constitution
penalties should be imposed on non- compliant of Kenya 2010, Public-Private Partnerships Act 2011),
institutions. This should include pursuing court Kenya External Resources Policy (2015), Policy on
remedies and legal redress for non-compliance with Devolved System of Government (2016), the Kenya
the legal requirements on representation. Vision 2030 and its Third Medium-Term Plan (2018-
2022) which includes the “Big Four” agenda, Kenya
To enhance inclusion of PWDs, it is of paramount Foreign Policy, Public Debt and Borrowing Policy,
importance to establish a framework for maintenance among others.
of data on PWDs in all sectors in a consistent and
prescribed format which may be achieved by ensuring Governance in Kenya is exercised at various
that all PWDs register with the National Council for levels following the principle of consultation and
Persons with Disabilities. The Kenyan Sign Language cooperation. At the national level, the main intra-
Bill, 2019 should be enacted to promote the use of governmental partnerships include collaborations
Kenya Sign language and enhance inclusion of deaf between the executive, the legislature and the national
persons while the Persons with Disabilities Act, 2003 assembly. The main inter-governmental relations are
xxiv
EXECUTIVE SUMMARY
between the National and County Governments. At the Council of Governors’ Forum. Whereas, this
the county level, there are collaborations between structure has given voice to the private sector, there
the Executive and the County Assembly. This system are concerns that the private sector lacks to broaden
of governance has worked well but there remain gaps their scope and influence at the sub- national level.
in terms of alternative dispute resolution, legislating
the Council of Governors (CoG) Secretariat and At the local level, the weakest link in partnerships
sectoral committees, granting borrowing powers in Kenya is the relationship between civil society
to counties, harmonizing cross-county taxation and and the Government. This emanates from lack of
licencing, aligning economic planning at the national self- regulation especially in the Non-Governmental
and county levels, and formulating benefit sharing Organizations (NGOs) sector. The NGO Council,
frameworks. which is supposed to ensure self-regulation has
been dysfunctional for a long time while the NGO
Kenya has established a dense network of bilateral Co-ordination Board, which is mandated to regulate
and multilateral partners. While these partnerships the sector is ill-equipped in terms of finances and
have attracted budgetary resources, technical personnel to perform this function. These factors
assistance and markets, there have been cases of have made it difficult to put in place formal structures
interference in domestic affairs, conditionalities, for engagement as is the case in the private sector.
asymmetric power and lack of national ownership.
Some of these arrangements exclude the private To enhance the effectiveness of partnerships to
sector and civil society, hence going against the promote inclusive growth, the Government needs to
“leave-no-one-behind” principle. be more proactive in pushing for reforms in north-
south cooperation towards equality, respect for
Engagements between the Government and the national sovereignty, non- conditionally and national
private sector in Kenya take two formats: Public ownership. Existing gaps in devolution can be dealt
Private Partnerships (PPPs) and Public-Private with by designing new policies and laws. Measures
Dialogue (PPD). PPPs are becoming more popular to strengthen public-private partnerships include a
in financing public investments with about sixty-four review of the PPP policy and law to accommodate
(64) bankable projects in the pipeline. However, public participation throughout the project cycle.
there are several factors curtailing the smooth To enhance PPD, the finance and lobbying capacity
implementation of PPPs including failure to realize of private sector associations at the county level
value-for money, corruption, inflated costs of capital, should be strengthened. To mitigate confidence rifts
low competition during bidding, political interests, between the Government and NGOs, the regulatory
lack of skills to manage PPPs and risk and lack of capacity of the NGO Co-ordination Board should be
transparency. There are also concerns that the enhanced and the self-regulation within the sector
process does not involve local communities during should be strengthened by expediting the review
the project cycle. The Public-Private Dialogue (PPD) and gazettement of the Public Benefit Organizations
in Kenya is spearheaded by the Kenya Private Sector Act (2013).
Alliance (KEPSA) through four platforms namely:
Presidential Roundtable, Ministerial Stakeholder
Forums, Speaker’s Roundtable Meetings and
xxv
1 INTRODUCTION
T
he theme of this Kenya Economic Report (KER) most quintile while the bottom quintile controls the
2020 is “Creating an Enabling Environment least share (3.6%) (KNBS, 2016).
for Inclusive Growth in Kenya”. The objective
is to provide insights on the foundation for In the Second Medium-Term Plan (MTP II), the target
broad-based economic growth and development. was to achieve a 10.0 per cent growth by 2017 but
Inclusive growth aims at advancing equal economic the country achieved an average growth of 5.5 per
opportunities to all stakeholders in development cent during the 2013-2017 period. The medium-term
processes, thus promoting pro-poor approaches growth prospects under MTP III is for the economy to
anchored on participation and contributions of all grow by 7.0 per cent by 2022. The critical challenge
stakeholders. This is echoed in the Government’s remains that of attaining high and sustainable levels of
long-term blueprint, the Kenya Vision 2030, which growth and development and translating the growth
promotes implementation of policies for broad- to be socially and economically inclusive. When
based inclusive growth. This is further stated growth and development policies are not inclusive,
in the Third Medium-Term Plan (MTP III) which they are likely to trigger social conflict and derail
includes the “Big Four” agenda. The emphasis on the development trajectory. Therefore, creating a
inclusive growth is reflected in global and regional conducive environment that ensures a productive
development commitments, namely: the Sustainable employment, low poverty levels, reduced inequality,
Development Goals (SDGs) - Goal 8 which promotes and environmental sustainability is paramount.
inclusive and sustainable economic growth and Goal The theme of the Kenya Economic Report 2020 is
10 which targets to reduce inequality within countries motivated partly by the recommendations of the
and among countries; the Africa Union Agenda Kenya Economic Report 2019 and the Government’s
2063; and the East African Community Vision 2050. quest for shared prosperity, as envisioned in the
Kenya’s economy grew by 5.4 per cent in 2019, Kenya’s long-term development blueprint the
which was a decrease by 0.9 percentage points from Kenya Vision 2030, the “Big Four” agenda and the
2018 (KNBS, 2020). The Kenya Vision 2030 target is Constitution of Kenya. This report assesses economic
to achieve a 10.0 per cent GDP growth and reduce performance against the backdrop of policies and
the number of people living in absolute poverty institutional frameworks that support balanced and
to the ‘tiniest proportion of the total population’. pro-poor growth strategies.
Under the first MTP I, the target was to reduce the In the medium-term, the Government intends to
number of those living below the poverty line from achieve inclusive growth by ensuring food security;
46.0 per cent to 28.0 per cent. However, according expanding the manufacturing sector to create jobs;
to the Kenya Integrated Household Budget Survey - providing universal health care to enhance the
KIHBS (2016), poverty levels stood at 36.1 per cent human capital; and providing affordable housing
in 2016, implying that poverty reduction efforts need to increase access to the low-income earners.
to be beefed up to realize the development agenda. The Government has also put in place policies to
Inequalities persist, where nationally more than half enhance youth empowerment, gender equality and
(59.4%) of total expenditure is controlled by the top- equal opportunities for persons with disabilities.
1
Whereas there is no universal definition for inclusive employment transitions. Therefore, inclusive growth
growth (Organization for Economic Co-operation entails increasing employment, reducing poverty
and Development - OECD, 2015), different authors and inequality, and promoting private sector activity
and international organizations define inclusive and diversification. First, by creating jobs, inclusive
growth in diverse ways. According to the World growth helps reduce poverty and inequality.
Bank1, inclusive growth denotes both the pace and Second, it increases labour force participation and
pattern of economic growth, which are interlinked employment, especially for those facing higher
and assessed together. The definition emphasizes obstacles in accessing labour markets (women and
linkages between the micro and macro determinants the youth). Third, inclusive growth encourages private
of economic growth. The Asian Development Bank sector activity by providing equal opportunities to
(2008) views inclusive growth as a growth episode that access markets and resources. Fourth, inclusive
meets two criteria: (1) creates new economic activities; growth is broad-based across sectors, entailing
and (2) ensures equal access to opportunities created greater economic diversification and reducing
for all segments of the society, especially the poor. vulnerability to external shocks.
Such economic growth is non-discriminatory (allows
participation of all members) and disadvantage- The KER 2020 assesses the status of inclusive growth
reducing (associated with declining inequality in in Kenya along different dimensions. The rest of the
non-income dimensions of well-being). The United report is organized as follows: Chapter Two reviews
Nations Development Programme (UNDP) defines the macroeconomic performance of the country.
inclusive growth as a process whose benefits Chapter Three discusses growth and inclusivity at
are shared equitably and ensures that everyone county level while the medium-term prospects are
participates in the growth process, and in decision- analyzed and discussed in Chapter Four. Chapter Five
making. When an economic growth episode creates discusses how financial inclusion can be enhanced
opportunities for all segments of the population for inclusive growth while Chapter Six analyses
and distributes the benefits of economic prosperity, inclusivity and trade in Kenya and international
then it is denoted inclusive (OECD, 2015). Further, context. In Chapter Seven, the contribution of
the International Monetary Fund (IMF) defines agriculture to food and nutrition security and inclusive
inclusive growth as broad sharing of the benefits of growth is examined. Chapter Eight discusses how
and the opportunities for, economic growth, that is inclusive growth can be enabled through access to
robust and broad-based across sectors, promotes affordable, reliable, sustainable and modern sources.
productive employment across the labour force, In Chapter Nine, the role of social protection in
embodies equal opportunities in access to markets enhancing social mobility and inclusive growth is
and resources and protects the vulnerable (IMF, analysed. Chapter Ten covers issues of governance
2017). in inclusive growth and Chapter Eleven, the role of
partnerships in achieving inclusive growth. In the
Inclusiveness is a concept that encompasses equity, last chapter, Chapter Twelve, conclusions and policy
equality of opportunity and protection in market and recommendations of the report are presented.
Endnotes
1 See <https://blogs.worldbank.org/developmenttalk/category/tags/inclusive-growth>
2
MACROECONOMIC
2 PERFORMANCE
Kenya has made significant progress in poverty reduction in the last two decades, with poverty rate
dropping from 52.3 per cent in 1997/98 to 46.8 per cent in 2005/06 and eventually to 36.1 per cent
in 2015/16. The rate of decline is however not commensurate with the growth in GDP, and income
and consumption inequalities persist. Poverty levels are higher in rural areas, among the elderly and
the youth. Employment growth has lagged GDP growth and while agriculture is the main employer,
the sector faces low and declining productivity, which has implications on the welfare of those
employed in the sector. Food constitutes the highest expenditure among the poor and, therefore,
food-related inflationary pressures tend to push some of the poor to below the poverty line. While
pro-poor expenditures have increased, the rising debt servicing costs threaten their sustainability. As
such, it is important to focus attention on economic transformation with emphasis on expanding the
industrial sector; increasing agricultural productivity; addressing gender gaps; equipping the youth
with appropriate skills; maintaining the fiscal consolidation path; and ensuring a supportive monetary
policy.
Table 2.1: Kenya’s key macroeconomic and inclusive growth indicators

Indicator Value/Status
GDP, 2019 (Ksh millions) 9,740,360.0
Real GDP growth, 2019 (%) 5.4
Real GDP per capita, 2019 (Ksh) 106,244.4
GNI per capita, Atlas Method, 2018 (US$) 1,620
Public debt as a % of GDP, 2018/19 (%) 61.1
Average overall inflation, 2019 (%) 5.2
Unemployment rate, 2015/16 (%) 7.4
Female unemployment rate, 2015/16 (%) 9.6
Male unemployment rate, 2015/16 (%) 5.3
Population size, 2019 (millions) 47.6
Overall poverty level, 2015/16 (%) 36.1
Rural poverty, 2015/16 (%) 40.1
Peri-urban poverty, 2015/16 (%) 27.5
Core-urban poverty, 2015/16 (%) 29.4
Child poverty, 2015/16 (%) 41.5
Youth poverty, 2015/16 (%) 29.1
3
Female poverty, 2015/16 (%) 30.2

Male poverty, 2015/16 (%) 26.0
Poverty gap, 2015/16 (%) 10.4
Inclusive development index score, 1-7 (best), 2017 3.23
Labour productivity growth, 2018 (%) 2.1
Net income Gini, 0-100 (0-perfect equality), 2018 41.6
Wealth Gini, 0-100 (0-complete equality), 2018 77.2
Source: KNBS (2019; 2020), Economic Survey; KNBS (2019), Population and Housing Census;
KNBS (2016), KIHBS (2015/16); and World Economic Forum (2018)
2.1 Economic Growth and Poverty Status decline in all key sectors of the economy due to
droughts, deterioration of infrastructure and low
Kenya has made remarkable progress in poverty aggregate demand. Real GDP per capita recorded
reduction in the last three decades. Poverty levels a meagre growth, averaging 1.2 per cent between
dropped from 52.3 per cent in 1997/98 to 46.8 per 1997 and 2016. Significant improvement in real GDP
cent in 2005/06 and to 36.1 per cent in 2015/16, per capita growth was witnessed between 2010
meaning that poverty dropped by 0.9 percentage and 2019, averaging 2.9 per cent. It is notable that
points per year. Kenya’s economy grew at an Kenya’s economic growth rate is commensurate
average of 3.9 per cent between 1997 and 2016 with real GDP per capita growth, which means that
despite recording a downward trend from 2.3 per enhanced economic activity is crucial in improving
cent in 1997 to -0.2 per cent in 2000 as a result of economic welfare.
Figure 2.1: Annual real GDP and real GDP per capita growth and poverty rates
Data Source: Kenya National Bureau of Statistics (Various), Economic Survey
Rural poverty level has remained high, and the rural poverty fell by only 0.7 percentage points for
pace of poverty reduction has been slower than in the year. Poverty levels in peri-urban and core urban
peri-urban and core urban areas. Rural poverty fell areas dropped by 21.5 and 19.8 percentage points,
by 12.8 percentage points from 52.9 per cent in respectively, to stand at 27.5 and 29.4 per cent in
1997/98 to 40.1 per cent in 2015/16, implying that 1997/98 and 2015/16.
4
MACROECONOMIC PERFORMANCE
Figure 2.2: Overall poverty at national level and by residence, 1997/98-2015/16
250
Poverty headcount rate (%)

200
49.2
150 32.1
49
42.5 29.4
100
52.9 27.5
52.5
50 40.1
52.3 46.8
36.1
0
1997/98 2005/06 2015/16
National Poverty Rural Peri-urban Core urban
Data Source: KNBS (2006; 2016), KIHBS 2005/06 and 2015/16
Hardcore poverty2 has significantly declined nationally the national average of 8.6 per cent (Figure 2.3).
but is still higher in rural areas. Hardcore poverty in However, hardcore poverty in peri-urban and core
the rural areas was 11.2 per cent in 2015/16, above urban areas was below the national level.
Figure 2.3: Trends in hardcore poverty at national and residence level

80
7.6 6
60
18.4
40 34.8
24.1 3.4
20 6
29.6 19.6 11.2
19.649
0
1997 2005/06 2015/16
National Poverty Rural Peri-urban Core urban
At national level, child poverty is relatively higher (Figure 2.4). Poverty is also more pronounced among
than for other age cohorts.3 Rural child poverty was the elderly (above 70 years) who reside in peri-urban
43.9 per cent in 2015/16, higher than the national areas compared to those in rural and core-urban
average of 41.5 per cent and other age cohorts areas.
5
Figure 2.4: Poverty by age groups, 2015/16

180
160
Poverty headcount rate (%) 140 35
37.9
120 32.2
25.5
100 30.2 22.4
42.7
80 25.3 31.6
23.1
60 43.9 37.5 39
36.7
40 34.9
20 41.5 32.5 36.2 39.1

29.1
0
0-17 Years 18-35 Years 36-59 Years 60-69 Years 70+ Years
National Rural Peri-urban Core urban
Data Source: KNBS (2016), KIHBS 2015/16
Generally, female-headed households are poorer per cent, respectively (Figure 2.5). Also, both female-
compared to the male counterparts, both at national and male-headed households residing in rural areas
and residence levels. In 2015/16, female- and male- were poorer than their counterparts in urban areas.
headed household poverty rates were 30.2 and 26.0
Figure 2.5: Overall poverty by sex of household head
120
100
80
46.2 30.2
60 30 26
40 19.3 24.1
48.8
80 31.7 50
34
0
Male Male Female Female
2005/06 2005/06 2005/06 2015/16
Rural Urban National
2.2 Consumption and Income Distribution

The level of inequality in income distribution in is below Burundi and Tanzania with Gini indices of
Kenya is comparatively high and has worsened 38.6 per cent and 40.5 per cent, respectively. In the
over time.4 Kenya’s Gini index increased from 45 Sub-Saharan Africa region, Ethiopia has the most
per cent in 1997 to 46.5 per cent in 2005 before equal income with a Gini index of 35.0 per cent as of
dropping to 40.8 per cent in 2015. In comparison to 2015. Kenya also trails several Lower Middle-Income
the East African Community partner states, Kenya Countries (LMICs) such as Bangladesh and Egypt
is performing better than Rwanda and Uganda but (Table 2.2).
6
Table 2.2: Gini index for select countries (%)

SSA- Region Latest Year Available Gini-Index
Botswana 2015 53.3
Burundi 2013 38.6
Ethiopia 2015 35.0
Ghana 2016 43.5
Kenya 2015 40.8
Mauritius 2017 36.8
Rwanda 2016 43.7
South Africa 2014 63.0
Tanzania 2017 40.5
Uganda 2016 42.8
Lower Middle-Income Countries
Bangladesh 2016 32.4

Egypt 2017 31.5
Moldova 2018 25.7
Myanmar 2017 30.7
Data Source: World Bank (2020), World Development Indicators
Inequality in household consumption is even more consumption share of the fifth quintile is 159 times
pronounced (Figure 2.6). At national level, the top- that of the first quintile.5 In rural areas, inequality is
most income quintile (fifth quintile) controls 59.4 less pronounced, and consumption share of the fifth
per cent of consumption expenditure, 16.5 times quintile is only 4 times that of the first.
that of the first quintile. In peri-urban areas, the
Figure 2.6: Consumption expenditure share by quintiles (%)
Core urban 1 10.1 15.8 35.3 44.8
Peri urban 1 14.8 79.5
Rural 8.1 13.9 19.5 25.9 32.6
National 3.6 10.7 19.7 59.4
0 10 20 30 40 50 60 70 80 90 100
Q1 Q2 Q3 Q4 Q5
7
2.3 Employment decelerating to 5.4 per cent in 2019 (Figure 2.7).

The greatest decline was in formal employment,
Employment growth in Kenya is slower compared which decreased by 3.2 percentage points from a
to the GDP growth rate. Total employment growth 5.8 per cent growth in 2014 to 2.6 per cent in 2019.
reveals a downward trend between 2014 and 2019. The decline in employment is mainly attributed to
Overall growth in employment fell from 6.2 per cent a freeze in formal employment by the Government
in 2014 to 4.9 per cent in 2019 while economic in 2015 to cut on the public sector wage bill. This
growth averaged 5.6 per cent and increased from restricted employment to only essential services
5.4 per cent in 2014 to 6.3 percent in 2018, before such as health, education and security.
Figure 2.7: Employment and real GDP growth
Source: Author’s computation using data from KNBS (2020), Economic Survey
The share of employment to population ratio and last decade (Figure 2.8). In addition, the share of
labour force participation rate6 have stagnated at employment to population dropped from 63.5 per
about 60.0 and 67.0 per cent, respectively, in the cent in year 2000 to 58.5 per cent in 2005.
8
Figure 2.8: Employment to population ratio (%)

80.0
Percentage 70.0
60.0
50.0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Employment to Population (%) Labour force participation rate
Source: ILOSTAT
Agriculture is the dominant employer, accounting for sector is services, accounting for 35.0 per cent of
57.5 per cent of total employment as of 2018 (Figure employment in 2018. The industry sector has the
2.9). The share of agricultural employment increased least share of employment, with employment share
from 57.2 per cent from 2000-2009 to 58.6 per cent dropping slightly from 8.0 per cent from 2000-2009
from 2010-2018. The second largest employment to 7.3 per cent from 2010-2018.
Figure 2.9: Share of employment by sector

120.0
100.0
80.0
Percent
60.0
20.0
20.0
0.0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Industry Service Agriculture
Source: ILOSTAT
As of 2019, the largest wage employment was in the at 12.2 per cent (Figure 2.12). The share of wage
education sector. The share of wage employment employment in the manufacturing sector was 11.1
in the education sector constituted 20.4 per cent per cent.
of total wage employment followed by agriculture
9
Figure 2.10: Share of wage employment by industry, 2019 (%)
The education sector employs more women while Information and Communication Technology (ICT)
the manufacturing sector7 employs more men and accommodation sectors. For an economy to
(Figure 2.11). The proportion of women is also generate more productive jobs, more employment
predominant in public administration and health should be concentrated in the manufacturing and
sectors at 13.6 and 8.3 per cent, respectively. There ICT sectors.
is minimal disparity in employment in agriculture,
Figure 2.11: Wage employment by industry and gender, 2019 (%)
50
45
40
35
27
Percentage
30
25
20 5.9
15 13.6 7.6 11.9
10 3.6
8.3 4.7 15.5 16.8
5 5.2 1.1 10.1 11.4
3.5 1.7 3 9.8 8.7
3.3 2.2 2.8 2.8 3.8 4.3 4.4
0
s i al al n lth rt T n in de re g n
ld nc io
n tio ea po IC ct
io m a ltu ur
in tio
eh
o a s a s Ad Tr u t a
s in es od H an tru ic ric ac uc
ou
F of m Tr ns bl Ag uf Ed
H Pr m Co Pu an
co M
Ac
Male Female
10
2.4 Productivity of the Labour Force
Kenya’s labour productivity8 growth increased in 2008 was a result of the post-election crisis which
marginally from an average of 1.5 per cent between led to contraction of GDP. Increasing the productivity
2001 and 2009 to an average of 2.3 per cent between of the economy is critical to ensuring sustainable
2010 and 2018 (Figure 2.12). A rise in productivity economic growth, supported by robust job creation.
was experienced between 2002 and 2005 with If labour productivity remains unchanged, workers
implementation of the Economic Recovery Strategy will not be able to earn enough to reduce the
(ERS), which led to improved performance of the population of Kenyans living below the poverty line.
economy. A sharp decline in productivity witnessed
Figure 2.12: Labour productivity growth
Source: ILOSTAT
There is misallocation of labour across the sectors per cent in 2000 to 57.0 per cent in 2018, while the
as majority are employed in the least-productive share of those employed in the industry and services’
agriculture sector. There was a shift in employment sectors dropped from 12.0 and 39.0 per cent in 2000
towards the least productive sectors in the economy. to 8.0 and 35.0 per cent in 2018, respectively. The
The agriculture sector, whose productivity dropped share of agricultural labour productivity in total factor
during the review period, employed more people productivity decelerated from 64.0 per cent in 2000
than the other sectors. The industrial and services’ to 43.0 per cent in 2018 while that of the industrial
sectors, which witnessed some growth in productivity, sector grew from 169.0 per cent in 2000 to 271.0 per
had a significant fall in employment. The share of the cent in 2018. The productivity share of the services
labour force in the agricultural sector grew from 49.0 sector grew from 124.0 per cent in 2000 to 157.0 per
cent in 2018 (Figure 2.13).
11
Figure 2.13: Kenya labour productivity gap analysis: 2000-2018
Source: World Bank (2019)
12
Unemployment is more severe among the youth high unemployment rates. Similarly, unemployment
and female populations than in non-youth and male is higher among females at 9.6 per cent compared
populations. As of 2015/16, unemployment was to 5.3 per cent for males. Therefore, unemployment
highest among the age cohort 20-24 years at 19.2 per among the youth and women is higher than the
cent (Figure 2.14a). In addition, youth unemployment overall unemployment rate of 7.4 per cent. In
stood at 10.8 per cent compared to the non-youth at addition, significant disparities exist in urban and
2.5 per cent (Figure 2.14b). Although unemployment rural areas. More unemployment is experienced in
was highest among the age-cohort 20-24 years, this urban areas at 11.6 per cent compared to 3.4 per
group comprises mainly college students, hence the cent in rural areas.
Figure 2.14: Unemployment by age category, and by gender and residence, 2015/16
Data Source: Author’s computation using KNBS (2018), Labour Force Basic Report 2015/16
2.5 Sectoral Analysis of Growth
Economic growth remained strong although with a first three quarters of 2018 to an average of 4.2 per
decline in 2019. Economic growth dropped to 5.6 cent in similar quarters in 2019. The slowdown in
per cent in the first and second quarters of 2019 the agriculture sector is mainly attributed to delay in
compared to 6.3 and 6.6 per cent in similar quarters onset of long rains in the first quarter of 2019 and a
in 2018 (Figure 2.15). In the third quarter of 2019, decline in production of key crops in the third quarter
growth decelerated to 5.1 per cent compared to 6.4 of 2019. Non-agricultural GDP remained stable,
per cent in the corresponding quarter of 2018. The averaging 6.1 per cent in the first three quarters of
decline in growth is linked to a drop in agricultural 2019 compared to an average of 6.3 per cent in a
GDP growth from an average of 7.0 per cent in the similar period in 2018.
13
Figure 2.15: Quarterly economic growth rates (%)
Data Source: KNBS (2019), Quarterly Gross Domestic Report, Third Quarter 2019
Kenya is experiencing a slow pace of industrialization employment and poverty reduction; that is, slow
constraining structural economic transformation. or lack of structural transformation can lead to high
The services sector is the largest contributor to unemployment rates.
GDP while the contribution of the industrial sector
is dwindling. Although the share of value added of The services sector has driven Kenya’s economic
the services sector declined from 48.1 per cent of growth in the last decade (Figure 2.16b). The
GDP in 2010 to 41.2 per cent in 2019, it is the largest services sector accounted for an average of 51.3 per
contributor to GDP (Figure 2.16a). The contribution cent of growth between 2010 and 2019, followed
of the industry sector, which includes manufacturing, by industry at 19.2 per cent. The agriculture sector,
portrays a downward trend, declining from 18.5 which suffered from weather shocks in 2011 and
per cent in 2010 to 16.2 per cent in 2019. The 2017 hence affecting its productivity, accounted for
decline in the performance of the manufacturing 17.8 per cent of the growth. The industry sector is the
sector is partially attributed to high production most resilient compared to agriculture and services
costs, competition from imported goods and poor sector. The contribution by the industry sector to
performance of the sugar industry in the recent GDP growth deviated from an average 3 percentage
past. The contribution from the agriculture sector points between 2010 and 2019. Agriculture and
rose by 9.3 percentage points between 2008 and services had, respectively, 6 and 7 percentage point
2018. Structural transformation has implications for deviations from the average contribution to growth.
14
Figure 2.16: Kenya’s supply side growth analysis
(a)Share of sectoral value added (% of GDP) (b) Sources of Kenya’s growth (%), 2010-2019
(c) Sources of Kenyan growth by sector (%), average for (d) Sectoral contribution to real GDP growth,
2010-2019 2015-2019 (percentage points)
Source: KNBS (Various), Economic Survey

The services sub-sectors experience faster growth rates of 11.1, 14.7 and 8.6 per cent, respectively
than other sectors. In the first three quarters of 2019, (Figure 2.17). The decline in growth is partially
information and communication, accommodation attributed to a decline in credit to transport and
and food services, and transport and storage had storage sector and a decrease in number of tourist
the highest growth, averaging 10.2, 9.9 and 7.0 arrivals through various points of entry in the first
per cent, respectively. This reflects a deceleration in two quarters of 2019 for accommodation and food
growth compared to the corresponding quarters in services sector. In the first three quarters of 2019,
2018 in which the sectors recorded average growth agriculture recorded an average growth of 4.2 per
15
cent compared to 7.0 per cent in 2018. The decline manufacture of food products, mainly manufacture of
in performance of the agriculture sector was driven sugar, processing of tea, processing and preservation
by a drop-in production of key crops such as tea, of fish and manufacture of biscuits. For the non-food
cane and vegetable and fruit exports. Growth in sub-sector, there was a decrease in production of
the manufacturing sector dropped to 3.5 per cent cement and manufacture of galvanized iron sheets,
compared to 4.4 per cent in 2018. Growth in the particularly in the third quarter.
manufacturing sector was curtailed by a slowdown in
Figure 2.17: Sectoral quarterly growth rates (%), 2018-2019
Data Source: KNBS (2019), Quarterly Gross Domestic Product Report, Third Quarter, 2019
Household consumption is the main driver of Investments were largely dominated by public
aggregate demand in Kenya. Between 2005 and investments. Public spending on infrastructure
2018, household consumption contributed an accounted for 10.1 per cent of the growth in
average of 62.5 per cent to real GDP growth (Figure the period 2005 and 2018. However, there was
2.18). The contribution increased from an average a significant decline in investments in 2016 due
of 42.1 per cent in 2005-2006 to an average of to substantial decline in investments in transport
84.2 per cent in 2015-2016, before declining to an equipment, civil works and residential buildings.
average 64.3 per cent in 2017-2018. Government
consumption explained an average of 11.3 per cent Net foreign demand (net exports) has remained
of the growth in 2005-2006, increasing to 23.7 per negative. It averaged -18.5 per cent between 2005
cent in 2015-2016 as a result of implementation and 2018. However, in 2015 and 2016, there was
of the new Constitution which led to roll-out of significant increase in exports and decline in imports
devolution. growth, resulting in positive net exports. The drop
in imports was driven by slow growth in value of
imports in 2015 and a decline in importation of
transport equipment in 2016.
16
Figure 2.18: Contribution of demand side to growth (%) (2-year averages)
Source: Author’s computation using data from KNBS (Various), Economic Surveys
The savings-investment gap widened to 8.3 per cent other than dwellings and other structures. However,
of GDP in 2019 from 7.1 per cent in 2018. This is as a percentage of GDP, investments marginally fell
attributed to a relatively faster growth in investments from 17.3 per cent in 2018 to 16.3 per cent in 2018
by 2.4 per cent from Ksh 1,543,650 million in 2018 while savings fell from 10.2 per cent in 2018 to 8.0
to Ksh 1,631,870.7 million in 2019 (Table 2.3). This per cent in 2019.
was mainly driven by increase in value of buildings
17
Table 2.3: Total investments and savings, current prices (Ksh millions)
2014 2015 2016 2017 2018 2019
Investment 1,236,107 1,358,366 1,238,164 1,469,650 1,543,417 1,631,870.7
Gross national savings 569,320.9 715,658.6 866,710.8 854,163.4 907,412.7 776,104.8
Investments as % of GDP 22.9 21.6 17.6 18.0 17.3 16.3
Savings as % of GDP 10.5 11.4 12.3 10.5 10.2 8.0
Savings-investments gap (% -12.4 -10.2 -5.3 -7.5 -7.1 -8.3
of GDP)
Source: KNBS (2020), Economic Survey
Business conditions reflected the weather conditions. index signals steady improvement of the business
The Purchasing Managers Index (PMI) dropped from environment in Kenya, with firms producing more
an all-time high of 56.4 in April 2018 to a low of 49.3 output and experiencing increase in new orders driven
in April 2019 before increasing to 53.3 per cent in by both domestic and external demand. In January
December 2019. The drop below 50 signalled a and February 2020, the headline index dropp=ed
deterioration in business conditions attributed to to 49.7 and 49.0, respectively, signalling declining
poor weather conditions, which affected some firms. business conditions. This was mainly attributed to
However, the headline figure rose by 5 index points poor weather conditions, which affected output of
from 49.3 in April 2019 to 54.3 in June 2019, the businesses and low demand from households. The
highest since April 2018 (Figure 2.19). In the third index dropped to 37.5 in March 2020, reflecting a
and fourth quarters of 2019, there were stable decline in business activity due to the COVID-19
manufacturing activities as the index averaged pandemic.
53.7 and 53.2 per cent, respectively. The rise in the
Figure 2.19: CFC Stanbic Purchasing Managers’ Index, Kenya
60.0
50.0
40.0
Percentage
30.0
20.0
10.0
0.0
Jan-17
Mar-17
May-17
Jul-17
Jan-17
Nov-17
Jan-18
Mar-18
May-18
Jul-18
Sep-18
Nov-18
Jan-19
Mar-19
May-19
Jul-19
Sep-19
Nov-19
Jan-20
Mar-20
Kenya PMI Index Average
Data Source: CFC Stanbic (2020)
18
2.6 Inflation conditions, leading to increase in food prices.

Increase in food prices affects the poor more than
Kenya has enjoyed a relatively stable macroeconomic those in higher income categories. Core inflation
environment with a stable inflation. Overall inflation was generally below 5.0 per cent in 2018 and 2019.
has remained within the Government’s range of In addition, it had been on a downward trend, from
5±2.5 per cent. Fuel inflation has maintained a 4.2 per cent in December 2018 to 2.7 per cent in
downward trend, dropping from 13.8 per cent in December 2019. Bread and cereals account for the
December 2018 to a low of 2.5 per cent in December largest share of food and non-alcoholic beverages
2019 (Figure 2.20). Food inflation rose from a low CPI at 10.5 per cent while meat; milk, cheese and
of 2.6 per cent in December 2018 to 9.6 per cent eggs; and vegetables account for 5.7, 4.9 and 5.7
in December 2019 owing to unfavourable weather per cent, respectively, in the food and non-alcoholic
beverages CPI.
Box 2.2: Food inflation, cost of living and the poor

Overall CPI and food and non-alcoholic beverages CPI tend to move together while vegetables CPI
drives food and non-alcoholic beverages CPI. The prices of food and non-alcoholic beverage carry
the largest weight (36.04) in consumer baskets used to compute the CPI in Kenya. Therefore, food
inflation and overall CPI inflation are strongly correlated. The prices of vegetables are likely to drive
food and non-alcoholic beverages, hence overall food inflation in Kenya.
Overall CPI and food and non-alcoholic Food and non-alcoholic beverages CPI
beverages CP
Data Source: Kenya National Bureau of Statistics (Various), Economic Surveys

According to KNBS (2016), KIHBS 2015/16, the following are the vegetables highly consumed by
households:
19
Main vegetable consumption by households in Kenya
Vegetable
Tomatoes 20.33
Kale (Sukuma Wiki) 17.14
Onion (Bulbs) 15.69
Traditional Vegetables 13.65
Cabbages 11.87
Onion (Leeks) 7.81
Spinach 5.13
Carrots 4.66
Others 3.72
Source: KIHBS 2015/16

Since food CPI and overall CPI move together, persistent food inflation can be a threat to macroeconomic
stability. In addition, the poor spend a larger share of their incomes on food, and therefore high food
inflation is likely to affect the poor more than other segments of the population. High food prices have
the potential to push some households back to below poverty lines.
Figure 2.20: Monthly inflation rates, 2018-2019
Data Source: Central Bank of Kenya (2019), Monthly Economic Indicators, December 2019
Given the weight taken by the food and non-alcoholic beverages in the basket used to compute Kenya’s CPI,
high inflation will be reflected in food prices, thereby low-income households, the Government has either
affecting the poor. VAT taxes are levied at 16.0 per zero-rated or exempt several commodities in the
cent in Kenya. Therefore, taxing such commodities food and non-alcoholic beverages CPI.9
imposes a heavy burden on poor households. To
Households from lower-and middle-income groups
lower the tax burden and the cost of living for the
20
in Nairobi are likely to experience high cost of living 22.5 and 21.1 per cent, respectively. Therefore,
due to drought (Figure 2.21). Between January 2017 the poor were affected more by high food prices.
and June 2018, households from lower-and middle- However, in 2018, overall inflation rate averaged 4.7
income experienced higher inflation rates. The year per cent, with food inflation averaging 1.8 per cent
2017 was characterized by widespread drought, due to good weather conditions that led to bumper
which led to low agricultural output and high food harvests. As a result, inflation for the lower income
prices. High food prices led to increase in annual households was relatively low at an average of 4.6
inflation from 6.3 per cent in 2016 to 8.0 per cent in per cent. Due to relatively poor weather conditions
2017. The food and non-alcoholic beverages index experienced in 2019, food inflation rose to an
increased by 13.4 per cent in 2017, with fruits and average 6.1 per cent, with lower income households
vegetables recording the highest inflation rates of experiencing an average inflation of 5.3 per cent.
Figure 2.21: Inflation trends across income groups in Nairobi (%)
On average, inflation in Nairobi does not display between January 2018 and July 2018, higher
significant disparities with inflation in other regions inflation was witnessed in Nairobi, mainly due to
in the country, except under conditions of high fuel increase in housing, water, electricity, gas and other
prices (Figure 2.22). There is no significant variation fuels index due to increase in price of cooking fuels;
in inflation trends across regions in Kenya. Inflation and increase in transport index due to increase in
in Nairobi averaged 5.3 per cent in 2019 compared petrol and diesel pump prices.
to 5.2 per cent for the rest of Kenya. However,
21
Figure 2.22: Inflation trends by region
Overall Producer Price Index (PPI) marginally to 120.00 from 120.80 in September 2019, leading
dropped from 120.61 in December 2018 to 120 in to a drop in PPI inflation rate to -0.51 per cent (Table
December 2019, leading to a drop in PPI inflation 2.4). The decline was reflected in a decrease in PPI
rate from 1.3 per cent to negative 0.5 per cent of electricity and manufacture of paper and paper
during the same period. However, the index fell products by 6.4 and 3.8 per cent, respectively. The
from 120.99 in June 2019 to 120.80 in September decrease in PPI index resulted in a decline in general
2019, resulting from a fall in prices of sugar and tea. cost of living for many households, hence improving
In addition, in December 2019, the index dropped their welfare.
Table 2.4: Overall PPI and inflation rates
Month/Year Indices PPI-Inflation Rate (%)

2018 March 119.38 1.53
June 119.37 -0.04
September 120.17 0.54
December 120.61 1.33
2019 March 118.95 -0.36

June 120.99 1.35
September 120.80 0.53
December 120.00 -0.51
Source: Kenya National Bureau of Statistics (2019)C, Producer Price Index Fourth Quarter 2019
22
2.7 Fiscal Performance
Domestic resource mobilization challenges persist, revenue. Income and VAT taxes constituted the
with revenue shortfalls experienced in 2018/19. Total largest shares of total revenue and GDP at 41.0 and
revenue (inclusive of grants) as a percentage of GDP 7.2 per cent and 25.0 and 4.3 per cent, respectively.
has remained below the Kenya Vision 2030 targets of Overall, deviation of ordinary revenue in 2018/19 was
25.0 per cent. Total revenue inclusive of grants was 5.7 per cent. Kenya’s tax revenues are less buoyant;
17.8 per cent of GDP in 2018/19 compared to 18.2 despite stable economic growth being experienced,
per cent in 2017/18 (Table 2.5). The drop-in revenue tax revenues as a ratio of GDP have either stagnated
collection was as a result of shortfalls in ordinary or declined in the last decade.
revenue collection, mainly the income tax and other
Table 2.5: Government revenue for 2017/18 and 2018/19 (Ksh millions)
2017/18 2018/19 Growth in
Revenue
Actual % of Total % of Actual % of Total % of Deviation
(%)
Revenue GDP Revenue GDP (%)
Import Duty 99,215 6.5 1.16 107,702 6 1.13 -0.74 8.55
Excise Duty 162,484 10.7 1.91 194,289 12 2.04 -2.05 19.57
Income Tax 640,593 42.08 7.51 685,389 41 7.21 -7.66 6.99
VAT 356,856 23.44 4.19 413,186 25 4.34 -2.89 15.79
Investment Revenue 24,123 1.58 0.28 24,575 1 0.26 -33.07 1.87
Others 81,793 5.37 0.96 71,789 4 0.75 -6.55 -12.23
Ordinary Revenue 1,365,063 89.66 16.01 1,496,930 90 15.74 -5.74 9.66
Appropriation in Aid 157,356 10.34 1.85 174,140 10 1.83 -15.53 10.67
Total Revenue 1,522,419 100 17.86 1,671,071 100 17.57 -6.87 9.76
Grants 26,484 1.74 0.31 19,702 1 0.21 -43.29 -25.61
Total Revenue and 1,548,903 - 18.17 1,690,773 - 17.78 -7.56 9.16
Grants
Source: National Treasury (2019), Quarterly Economic and Budgetary Review: Fourth Quarter 2018/19
Government expenditure as a percentage of GDP of operations and maintenance by the National

marginally rose to 25.3 per cent of GDP in 2018/19 Government. Recurrent expenditure constitutes the
from 25.2 per cent of GDP in 2017/18. Total largest share of National Government expenditure
Government spending in 2018/19 grew by 12.1 per at 60.0 per cent. Development expenditure and
cent to Ksh 2.4 trillion but was 5.3 per cent below allocation to County Governments constitute 23.0
the targeted Ksh 2.5 trillion due to low absorption and 15.0 per cent, respectively (Table 2.6).
23
Table 2.6: Government expenditure for 2016/17-2018/19 (Ksh millions)

Expenditure 2016/17 2017/18 2018/19 Growth
(%)
Actual Actual Share of Total Actual Share Target
Expenditure of Total
(%) Expenditure
(%)
Recurrent 1,142,412 1,312,082 61.12 1,454,984 60.47 1,528,546 10.9
Development 645,771 469,673 21.88 542,007 22.53 598,094 15.4
County Governments 284,708 327,274 15.25 360,740 14.99 364,958 10.2
Parliamentary Service 24,215 25,678 1.20 28,525 1.19 32,088 11.1
Judicial Service 11,846 11,944 0.56 12,713 0.53 13,495 6.4

Equalization Fund 6,000 - - 6,962 0.29 4,700 -
Total Expenditure 2,114,952 2,146,651 100 2,405,933 100 2,541,881 12.1
Source: National Treasury (2019), Quarterly Economic and Budgetary Review: Fourth Quarter 2018/19
Government’s share of pro-poor expenditure health and social protection increased from 1.7 and
significantly increased between 2015/16 and 3.7 per cent in 2015/16 to 3.7 and 5.9 per cent,
2018/19. The share of education expenditure in total respectively, in 2018/19. Government expenditure
national expenditure increased from 15.3 per cent on housing shows an upward trend, with share of
in 2015/16 to 22.2 per cent in 2018/19, accounting expenditure on housing increasing from 2.1 per cent
for the largest share of total Government spending in 2015/16 to 4.1 per cent in 2018/19.
(Figure 2.23). Similarly, the share of expenditure on
Figure 2.23: National Government expenditure by selected functions (% of total expenditure)
60.0
0.4
50.0
5.9
Government spending
0.4
0.3 3.7
40.0 3.7 3.8
14.3 22.2
30.0 15.3
16.0
2.5
1.7 2.7
20.0 2.1 0.5 2.4 3.7
0.9 2.4 4.1
0.4 0.2
10.0 18.0 21.3
14.8 15.1
0.0
2015/16 2016/17 2017/18 2018/19
Economic Affairs Environmental Proctection Housing

Health Education Social Protection
Recreation, culture & Rel
24
Government spending on social protection increased However, Cash Transfers to Orphans and Vulnerable
from 0.8 per cent of GDP in 2013/14 to 1.5 per cent Children (CT-OVC) reduced from 12.0 per cent of
in 2018/19. Similarly, spending on older persons total social protection spending to 5.8 per cent in
through the Older Persons’ Cash Transfers (OPCT) 2018/19. Persons with Severe Disabilities Cash
increased from 7.8 per cent of total social protection Transfers (PwSD-CT) dropped from 1.3 per cent in
spending in 2013/14 to 12.1 per cent in 2017/18. 2015/16 to 0.9 per cent in 2018/19 (Figure 2.24).
Figure 2.24: Social protection spending by categories, 2013/14-2018/19
Source: Author’s computation using data from KNBS (Various), Economic Survey
Low domestic resource mobilization coupled with by Ksh 761.8 billion from Ksh 5.0 trillion in 2017/18,
increased public spending on infrastructure has led equivalent of 57.1 per cent of GDP, to Ksh 5.8 trillion
to high fiscal deficit in Kenya. Fiscal deficit in 2018/19 in 2018/19, which is 61.1 per cent of GDP. The stock
was above the targeted 6.8 per cent of GDP and of domestic debt grew by 12.4 per cent to Ksh 2.8
higher than in 2017/18. The country’s fiscal deficit trillion in 2018/19 from Ksh 2.5 trillion in 2017/18,
in 2018/19 stood at Ksh 721.1 billion, representing an increase of over Ksh 300 billion. As a percentage
7.7 per cent of GDP compared to Ksh 624 billion in of GDP, domestic debt increased to 29.3 per cent
2017/18, which was 7.1 per cent of GDP. The share of GDP in 2018/19 from 28.0 per cent of GDP in
of development and infrastructure spending in total 2017/18. The increase is reflected in rise in share of
spending was 22.5 per cent in 2018/19, representing Treasury bonds from 61 per cent of total domestic
a 15.4 per cent growth from 2017/18 to Ksh 542 debt in 2017/18 to 63 per cent in 2018/19.
billion in 2018/19. The share of development
spending in total Government spending averaged External debt stock as a percentage of GDP increased
27.8 per cent between 2013/14 and 2018/19. from 29.0 per cent in 2017/18 to 31.8 per cent in
2018/19, an increase of Ksh 454.7 billion. Further, the
share of commercial debt in external debt stock was
2.8 Public Debt dominant. The share of external debt in total debt
rose to 52.0 per cent in 2018/19 from 50.9 per cent
Kenya’s public debt stock as a percentage of GDP in 2017/18. The increase is reflected in increases in
increased by 4 percentage points to stand at 61.1 both commercial and bilateral debt stocks as shares
per cent in 2018/19 (Table 2.7). The increase is of external debt by 2.0 and 1.7 percentage points,
attributed to increased spending on infrastructure respectively. Commercial debt stock constituted
projects, which are financed mainly through external 36.2 per cent of the external debt in 2018/19.
borrowing. Kenya’s gross public debt stock increased
25
Table 2.7: Kenya’s public debt, 2017/18-2018/19

Debt 2017/18 2018/19 Change
Domestic Debt
Nominal value (Ksh millions) 2,478,835 2,785,936 307,101
Domestic debt (% of GDP) 28.0 29.3 1.3
Share in total debt (%) 49.1 48.0 (1.1)
Treasury bills (% of domestic debt stock) 35.4 34.0 (1.4)
Treasury bonds (% of domestic debt stock) 61.0 63.0 2.0
External Debt
Nominal value (Ksh millions) 2,568,398.70 3,023,139.47 454,740.77
As % of GDP 29.0 31.8 2.8
Share in total debt (%) 50.9 52.0 1.1
Multilateral (% of external debt stock) 33.9 30.2 (3.7)
Bilateral (% of external debt stock) 31.2 32.9 1.7
Commercial (% of external debt stock) 34.2 36.2 2.0
Public Debt
Nominal Value (Ksh millions) 5,047,234 5,809,074 761,840
Nominal public debt (% of GDP) 57.1 61.1 4
Data Source: National Treasury (2018), Annual Public Debt Management Report 2018 and National
Treasury (2019), Quarterly Economic and Budgetary Review: Fourth Quarter, 2018/19
Commercial banks are the largest holders of Kenya’s in 2017/18 to 72.0 per cent in 2018/19, the largest in
domestic debt at 50.8 per cent as of 2018/19. Non- the bilateral category. France rose to be the second
bank financial institutions and non-residents are largest lender at 7.9 per cent, overtaking Japan
second at 44.3 per cent. For external debt, China’s whose share dropped from 12.3 per cent in 2017/18
share of bilateral debt increased from 67.4 per cent to 6.9 per cent in 2018/19 (Table 2.8).
Table 2.8: Kenya’s debt by holder
Debt 2017/18 2018/19 Change

Domestic Debt
Commercial banks (% of domestic 51.1 50.8 (0.3)
debt)
CBK (% of domestic debt) 4.5 3.9 (0.6)
NBFIs (% of domestic debt) 43.4 44.3 0.9
External Debt
Bilateral (main creditors)
China (% of bilateral) 67.4 72.0 4.6
Japan (% of bilateral) 12.3 6.9 (5.4)
26
France (% of bilateral) 7.4 7.9 0.5

Germany (% of bilateral) 4.2 3.3 (0.9)
Multilateral
IDA/IFAD (% of multilateral) 63.4 62.5 (0.9)
ADB/ADF (% of multilateral) 25.1 25.2 0.1
IMF (% of multilateral) 8.8 5.4 (3.4)
Data Source: National Treasury (2018), Annual Public Debt Management Report 2018 and National
Treasury (2019), Quarterly Economic and Budgetary Review: Fourth Quarter, 2018/19
Debt servicing cost consumes a significant amount service amounted to Ksh 640,829 million while in
of Government revenue and higher than combined 2017/18, total debt service was Ksh 460,135 million,
spending on social protection, housing and representing 33.8 per cent of total revenue. The
health. Total debt service increased from 24.5 per increase in debt servicing was attributed to higher
cent of total revenue in 2014/15 to 42.8 per cent stock of commercial debt, which matured in 2017/18
in 2018/19 (Figure 2.25). In 2018/19, total debt and 2018/19.
Figure 2.25: Debt service and social spending, 2014/15-2018/19
Source: Author’s computation using data from KNBS (Various), Economic Survey, and
National Treasury (2019), Annual Public Debt Management Report
Kenya faces a moderate risk of debt distress, export ratio, external debt service-to-revenue ratio
although the external debt sustainability indicators and the present value (PV) of external debt to export
are projected to remain sustainable. Kenya breached ratio. However, in PV terms, total public debt to GDP
external debt service-to-export ratio in a baseline is below the threshold. Kenya, being a low middle-
scenario and the three external debt indicators income country, is subjected to a threshold of 70 per
under extreme shock: external debt service-to- cent of GDP (Table 2.9).
27
Table 2.9: Debt sustainability indicators (%)
Indicator Threshold Actual Projections

External Debt Kenya 2016 2017 2018 2019 2020 2021 2022
PV ED/GDP 55 23.7 25.9 31.4 32.3 29.1 25.6 24.3

PV ED/Exports 240 163.8 165.4 191.1 191.4 168.5 146.9 139.6
PPG ED Service/Exports 21 9.0 16.5 19.9 26.2 25.6 24.9 13.1
PPG ED Service/Revenue 23 7.1 13.3 16.2 21.6 22.0 21.6 11.2
Public Debt
PV of PD/GDP 70 50.6 55.4 60.6 59.9 56.9 54.3 53.1
PV of PD/Revenue 300 275.9 285.0 299.6 292.9 282.1 269.7 261.5
PD Service/Revenue 22 36.3 42.7 44.8 49.4 49.3 48.9 37.6
Source: IMF (2018), Country Report No. 18/295

NB: PV = Present Value; ED = External Debt; PPG = Public and Publicly Guaranteed; PD = Public Debt
2.9 External Sector Developments Kenya is a net exporter of services. However, the
value of service exports fell by 2.7 per cent between
Kenya’s trade in goods experiences deficits and a December 2018 and December 2019 while services
surplus in services. The value of domestic exports imports fell by 1.7 per cent over the same period.
goods fell by 4.3 per cent from US$ 6,152.5 million in Trade in services surplus dropped by 5.0 per cent
December 2018 to US$ 5,890.7 million in December to US$ 1,612 million in December 2019. Overall
2019 (Figure 2.26). During the same period, the export earnings grew by 1.1 per cent from US$
value of goods imports fell by 0.8 per cent from 11,750 million in January 2019 to US$ 11,875 million
US$ 16,324.5 in December 2018 to stand at US$ in May 2019 before declining to US$ 11,312 million
16,191.6 million in December 2019. The decline in in December 2019. This reflected a 3.5 per cent
imports is attributed to reduced food imports due decline compared to US$ 11,723.4 million recorded
to favourable weather conditions in 2019. Trade in in December 2018, attributed to reduced quantity
goods deficit grew by 1.3 per cent from December of agricultural exports. Total export earnings in 2019
2018 to US$ 10,300 million in December 2019. amounted to US$ 139,683 million.
28
Figure 2.26: Trade in goods and services, US$ millions
The value of coffee exports fell by 8.3 per cent in February 2019 to Ksh 9,958 million in February
from Ksh 1,910.22 million in February 2019 to 2020. Diaspora remittances recorded a 10 per cent
Ksh 1,751.84 million in February 2020 while tea growth from US$ 199.1 million in February 2019 to
exports grew by 14.4 per cent. Horticultural exports US$ 219.0 million in February 2020 (Figure 2.27).
dropped by 2.6 per cent from Ksh 10,221.16 million
Figure 2.27: Kenya’s major exports and remittances
Source: Central Bank of Kenya (2019)
29
Diaspora remittances have grown over time to In 2019, the current account deficit worsened in
surpass earnings from traditional exports. In the last absolute terms, it remained at 5.8 per cent of the
decade, diaspora remittances grew from 1.9 per GDP as in 2018. This is attributed to reduced growth
cent of GDP in 2008 to 3 per cent of GDP in 2019. in exports by 2.9 percent while imports increased by
Earnings from horticulture and tea show a downward 2.3 percent due to increase in import of petroleum
trend from 3.4 and 3.0 per cent of GDP in 2008 to and machinery and other capital equipment.
1.3 and 1.2 per cent of GDP in 2019, respectively.
Exports from coffee constitute an average of only 0.4 Between December 2018 and December 2019, net
per cent of GDP (Figure 2.28). Diaspora remittances Foreign Direct Investments (FDI) dropped by 27 per
are important as they finance consumption and cent to US$ 1,066.2 million. The surplus in the capital
investments. account fell by 18.6 per cent from US$ 262.5 million
in December 2018 to US$ 213.6 million in December
2019 (Figure 2.29).
Figure 2.28: Kenya’s major exports and remittances (% of GDP)
4.0
3.5
3.4
3.0 3.0
Percentage of GDP
2.5
2.0
1.9
1.5
1.3
1.0
0.5
0.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Coffee Tea Horticulture Remittances
30
Figure 2.29: Balance of payment cumulative flows (US$ millions)
3,000.00
2,000.00
1,000.00
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
jul-18
Aug-18
Sep-18
Oct-18
Nov-18
Dec-18
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
(1,000.00)
US $ Millions
(2,000.00)
(3,000.00)
(4,000.00)
(5,000.00)
(6,000.00)
(7,000.00)
(8,000.00)
Current Account Capital Account Financial Account FDI (Net) Overall BOP
Source: Central Bank of Kenya (Various), Monthly Economic Indicators
The financial account surplus recorded 6.5 per cent and April 2019, respectively, before declining to
drop between December 2018 and December 2019. a deficit of US$ 997.3 million in May 2019. As of
The financial account surplus decreased from US$ December 2019, overall BoP deficit stood at US$
6,548.4 million in December 2018 to US$ 6,199.8 1,055.2 million compared to US$ 1,044.3 deficit in
million in December 2019. The surplus in the financial December 2018.
account is partly driven by Government financing of
infrastructure projects from external sources. Official reserves grew by 7.2 per cent between January
2019 and January 2020. Official reserves rose from
Deficits dominate overall Balance of Payment (BoP) US$ 8,241.6 million (5.3 months of import cover) in
position. However, surpluses were recorded in March January 2019 to US$ 8,880.2 million (5.4 months of
and April 2019. The BoP position improved from import cover) in January 2020, representing a 7.2 per
deficits of US$ 1,054.3 million and US$ 837.2 million cent growth (Figure 2.30). In May 2019, the official
in March and April 2018, respectively, to surpluses reserves stood at US$ 10,122.2 million (6.3 months
of US$ 721 million and US$ 1,184.7 million in March of import cover), the highest level attained in 2019.
31
Figure 2.30: Trends in months of import cover and official reserves (US$ millions)
2.10 Monetary Policy and Financial Sector Performance
The Central Bank of Kenya (CBK) has relaxed the and further to 7.0 per cent in April 2020.
monetary policy stance since 2015, cutting the
benchmark rate by 300 basis points between 2015 The movement in interbank rate shows significant
and 2019. The Central Bank Rate (CBR) from 11.5 decline from a highest of 25.9 per cent in September
per cent in July 2015 to 10 per cent in January 2018; 2015 to a lowest of 1.2 per cent in February 2019
9.5 per cent in March 2018 and maintained the same (Figure 2.31). In the first quarter of 2019, the
level up to May 2018 (Figure 2.30). In July 2018, it was interbank rate averaged 3.2 per cent before slightly
reduced to 9.0 per cent and thereafter maintained rising to an average of 4.1 per cent in the second
at 9.0 per cent up to November 2019. The CBR and third quarters of 2019. However, in the fourth
was further reduced to 8.50 per cent in November quarter of 2019, the interbank rate averaged 5.7
2019 and further by 25 basis points to 8.25 per cent per cent, indicating tightening liquidity conditions
in January 2020 to ease liquidity conditions in the among banks. In 2019, the interbank rate ranged
market. To expand economic activities and cushion between 1.2 and 8.0 per cent. In the first quarter of
the public from the effects of COVID-19 pandemic, 2020 the interbank rate averaged 4.4 per cent but
the CBR was reduced to 7.25 per cent in March 2020 increased to an average of 5.3 per cent in April 2020.
32
Figure 2.31: Trend of interbank rate and CBR (%), 2015-2020
Source: https://www.centralbank.go.ke/rates/interbank-rates/
The lending rates in the interest cap regime were 2019 to 12.19 per cent in February 2020 owing to the
relatively low and stable with narrow interest rate easing of monetary policy stance. Similarly, overdraft
spreads (Figure 2.32). However, the interest rate rate fell from 12.13 per cent to 11.82 per cent in the
cap was repealed in November 2019 following same period. The interest rate spread averaged 5.4
enactment of the Finance Bill 2019. The lending per cent between February 2019 and February 2020.
rates marginally fell from 12.47 per cent in February
Figure 2.32: Trend in commercial banks’ interest rates
Data Source: https://www.centralbank.go.ke/commercial-banks-weighted-average-rates/

The annual growth rate of domestic credit reveals the private sector. Growth in domestic credit to
more preference to Government lending in the Government in 2018 averaged 17.5 per cent.
period under review. The growth rate of credit This slightly increased to an average of 18.8 per
to Government was relatively faster than that of cent in 2019 (Figure 2.33). Domestic credit to the
33
private sector grew at an average of 3.6 per cent sector grew by 7.1 per cent to reach Ksh 2,594.6
in 2018 before increasing slightly to an average of billion, accounting for 72.0 per cent of domestic
5.5 per cent in 2019. Between December 2018 and credit as at December 2019. Domestic credit grew
December 2019, credit to Government grew by 9.7 by 7.3 per cent from Ksh 3,381.1 billion in December
per cent to reach Ksh 941.2 billion, accounting for 2018 to Ksh 3,628.1 billion in December 2019.
26 per cent of domestic credit. Credit to the private
Figure 2.33: Annual growth rate of credit (%)
2.11 Key Messages and Recommendations
2.11.1 Key Messages

1.) Kenya has made remarkable progress in poverty 2.) Rural poverty level remains higher, with the
reduction in the last three decades. However, pace of poverty reduction slower than in peri-
the pace of poverty reduction has been slow. urban and core urban areas. In 2015/16, rural
The poverty rate dropped from 52.3 per cent poverty was 40 per cent, above the national
in 1997/98 to 46.8 per cent in 2005/06 and average of 36.1 per cent and 27.5 and 29.4
eventually to 36.1 per cent in 2015/16. This per cent in peri-urban areas and core urban
implies that, on average, between 1997/98 and areas, respectively. Rural poverty dropped by
2005/06, poverty dropped by 0.7 percentage an average of 0.7 percentage points per year
points per year while, between 2005/06 and between 1997/98 and 2015/16 compared to
2015/16, poverty dropped by 1 percentage 1.2 and 1.1 percentage points for peri-urban
point annually as GDP growth rate averaged areas and core urban areas, respectively.
2.8 per cent between 1997 and 2006 and 5.0 3.) Nationally, child poverty is higher than any
per cent between 2007 and 2016. other age cohort and more pronounced in
rural and core urban areas. In 2015/16, national
34
child poverty was 41.5 per cent, higher than 41.2 and 34.1 per cent of GDP. The contribution
the youth and the non-youth categories. Child of the industry to GDP stood at 16.2 per cent,
poverty in rural areas was 43.9 per cent, which having dropped from 18.5 per cent in 2010.
is above the national average, and higher than 9.) There is misallocation of labour across sectors,
in peri-urban and core urban areas, which were as majority are employed in the least productive
at 30.2 and 37.9 per cent in a similar period. In agriculture sector. The share of agricultural
terms of gender, female-headed households labour productivity in total factor productivity
face a higher poverty rate of 30.2 per cent decelerated from 64.0 per cent in 2000 to 41.0
compared to male-headed households at 26.0 per cent in 2019 while its employment share
per cent. increased from 49.0 per cent in 2000 to 55.0
4.) Inequality in household consumption is more per cent in 2018. The industrial and services
pronounced in peri-urban areas. In peri-urban sectors, whose productivity grew from 169.0
areas, the richest households consume 159 and 124.0 per cent, respectively, in 2000 to
times higher than the poorest households 249.0 and 156.0 per cent, respectively, in 2019
in the first quintile, while at national level, had a significant fall in employment.
the richest household’s consumption level is 10.) Youth and female unemployment is more
17 times higher than the poorest. However, severe in the economy. As of 2015/16, youth
inequality in household consumption is less unemployment was 10.8 per cent, higher than
severe in rural households, where the share the overall unemployment level of 7.4 per cent.
of consumption of a household in the fifth Further, compared to the male counterparts
quintile is just 4 times that of the first. whose unemployment level was 5.3 per cent,
5.) High inequality level in a country may diminish female unemployment was 9.6 per cent in
growth. Income inequality is also high and 2015/16.
indicates slow progress; the Gini index 11.) Persistent food inflation can be a threat to
dropped from 46.5 per cent in 2005 to 40.8 macroeconomic stability and affects the poor
per cent in 2015. more than other segments of the population.
6.) Employment creation in Kenya is growing High food prices have the potential to push
at a slower pace compared to economic some households back to below the poverty
growth. Despite the strong economic line. In addition, droughts lead to higher food
growth experienced in recent years, overall prices, which aggravates the cost of living for
employment growth was on a downward trend the low-income households who spend a larger
between 2014 and 2019. In addition, the share of their incomes on food. However, to
share of employment to population ratio has protect the poor from higher cost of living,
stagnated at 60 per cent in the last decade. the Government has zero-rated tax on several
7.) Agriculture is the dominant employer in the food-related commodities such as maize flour,
economy, signifying slow pace of structural cassava flour, wheat flour, milk, among others.
transformation. As of 2019, employment in 12.) Domestic revenue mobilization is a challenge
the agriculture sector accounted for 56.0 per for the Kenyan economy. In 2018/19, total
cent of total employment, while the services revenue as a percentage of GDP dropped
sector employs 36.0 per cent of the labour to 17.8 per cent compared to 18.2 per cent
force. The industrial sector, which is expected in 2017/18. In addition, the deviation from
to contribute more in terms of productive the targeted revenue was 7.6 per cent. This
employment, employs only 8.0 per cent of the was partially attributed to shortfalls in other
country’s labour force. revenue collections, which dropped by 12.3
8.) The services and agriculture sectors are the per cent.
largest contributors to GDP. As of 2019, the 13.) There was a significant rise in Government’s
services and agriculture sectors accounted for share of pro-poor spending between 2015/16
35
and 2018/19. However, debt servicing costs million in January 2020 (5.4 months of import
have been rising and could crowd-out pro-poor cover).
spending. The share of education and social 17.) The Central Bank of Kenya (CBK) has relaxed
protection spending in total national spending the monetary policy stance since 2015, cutting
increased from 15.3 and 3.7 per cent in the benchmark rate by 300 basis points
2015/16 to 21.5 and 6.7 per cent, respectively, between 2015 and 2019. To ease the liquidity
in 2018/19. Debt servicing costs rose from 21.5 conditions in the market, the CBK lowered the
per cent of Government revenue in 2014/15 CBR from 11.5 per cent in July 2015 to 8.5 per
to 33.8 per cent in 2017/18. Additionally, debt cent in November 2019. Further, in April 2020,
servicing costs accounted for 17.9 per cent the benchmark rate was lowered to 7.0 per
of Government spending in 2017/18, more cent.
than the combined spending on health, social
protection and housing. 2.11.2 Recommendations
14). Kenya’s public debt stock rose by 4 percentage 1.) Sustained economic growth is one of the
points to stand at 61.1 per cent of GDP in channels through which the Government can
2018/19. Kenya’s gross stock of public debt enhance inclusivity. A sustained period of
increased by Ksh 761.8 billion to stand at Ksh structural transformation and diversification
5.8 trillion in 2018/19. This was reflected in is critical in sustaining growth and creating
increases in the stock of both domestic and productive jobs for the population. There
external debt stocks, which stood at 29.3 and is need to enhance the development of the
31.8 per cent of GDP in 2018/19, respectively, manufacturing sector to promote structural
from 28.0 and 29.0 per cent of GDP in 2018/19. transformation in Kenya.
The share of commercial debt in external debt
stood at 36.2 per cent in 2018/19 while debt 2.) Maintaining macroeconomic stability is critical
from China accounted for 72 per cent of the for sustained economic growth to propel the
bilateral debt. The increase in stock of debt is pace of poverty reduction.
mainly due to increased public spending on 3.) Better educational and health outcomes will
infrastructure, which is largely foreign financed. be realized with more investments in health
In 2018, Kenya’s risk of debt distress increased and education. This will go a long way in
from low to moderate, having breached three boosting the productivity of the workforce and
indicators (external debt service-to-export the entire economy to enhance growth and
ratio, external debt service-to-revenue ratio, job creation.
and PV of external debt to export ratio). 4.) Increased agricultural productivity will not
15.) Diaspora remittances have grown significantly only increase incomes, but also create more
to surpass earnings from commodity exports. employment opportunities. This can be
In 2019, diaspora remittances constituted 3.0 achieved through targeted fertilizer subsidy
per cent of GDP, having grown from 1.9 per programmes, mechanization of agriculture,
cent of GDP in 2008. On the contrary, earnings and proper water management to enhance
from horticulture and tea were 1.3 and 1.2 per irrigation. Further, there is need to increase
cent of GDP in 2019 compared to 3.4 and 3.0 spending on agricultural research and
per cent of GDP in 2008. Earnings from coffee investments in rural infrastructure to reduce
have also contracted over time to 0.2 per cent loss of agricultural output and to facilitate
of GDP in 2019. access to markets.
16.) The foreign reserves recorded a 7.2 per cent 5.) Gender gaps need to be addressed for more
growth from US$ 8,241.6 million (5.3 months of inclusive growth and to encourage more
import cover) in January 2019 to US$ 8,880.2 female labour force participation. The skills of
women need to be enhanced through more
36
education, and the cultural constraints women employment on a temporary basis, part-time
face need to be given much more attention. and on call. Such measures will provide the
Women can be empowered through civic unemployed youth with opportunities to enter
education, awareness creation, ensuring access the labour market and gain some experience.
to information on their rights and ensuring 7.) Promote fiscal consolidation in the medium-
their participation in decision making. term to keep a check on debt sustainability.
6.) Equipping graduates with marketable skills Domestic revenue mobilization could be
and enhancing labour market reforms to enhanced and public spending made more
promote flexible job schedules could lower efficient to contain the current debt trajectory.
high unemployment rates among the youth. There is also need to shift from non-concessional
The Government internship programme could borrowing to more concessional loans, and
be expanded to equip graduates with relevant capitalize on public-private partnerships to tap
skills needed in the market. Flexible forms private sector capital.
of employment can be achieved through
Endnotes
2 According to KNBS (2018) Economic Survey, households and individuals are extremely poor if monthly adult
equivalent of total consumption expenditure per person is < Ksh 1,954 in rural and urban areas and < Ksh 2,551
in core urban areas.
3 According to KNBS (2018), children are considered as poor if they live in households that are considered as poor
based on the absolute poverty lines.
4 These are estimates based on World Development Indicators (WDI) by the World Bank.
5 The first quintile (Q1) refers to households whose consumption expenditure fall below Ksh 3,159, for Quarter 2
consumption ranges Ksh 3,159-4,801, Quarter 3 = Ksh 4,802-7,037, Quarter 4 = 7,038-10,859, and Quarter 5 =
above Ksh 10, 859.
6 Labour force participation rate measures the share of employed in the economically active part of the population.
7 Kenya’s manufacturing sector comprises: Food products; beverages and tobacco; rubber and plastic products;
basic metals; electrical equipment; motor vehicle, trailers and semi-trailers; and cement production.
8 Productivity measures the efficiency with which an economy transforms inputs into output.
37
GROWTH AND INCLUSIVITY
3 IN A DEVOLVED SYSTEM
OF GOVERNMENT
Counties experienced a robust growth, with real GCP and real GCP per capita growth averaging 5.6
and 2.8 per cent, respectively, between 2014 and 2017. Huge disparities exist across counties, with
poverty rates at 16.7 per cent for Nairobi County and as high as 79.4 per cent for Turkana County.
In addition, counties in arid and semi-arid areas contribute less to GDP, have low GCP per capita,
and high poverty rates. Most counties are heavily reliant on agriculture, with only seven (7) counties
having significant manufacturing activities. Whereas the Government has made significant efforts to
address poverty and inequality through equitable transfers, County Governments need to diversify
their economic activities and align more spending towards development to expand the capacity for
economic activity, resulting in poverty reduction. More emphasis is needed to enhance collection of
own source revenue by promoting private sector activity. Moreover, increasing the share of protection
spending is important in protecting the hardcore poor.
3.1 County Economic Performance, 2014-2017
R
eal GCP growth rate for counties averaged growing counties include Nyandarua, Laikipia, Siaya
5.6 per cent between 2014 and 2017 with and Tharaka Nithi, having attained average growth
18 counties growing faster than the overall rates of 9.3, 8.6, 8.4 and 8.3 per cent, respectively.
county average (Figure 3.1). Elgeyo Marakwet Some of the counties that attained higher growth
attained an average growth of 10.0 per cent, the rates started from a relatively low real GCP base.
highest for the period under review, while Embu Real GCP growth rate is reflective of the national
County had an average growth rate of 2.6 per cent, GDP growth rate; during the period, the country also
the lowest for the period under review. Other fastest attained an average GDP growth of 5.6 per cent.
38
GROWTH AND INCLUSIVITY IN A DEVOLVED SYSTEM OF GOVERNMENT
Figure 3.1: Average real GCP growth rate, 2014-2017 (%)

12
10
Real GCP Growth Rate (%)
9.3
10
8.6
8.3
8.4
7.7
7.6
7.5
8
7.2
7.1
6.9
6.8
6.5
6.5
6.3
5.9
5.9
5.7
5.6
5.4
6
5.1
5.2
5.2
5.3
5.3
4.6
4.6
4.8
4.8
4.8
4.5
4.9
5
5
5
4.4
5
4.2
4.1
3.9
3.9
3.5
3.6
3.7
4
3.5
3.2
2.6
0
Embu
Garissa
Kisumu
Kitui
Nandi
Wajir
Kericho
Makueni
Trans Nzoia
Turkana
Mandera
Kakamega
Muranga
Narok
Kilifi
Kirinyaga
Nyamira
Marsabit
Isiolo
Lamu
Uasin-Gishu
West Pokot
Machakos
Kisii
Meru
HomaBay
Tana River
Samburu
Nairobi
Kwale
Bomet
Kajiado
Vihiga
Mombasa
Tata Taveta
Kiambu
Nyeri
Migori
Busia
Siaya
Laikipia
Nyandarua
Elgeyo Marakwet
Baringo
Bungoma
Nakuru
TharakaNithi
County
Average Real GCp Growth County average = 5.6%
Data Source: KNBS (2019), Gross County Product
Counties with higher GCP levels have a relatively million, respectively. Most counties in the Arid and
well-developed industrial sector. As of 2017, Nairobi Semi-Arid Lands (ASALs) whose main economic
County had the highest GCP of Ksh 998,160 million. activity is pastoralism have low GCP levels. Isiolo,
Kiambu, Nakuru and Mombasa counties had GCP Samburu and Lamu counties have GCP levels of
levels of Ksh 225,457, Ksh 216,295 and Ksh 206,409 Ksh 9,253, Ksh 12,980 and Ksh 14,121 million,
respectively (Figure 3.2).
Figure 3.2: County real GCP, 2017 (Ksh millions)
1,200,000
998160
1,000,000
800,000
600,000
225457
206409
216295
400,000
134410
115128
105150
82099
85519
80376
86606
91299
66381
72226
77680
79118
91221
64971
65588
52604
53201
53396
54622
59505
63092
51811
52047
52257
46173
50595
200,000
25561
25982
31466
34861
37776
38864
39212
43308
44893
18369
20725
20908
22931
14121
18094
12980
9253
0
Baringo
Turkana
Siaya
Kwale
Nyamira
Homa Bay
Migori
Kitui
Embu
Makueni
Kirinyaga
Elgeyo Marakwet
Nandi
Trans Nzoia
Bomet
Kajiado
Kilifi
Kericho
Kisii
Narok
Nyeri
Nyandarua
Muranga
Bungoma
Uasin-Gishu
Kakamega
Meru
Kisumu
Machakos
Mombasa
Nakuru
Kiambu
Nairobi
Taita Taveta
Vihiga
Tharaka Nithi
Busia
Laikipia
Marsabit
Mandera
Wajir
Garissa
West Pokot
Isiolo
Samburu
Lamu
Tana River
County
Counties that have relatively well-developed urban of the country’s GDP. Other counties such as Kiambu
centres and higher populations contribute more to and Nakuru that have higher concentration of
the country’s GDP. Between 2014 and 2017, Nairobi agricultural activities and agro-processing industries
County accounted for an average of 24.8 per cent contributed more to the country’s GDP, with shares
39
of 5.6 and 5.3 per cent, respectively. Due to the on the availability of labour. Counties with less
strategic economic activities in these counties, they productive economic activities such as Isiolo, Lamu
have larger population size, which has implications and Samburu have low shares of GDP (Figure 3.3)
Figure 3.3: County average contribution to GDP, 2014-2017 (%)

30.0
24.8
Percentage Contribution
25.0
20.0
15.0
10.0
5.6
5.3
5.0
3.4
5.0
3.0
2.7
2.4
1.9
1.9
2.0
2.0
2.0
2.1
2.2
2.4
1.7
1.6
1.6
1.7
1.3
1.3
1.4
1.4
1.4
1.4
1.6
0.9
0.9
1.3
1.3
0.8
0.8
1.0
1.1
1.1
1.1
0.4
0.5
0.5
0.5
0.5
0.6
0.6
0.7
0.3
0.2
0.0
Isiolo
Samburu
Lamu
Marsabit
Tana River
Mandera
Wajir
Garissa
Taita Taveta
West Pokot
Vihiga
Tharaka Nithi
Busia
Laikipia
Baringo
Siaya
Turkana
Kwale
Elgeyo Marak-
wet
Migori
Homa Bay
Nyamira
Kirinyaga
Kitui
Embu
Makueni
Nandi
Bomet
Trans Nzoia
Kajiado
Kilifi
Kerlcho
Nyandarua
Kisii
Nyeri
Narok
Bungoma
Muranga
Kakamega
Uasin-Gishu
Meru
Kisumu
Machakos
Mombasa
Nakuru
Kiambu
Nairobi
County
Between 2014 and 2017, counties real GCP per per capita growth rates of 7.2, 7.1 and 6.2 per cent,
capita grew by an average of 2.8 per cent. Only 22 respectively. However, Nairobi and Nandi counties
counties grew faster than the overall average of 2.8 did not have a significant change in real GCP per
per cent (Figure 3.4). Tharaka Nithi, Nyandarua and capita between 2014 and 2017.
Elgeyo Marakwet counties had the highest real GCP
Figure 3.4: Average real GCP per capita growth rate, 2014-2017 (%)
8.0
7.2
7.1
7.0 6.2
6.0
5.8
Growth rate (%)
5.4
6.0
4.8
4.8
4.7
4.7
4.4
5.0
4.1
4.0
3.9
3.8
3.9
3.7
3.1
4.0
3.0
2.9
2.9
2.9
2.7
2.5
2.7
2.5
2.6
2.5
2.4
3.0
2.2
2.1
1.8
1.8
1.7
1.5
1.6
2.0
1.4
1.3
1.4
1.3
1.2
1.0
1.0
0.6
0.5
1.0
0.0
0.0 Nairobi
Nandi
Trans Nzoia
Turkana
Kericho
Narok
Kisumu
Kilifi
Uasin-Gishu
Garissa
West Pokot
Lamu
Embu
Samburu
Tana River
Wajir
Kwale
Kajiado
Bo met
Kitui
Mandera
Nyamira
Muranga
Kakamega
Kirinyaga
Makueni
Mombasa
Kisii
Homa Bay
Taita Taveta
Baringo
Marsabit
Isiolo
Nakuru
Machakos
Meru
Vlhiga
Kiambu
Migori
Laikipia
Nyeri
Busia
Bungoma
Siaya
Elgeyo Marakwet
Nyandarua
Tharaka Nithi
County
Average GCP per capita growth County Average = 2.8%
40
As of 2017, only 10 counties (21 % of the counties) respectively (Figure 3.5). Mandera and West Pokot
had real GCP per capita above the national GDP had the lowest GCP per capita of Ksh 38,021 and
per capita of Ksh 96,799.8, with counties in arid Ksh 28,602, respectively. The wide range between
and semi-arid areas having lowest real GCP per the GCPs indicates large disparities in economic
capita. Nairobi and Mombasa had the highest real activity and demographic characteristics among the
GCP per capita of Ksh 212,498 and Ksh 168,448, counties.
Figure 3.5: Real GCP per capita, 2017 (Ksh)
Majority of county economies are heavily dependent productive employment opportunities at national
on agriculture, with only 7 counties (15.0% of the and county level. The small share of manufacturing
counties) having significant manufacturing activities sector indicates limited productive employment
(Figure 3.6). Only 7 counties (Nairobi, Kiambu, opportunities at county level. Because of the important
Mombasa, Machakos, Kisumu, Nakuru and Kericho) employment opportunities created, counties with
have manufacturing contributing at least 0.2 per robust manufacturing and agricultural sectors attract
cent of the country’s GDP. This further explains larger populations. For example, Nairobi, Kiambu
limited structural transformation at county level. A and Nakuru have relatively established industrial
robust manufacturing sector is expected to generate sectors, hence the large population size.
41
Figure 3.6: Economic activities at county level (% share), 2017
3.2 County Population Structure

As per the 2019 census, Nairobi is the most populous include Kakamega, Kiambu and Nakuru, each having
county with a population of 4,397,073 while Lamu a population of 2,417,735, 2,162,202 and 1,867,579,
is the least populated with a population of 143,920 respectively (Figure 3.7).
(Figure 3.6). Other counties with higher population
Figure 3.7: Population size by county
Source: KNBS (2019), Kenya Population and Housing Census
The population growth rate in 19 counties was rate of 8.9 per cent while Mandera County had the
faster than the national growth rate of 2.2 per cent. lowest of negative 1.5 per cent. Nairobi County, the
However, the growth rates were mixed and do not most populous, had a population growth rate of 4.1
display any unique economic or cultural patterns. per cent (Figure 3.8).
Isiolo County had the highest population growth
42
Figure 3.8: County population growth rates

10
6.8
8
6.4
5.9
5.4
6
4.9
4.3
4.1
3.7
Percentage
3.6
4
3.6
4
3.4
3.2
3.1
3.1
3.1
3
2.3
2.2
2.3
2.1
2.2
2.1
2.1
1.8
1.8
1.8
1.9
1.9
1.6
1.4
2
2
2
1.4
1.3
1.3
1.3
1.2
0.9
0.8
0.7
0.7
1
1
0.1
0
Mandera
Bomet
Nyamira
Nyandarua
Vihiga
Tharaka-Nithi
Turkaria
Kisii
Nyeri
Makueni
Kakamega
Kitui
Murang’a
Meru
Tana River
Kirinyaga
Homa Bay
Nandi
Siaya
Embu
Wajir
Baringo
Kisumu
Busia
Trans Nzoia
West Pokot
Bungoma
Migori
Elgeyo
Marakwet
Taita Taveta
Machakos
Laikipia
Mombasa
Uasin Gishu
Kilifi
Kwale
Garissa
Nakuru
Narok
Samburu
Nairobi
Lamu
Kiambu
Kericho
Marsabit
Kajiado
Isiolo
–2
-1.5
–4 County
County population growth rate National inter censal growth rate (2%)
Counties in the ASAL regions have larger household counties such as Kirinyaga, Kiambu and Nairobi, each
sizes. Mandera, Wajir, Garissa and Marsabit, all in having a household size of 3.0 and 2.9, respectively
ASALs, have the largest household sizes of 6.9, 6.1, (Figure 3.9).
5.9 and 5.8, respectively. Household size is lower in
Figure 3.9: Household size by county, 2019
8
7
5.8
6
5.6
5.3
Household size
4.8
4.8
4.7
4.7
4.7
4.6
5
4.6
4.6
4.6
4.5
4.5
4.4
4.4
4.4
4.3
4.3
4.3
4.1
4.1
3.9
4
3.8
3.8
3.7
4
4
3.6
3.6
3.5
3.5
3.5
3.5
3.5
3.3
3.1
3.4
3.3
6.9
6.1
5.9
2.9
3
3
3
5
2
1
0
Mandera
Wajir
Garissa
Marsabit
Turkana
West Pokot
Kwale
Kilifi
Narok
Samburu
Baringo
Bomet
Tana River
Isiolo
Burgoma
Migori
Elgeyo Marakwet
Busia
Trans Nzoia
Nandi
Kericho
Kitui
Kakamega
Homa Bay
Vihiga
Kisii
Makueni
Nyamira
Siaya
Uasin-Gishu
Kisumu
Lamu
Meru
Tharaka Nithi
Taita Taveta
Machakos
Nyandarua
Nakuru
Kajiado
Laikipia
Embu
Muranga
Mombasa
Nyeri
Kirinyaga
Kiambu
Nairobi
County
Household Site Average = 3.9

There are minimal variations in terms of population proportion of females. Counties such as Garissa,
proportion by gender for most counties, although Wajir and Marsabit have male proportions of 54.6,
counties in ASALs have relatively higher proportion 53.2 and 53.0 per cent, respectively. Counties in the
of males while those in the lake region have a higher
43
lake region have higher proportions of females than 52.3 per cent, respectively. The proportion of the
males. Siaya, Homa Bay and Busia counties have inter-sex in the total population was low across all
proportions of female populations of 52.5, 52.3 and counties (Figure 3.10).
Figure 3.10: County population proportion by gender (%)
3.3 Poverty at County Level
At county level, significant disparities exist in rates of 16.7, 23.3 and 27.1 per cent, respectively,
overall poverty incidence, from a low of 16.7 per while Turkana, Mandera and Samburu have one of
cent in Nairobi County to a high of 79.4 per cent the highest poverty rates at 79.4, 77.6 and 75.8 per
in Turkana County. Counties in arid-and semi-arid cent, respectively. The latter also have low GCP per
areas, which tend to have the lowest real GCP per capita of Ksh 36,592, Ksh 28,602 and Ksh 44,147,
capita, also have the highest incidences of poverty. respectively. In comparison to the national level,
For example, Nairobi, Mombasa and Kiambu, which 53.0 per cent of the counties fall below the national
have the highest GCP per capita, have low poverty poverty rate of 36.1 per cent (Figure 3.11).
44
Food poverty rate Poverty headcount (%)
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
Nairobi 16.7
Nyeri 15.5
Nyeri 19.3
Meru 15.5
Meru 19.4
Nairobi 16.1
Kirinyaga 20.0
Kirinyaga 18.8
Narok 22.6
Nakuru 19.6
Machakos 23.3
Lamu 19.9
Kiambu 23.3
Narok 22.1
Tharaka Nithi 23.6
Muranga 22.7
Homa Bay 22.7 Muranga 25.3
Kiambu 23.5 Mombasa 27.1
Mombasa 23.6 Embu 28.2
Machakos 24.1 Lamu 28.5
Si ay a 27.3 Nakuru 29.1
Embu 28.3 Kericho 30.3
Laikipia 28.5 Taita Taveta 32.3
Food poverty Rate

Nyandarua 29.6 Nyamira 32.7
Makueni 30.7 Homa Bay 33.5
Tharaka Nithi 31.2 Si ay a 33.8
Poverty Head County Rate

Kericho 31.4 Kisumu 33.9
Nandi 31.5 Trans Nzoia 34.0
(Turkana, Mandera, Samburu, Busia, West Pokot,

2015/16, half of the population of seven (7) counties
at 66.1, 61.9 and 60.1 per cent, respectively. As of
ASALs, including Turkana, Mandera and Samburu
Food poverty10 is highly prevalent in counties in
Migori 32.0 Makueni 34.6
Burgoma 32.4 Nyandarua 34.8
Bungoma 35.7
County
Kisumu 32.5
Bomet 32.8 Kakamega 35.8
Kakamega 33.3 Nandi 36.0
Trans Nzoia 33.3 Baringo 39.6
Isiolo 34.2 Kajiado 40.7
Nyamira 36.3 Uasin-Gishu 41.0
Vlhiga 36.6 Migori 41.1
Kajiado 36.9 Kisii 41.7
Uasin-Gishu 38.2 Vlhiga 43.2
Taita Taveta 38.9 Elgeyo Marakwet 43.4
cent, respectively. 45.9
Kitui 39.4 Laikipia
Kwale 41.1 Kilifi 46.4
Figure 3.12: Food poverty by county 2015/16

Wajir 41.3 Kwale 47.4
Baringo 41.4 Kitui 47.5
Kisii 44.5 Bo met 48.8
Elgeyo Marakwet 44.8 Isiolo 51.9
Gari ssa 45.2 West Pokot 57.4
National Food poverty Rate = 32%

National Head Count Rate = 36.1%
Figure 3.11: Overall poverty headcount across counties, 2015/16
Kilifi 48.4 Tana River 62.2

Tana River 55.4 Wajir 62.6
Data Source: Kenya National Bureau of Statistics (2018), KIHBS 2015/16

Marsabit 55.6 Marsabit 63.7
West Pokot 57.3 Gari ssa 65.5
Busia 59.5 Busia 69.3
Samburu 60.1 Samburu 75.8
Mandera 61.9 Mandera 77.6
Turkana 66.1 Turkana 79.4
proportion of food poor at 15.5, 15.5 and 16.1 per

Marsabit and Tana River) were food poor (Figure
3.12). Nyeri, Meru and Nairobi have the lowest
45
Sixteen (16) counties (34%) fall below the national It is only Trans Nzoia and Bungoma that fall above
hardcore poverty11 line of 8.6 per cent (Figure the national overall poverty rate but fall below the
3.13). Fourteen (14) out of the 16 counties also fall national hardcore poverty rate.
below the national poverty rate of 36.1 per cent.
Figure 3.13: Hardcore poverty rate by county, 2015/16
52.7
60.0
42.2
Hardcore poverty rate
50.0
38.9
26.8
40.0
26.2
23.8
30.0
23.8
17.9
15.0
20.0
12.8
12.1
11.4
10.5
8.9
9.7
8.8
8.5
8.0
8.2
8.0
6.9
7.0
7.6
7.3
7.5
10.0
6.1
6.6
5.9
5.9
6.0
6.1
5.3
5.5
4.0
5.2
3.1
3.2
3.4
3.5
3.6
3.7
1.8
2.2
2.8
0.6
0.9
0.2 Nyeri
Nairobi
Kirinyaga
Tharaka Nithi
Mombasa
Meru
Kiambu
Lamu
Nyandarua
Machakos
Migori
Nakuru
Embu
Muranga
Taita Taveta
Narok
Homa Bay
Kwale
Kisumu
Siaya
Bomet
Makueni
Kakamega
Kilifi
Kericho
Klsil
Nyamira
Nandi
.Elgeyo Marakwet
Vihiga
Baringo
Bungoma
Isiolo
Trans Nzoia
Wajir
Kajiado
Uasin-Gishu
Kitui
Laikipia
Tana River
Marsabit
Garissa
West Pokot
Busia
Mandera
Samburu
Turkana
County
Hardcore poverty National = 8.6%

Turkana has the highest number of hardcore poor, by Mandera and Busia with 277,000 and 225,000
accounting for 15 per cent of the total hardcore poor individuals, respectively. The top ten counties with
in the country. In terms of the actual numbers of the the highest number of hardcore poor account for
hardcore poor, counties in arid and semi-arid lands 51.0 per cent of the total hardcore poor nationally.
still dominate. The highest number of the actual poor Nyeri has the least number of hardcore poor, with
are in Turkana, with 571,000 individuals followed only 1,000 individuals (Figure 3.14).
Figure 3.14: Actual number of hardcore poor by county (‘000)
571
600
Number of hardcore poor
500
400
277
300
225
170
141
200
137
137
129
120
101
103
101
99
98
76
76
75
100
64
68
69
75
53
54
56
60
60
63
51
56
60
48
57
58
27
40
41
48
26
42
14
23
19
22
7
6
4
1 Nyeri
Lamu
Kirinyaga
Tharaka Nithi
Isiolo
Taita Taveta
Embu
Nyandarua
Nairobi
Mombasa
Migori
Machakos
Meru
Kwale
Wajir
Vihiga
Nyamira
Tana River
Muranga
Bomet
Elgeyo
Marakwet
Kiambu
Baringo
Narok
Siaya
Makueni
Homa Bay
Kisumu
Kericho
Marsabit
Nakuru
Nandi
Laikipia
Kilifi
Kajiado
Trans Nzoia
Kisii
Gari ssa
Samburu
Kakamega
Uasin-Gishu
Bungoma
Kitui
West Pokot
Busia
Mandera
Turkana
County
Hardcore Poor
46
From the analysis, there is a strong positive equitable transfers. Between 2013/14 and 2018/19,
correlation between household size at county level a total of Ksh 1.7 trillion was disbursed to counties
and poverty rates. Counties in arid-and semi-lands, in terms of equitable transfers. The Commission
which also have high poverty incidences, have the on Revenue Allocation (CRA) formula is used in
largest household sizes. The top three counties in calculation of the allocations, of which population
terms of household size are Mandera, Wajir and factor accounts for 45 per cent of the allocation while
Garissa, with household sizes of 6.9, 6.1 and 5.9, poverty factor accounts for 18 per cent. Nairobi
respectively. These counties also have relatively County, the most populous, received 5.3 per cent
higher poverty rates at 77.6, 62.6 and 65.5 per cent, of the transfers, the largest share of the equitable
respectively. Nairobi and Nyeri counties with the transfers between 2013/14 and 2018/19. Turkana
smallest household sizes of 2.9 and 3.0, respectively, County received the second largest share, 3.9 per
have the lowest poverty headcount rates at 16.7 and cent, largely driven by high poverty rates in the
19.3, per cent, respectively. county, the highest in the country. Mandera, being
the second poorest county received the third largest
share of 3.4 per cent. Lamu County received the least
3.4 County Fiscal Performance share of 0.8 per cent. It is the least populated county
and has relatively low poverty rates (Figure 3.15).
The Government has made significant effort to
address poverty and inequality across counties using
Figure 3.15: County share of equitable transfers (%), 2013/14-2018/19
Source: Office of the Controller of Budget (Various) Reports
A total of Ksh 119.7 billion was issued between grants to counties are meant to implement specific
2013/14 and 2018/19 in form of conditional grants. national policies in different sectors such as health.
Kiambu, Nakuru and Machakos received the largest For example, a larger share of conditional grants
share of 6.8, 5.2 and 4.3 per cent, respectively. Lamu went to Level Five Hospitals and Free Maternal
and Kirinyaga received the least shares of 0.8 and 1.0 Health Care for the period under review.
per cent, respectively (Figure 3.16). The conditional
47
Figure 3.16: County share of conditional grants to total transfers (%), 2013/14-2018/19
Lamu
Kirinyaga
Samburu
Isiolo
Laikipia
Tana River
Marsabit
Nyamira
Bomet
Busia
Siaya
Tharaka Nithi
West Pokot
Elgeyo Marakwet
Murang’a
Nairobi
Nandi
Narok
Nyandarua
Taita Taveta
Turkana
Vihiga
Kajiado
Kericho
Traris Nzoia
Baririgo
Makueni
Kwale
Maridera
Bungoma
Embu
Kitui
Meru
Uasin Gishu
Homa Bay
Wajir
Kilifi
Migori
Mombasa
Kisii
Nyeri
Garissa
Kakamega
Kisumu
Machakos
Nakuru
Kiambu
Own Source Revenue (OSR) collections remain low, billion (32.2 %) is from Nairobi County while Tana
with huge disparities existing in county revenue River collected only Ksh 239.7 million (0.1%). Other
bases and potential. As of 2018/19, only seven counties with significant share of OSR include
(7) counties (Nairobi, Mombasa, Narok, Nakuru, Mombasa, Nakuru and Kiambu with 8.6, 6.5 and
Kiambu, Machakos and Kajiado) collected more 6.1 per cent, respectively (Figure 3.17). Counties
than Ksh 1 billion in OSR collections. Between with relatively well-established industry and service
2013/14 and 2018/19, a total of Ksh 200.5 billion sectors collect more revenue.
was collected as county OSR. Out of this, Ksh 64.5
Figure 3.17: County own source revenue share
Source: Author’s computation using data from Office of the Controller of Budget (Various) Reports
48
Counties with the highest poverty rates spent larger The Public Finance Management (PFM) Act 2012
shares of their revenues on development between requires that at least 30 per cent of the spending
2013/14 and 2018/19. Mandera, Turkana and Wajir, should be on development over a medium-term.
some of the poorest counties, spent 49.8, 45.8 59.6 per cent of the counties (28 counties) did not
and 44.1 per cent, respectively, on development meet this requirement. Majority of these counties
(Figure 3.18). Such spending is expected to spent more than 50.0 per cent of their revenue on
stimulate economic activities at county level and personal emoluments, with Nairobi County leading
uplift the population from poverty. Counties that are at 57.4 per cent.
relatively well-off spent the least share of revenue
on development. For example, Nairobi, Nakuru and
Kisumu spent only 14.5, 17.2 and 22.4 per cent,
respectively.
Figure 3.18: Share of county spending by economic classification (%), 2013/14-2018/19
At county level, there was a significant increase in marginally increased from 20.2 per cent in 2014/15
spending in housing between 2014/15 and 2018/19 to 23.5 per cent in 2018/19. The share of education
but spending on social protection is important but expenditure increased from 7.4 per cent in 2014/15
limited. The share of housing expenditure rose by to 8 per cent in 2018/19. The share of expenditure
6 percentage points from 2.6 per cent in 2014/15 on social protection is the lowest at county level, and
to 8.6 per cent in 2018/19 (Figure 3.19). Health and marginally increased from 0.1 per cent in 2014/15 to
early childhood education are devolved functions. 0.4 per cent in 2018/19.
The share of health expenditure in total spending
49
Figure 3.19: County Government expenditure by function (% of total expenditure)
Counties spend about 4.0 per cent of the GDP, on 2018/19 compared to an average of 26.5 per cent
average. Total county spending as a percentage of for the National Government (Figure 3.20).
GDP averaged 4.0 per cent between 2013/14 and
Figure 3.20: County and National Government spending (% of GDP)
Source: Office of the Controller of Budget (Various) Reports and National Treasury (2019), Quarterly
Economic and Budgetary Review: Fourth Quarter 2018/19
50
3.5 Key Messages and Recommendations of Ksh 28,602, Ksh 38,021 and Ksh 38,592,
respectively; their poverty rates were 77.6
per cent, 57.4 per cent and 79.4 per cent,
3.5.1 Key messages respectively. Nairobi, Mombasa and Kiambu
counties have relatively low poverty rates
1.) Counties real GCP per capita grew at an at 16.7 per cent, 23.3 per cent and 27.1 per
average of 2.8 per cent between 2014 and cent, respectively. Food poverty is also highly
2017, with only 47 per cent of the counties (22 prevalent in the ASALs.
counties) attaining above average growth rate.
In addition, counties such as Nyandarua and 6.) There is a strong positive correlation between
Tharaka Nithi had the highest average growth household size at county level and poverty
rates of 7.2 and 7.1 per cent, respectively, rates. Counties in ASALs, with high poverty
while counties such as Nairobi and Nandi did incidences, have the largest household sizes.
not have a significant change in real GCP per The top six counties in terms of household size
capita. have an average of 5.9 members.
2.) Counties in ASALs contribute less to GDP and 7.) The Government has made notable effort to
have the least real GCP per capita. Nairobi and address poverty and inequality across counties
Kiambu account for the largest share of GDP at through the budget. Turkana and Mandera,
24.8 and 5.6 per cent, respectively, while Isiolo one of the poorest counties, received relatively
and Samburu have the least contribution to larger share of revenue allocation of 3.9 and
GDP at 0.2 and 0.3 per cent, respectively. Only 3.4 per cent between 2013/14 and 2017/18,
21.0 per cent of the 47 counties have real GCP largely influenced by the poverty factor in the
per capita above the national GDP per capita CRA formula, which accounts for 18 per cent
of Ksh 96,799.8. Mandera and West Pokot of the revenue allocation.
counties have the least GCP per capita of Ksh 8.) Huge disparities exist in county own source
38,021 and Ksh 28,602, respectively. Nairobi revenue bases and thus, the OSR collections.
and Mombasa have the largest GCP per capita In 2018/19, only seven (7) counties managed
of Ksh 212,498 and Ksh 168,448 respectively; to collect an excess of Ksh 1 billion. County
they have relatively well-established industrial OSR collections amounted to Ksh 200.5 billion
sectors. between 2013/14 and 2018/19, 32.2 per cent
3.) Only 15.0 per cent of the 47 counties have of this from Nairobi County while counties
significant manufacturing activities, with most such as Tana River and Lamu accounted for
counties heavily dependent on agriculture. only 0.1 and 0.2 per cent of the total county
Agriculture is the key economic activity of collections, respectively. This indicates huge
most counties followed by activities in the differences in OSR potential at county level.
services sector. Counties with relatively well- 9.) Between 2013/14 and 2018/19, counties with
established manufacturing and agriculture the highest poverty rates devoted a significant
sectors have larger population size. share of their spending on development.
4.) Disparities exist in poverty rates in counties, Mandera, Turkana and Wajir, some of the
ranging from a low of 16.7 per cent in Nairobi poorest counties, spent 49.8, 45.8 and 44.1
County, to a high of 79.0 per cent in Turkana per cent, respectively, on development. Such
County. Even though the national poverty level spending is expected to stimulate economic
is 36.1 per cent, 22 out of the 47 counties still activities at county level and uplift the
fall below the national level. Furthermore, 16 population from poverty.
counties still fall below the national hardcore 10.) On average, between 2013/14 and 2018/19,
poverty rate of 8.6 per cent. 60 per cent of the counties (28 counties) did
5.) Counties with low GCP per capita are mainly not meet the PFM Act 2012 requirement
in the ASALs; they have the highest poverty that at least 30 per cent of the total county
rates in Kenya. For example, Mandera, West spending be on development.
Pokot and Turkana have real GCP per capita
51
3.5.2 Recommendations
1.) Promote GCP growth through increased to promote a more inclusive growth in the
spending on development to accelerate the counties.
pace of poverty reduction in the counties.
4.) Support industrialization in the rural areas to
Development spending serves to expand
absorb rural labour. This can be achieved by
the capacity for economic activity. Ensure
diversifying economic activities by creating
adherence to the PFM Act by fast-tracking its
an enabling environment with, for example,
implementation on the 30 per cent allocation
infrastructure development to attract
of total budget to development projects
investments in manufacturing activity by the
through the Controller of Budget at county
private sector.
level. The Commission on Revenue Allocation
(CRA) could impose penalties on counties 5.) Provide guidelines and standards on OSR
that do not comply with the PFM Act 2012 collection and usage to counties to enhance
requirement on development spending. county revenue base to boost development
and inclusive growth at county level.
2.) Establish tanneries, leather and meat
processing factories to empower the pastoralist 6.) Enhance OSR collections by full automation
communities that live in the arid and semi-arid of revenue collection systems to seal revenue
lands to expand their production, increase leakages and promote private sector growth.
incomes and lower poverty. This will facilitate in mobilizing adequate
resources to finance development needs at
3.) Establish and revive agricultural-related the county level.
cooperative societies to mobilize and
aggregate financial capital at the county level 7.) Increase spending on social protection to
protect the hardcore poor.
Endnotes
10 According to KNBS (2018), households and individuals are food poor if monthly adult equivalent food
consumption expenditure is < Ksh 1,954 in rural and peri-urban areas and < Ksh 2,551 in core-urban areas.
11 According to KNBS (2018), households and individuals are extreme poor if monthly adult equivalent of total
consumption expenditure per person is < Ksh 1,954 in rural and urban areas and < Ksh 2,551 in core urban areas.
52
MEDIUM-TERM ECONOMIC
4 PROSPECTS FOR KENYA
Kenya’s economy registered an average growth of 5.6 per cent in 2014 to 2019, depicting a stable
economy on a path to achieving the objectives of the Kenya Vision 2030. To cushion the economy
against major exogenous shocks, including uncertain weather conditions, invasion of desert locust
and the coronavirus, efforts towards maintaining macroeconomic stability, growth-enhancing and
prudent fiscal policy, supportive monetary policy, and political stability are crucial. In addition, Kenya
could strategically prepare to exploit opportunities with the coming to effect of the AfCFTA. Further,
counties are core in delivering the required economic growth and need to invest more to strengthen
agriculture and manufacturing, which are crucial in achieving economic transformation.
4.1 Introduction be attributed to the slowdown in the sectors of
K
accommodation and food services, agriculture,
enya has experienced a stable economic manufacturing and transportation, which were
growth in the recent past, which is attributable affected by delay in the long rains, and the upsurge of
to a favourable macroeconomic environment, crude oil prices. The slowdown in the manufacturing
political stability, heavy infrastructural public sector was due to low performance in manufacture of
investments and growth in domestic demand. The tobacco products and processing and preservation
economy registered a steady economic growth of fish.
averaging 5.6 per cent per annum for the period
For the external sector, the current account deficit
2014 to 2019. This was a strong recovery from the 1.5
stood at Ksh 567.0 billion 2019, representing 5.8 per
per cent growth rate recorded following the financial
cent of the GDP compared to a deficit of Ksh 511.3
crisis in 2008. The growth was also slightly higher
billion in 2018. The deterioration of current account
than the 5.1 per cent average recorded between
by 10.9 per cent was as a result of a 2.9 per cent
2008 and 2013. The annual economic growth
decline in merchandise exports in 2019 and growth
recorded for the last four years had 2019 growing by
in merchandise imports due to increased importation
5.4, 2018 by 6.3 per cent, 2017 by 4.9 per cent and
of petroleum products.
2016 by 5.9 per cent, which were impressive growth
rates given a period of drought and highly contested Inflation remained stable for the period January to
general elections. The sectors that recorded high December 2019, averaging 5.2 per cent which was
growth rates in 2019 were accommodation and food within the policy target. This was mainly attributed
services (10.3%), information and communication a continued stability of prices for food and non-
(8.8%), public administration and defence (8.1 per alcoholic drinks during the period. The lowest
cent), electricity supply (7.9%), arts, entertainment inflation level was in September 2019 at 3.83 per
and recreation (7.9%) and transport and storage cent while the highest was in April at 6.58 per cent.
(7.8%). Apart from April and July, all the other months
registered inflation levels of below 6.00 per cent,
The economy grew by 5.4 per cent in 2019, which
which indicates a general stability in price levels
is lower than 6.3 per cent in 2018 but higher than
throughout the year.
4.9 per cent in 2017. The slow growth in 2019 can
53
Actual revenue collections remained lower than for sustainable and inclusive growth. It ensures that
the targets. As at December 2019, total revenue there is a conducive environment for Government
collection including Appropriations-in-Aid (AIA) was and private sector to invest. Fiscal and monetary
Ksh 920.6 billion (8.9% of GDP), which was lower than policies play a stabilization and redistribution role
the target of Ksh 1,059.3 billion (10.2% of GDP). The and are critical in achieving more inclusive growth.
shortfall was Ksh 138.7 billion and was attributed
mainly to under-performance in ordinary revenue A fair economic growth is expected for Kenya given
by Ksh 88.4 billion and AIA by Ksh 50.3 billion. This the stable macroeconomic environment so far
under-performance was mainly attributed to low registered in the economy. The forecast scenario
performance of all tax heads and AIA, where the was based on a stable macroeconomic environment,
main contributor was income tax, basically due to together with the political goodwill generated from
lower than targeted performance in both Pay As You several Government initiatives that are ongoing,
Earn (PAYE) and Other Income taxes. including the ‘handshake’. The general prices have
been stable in the medium-term, coupled by stable
Actual expenditures were also below the target. crude oil prices which are on a downward trend (an
Total expenditure and net lending as at December effect of coronavirus on demand especially from
2019 was Ksh 1,144.9 billion, which was below the China). The current rains are expected to yield
target by Ksh 163.1 billion. Recurrent expenditure better outcomes for the agricultural sector, which
amounted to Ksh 772.5 billion, while development will further provide inputs/raw materials for the agro-
expenditure and transfer to County Governments processing industries and are expected to create
(equitable share only) were Ksh 250.2 billion and Ksh more job opportunities. It is worth noting that the
112.0 billion, respectively. The recurrent expenditure prioritization of expenditures into more productive
was below the target by Ksh 24.8 billion, which economic activities is also yielding good fruits in
was attributed to lower than targeted pensions the country. It is also assumed that development
payments. Development expenditures were below partners’ funding will materialize to fight the desert
target by Ksh 98.0 billion mainly due to lower than locusts and the coronavirus pandemic. More so, trade
expected absorption of foreign and domestically is expected to benefit a lot with the ongoing African
financed development expenditures. This resulted Continental Free Trade Area (AfCFTA) negotiations
to an overall deficit of Ksh 228.3 billion, which was to improve trade within the continent. However, it is
an improvement as it was lower than the target of not yet known for how long the coronavirus will be
Ksh 232.2 billion. This deficit was financed mainly with us and the extent of the damage it will cause.
through net domestic borrowing of Ksh 152.9 billion
while net foreign borrowing was Ksh 73.8 billion. The resource mobilization from development
partners and other sources to counter desert locusts
The level of formal employment in 2018 was 2.8 and the Coronavirus leads to no major, if any, budget
million, of which 1.9 million was in the private sector, reallocation would be expected for Kenya. The World
0.8 million in the public sector, and 0.2 million in Bank Group has committed to provide US$ 60 million
formal self-employed and unpaid family workers. to counter desert locusts and the coronavirus. The
The informal sector engaged 14.9 million people Covid-19 Financing Facility will avail US$ 50 million
with majority in wholesale and retail trade (8.9 (Ksh 5.15 billion) and the Contingency Emergency
million) followed by manufacturing at 3.0 million Response Component of Transforming Health
and community social and personal services at 1.4 Systems for Universal Care Project an additional US$
million. Therefore, three sectors held the bulk of 10 million (Ksh 1.03 billion). The World Bank has also
informal sector jobs at 89.3 per cent of total informal activated the disbursement of US$ 14 million (Ksh 1.4
sector employment. billion) to enhance control of desert locust invasion
in Kenya. The funds are drawn from the Contingency
4.2 Growth Forecasts for Kenya Emergency Response Component of Kenya Climate
Smart Agriculture Project.12 Table 4.1 gives the
Considering inclusivity in the country, economic forecast for the baseline scenario, which assumes
growth creates economic opportunities, which that external funding will cushion the country from
are widely distributed across all segments of the the adverse effects of coronavirus, the business as
society. Macroeconomic stability is a prerequisite usual scenario.
54
MEDIUM-TERM ECONOMIC PROSPECTS FOR KENYA
Table 4.1: Economic projections for 2019-2022

2016 2017 2018 2019 2020 2021 2022
Rates (%)
GDP Growth 5.9 4.8 6.3 5.4 4.8 6.1 6.3
Inflation 6.3 8.0 4.7 5.2 5.0 5.1 5.1
Interest Rate 8.5 8.4 7.8 6.9 7.0 7.2 7.2
Volumes (%)
Private Consumption 7.0 7.4 7.0 4.6 5.7 6.6 6.6
Government Consumption 5.6 3.9 5.6 4.9 3.1 3.7 4.2
Private Investments -7.2 8.3 2.4 3.1 2.3 3.8 4.0
Government Investments 7.8 -3.1 -8.4 -1.0 1.9 5.0 4.5
Export Goods and Service -2.2 -6.2 3.9 -0.2 3.4 3.6 3.7
Imports Goods and Services -3.4 8.6 2.5 -2.0 3.7 4.2 5.0
%GDP
Current Account Balance -5.8 -7.2 -5.8 -5.8 -4.0 -3.2 -3.4
Fiscal Deficit -5.4 -6.1 -6.3 -5.3 -5.1 -4.8 -4.0
Expenditures 25.1 26.8 26.2 25.9 26.4 26.5 27.8
Index
Ksh per Dollar 101.5 103.4 101.3 102.1 103.5 103.9 103.4
Source: KIPPRA (2020), KIPPRA Treasury Macroeconomic Model (KTMM)
In this scenario, it is expected that the current 4.3.1 Downside risks

economic growth momentum will be maintained
in the medium-term, based on the 2018 economic Among the downside risks include enhanced fiscal
growth rate of 6.3 per cent. This projects a gradual pressure, with rising budgetary demands coupled
economic growth of 4.8 per cent in 2020, with a slight with a narrowing fiscal space. The fiscal demands
recovery in 2022, which is expected to deliver a 6.3 include the high public debt levels with rising
per cent economic growth rate. Inflation is expected debt servicing costs; demands emanating from
to remain within the policy scenario of 5.0 per cent the coronavirus pandemic, and misappropriation
and, at most, below that level, on average. Given of public funds. In addition are exogenous shocks
the stable general prices, household consumption is including the weather conditions and the invasion by
expected to thrive and grow at the level of 6.6 per desert locusts.
cent for 2021 and 2022.
The rising debt servicing costs is a risk in the
medium-term forecasting, mainly due to possible
4.3 Risk Factors in Medium Term reallocation of funds away from delivery of public
Forecasting service. Public debt is currently Ksh 6.2 trillion,
with the levels of debt servicing estimated at 30
Currently, the world is dealing with the coronavirus per cent of total revenue. The estimate of ordinary
pandemic whose dynamics are yet to be fully revenue performance, according to the Budget
understood. A protracted scenario will have Policy Statement (BPS) 2020 is Ksh 1.8 trillion and,
significant economic repercussions in the medium- therefore, debt servicing approximates to about Ksh
term. For the medium-term prospects, there are 540.0 billion every year, compared to the country
both downside and upside risks that need to be annual development budget of Ksh 730.8 billion for
taken into consideration in the forecasting period. 2019/20 (National Treasury, 2020).
55
The uncertainty in weather conditions is a key The Government has instituted various preventive
exogenous shock impacting on the agricultural measures in the wake of Covid-19. These include
sector, the biggest contributor to GDP in the country. personal hygiene measures such as: regular washing
A KIPPRA study documents that during drought of hands with soap, sanitizing, maintaining a social
episodes, the country losses about 2.0 percentage distance for all and maintaining good respiratory
points in GDP growth. This shows that the losses hygiene. Further, the Government, through a
incurred mainly in the agricultural sector and any Presidential Directive, introduced a curfew (from
other adverse effects in the economy are equivalent 7.00pm to 5.00am), suspended all public gatherings,
to 2.0 per cent of GDP in the country in one year. meetings and events and all inter-school events.
To that effect, all learning institutions have been
The desert locust is wreaking havoc across various temporarily closed. Similarly, prison visits were
countries, being one of the most destructive species. suspended for 30 days, beginning 13th March 2020.
Its greatest asset is the agility and endurance, In addition, Kenyan’s have been urged not to spread
enabling it to remain in the air for long periods of misinformation through social media that could
time. The desert locust can cover 150km per day cause fear and panic.
at a speed of 16km/hr, destroying everything in its
path. A single swarm, up to 150 million insects, can The Government has also instituted fiscal, monetary
consume enough food to feed 35,000 people. The and financial policies to support the most vulnerable.
swarms that entered the country were in the adult These include tax reliefs, enhanced expenditure for
stage, but immature, meaning, they are ready to social protection, easing of monetary policy, and
mate and lay eggs, and it is estimated that should financial policy related to bad debt. The Government
these eggs hatch successfully, then the swarm will is also supporting production of protective gear
be double what is being witnessed. Aerial spraying including face masks locally.
to beat back a plague of locusts swarming across
Kenya will cost US$ 70 million (Ksh 7.0 billion), On the external factor, security risk is a key concern
according to UN estimates. The price tag for the to Kenya, especially through terrorist attacks. As
spraying comes from the UN Food and Agricultural a proxy for the cost of terrorism, we consider the
Organization (FAO), which leads international efforts budget on Kenya Defense Forces (KDF) expenditure
to fight hunger. to be refunded by AMISOM. Where possible, one
can estimate the risk factor through assumption of
The impact of the coronavirus (COVID-19) in Kenya is the cost associated with travel bans issued during
attributable to internal and external developments. threats of terrorism.
The virus was first reported from Wuhan, China
on 31st December 2019. Kenya reported its first
confirmed case on 13th March 2020 and by 4th May 4.3.2 Upside risks-opportunities
2020 the number of confirmed cases had increased
to 490. The most affected region in addition to China There are various opportunities to exploit in the
is Europe, which is a big export market for Kenya, medium-term. These include the removal of interest
and Sub-Saharan Africa is starting to feel the heat. rate cap, which allows appropriate pricing of credit
China is a major global economic player, the second risk; and the coming to effect of the AfCFTA in July
largest importer of goods and the largest exporter of 2020, thereby creating a single continental market for
goods. Projections show that China could lose one goods and services, with free movement of business
per cent of GDP in 2020, while the world economy persons and investments, and thus paving way for
is set to lose 0.4 per cent of GDP. Kenya’s economic accelerated establishment of a Customs Union.
growth is likely to be affected adversely as it trades The declining oil prices due to reduced demand with
heavily with China. The exports are likely to reduce coronavirus will have a favourable effect on imports
while imports that include finished and intermediate bill in Kenya. It will cushion inflationary pressures
goods will affect manufacturing, construction and that may arise from reduced production activity at
MSE sectors in Kenya as China closes most of her the domestic market level. It is anticipated that oil
factories. prices could go as low as US$ 30 per barrel.
56
Kenya securing a non-permanent seat in the UN there will be a possibility of resolving the coastline
Security Council (UNSC) is an opportunity that can be border conflict between Kenya and Somali with
exploited to improve economic development. The urgency and the weight it deserves. These will free
UNSC has the primary responsibility of maintaining resources that Kenya would have spent without any
international peace and security. It enjoys robust influence in the UN Security council. An estimate of
powers, including the imposition of sanctions and Ksh 110.0 billion under the AMISOM can be spared
authorization of military action when international when border dispute is resolved, and Kenya would
peace is threatened. Given the Council’s pre-eminent be able to exploit the resources that are within that
role in international affairs, it is not surprising that border region.
most States aspire to get the membership. Should
Kenya get the seat in the UN Security Council, Table 4.2 presents a forecast that incorporates all the
there are possibilities that are likely to be direct risks and opportunities at domestic and international
advantages. One, there will be an opportunity of level. The impact of the risks, in case they materialize,
bargaining for more resources to maintain peace can be disastrous given the country is still recovering
with her neighbours, Somalia and South Sudan. Two, from several other previous risks that affected the
Kenyan economy.
Table 4.2: Economic projections for 2019-2022 (with risks materializing)

2016 2017 2018 2019 2020 2021 2022
Rates (%)
GDP Growth 5.9 4.8 6.3 5.4 1.7 3.1 4.2
Inflation 6.3 8.0 4.7 5.2 6.1 6.4 6.5
Interest Rate 8.5 8.4 7.8 6.9 7.0 7.2 7.2
Volumes (%)
Private Consumption 7.0 7.4 7.0 4.6 1.8 3.2 4.1
Government Consumption 5.6 3.9 5.6 4.9 2.9 3.1 4.2
Private Investments -7.2 8.3 2.4 3.1 -7.9 2.6 3.4
Government Investments 7.8 -3.1 -8.4 -1.0 -11.2 2.8 4.5
Export Goods and Services -2.2 -6.2 3.9 -0.2 -9.4 1.8 2.6
Import Goods and Services -3.4 8.6 2.5 -2.0 -8.2 2.7 3.5
% GDP
Current Account Balance -5.8 -7.2 -5.8 -5.8 -2.3 -3.1 -2.3
Fiscal Deficit -5.4 -6.1 -6.3 -5.3 -6.5 -5.8 -5.4
Expenditures 25.1 26.8 26.2 25.9 23.5 24.1 24.6
Index
Ksh per Dollar 101.5 103.4 101.3 102.1 106.1 106.2 106.1
Source: KIPPRA Treasury Macroeconomic Model (KTMM)
The occurrence of the many specified risks gives assumed to be affected by the dimming Chinese
a dim scenario for Kenya economic growth given markets and slippage of Government investments
that it is projected to decelerate to 1.7 per cent in due to misappropriation of funds. The exchange
2020 and thereafter a slight pick to reach 4.2 per rate has the Kenya shilling weakening mainly due
cent in 2022. This is attributed to low performance to low performance of exports and the inflationary
in exports and total investments, which were pressures expected to occur in the economy. Private
57
consumption is also adversely affected due to From the estimated GCP, the average performance
increasing inflation, leading to reduced disposable for all the counties was 5.6 per cent for 2014-2017,
incomes of the households. which is the national GDP growth (Figure 4.1).
Elgeyo Marakwet had the highest GCP growth with
an average growth rate of 10.0 per cent for the four
4.4 County GCP and Medium-Term years followed by Nyandarua at 9.3 per cent. The
Prospects marked performance was also exhibited by the fact
that nine (9) counties had an average growth rate
The Gross County Product (GCP) is a measure of how of over 5.6 per cent. These were mainly the former
much each county contributes to Kenya’s GDP, hence a provincial headquarters.
“county GDP”. It gives the value of total product (GDP)
by each county and, therefore, is a disaggregation of Of the nine (9) counties that registered an average
the overall GDP into counties. The GCP estimates growth rate of below 4.0 per cent, Embu and Garissa
were computed to be consistent with the national GDP were at the tail end with 2.6 per cent and 3.2 per
estimates. The GCP for the 47 counties should ideally cent, respectively. All the counties save for Nairobi
sum up to Kenya’s GDP. However, this was affected, and Mombasa derive their GCP growth mainly from
but minimally, by the impossibility to distribute taxes agriculture and services sectors..
(less subsidies) on products, which eventually distorts
the relative sizes of GCP.
Figure 4.1: County average growth rates, 2014-2017
Source: KNBS (2019), GCP 2019
58
Figure 4.2: County annual growth rates, 2015-2017
Source: KNBS (2019), GCP 2019
From the annual growth rates, Figure 4.4, there which imply a decline in value added in constant
are some counties registering huge growth rates prices when there is no major calamity reported in
in different years, especially Kitui at 20.5 per cent any of the affected counties.
in 2015, Nyamira at 17.3 per cent in 2016, Tharaka
Nithi at 15.8 per cent in 2017, Laikipia at 14.8 per
4.4.1 County GCP projections
cent in 2016 and Baringo at 14.5 per cent in 2015
to mention but a few. However, some counties The GCP was estimated for 2013 to 2017 using a
also recorded negative growth rates in GCP (a top-down approach where the national GDP was
contraction) for different years, namely: Tana River allocated to all counties by means of a distribution
at -17.4 per cent in 2015, Kitui at -10.0 per cent in key as a weight to the county’s contribution to
2016, Embu at -3.5 per cent in 2016 and Nyamira an economic activity. The distribution key was
at -1.7 per cent and -3.3 per cent in 2015 and 2017, derived from data on output, employment, wages,
respectively. This can be partly attributed to data salaries and populations for the counties to ensure
compilation method, which utilized implicit deflators consistency between national and county estimates.
for the value added at the national level and basically Though this is a very good attempt, an improvement
assumed that price changes were substantially is required to obtain an accurate measure of the level
similar in all counties even where it may not be the of economic activity at the county level.
case. In Nyamira County, the contraction in 2017 can
be explained by three sectors whose value added This gives a challenge on attempting to provide
per cent of total were the lowest compared to the projections based on the estimates of the county
Lake region counties, namely: wholesale and retail economic activities. However, a simple framework
trade (2.6% against 6.3%); transport and storage has been applied to forecast county GCP by using
(3.2% against 7.0%); and public administration (5.1% a number of assumptions. This include that counties
against 5.9%). The huge positive growth rates can be need to grow by a minimum of 7.0 per cent, a similar
attributed to lower bases and mainly data estimation growth projection as specified in the Third Medium-
challenges with this first round of estimation of GCP. Term Plan (MTP III) for the years 2018 to 2022.
The same applies to the high negative growth rates, Also, that the counties that had a growth rate of
59
above 7.0 per cent in 2017 will maintain the growth If this assumption would have actualized in 2018,
momentum in the medium-term and in a consistent then the Kenyan economy would have grown by 7.2
manner. Thus, it is assumed that counties such as per cent instead of the recorded 6.3 per cent in the
Elgeyo Marakwet and Nyandarua with high growth 2019 Economic Survey. Eventually, even in 2019,
rates of 10.0 per cent and 9.3 per cent, respectively, the growth would also have been 7.2 per cent as
will maintain the momentum up to 2022 (Table 4.3). opposed to the current projection of 5.8 per cent in
the baseline scenario.
Table 4.3: Projections for GCP 2018-2022
County 2018 2019 2020 2021 2022

Elgeyo Marakwet 10.0 10.0 10.0 10.0 10.0
Nyandarua 9.3 9.3 9.3 9.3 9.3
Laikipia 8.6 8.6 8.6 8.6 8.6
Siaya 8.4 8.4 8.4 8.4 8.4
Tharaka Nithi 8.3 8.3 8.3 8.3 8.3
Nakuru 7.7 7.7 7.7 7.7 7.7
Bungoma 7.6 7.6 7.6 7.6 7.6
Baringo 7.5 7.5 7.5 7.5 7.5
Busia 7.2 7.2 7.2 7.2 7.2
Migori 7.1 7.1 7.1 7.1 7.1
Bomet 7.0 7.0 7.1 7.2 7.3
Embu 7.0 7.0 7.1 7.2 7.3
Garissa 7.0 7.0 7.1 7.2 7.3
Total 7.2 7.2 7.3 7.4 7.5
Source: Authors’ Compilation from KNBS (2019), GCP 2019 Data
If all the counties were to grow by a minimum of 7.0 required targeting the two broad sectors to deliver
per cent in 2020 up to 2022, the Kenyan economy this desired growth, which was only witnessed during
would grow by 7.3 per cent in 2020, and up to 7.5 the Economic Recovery Strategy (ERS) period from
per cent in 2022. Since growth mainly is from sectors 2003 to 2007. This calls for an improvement in county
of agriculture and services for all counties, save for resources, and heightening prudent utilization of
Nairobi and Mombasa, strategic interventions are available resources in the targeted sectors to realize
such growth.
60
Figure 4.3: County growth projections
Source: Author’s computation. Figure 4.3 shows the projections of GCP by counties with a sustained
constant growth for the 2018 up to 2022 in all counties. The total for all shows that Kenya can grow by 7.5
per cent by the year 2022, with all the counties registering high annual growth rates.
In the counties, the sectors with high value and retail trade with 8.2 per cent, These sectors have
added and therefore the potential for delivering high levels of value added that amount to close to 10
high economic growth rates are agriculture, per cent and above, out of the total value added in
manufacturing, wholesale and retail, finance and each county (Annex Table 4.1). Some counties such
insurance, transport and storage, real estate, as Nairobi have five (5) huge sectors while Kiambu
construction, public administration and education and Kisumu have four (4) major sectors. The others
(Table 4.4). These are nine (9) economic sectors where have three (3) and two (2) major sectors that they
agriculture is the highest with a proportion of 37.7 can count on while Nyandarua, Nakuru, Bomet and
per cent of the county value added. This is followed Elgeyo Marakwet have only one major sector which
by manufacturing with 8.6 per cent and wholesale is agriculture, which includes forestry and fishing.
Table 4.4: County sectors with high value added, 2017
Code County Sector1 Sector2 Sector3 Sector4

1 Mombasa Transport and Manufacturing Real Estate
Storage
2 Kwale Agriculture* Real Estate
3 Kilifi Agriculture Real Estate
4 Tana River Agriculture Wholesale and Retail Public Administration
5 Lamu Agriculture Transport and Storage
6 Taita Taveta Agriculture Public Administration Finance and Insurance
61
Code County Sector1 Sector2 Sector3 Sector4

7 Garissa Agriculture Public Administration Education
8 Wajir Agriculture Public Administration
9 Mandera Agriculture Public Administration
10 Marsabit Agriculture Public Administration
11 Isiolo Agriculture Construction Wholesale and Retail
12 Meru Agriculture Finance and Insurance
13 Tharaka Nithi Agriculture Wholesale and Retail
14 Embu Agriculture Transport and Storage
15 Kitui Agriculture Finance and Insurance Education
16 Machakos Agriculture Manufacturing. Real Estate
17 Makueni Agriculture Education
18 Nyandarua Agriculture
19 Nyeri Agriculture Finance and Insurance
20 Kirinyaga Agriculture Transport and Storage
21 Muranga Agriculture Finance and Insurance
22 Kiambu Agriculture Construction Real Estate Finance and Insurance
23 Turkana Agriculture Education
24 West Pokot Agriculture Education
25 Samburu Agriculture Wholesale and Retail Public Administration
26 Trans Nzoia Agriculture Finance and Insurance
27 Uasin Gishu Agriculture Wholesale and Retail Finance and Insurance
28 Elgeyo Marakwet Agriculture
29 Nandi Agriculture Finance and Insurance
30 Baringo Agriculture Finance and Insurance
31 Laikipia Agriculture Wholesale and Retail
32 Nakuru Agriculture
33 Narok Agriculture Finance and Insurance
34 Kajiado Agriculture Real Estate, Finance and Insurance
35 Kericho Agriculture Finance and Insurance Manufacturing
36 Bomet Agriculture
37 Kakamega Agriculture Education
38 Vihiga Agriculture Finance and Insurance Education
39 Bungoma Agriculture Education
40 Busia Agriculture Education
41 Siaya Agriculture Education
42 Kisumu Agriculture Wholesale and Retail Manufacturing Real Estate
43 Homa Bay Agriculture Education
44 Migori Agriculture Education
45 Kisii Agriculture Finance and Insurance
46 Nyamira Agriculture Finance and Insurance
47 Nairobi Manufacturing Wholesale and Retail Transport and Storage Construction & Real
Estate
*Agriculture sector refers to Agriculture, Forestry and Fishing
62
4.5 Key Messages and Recommendations 4.5.2 Recommendations
4.5.1 Key messages 1.) Secure and sustain macroeconomic stability.

It is important that supply of adequate food
1.) Secure the stability of the macroeconomic is sustained, including through enhanced
environment. A stable macroeconomic agricultural productivity to maintain low and
environment supports in delivering on inclusive stable inflation. In addition, there is need to
growth. This includes internal stability with low address transport costs, which have implications
and stable inflation and fiscal sustainability; on all sectors by reviewing the pricing of key
and external stability with favourable current fuel products. Further, is to emphasis on
account balance. prudent public finance management to reduce
2.) Kenya faces significant downside risks that wastage of resources.
could see a slowdown in economic activity. 2.) Maintain a growth-enhancing fiscal policy. This
These include rising fiscal pressures with includes cushioning the most vulnerable to the
increased debt servicing costs and fiscal exogenous shocks; enhanced management of
measures to cushion the economy from the public debt to ensure the debt servicing costs
effects of Covid-19; weather conditions; desert do not crowd-out financing of priority public
locust invasion; impact of Covid-19 on the services; and enhanced public investment
economy. This is expected to have implications management so that projects with high social
on economic activity. and economic returns are prioritized.
3.) There are also opportunities that Kenya can 3.) Take advantage of the AfCFTA opportunities
exploit in pushing ahead the development in diversifying trade at regional level. This
agenda. These include the coming into effect includes actively and strategically identifying
of the AfCFTA in July 2020; the declining oil areas that Kenya has comparative advantage
prices that will see a reduced import bill; and in exploiting the opportunities offered by
Kenya getting the UN Security Council seat. participation in the AfCFTA; and enhancing
4.) The projected economic growth may not deliver bilateral trade agreements and improving
on the desired inclusive economic growth value addition for exports to fetch higher
in the country. Taking timely intervention to foreign exchange earnings.
avert the adverse effects of the downside risks 4.) Support key drivers of growth at county level
is necessary in putting the country on a high by enhancing the business environment within
growth trajectory. priority county investment programmes.
This includes in sectors such as agriculture,
5.) The counties can play a significant role in
manufacturing and wholesale and retail
meeting the targeted medium-term growth
trade, which are key in delivering the desired
of 7.0 per cent. This requires greater support
economic growth in the medium-term.
in the economic sectors of agriculture,
manufacturing and wholesale and retail trade
to deliver a minimum of 7.0 per cent in GDP
growth annually.
Endnote
12 https://www.standardmedia.co.ke/business/article/2001364472/world-bank-to-give-kenya-sh8-billion-to-counter-
coronavirus-locusts; 16th March 2020.
63
ENHANCING FINANCIAL
5 INCLUSION FOR INCLUSIVE
GROWTH
Access to financial products, such as savings, loans and payment of services, has the potential to
contribute to inclusive growth. Overall, national access to financial inclusion is at 82.9 per cent, while
about 17 per cent of the population is still excluded from access to formal financial services and
therefore cannot participate effectively in the economic activity. Disaggregation of data by counties
shows that counties with most access to finances, either credit, savings or insurance, are mainly
counties with big urban areas. A further disaggregation of data by gender shows a wide gender
disparity between males (85.58%) and females (80.33%). For the youth, a significant proportion of
them (23.47% male and 25.36% female) did not have formal financial access especially in insurance
and credit aspects. Moreover, proximity to financial services providers, level of trust of financial services
providers, excessive documentation, financial literacy and the cost of accessing financial services play
a pivotal role in ensuring financial access. Finally, mobile money agents present a potential solution
for many of the barriers to closing the financial inclusion gap and reaching the excluded as they
employ mobile phones and agents which are accessible to most of the population, to deliver financial
services, improving accessibility to existing customers and new ones.
5.1 Introduction vulnerabilities they face, from illness and accidents,

to theft, to unemployment. It enables poor people
Financial inclusion has been identified as a key plank to save and borrow to build their assets and to
in the Kenya Vision 2030, the country’s long-term make educational and entrepreneurial investments
blueprint, the Third Medium-Term Plan (MTP III) and to improve their livelihood. Inclusive finance is
the “Big Four” agenda. It is further singled out as particularly important to disadvantaged groups: the
an enabler for 7 of the 17 Sustainable Development poor, women, youth and Persons With Disabilities
Goals.13 In the Kenya Vision 2030 and its Medium- (PWDs). For these reasons, financial inclusion has
Term Plans, the Financial sector under the Economic gained prominence as a policy objective to improve
Pillar sets out priority objectives that include the the lives of the poor.
need to enhance financial inclusion. The realization
The relationship between financial development
of this objective is premised on widening both the
and inclusive economic growth is well documented.
access of affordable financial services and products
In the policy circles, the importance of an inclusive
by a wider section of the Kenyan population. This is
financial system is widely recognized and seen
essentially the case with the poor and low-income
as a policy priority in many countries. An inclusive
households as well as the youth and women, who
financial system facilitates efficient allocation of
largely comprise those segments that are un-served
productive resources and thus can potentially reduce
by the financial sector.
the cost of capital. In addition, access to appropriate
Expanding financial access to all is vital in providing financial services can significantly improve the
people with basic financial services, such as savings, day-to-day management of finances. An inclusive
loans, and insurance. Inclusive financial systems financial system can help reduce the growth of
allow the poor to smooth their consumption and informal sources of credit, which are often found
insure themselves against the many economic to be exploitative. Thus, an all-inclusive financial
64
ENHANCING FINANCIAL INCLUSION FOR INCLUSIVE GROWTH
system enhances efficiency and welfare by providing social development benefits and subsidies directly
avenues for secure and safe saving practices and to the beneficiary bank accounts, thereby reducing
by facilitating a whole range of efficient financial leakages and pilferages in social welfare schemes. In
services. a nutshell, there have been many objectives related
to the need for financial inclusion such as:
The effectiveness of a financial system depends on
its ability to source funds from surplus units and i. Economic Objectives: Financial inclusion aims
finance deficit units. This challenge becomes more at promoting economic growth and equitable
pronounced when the units that experience the distribution of income.
deficit do not have access to the formal sources of
finance. Financial inclusion initiatives highlight the ii. Mobilization of Savings: In the process of
concerted efforts undertaken by the financial system financial inclusion the weaker sections of the
or any constituent thereof to bring on board sections society can be linked to the banking services
of the economy that have been excluded from access which will create high level of national savings
to affordable credit and other financial services. It and later these savings can be used for
is, therefore, important to address constraints that investment and economic growth.
exclude the poor from participating in the financial iii. Social Objectives: Through financial inclusion,
sector. Additionally, a properly developed financial social problems like poverty can be reduced in
system accessible to all, reduces information the form of giving bank loans to create income
and transaction costs, influences savings rates, and improve livelihoods.
investment decisions, technological innovations and iv. Sustainable Livelihood: If the bank loans are
long run growth rates. given to weaker sections of the society, they
Moreover, financial inclusion to all segments of will create their own business and that can
the economy would lead to increasing economic lead to sustainable livelihood of those weaker
activities and employment opportunities for rural sections.
households with a possible multiplier effect on v. Larger Market for the Financial System: A
the economy. It could enable a higher disposable larger market for the financial system can be
income in the hands of rural households leading created through the creation of high level of
to greater savings and a wider deposit base for savings. This market will meet the demand of
banks and other financial institutions. Financial the larger section of the society.
inclusion will enable the Government to provide
Box 5.1: Measuring Financial Inclusion

The initial step towards determining the extent of financial inclusion is to identify the dimensions
or indicators that measure the level of accessibility of financial services in a country. Reliable
information about the extent of inclusiveness prevalent currently is necessary in order to formulate
policies and action points to overcome barriers.
First, there is no universally accepted definition or consensus on standard of measuring financial
inclusion. Financial inclusion has been defined differently by different authors and institutions (see
Box 5.1 and 5.2). Having access to a financial account or products is equal to financial inclusion, as
defined by World Bank and other institutions/authors. Others use a combination of various aspects
to allude to financial inclusion, for instance, access and usage; impact; and quality of the services/
products provided.
65
S/ Institution/Author Financial Inclusion Dimensions

No. included
World Bank/FINDEX Defined as access to a regulated account. Access

World Bank/Global
Findex, 2017
Central Bank of Access to an account/product/service from Access and/usage
Kenya/FSD/KNBS either a prudentially regulated Institution/
Non-Prudentially Regulated Institution/
Formally Registered.
Demirguc Kunt and Financial Inclusion measures focused on Access
Klapper, 2013 single product measures such as: ownership
of an account, saving or loan product.
Hannig and Jansen, Financial inclusion can be measured through Access, Usage,
2010 various lenses in order of complexity, that is, Quality and Impact
access, usage, quality and impact.
Amidžić, Massara, and Incorporates product usage concept which Usage
Mialou (2014) characterizes the modern day consumer.
Sarma (2008) Measures financial inclusion based on a Access and Usage
combination of various indicators using
macroeconomic data based on banking sector
outreach.
Accessibility proxied using bank penetration
is measured using the number of bank
accounts per 1000 adult population
The ratio of credit plus deposit to GDP
measured usage.
Honohan (2008) Uses the ratio of Micro Finance accounts Access
and bank accounts to the total population,
household survey-based access and the
average deposit size and the per capita GDP
for more than 160 countries.
Drawn from various sources
Studies have omitted one or other dimensions of financial inclusion for various reasons, and especially
regarding the availability of data. However, where possible, it is important to incorporate as many
dimensions as possible when looking at financial inclusion. This Chapter 5 of the Kenya Economic
Report 2020 will look at financial inclusion from the access dimension drawing from Finaccess
data and other sources. Using this data, those who have access to various products or providers -
savings, credit, insurance, Banks, Micro Finance Institutions (MFIs), SACCOs, Groups/Chamas and
other financial services - are also implied to be using them. This section reviews financial inclusion
by tracking access by gender, youth and the counties. Moreover, barriers to financial inclusion are
explored.
66
5.2 Financial Access in Kenya 5.2.1 Financial access by gender, youth

and counties
Access to finance connects people into the formal
financial system, making it easier to run daily a) Access by gender
activities, build savings, mitigate shocks from The gender gap in financial access is persistent
unforeseen events and make investments. Globally, worldwide and in the country. Globally, only 37.0 per
the share of adults having financial access is 69 per cent of women have formal access compared with 46.0
cent (World Bank, 2017). These are adults who have per cent of men, and the difference is experienced in
gained access to financial products or services from all developing countries across all groups. In Kenya,
regulated financial institutions. In Kenya, significant there is a disparity in financial access between males
progress has been realised in fostering financial and females as highlighted in Figure 5.1a. Women
access. The 2019 Finaccess household survey shows continue to lag behind men; 80.3 per cent of women
that formal financial access is at 82.9 per cent, while have access compared to 85.6 of men, with a gender
exclusion from formal financial access is about 17 per gap at about 5 percentage points in 2019. This
cent of the population. There has been significant represents a significant improvement since 2006,
progress since 2006 when the Finaccess surveys where the gender gap stood at about 12.0 per cent,
started, as only 26.7 per cent of the population with males’ access at 33.0 per cent and females’
had formal financial access. This achievement could access at 21.0 per cent. This means that over time,
be partly attributed to the introduction of mobile females have gained significantly in terms of financial
financial services in 2007 and extensive uptake of the access compared to males.
services thereafter. In addition, innovations such as
agency banking, mobile banking and digital finance
which ride on this platform have contributed to this
progress.
Box 5.2: Definitions of financial inclusion

Defining Financial Inclusion
Financial inclusion is generally defined as broad access to and use of financial services, where
individuals and businesses have access to useful and affordable financial products and services that
meet their needs that are delivered in a sustainable way. The key is to ensure that all households
and businesses, regardless of income level, have access to, and can effectively use, the appropriate
financial services they need to improve their lives.
Other Definitions:
“Full financial Inclusion is a state in which all people who can use them have access to a full suite of
quality financial services, provided at affordable prices, in a convenient manner, and with dignity for
the clients” Alliance for Financial Inclusion, 2011.
The World Bank Group (WBG) with private and public sector partners set an ambitious target to
achieve Universal Financial Access (UFA) by 2020. The UFA goal envisions that, by 2020, adults
globally will be able to have access to a transaction account or electronic instrument to store money,
send and receive payments. Financial access is the first step toward broader financial inclusion,
where individuals and firms can safely use of a range of appropriate financial services, including
savings, payments, credit and insurance.
The UFA goal is that by 2020, adults, who currently aren’t part of the formal financial system, are
able to have access to a transaction account to store money, send and receive payments as the basic
building block to manage their financial lives.
67
The availability to a given person of affordable and appropriate financial services – Centre for
Financial Inclusion, Accion.
Financial inclusion refers to “the process of promoting affordable, timely and adequate access to
regulated financial products and services and broadening their use by all segments of society through
the implementation of tailored existing and innovative approaches, including financial awareness and
education, with a view to promote financial wellbeing as well as economic and social inclusion” - OECD.
Financial Inclusion is defined as “the process of ensuring access to financial services and timely
and adequate credit where needed by vulnerable groups such as weaker sections and low-income
groups at an affordable cost” - the report of the Committee on financial inclusion in India.
b) Access by youth include Mombasa, Laikipia, Wajir, Uasin Gishu and

According to FinAccess 2019, overall access by Nakuru. On the flipside, counties with the least
male and female youth (15-34 years) is 76.5 per cent access to financial services include Turkana (50.7%),
and 74.6 per cent, respectively. This means that a Marsabit (55.9%), West Pokot (57.9%), and Narok
significant proportion of the youth (23.5% male and (64.3%). This is partly explained by the time it takes to
25.4% female) do not have formal financial access, reach a financial provider. For example, when asked,
which could help them participate in the economy. the average time it takes to reach a service provider,
This is partly due to their inability to access various 85.6% and 94.3% of Kiambu and Nairobi county
financial products/services given low or lack of residents, respectively, take less than 10 minutes to
income. This relatively low access by both male and reach a given service provider. The proportions for
female youth may be contributed by being in school other counties were Turkana 36.7 per cent, Marsabit
or unemployment for those who have completed 30.5 per cent, West Pokot 27.7 per cent and Narok
their studies. When the data on youth is further 44.2 per cent for the same ten minutes.
disaggregated, the youth group between 25 and 29 d) Financial access by counties in relation to poverty
years have more financial access for both male and headcount rates
female, compared to other youth sub-groups. The
youth sub-group between 15-19 years have higher It is noted that counties with highest financial access,
levels of exclusion, perhaps denoting their inability to for instance Kiambu, Nairobi and Mombasa, also
access financial services on account of their age. For have the least poverty rates as highlighted in Figure
example, those less than 18 years lack the national 5.1d. Garissa County, however, has relatively higher
identity card, which is a necessary documentation to financial access compared to other counties but also
access financial services (Figure 5.1b). significantly higher rates of poverty. Turkana and
Marsabit counties have the least levels of access and
c) Access to finance by counties higher levels of poverty rates compared to other
Overall, Kiambu and Nairobi counties lead in terms counties. These results though, do not necessarily
of financial access at 97.39 per cent and 96.42 per imply causality between financial services and
cent respectively as depicted in Figure 5.1c. Other economic development.
counties with more than 90 per cent financial access
68
Figure 5.1: Financial access by gender, youth and counties
Source: Author’s computation using data from FinAccess Household Survey (CBK, KNBS, FSD (K) (2019)
and KNBS (2019), Economic Survey
69
5.2.2 Access to financial products or set money aside in the last 12 months (World Bank,
2017). When Kenya’s data is disaggregated by male
Overall, access to financial products by males is
and female, access to savings to these groups is 60.2
higher compared to females. Access to mobile
per cent and 50.0 per cent respectively, denoting
money is the highest among the financial products,
a relatively wide gender gap in access to savings.
with male access at 81.3 per cent and women at
Moreover, when the data is further disaggregated by
74.6 per cent. Access to life insurance policy is the
youth (Table 5.1), access to savings by Mobile Money
least for both male and female at 1.4 per cent and
Providers is the preferred mode at 46.3 per cent for
0.8 per cent, respectively. Further, men had more
youth male between 20-24 years and 43.9 per cent
access to loans from banks at 4.4 per cent compared
for female youth from the same age cohort. Savings
to women at 2.0 per cent. This could be as a result
with Micro-Finance Institutions (MFIs) is the least
of lack of collateral to access loans from a formal
from all youth cohorts, with female youth accessing
financial institution or cultural barriers which impede
relatively more compared to their male counterparts.
women from accessing formal financial services.
Generally, the youth in all given cohorts have
a) Access to savings relatively bigger challenge in savings compared to
the rest of the population. When disaggregation
The overall formal access to savings in Kenya is 55.0 is done at the county level, savings are highest in
per cent, which is more than the global average of Nairobi, Kiambu, Laikipia and Nyandarua counties,
36.0 per cent. In Sub-Saharan Africa, only 40.0 per and least in Mandera, Marsabit and Elgeyo Marakwet
cent of the adult population reported to have saved as highlighted in Table 5.1.
Table 5.1: Access to savings

Gender MFIs Mobile Banking Mobile Money SACCO Saving at Savings with
(Mswari, Provider (e.g. Group/Chama Family or
M-Coop Cash) M-Pesa) Friends
Overall (%) 1.42 13.39 40.47 9.71 27.79 4.38
Male (%) 1.23 16.57 44.14 12.09 20.28 4.26
Female (%) 1.56 11.07 37.77 7.97 33.28 4.47
Male 15-19 (%) 0.0 4.09 17.9 1.02 2.05 5.63
Male 20-24 (%) 0.0 28.1 46.28 4.96 14.33 5.23
Male 25-29 (%) 0.97 28.57 56.17 9.93 23.49 4.36
Male 30-34 (%) 0.93 26.05 53.95 10.93 26.74 5.35
Female 15-19 (%) 0.0 1.86 12.47 0.53 3.18 5.84
Female 20-24 (%) 0.46 16.28 43.93 2.76 17.67 5.22
Female 25-29 (%) 1.61 20.54 46.71 6.58 37.72 4.97
Female 30-34 (%) 2.43 15.41 46.08 11.08 42.43 3.65
Source: Computed from CBK, KNBS, FSD (K) (2019), FinAccess Household Survey
70
b) Access to credit/loans cohorts between 20-24 years (5.68%); 25-29 years

Overall access to formal credit is 22.9 per cent. (8.3%); and 30-34 years (12.0%) compared to 3.0 per
Access by gender shows male at 27.3 per cent and cent; 4.8 per cent; and 6.7 per cent male counterparts
female at 18.7 per cent. Women have more access for the same age groups, respectively. When the data
to informal sources, for example, groups/Chamas, at is disaggregated by counties, the results are shown
9.5 per cent compared to men at 5.2 per cent. The in the Table 5.2. Kiambu, Murang’a, Nairobi and
same pattern is reflected among the female youth Mombasa counties have the most access to credit
at various sub-groups (Table 5.2). For instance, the while Wajir, Mandera, Turkana and Garissa counties
have the least access.
Table 5.2: Access to credit/loans

Access to credit/loans
Gender Loan from Loan from Loan from Loan Loan from Digital Credit
Banks Mobile SACCO from Group/Chama Loans Card
Banking MFIs
Overall (%) 2.99 7.42 3.76 0.83 7.67 6.45 0.35
Male (%) 4.4 9.86 5.24 0.55 5.19 7.15 0.52
Female (%) 1.96 5.63 2.68 1.04 9.49 5.93 0.22
Male 15-19 (%) 0 0.77 0.26 0 0.26 4.86 0
Male 20-24 (%) 1.1 10.47 0.83 0 3.03 12.67 0.55
Male 25-29 2.18 15.5 2.66 0.24 4.84 12.83 1.45
Male 30-34 (%) 5.12 10.02 4.19 0.7 6.74 9.07 0.23
Female 15-19 (%) 0.27 0.53 0 0 0 1.86 0
Female 20-24 (%) 0.77 5.68 0.31 0.46 5.68 9.06 0.15
Female 25-29 (%) 1.88 8.99 1.61 0.81 8.32 7.25 0.27
Female 30-34 (%) 2.7 9.32 3.78 1.89 12.03 6.22 0.27
Access to credit/loans by counties
71
c) Access to Insurance NHIF and NSSF as the most used forms of mitigating
Access to overall insurance, including the National risks, compared to car, crop and livestock insurance.
Health Insurance Fund (NHIF) and National Social This could mean that the youth are not engaged in
Security Fund (NSSF) is 29.05 per cent. Access by agriculture as a form of generating income. Further,
the male population is 35.0 per cent while the female disaggregation of the data by counties shows
population is 23.4 per cent. Disaggregation of the Laikipia, Nairobi and Kiambu leading in access to
data by different youth cohorts (Table 5.3) shows insurance. The counties with least access include
Turkana, Wajir, Kitui and Busia as shown in Table 5.3.
Table 5.3: Access to insurance

Access to insurance
Gender Car Crop Livestock NHIF NSSF Other

Insurance Insurance Insurance Insurance
Overall (%) 1.58 0.16 0.06 23.19 9.09 0.63
Male (%) 2.38 0.19 0.05 28.04 13.35 0.68
Female (%) 1.0 0.14 0.06 19.64 5.97 0.6
Male 15-19 (%) 0.51 0 0 7.42 0 0
Male 20-24 (%) 1.1 0 0 18.46 12.12 1.38
Male 25-29 (%) 0.73 0 0 29.78 9.13 0.48
Male 30-34 (%) 2.56 0 0 32.09 20.23 0.23
Female 15-19 (%) 0 0 0 6.9 0.27 0.27
Female 20-24 (%) 0 0 0 13.21 5.22 0
Female 25-29 (%) 0.67 0.13 0.14 22.01 9.4 0.4
Female 30-34 (%) 0.95 0 0 23.11 9.05 1.08
Access to insurance by counties
72
5.3 Barriers to Financial Inclusion is heavily around Nairobi, Central and Western
regions of Kenya. The distribution in coastal areas
This section reviews some of the main barriers to (with exception of Mombasa County) and northern
greater financial inclusion. It is noted, however, regions are generally sparse.
that while these barriers have persisted over the
In the same vein, when a Finaccess survey was
last decade, the advent of mobile-based financial
conducted to establish access to the nearest financial
services has transformed financial systems and
institution, about 93.5 per cent of the respondents
payments in Kenya, helping more people to access
cited mobile money agents as their nearest financial
financial services. These include:
service institution as shown in Figure 5.2. This was
a) Access of physical amenities followed by Banks/Post Bank branches at a paltry
1.9 per cent; Banks Agent/Post Bank Agent (1.9%);
Proximity to financial institutions is important to SACCO (0.2%) and Microfinance Institutions (0.02%).
access financial services. Studies show that, for In fact, about 57.0 per cent of the respondents noted
instance, proximity of borrowers to lenders can avail they would take less than 10 minutes to access the
local information which can affect accessibility to nearest financial provider (mobile money agents),
credit and other services. Further, greater distance compared to banks (22.4%) for the same time.
between borrowers and financial providers can Further, 78.51 per cent noted that the mobile money
worsen the availability of services. However, the agents were close enough to walk to and hence no
introduction of information technology and mobile need to spend to access them compared to banks
agent banking has the potential to reduce the (33.8%). This shows that other than mobile money
operational distance between providers and their agents, for the rest of financial providers, it takes
customers. In Kenya, financial institutions are widely more time and cost to access them, and hence could
distributed as highlighted in Figures 5.3, 5.4 and 5.5 contribute to financial exclusion.
(see Annex 5.1 for county codes). But the distribution
Figure 5.2: Nearest financial institution
73
By December 2018, there were 61,604 agents The increase in both number and value of the
contracted by 19 commercial banks and microfinance transactions shows Kenyans increasing confidence
banks who undertook approximately 157.3 million and acceptability of the agency banking model by
banking transactions (CBK, 2018). The value of banks and public. This presents an important channel
banking transactions undertaken increased from for financial inclusion since agents are distributed
Ksh 1 trillion in 2017 to Ksh 1.18 trillion in 2018. across the country.
Figure 5.3: Banks branch network per county as at December 2018
Source: Author’s computation from Central Bank of Kenya (2018)
74
Figure 5.4: Distribution of micro-finance institutions
Source: Author’s computation from Sector Report on the Micro Finance Sector in Kenya, 2014
Figure 5.5: Distribution of savings and credit cooperative societies
Source: Author’s computation from SASRA (2019)
75
b) Lack of trust males and females, banks are most trusted at 43.4 per
cent and 35.2 per cent, respectively, with Insurance
Negative perceptions or experiences with financial Companies being the least trusted providers at 0.2
institutions or products could lead to self-exclusion per cent and 0.1 per cent respectively. Even among
from the formal financial institutions. This could all the male and female youth cohorts (Figure 5.6b),
be caused by improper supervisory mechanism in banks are the most trusted. It is worth noting that
financial institutions leading to the loss of customer Mobile Money Agents are the least trusted yet they
trust. When Kenyans were asked which financial are the most accessible. This means they could
provider they trusted the most, majority of the potentially enhance more access if they addressed
population indicated their trust in banks as a financial trust issues that include loss of money to fraud.
provider, at about 39 per cent as shown in Figure 5.6a. Banks are the most trusted among all the groups as
This is followed by Mobile Money Providers (19.9%); indicated above. Hence, they could play a key role
A group/chama (10.4%); SACCO (6.7%); Mobile in enhancing financial access if they increased more
Banking (4.5%); Mobile Money Agents (2.4%); MFIs physical presence at relatively affordable prices.
(0.8%); and Insurance Company (0.2%). Among both
Figure 5.6: Most trusted financial provider

(a) Most trusted financial provider/overall (b) Most trusted financial provider/youth cohorts
c) Excessive documentation d) Financial literacy

Excessive documentation is one of key hinderances Greater financial numeracy skills and awareness of
to accessing finance. World Bank’s Global Findex formal financial products and services increase the
shows that over 300 million adults worldwide cite probability of being formally banked and helps to
excessive documentation as a major obstacle to overcome information asymmetry. Studies have
accessing finance. One way of addressing this established that low levels of financial literacy are
obstacle is to simplify documentation requirements negatively related to savings, credit and investment
or adding exceptions for certain applicants and practices. Additionally, greater understanding of
especially the low-income groups or products which the benefits of financial services can lead to greater
are of small value and low risk while still adhering to demand for formal banking and other formal financial
sound prudential requirements. institutions, and lead to financial inclusion.
76
A survey on financial inclusion in Kenya (FinAccess, 61.5 per cent of males and 50.8 per cent of females
2019) asked those who could read a Short Messaging could read and give the right answer. This shows
Service (SMS) provided on a given screen and give relatively low literacy rates for the overall population,
the correct answer, as an indicator of financial literacy. with also a wide gap between males and females.
Overall, 55.3 per cent of the population could read This could possibly mean low levels of education
and gave the correct answer while 21.1 per cent of among both male and females. A similar trend of low
the population could not as depicted in Figure 5.7a. financial literacy rates is observed among the youth
When disaggregated between male and female, cohorts as depicted in Figure 5.7b.
Figure 5.7: Financial literacy

a) Overall financial literacy (b) Financial literacy among youth
e) Cost
High transaction costs for accessing financial services are close enough on average to reach the nearest
and products could exclude the population from financial provider (Figure 5.8). About 12.0 per cent
either accessing or increasing their assortment of would need to spend so as to access the nearest
financial services. For instance, people living in financial provider. About 57.0 per cent of population
underdeveloped areas may face difficulties reaching would not need to spent to access mobile money
financial providers due to transportation costs or agent while 34.0 per cent would need not spent
they may fail to access due to lack of technology to access banks. This means to majority of the
connectivity that could enable them to use phones population, cost is a factor in accessing financial
or internet, and hence exclude them from financial services. This could partly explain the reason majority
access. About 78.5 per cent of the Kenyan population of the population use mobile money agents.
77
Figure 5.8: Average cost to the nearest financial provider, bank, and mobile money agent
5.4 A Review of Government Interventions to Increase Financial Access

The National and some County Governments have Development Corporation (ICDC); affirmative
been addressing financial inclusion initiatives by platforms such as the Uwezo Fund, Women
providing financial support to youth and women Enterprise Fund (WEF), and the Youth Enterprise
to raise their incomes. To achieve this, several Development Fund (YEDF) have been established
initiatives such as Joint Loan Board Credit Scheme; (Table 5.4). Additionally, County Governments have
development financial institutions such as Kenya initiatives for enhancing financial access among the
Industrial Estates; Industrial and Commercial same groups as highlighted in Table 5.5.
Table 5.4: National Government initiatives
S/No. Initiative Target Objectives Challenges

group
1. Kenya Industrial MSMEs Kenya Industrial Estates Ltd was established to Inadequate budgetary
Estates Ltd champion the development of Micro Small and allocation; Low repayment
(1967) Medium Enterprises (MSMEs) throughout the rate, which can be attributed
country with focus on clustering of industries, and to several factors, including
value addition to locally available raw materials politics.
2. Industrial and SMEs ICDC offers financial boost to SMEs and start ups Administrative and bureaucratic
Commercial challenges; Competition from
Development Supports SMEs and start-ups with financial increase in commercial banks
Corporation solutions such as business advisory services, equity and micro finance institutions.
(ICDC) partnerships and debt financing.
(1954)
78
S/No. Initiative Target Objectives Challenges

group
3. Women Women, Women Enterprise Fund (WEF) was established in Most groups lack book-keeping
Enterprise Fund 2007 to provide accessible and affordable credit skills, have no knowledge
(WEF) MSMEs to support women start and/or expand business on how to prepare business
for income generation and employment creation. plans and loan expenditure
(2007) plans and have no avenues of
receiving training on financial
management; and
The Fund was therefore set up to benefit women
aged above 18 years, meaning any woman can there is limited knowledge
apply, whether she is part of a group or as an amongst the groups on
individual. administration of the WEF and
the application procedures.
4. Uwezo Fund Women, The Uwezo Fund aims at enabling women, youth Lack of feasible ideas; Lack of
Youth, and persons with disabilities’ access finances skills to run a business; poor
(2013) PWDs, to promote businesses and enterprises at the attitude towards loans; and Lack
MSMEs constituency level, thereby enhancing economic of adequate information about
growth. It also provides mentorship opportunities the fund.
to enable the beneficiaries take advantage of
the 30% Government procurement preference
through its Capacity Building Programme.
5 Youth Male and Established to address unemployment among the Slow processing of loans, Young
Enterprise Female youth through entrepreneurship and encouraging people lack entrepreneurial skills
Development Youth them to be job creators. It does this by providing and mentorship that would allow
Fund (YEDF) affordable financial and business development them to effectively participate in
support services to youth who are keen on starting the YEDF. Inadequate support
(2006) or expanding businesses. structures also exclude young
people from the YEDF.
Source: Computed from various sources
Table 5.5: County Government initiatives
County Initiative Target group Objectives Challenges

Kiambu Kiambu County Youth, Women, This programme, which is interest free, is aimed Beneficiaries not
Jijenge Fund and PWDs at promoting and developing new and existing returning money
(2018). micro and small market enterprises among borrowed, hence
youth, women, people living with disabilities affecting its revolving
(PWD) and vulnerable men and women. ability; Limitation in
identifying credible and
viable applicants
Kajiado Mbuzi Moja Afya All county The Mbuzi Moja Afya Bora initiative is a concept Sustainability of the
Bora residents by County Government of Kajiado that allows initiative
local residents to offer one goat for sale in a
(2018) public auction. The proceeds are deposited with
NHIF for a family’s medical insurance for one
year. This initiative provides its beneficiaries with
a readily available alternative to affording health
insurance. In this sense, registration into the
programme or renewal of registration is done at
an exchange of a goat.
79
County Initiative Target group Objectives Challenges

Makueni Makueni County Youth, Men, This Fund provides access to capital and Sustainability
Empowerment Women and financing facilities to micro and small enterprises challenges
Fund (Tetheka PWDs owned by youth, men, women and PWDs
Fund) resident in the County. A minimum of Ksh 50,000
and a maximum of Ksh 200,000 at a time; the
(2016) Potential loan default
funds are distributed on a first come first served
basis for all the 30 wards within Makueni County.
Wajir Wajir County Youths, Women The revolving fund is sharia compliant, aims Low levels of education;
Revolving Fund and PWDs, and to promote self-employment and promote poor management
Co-operative entrepreneurship. Loans from the fund are practices.
(2014) Societies, any payable within two years, through monthly
business involved instalments. The beneficiaries have a three-
in value addition month grace period before commencement of
of products. repayment.
Mandera County Trade Youth, PWDs and The no-interest sharia compliant kitty aims to Loan repayment
Development Women promote creative business ventures. challenges;
Fund (2014) sustainability of the
enterprises
Garissa Revolving Fund Youth, Women The Ksh 150 million revolving fund provides Loan repayment
and PWDs interest-free loans to the youth, women and challenges;
(2019) persons with disabilities. It intends to expand sustainability of the
access to finances, generate self-employment enterprises
and generally reduce poverty levels it the
community.
Source: Computed from various sources
5.5.1 Key messages 3.) For the youth, a significant proportion of them
(23.5% male and 25.4% female) have no formal
1.) The national access to financial inclusion is access, which could hinder their effective
at 82.9 per cent, which means about 17.0 participation in the economy. This could be
per cent of the population is still excluded due to cost of accessing the various financial
from access to formal financial services and products/services which may be occasioned by
therefore cannot participate effectively in the lack of income, partly due to unemployment
economy. Disaggregation of data by counties especially for those who have completed their
shows that counties with most access to studies.
finances, either credit, savings or insurance,
4.) The main barriers to greater financial inclusion
are mainly counties with big urban areas like
include proximity to financial providers,
Nairobi, Mombasa, Nakuru, and Kiambu.
level of trust of financial providers, excessive
2.) A further disaggregation of data by gender on documentation, financial literacy and the
financial access shows a wide gender disparity cost of accessing financial services. It is
between males (85.6%) and females (80.3%). noted, however, that while these barriers
However, this gap reduced significantly since have persisted over the last decade, the
2006, when it was at 12 percentage points with advent of mobile-based financial services has
males at 33.0 per cent and females at 21.0 per transformed financial systems and payments in
cent. This means that over time, females have Kenya, helping more people to access financial
gained in terms of financial access compared services.
to males.
80
5.) The National Government and some County cost delivery channels such as local retail shops
Governments have initiated interventions serving as agents for financial service providers.
to deepen financial inclusion among the Such approaches can cost-effectively expand
population. These initiatives, offering financial the physical presence of financial services
and capacity support to the women and providers while providing meaningful benefits
youth could be scaled up, in addition to to those reached.
addressing their challenges in order to ensure 2.) Promote financial literacy to allow individuals to
sustainability. know their financial circumstances. To this end,
6.) Mobile money agents present a potential a financial curriculum could be developed by
solution for many of the barriers to closing the the National Treasury, in collaboration with
the financial inclusion gap and reaching the the Central Bank of Kenya, to build capacity in
excluded. About 57.0 per cent of population this area.
would not need to spend to reach the 3.) The Government to consider establishment of
nearest mobile money agent. This is because the Biashara Fund, consolidating the Uwezo
they employ mobile phones and agents to Fund, Youth Enterprise Development Fund
deliver financial services, without the high and the Women Enterprise Fund. This would
costs of construction and bank staff that ensure the challenges facing these funds are
underlie traditional brick-and-mortar banking adequately addressed especially in achieving
institutions, improving accessibility to existing self-reliance and adequately target women,
customers and new ones. youth and PWDs.
5.5.2 Recommendations 4.) The National Treasury and Ministry of ICT could
play a critical role in strengthening financial
The following key recommendations are proposed:
infrastructure, which serves as the underlying
1.) Continued expansion of agent-based banking foundation to support financial inclusion.
and other cost-effective delivery channels is 5.) To address the challenge of high transaction
important to reach the financially excluded. costs and outreach, formal financial institutions
Regulatory approaches can help overcome can use information technology-based
this obstacle by allowing for the use of low- solutions such as mobile phones for efficiency
in service provision as well as penetration.
Endnote
13 These include SDG1, on eradicating poverty; SDG 2 on ending hunger, achieving food security and promoting
sustainable agriculture; SDG 3 on profiting health and well-being; SDG 5 on achieving gender equality and eco-
nomic empowerment of women; SDG 8 on promoting economic growth and jobs; SDG 9 on supporting industry,
innovation, and infrastructure; and SDG 10 on reducing inequality.
81
6 INCLUSIVITY AND TRADE
Domestic and international trade play an important role in economic transformation by linking products
and markets, enhancing efficiency in production, increasing access to diverse products through
distribution processes, and creating opportunities for employment. Increased participation of women,
youth and persons with disabilities in trade would be a boost to inclusive growth sustainability, with
reduced poverty and income inequality. Specifically, unlocking markets for these vulnerable groups
would enhance their access to employment and entrepreneurship and break down the legal and
cultural barriers that restrict them from achieving their full economic potential. Moreover, facilitating
access to finance, market information and networks, and building capacity through training is critical
in exploiting trade opportunities. Therefore, public policy should foster greater transparency in
regulations and lower non-tariff barriers to trade beneficial to small firms, particularly to the type
of firms typically owned by women, youth and persons with disabilities. Specifically, the agricultural
sector, manufacturing and services have huge potentials for trade expansion.
6.1 Introduction Women tend to be concentrated in the informal
T
sector, accounting for 70 to 80 per cent of persons
he Government has put in place measures for engaged in petty and informal trading. Female-
empowerment of women, youth and persons owned businesses accounted for 61.8 per cent of
with disabilities in the pursuit of the economic unlicensed establishments in 2015. According to
growth goals envisaged in the Kenya Vision Kenya’s National Trade Policy (2017), the formal trade
2030 and its Medium-Term Plans, and the “Big Four” sector does not offer equal opportunities to both
agenda. For instance, the affirmative action funds men and women. Most female-owned businesses
such as Uwezo Fund, Youth Enterprise Development are micro small and medium enterprises (MSMEs).
Fund and Women Enterprise Development Fund. Effective trade and investment programmes for
The consolidation of the three funds into the Biashara economic and social development of the country
Kenya Fund is expected to increase efficiency and cannot be effectively implemented without
eliminate overlaps and seek to give special priority participation of women in the formal trade sector.
to businesses owned by youth, women and persons
About 2.2 per cent of the Kenyan population has
with disabilities. It is also expected to enhance
some form of disability as per the 2019 Census,
their self-sufficiency and targeting of beneficiaries.
compared to 3.5 per cent recorded in the 2009
In addition, the Public Procurement and Disposal
census. Out of this, 2.6 per cent live in rural areas
Act 2015 requires that 30 per cent of Government
while 1.4 per cent are in the urban centres. Women
tenders be awarded to enterprises owned by youth,
constitute the largest share of the number of persons
women and persons with disabilities in a bid to
with disabilities (PWDs) at 57.0 per cent compared
integrate them in the value chain. Nevertheless,
with 43.0 per cent for men. The most common form
much more is required to bring about the much-
of disability was mobility (42%), followed by visual
needed empowerment and inclusivity necessary for
(36%) while persons with albinism constitute 1.1
sustainable development.
82
INCLUSIVITY AND TRADE
per cent of PWDs. Majority of female PWDs (19.8%) growth in 2018. The slow growth of volume of trade
were self-employed in the informal sector and was a result of a decline in value of exports due to
smallscale agriculture (16.3%) compared to 17.0 per deterioration of terms of trade for the major exports
cent and 13.9 per cent of male PWDs, respectively. during that period. The values of domestic exports
One in five children with disabilities attending fell by 2.9 per cent, from Ksh 613 billion in 2018 to
school had physical disability, followed by those with Ksh 595 billion in 2019 while that of imports rose by
speech impairment (19.4%) and hearing impairment 2.3 per cent from Ksh 1,760 billion in 2018 to Ksh
(19.3%). In addition, only a small proportion of PWDs 1,801 billion in 2019 (KNBS, 2020). Re-exports grew
reached secondary (2.4%) or tertiary/college (2.6%) by 6.2 per cent compared to a 12.5 per cent growth
level. More males than females reached secondary recorded in 2018.This accounted for 12.7 per cent of
and tertiary education level, and more females with total exports earnings in 2019.
disability never attended school compared to their
male counterparts. The leading exports were tea, coffee and
horticulture, collectively accounting for 46.8 per cent
The youth exude both energy and talent and can be of total domestic export earnings in 2019. In terms
nurtured to contribute even more by helping them of broad economic categories, food and beverages
acquire basic skills needed in the labour market. and industrial supplies (non-food) accounted for an
There is need for specific interventions and incentives average of 65 per cent of total export earnings. The
to ensure that this huge category of the population structure of exports and distribution of employment
is not left behind. in these sectors have implications on inclusivity.
Total imports rose from Ksh 1,760 billion in 2018
6.2 Balance of Trade to Ksh 1,801 billion in 2019. The leading import
products were industrial supplies (33.6%), fuel
The external trade sector has been characterized and lubricants (18.3%) and machinery and capital
by declining overall trade balance, low shares of equipment (18.1%). Notable during the year was a
trade in global markets, low levels of diversification marginal increase in imports of food and beverages
of export products and export markets, and high from 9.3 per cent in 2018 to 10.3 per cent in 2019,
costs of production. The volume of trade increased mainly due to delays in receipt of long rains, which
by 1.0 per cent in 2019 compared to 2.3 per cent affected agricultural produce.
Figure 6.1: Kenya’s balance of trade, 2014-2019
2.00
1.00
Ksh millions
2014 2015 2016 2017 2018 2019

(1.00)
(2.00)
Year
Exports Imports BoT
Source: Kenya National Bureau of Statistics (2020), Economic Survey
83
The balance of trade for all trade items deteriorated The services exports grew by 14 per cent from US$
by 75.1 per cent in 2019 compared to 1.4 per cent 59,925 million in 2018 to US$ 68,133 million in 2019.
recorded in 2018. This was due to a higher growth Services imports recorded a slower growth of 8 per
in price index of all imports compared to that of all cent from US$ 42,289 million in 2018 to US$ 45,583
exports. Besides, the continued increase in imports in 2019. Trade in services surplus grew by 28 per
relative to total exports resulted to worsening of the cent in 2019 (Figure 6.2).
trade deficit from Ksh 1,147.3 billion in 2018 to Ksh
1,205.5 billion in 2019.
Figure 6.2: Trade in services, 2018-2019
Data Source: CBK (2019), Monthly Economic Indicators, December 2019
6.3 Role of Trade in Empowering Women, Youth and Persons with Disability
Trade has the potential to open more employment and vulnerable groups can help maximize the gains
opportunities and economic empowerment. Greater from trade. For example, there is evidence across the
access to domestic, regional and international world that trade has contributed to women moving
markets can help the vulnerable groups expand their out of agriculture into manufacturing and especially
businesses and be more productive and innovative. services, and this has brought with it higher incomes
Furthermore, lowering trade costs is particularly and more formal employment.
important for countries seeking to take advantage
of the fragmentation of production through While there has been significant progress towards
global value chains, which offer new opportunities gender equality and empowerment of women in Kenya,
to generate growth and income gains through gender disparities remain. Female informal cross-
trade (WTO, 2015). According to the World Trade border traders, in particular, face disproportionately
Organization - WTO (2010), keeping trade open and higher trade barriers, which include: limited access
lowering trade costs are key to increasing efficiency to markets and information, difficulties in complying
and can increase the competitiveness of the goods with regulatory and procedural requirements, higher
and services traded by vulnerable groups and lower risk of abuse, including corruption and harassment
the costs of key inputs in production. Pursuing at the border, lack of awareness of their rights,
strategies for economic integration in ways that poor sanitation facilities, and price differentiation/
address the challenges faced by the extreme poor cheating associated with cross-border currency and
84
exchange rates. Likewise, constraints confronting related to physical and mental disabilities of the
female-owned businesses in the formal sector persons concerned. Apart from Government policies
include: limited access to finance, inadequate skills put in place to eliminate discrimination, trade unions
development, and costly and cumbersome licensing play important roles in employment or economic
procedures. Gender discriminatory social norms, engagement of people with disability. Regardless
and lack of childcare facilities further constrain of the sector, trade union actions on disability are
female-owned businesses. directly contributing to achieving decent work by
promoting employment; improving work-place
A study by KIPPRA in 2019 on factors that determine conditions; assuring protections for workers with
choice of products' market for businesses in the injuries and disabilities; ensuring the representation
informal sector in Kenya revealed that business, of workers; and ensuring implementation of
entrepreneur and microeconomic factors significantly legislation and standards related rights (ILO, 2017).
influenced the choice of a product market among
informal businesses. Market places create strategic In 2013, Public Procurement and Disposal
location for access to customers compared to Amendment Regulations was enacted, it requires
commercial and residential premises. Female- that all public procurement entities should set aside
owned businesses have a limited scope and do not at least 30 per cent of their procurement spending
access wider markets, and mostly access individual for purposes of procuring goods, works and services
customers as the main buyers of their products. from micro and small enterprises owned by youth,
Mobile phones were found to be the most reliable women and persons with disabilities (PWDs). The
source of market information by businesses in the scheme aims at empowering youth, women and
informal sector. PWDs by linking them with Access to Government
Procurement Opportunities (AGPO). A study
Kenya’s services sector has huge potential for job conducted by KIPPRA and Public Procurement
creation for the youth and therefore economic Regulatory Authority (PPRA) in 2019 revealed that
growth, especially if supported with digitization and on average, 93.1 per cent of youth, 92.8 per cent
the creatives arts industry. A study by the United of women and 94.2 per cent of PWDs had applied
Nations Conference on Trade and Development – and won various tenders with public procurement
UNCTAD (2010) indicated that Africa’s share of the entities across the country. However, some of the key
global creative economy is less than one per cent. challenges the targeted group experiences include
The creative economy encompasses films, television, delays in payment, lack of transparency in award of
literature, advertising, art, crafts, design, fashion, tenders and lack of sufficient capital.
music, performing arts, publishing and video games.
Indeed, there is growing international interest in
the potential of the cultural and creative industries 6.3 Participation of Women, Youth and
to drive sustainable development and create PWDs in the Labour Force
inclusive job opportunities. According to Onyango
et. al (2017), the creative arts and sports industries Kenya’s domestic and international trade sectors
have great potential to create gainful employment play a significant role in economic growth and
for the youth. However, the contribution of arts, employment creation. The sector employs 60.0 per
entertainment and recreation in Kenya is less than cent of informal sector employees and is an important
0.1 per cent of GDP, and the numbers gainfully source, with a growth rate of 6.6 per cent in 2019
employed in the creative industry are still negligible. (KNBS, 2019). The contribution of the wholesale
Yet, worldwide, the cultural and creative industries and retail trade sector to GDP and employment
generate US$ 250 billion in revenue a year and during the period 2014-2019 is shown in Table 6.1.
create 29.5 million jobs worldwide, according to The contribution to GDP has remained more or less
United Nations Educational, Scientific and Cultural stagnant in the recent past, while the total number
Organization (UNESCO). of persons engaged in informal trade sector, and in
The International Labour Organization - ILO (2007) the wholesale and retail trade, has been growing.
guidelines indicate that unemployment and under-
employment of persons with disabilities was closely
85
Table 6.1: Contribution of wholesale and retail trade to GDP and employment, 2014-2018
Year 2014 2015 2016 2017 2018 2019

Contribution to GDP (%) 8.0 7.5 7.2 7.4 7.5 7.6
Total number of persons engaged in the informal trade 11.8 12.6 13.3 14.1 14.9 15.1
sector (No. millions)
Number of persons 7.1 7.2 7.6 8.1 8.6 9.0
engaged in the informal sector in the wholesale and

retail trade (No. millions)
6.5 Gender and Employment

Regarding distribution of employment by gender, (KNBS, 2019). For instance, in 2019, out of a total
women have been significantly under-represented 2.9 million jobs in the formal sector, women workers
in both formal employment and employment in the constituted about 1 million workers or 36 per cent of
more lucrative industries, including manufacturing all formal sector employment in Kenya (Figure 6.3).
and professional, scientific and technical activities
Figure 6.3: Modern sector employment by gender (%)
80 71 68
63 63 63 66 66 63 64
60
60
% Shares
37 40 37 37 36
37 34 34
40 29 32
20
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Year
Men Women
Source: KNBS (Various), Economic Survey
In terms of employment by sector, available statistics

technology, cultural impediments, gender roles and
indicate that the share of women employed in trade
other constraints limiting employment options and
and manufacturing was significantly lower than that
participation of women in decision-making (State
of men (Figure 6.4).
Department of Gender, Strategic Plan 2018-2022).
Gender inequalities can be attributed to limited In addition to the many cultural, social and economic
access to and control of productive resources, barriers, these constraints limit women’s ability to
access to financial services, insufficient access to effectively participate in, and benefit from, economic
education, inadequate skills, limited access to development.
86
Figure 6.4: Wage employment by industry and gender, 2019 (%)
Similarly, the participation of women in domestic enterprises (due to lack of collateral since women
trade is highly skewed against women. Over the years, rarely own property); and lack of requisite skills,
women represent hardly 30.0 per cent of total wage information and networking to enable engagement
employment in the wholesale and retail trade. Some in productive business-related activities. Besides,
of the identified obstacles hindering full participation other significant challenges facing female traders
of women include inadequate legal framework to in the informal sector are management of time as
address discriminatory practices against women; they are involved in other household chores, and the
inadequate access to capital by women-owned relatively high costs of doing business.
Figure 6.5: Wage employment in wholesale and retail trade by gender, 2010-2019
75 77 77 77
80 73 74 75 73
70 71
70
60
50
40
% Shares
32 29
27 26 25 25 27
30 23 23 23
20
10
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Year
Men Women
87
A similar situation of inequality in employment is sectors as indicated in Figures 6.6 and 6.7,
exhibited in the agriculture and manufacturing respectively.
Figure 6.6: Wage employment in the agriculture sector by gender, 2010-2019
77 77
80
66 66 67 67
70 62 64 63 63
60
50
% Shares
28 36 37 37
40 34 34 33 33
30 23 23
20
10
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Year
Men Women
Figure 6.7: Wage employment in the manufacturing sector by gender, 2010-2019
90
86 84 84 84
90 82 80 90
80 71 72
70
60
50
40 29 28
30 20
16 18 17 16 16 17
20 14
10
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Year
Men Women
A study by Oiro et al. (2019) revealed that the process. Most of the manufacturing industries such
existence of skills gap among women hinders their as dairy products, textiles and manufacture of
employability in the manufacturing sector. There is roofing sheets demand technical labour, which most
a low likelihood of women getting employed in the women lack. In addition, the labour intensive nature
manufacturing sector due to their deficiency in skills, of the manufacturing processes is a hindrance to the
especially in the technical stages of the manufacturing employment of women in the sector. The low level
88
of automation and mechanization of the production both youth and women, but some are more specific
process prevents women from participating because to a given cohort.
of the physical demands of the job. The menial jobs
are more favourable for men due to their physique Regarding PWDs, there are mixed results depending
as opposed to women. on the nature of disability and the type of economic
activities. The KNBS (2012) statistics show that
The youth face a myriad of challenges, some majority of females with disabilities were engaged in
of which include high unemployment levels, own family agricultural holding (30.3%), followed by
inadequate technical skills for the job market, poor full time students (14.7%), incapacitated (12.7%) and
representation in policy making platforms and homemakers (10.6%). Only 6.6 per cent of PWDs
limited access to credit by youth-run enterprises. It is worked for pay.
imperative to note that some of the challenges affect
Table 6.2: Females with disability by economic activity and domain
Domain of Disability
Economic Activity Visual Hearing Speech Physical Mental Self- Others None Total
Care PWDs
Worked for Pay 8.6 5.6 7.4 6.2 5.2 3.4 6.8 8.6 6.6
Sick Leave 1.1 1.3 1.3 1.5 2.2 2.4 1.5 0.9 1.5
Own - Family Business 9.7 7.9 7.7 9.4 6.1 4.9 9.3 8.6 8.5
Own - Family Agriculture Holding 32.6 34.0 24.7 32.3 25.5 17.7 34.0 25.7 30.3
Intern/Apprentice 1.0 1.2 1.3 1.1 1.9 1.8 1.1 1.0 1.2
Volunteer 0.9 1.2 1.2 1.1 1.8 1.7 1.0 0.9 1.2
Seeking Work (Action Taken) 0.8 0.5 0.8 0.6 0.5 0.3 0.8 0.9 0.6
Seeking Work (No Action Taken) 0.4 0.3 0.4 0.4 0.5 0.3 0.4 0.5 0.4
No Work Available 4.7 4.1 2.8 4.8 5.4 6.6 3.6 2.5 4.5
Retired 0.7 0.5 0.1 0.6 0.2 1.4 0.4 0.1 0.5
Homemaker 11.8 11.3 7.7 10.7 10.3 8.2 10.9 8.9 10.6
Full Time Student 14.9 19.9 24.9 10.4 14.6 4.5 16.7 26.9 15
Incapacitated 9.0 6.6 3.7 14.7 19.1 44.4 7.0 0.4 12.7
Other 0.5 0.5 0.4 0.5 0.6 0.7 0.5 0.3
Not Applicable 2.2 4.0 14.1 4.5 4.2 0.0 5.2 12.7 4.6
Regarding males with disability, 26.0 per cent (10.0%) and homemakers (2.6%). Only 14.0 per cent
were engaged in own family agricultural holding, of males with disability worked for pay, but is more
followed by full time students (20.1%), incapacitated than double the respective proportion of females.
89
Table 6.3: Males with disability by economic activity and domain

Domain of Disability
Economic Activity Visual Hearing Speech Physical Mental S e l f - Others None To t a l
Care PWDs
Worked for Pay 18.1 12.6 14.3 14.1 9.5 6.8 14.1 17.5 14.0
On Leave 1.2 1.2 1.4 1.2 1.8 1.8 1.1 1.1 1.4
Sick Leave 1.1 1.3 1.3 1.8 2.2 2.6 1.6 0.9 1.5
Own - Family Business 10.2 9.0 8.3 10.4 6.3 6.3 8.7 9.2 8.6
Own - Family Agriculture 28.7 30.2 21.4 27.4 23.7 18.6 26.0 20.8 26.0
Holding
Intern/Apprentice 1.0 1.3 1.4 1.1 1.8 1.6 1.1 1.0 1.3
Volunteer 1.0 1.2 1.3 1.1 1.9 1.7 1.2 1.0 1.3
Seeking Work (Action 1.2 0.9 1.0 1.1 1.0 0.6 1.2 1.3 1.0
Taken)
Seeking Work (No Action 0.6 0.5 0.5 0.6 0.9 0.5 0.6 0.6 0.6
Taken)
No Work Available 4.7 4.1 2.8 5.3 6.7 7.0 3.5 2.6 4.6
Retired 1.5 0.8 0.2 1.0 0.3 2.3 0.8 0.3 0.9
Homemaker 2.6 2.3 1.6 2.7 3.7 3.2 2.4 1.3 2.6
Full Time Student 17.8 24.8 26.5 13.5 14.4 8.3 22.8 28.7 20.1
Incapacitated 7.0 4.4 3.9 12.5 20.9 37.8 6.7 0.3 10.0
Other 0.5 0.6 0.4 0.6 0.7 0.9 0.6 0.4 0.6
Not Applicable 2.9 4.7 13.5 5.6 4.2 0.0 7.7 13.2 5.6
6.6 Strategic Sectors for Women’s Economic Empowerment through Trade

(a) Agriculture
Women, including those with disabilities, are to 51.0 per cent of those living in urban areas. The
confronted by prevailing gender inequalities in main source of financial information for women living
the agricultural sector. A 2017 report by the Kenya in both urban and rural areas is family and friends,
National Bureau of Statistics titled ‘Women and at an average proportion of 40.0 per cent, followed
Men in Kenya – Facts and Figures 2017’ notes that by their own personal decision, implying that
women provide 80.0 per cent of Kenya’s farm labour communal channels of communication are critical
and manage 40.0 per cent of Kenya’s smallholder for the information to spread among the female folk.
farms, yet they own only about 1.0 per cent of Even when the proportion of “chama” ranks low, it
agricultural land and receive just 10.0 per cent of is still implied because usually the members of the
available credit’. “chama” are friends and family.
According to a study by KIPPRA in 2019, an estimated The expanded markets for exports (arising from
16.0 per cent of women have access to finance from regional trade blocs) create opportunities for
institutions offering both formal and non-formal women to enhance agricultural productivity through
prudential services and products. 66.0 per cent of the integration into regional agricultural value chains,
women living in rural areas are excluded, compared value added agro-processing and other upstream
90
and downstream activities. For women to leverage (ii) Enhancing women’s access to regional markets
these opportunities and benefit from expanded for export, by providing support for tailored
trade integration in the agricultural sector, it will capacity building and training programmes,
be necessary to address existing gender-based including on quality standards, links to input
inequalities by designing measures aimed at distribution networks;
improving agricultural production, agribusiness and (iii) Targeted studies to identify high-value cash
value chain advancement. In addition to livestock crops and other priority sectors and industries
and fisheries, coffee, tea, vegetables and pulses, in the agricultural sector identified for export
fruit and nuts, and floriculture are priority sectors development, with significant potential for
for enhanced value addition and exports in the income generation and employment creation
agricultural sector. for women. Corresponding strategies to
While these sectors are likely to offer significant advance these objectives to be designed
growth and value chain potential for women, a accordingly;
comprehensive approach, including a regional (iv) Value chain analysis and identification of
agricultural value chain analysis that considers economic opportunities in selected regional
employment and empowerment opportunities for agricultural value chains with positive
women within sectoral value chains – from production, socio-economic impact (particularly for
processing and final market prospects – should be smallholder female farmers). Skills training and
undertaken. As part of a comprehensive approach, it entrepreneurship support programmes, to be
will be necessary to consider interventions that open designed accordingly;
up access for women to productive resources such as (v) Female co-operatives and producer
finance, markets, land, technology, extension support organizations that enable women to reach
and quality inputs. This would increase the yields more scale in their enterprises and have greater
- particularly of female smallholder farmers - and influence on decision-making in a particular
facilitate their transition from subsistence agriculture sector Facilities include marketing and storage
to higher value crops for exports. Likewise, women facilities for women’s produce. Attention
in the agricultural sector need to be provided with should be given to issues of location and
requisite skills and knowledge of product packaging transport, which may pose access challenges
and marketing to avoid limiting their participation to for women in remote rural areas;
the lowest nodes of the value chain.
(vi) Increased access to extension services,
For women to leverage the benefits of intra-African particularly training programmes and
agricultural trade, they require targeted support in information on time and labour-saving
the form of agricultural trade policies that respond technologies that boost productivity.
to Regional Economic Communities (RECs),
buttressed with context-specific complementary (b) Manufacturing
measures. Interventions that build upon existing In formal employment, manufacturing accounted
strategic actions to increase the participation of for 49 per cent of women employed in industry. But
women in productive agriculture activities and trade women also dominate in the formal workforce of
must be pursued. Agricultural policies and proactive important labour-intensive export sectors such as cut
complementary measures to promote agricultural flowers (65-75% of workers), textiles (75% of workers)
productivity and gender-inclusive agricultural trade and tourism (33% of workers). However, they are
under the RECs may include support for: often employed in low-skilled jobs such as sewing
and finishing), while men often act as supervisors.
(i) Addressing gender-specific challenges that
constrain agricultural productivity and other The development of Kenya’s manufacturing sector
economic activities. There is need for targeted brings with it strong opportunities to absorb a
gender-sensitive rural financial services, and large number of women, both as workers and
access to land and security of land tenure to as entrepreneurs. Gender-specific interventions,
facilitate the effective participation of women however, are required to ensure that as the country
in agriculture; seeks to promote industrialization through targeted
91
support for small- and large-scale manufacturing Table 6.5: Women-owned or managed exporting
industries, that women’s manufacturing employment firms, by country, 2010-2014
is promoted as part of this process. Priority
Up to 20% 21-50% 51-100%
manufacturing sectors for Kenya include: textiles
and apparel; agro-processing; leather and leather East Africa 42% 30% 28%
products; pharmaceuticals; plastic and plastic Kenya 41% 37% 22%
products; metals and allied products; chemicals and Madagascar 25% 23% 52%
allied Industries; light engineering; furniture and
furnishings industry; and automotive and automotive Malawi 61% 32% 7%
parts. Kenya’s handicraft industry, and the following Mauritius 23% 30% 47%
10 sub-categories, are priority exports: handmade/ Rwanda 19% 38% 43%
hand decorated fabrics, leather crafts, basketry,
Tanzania (United
woodwork and crafts, metalwork and crafts, jewelry, Republic of)
72% 24% 4%
stone carvings, pottery and ceramics, beads and
traditional artifacts. Source: International Trade Centre (ITC) Non-
Tariff Measures (NTM) Surveys in 20 developing
For instance, taking into account the export business countries, 2010 to 2014. Available at: www.
structure in the Eastern Africa region, Kenya to some ntmsurvey.org
extent performs better than her neighbours in regard
to women participation, though it is important to There is significant potential for formal employment
appreciate that the countries in the Eastern Africa for both skilled and unskilled women in the
are heterogeneous. They include countries with a identified manufacturing sectors and sub-categories.
large share of women-owned or managed exporting Further analysis, however, is required to identify
firms such as Kenya at 46.0 per cent and Madagascar entrepreneurship and empowerment opportunities
at 36.0 per cent, and the opposite with Malawi at 7.0 for women in both identified export-oriented and
per cent and the United Republic of Tanzania at 8.0 other non-traditional manufacturing sectors that
per cent (Table 6.4) emerge as potential growth drivers. In addition, it
will be necessary to undertake a gender-sensitive
Table 6.4: Women-owned or managed exporting value chain analysis for specific sectors that
firms (%), by country, 2010-2014 identify productive employment and decent work
opportunities for women along the value chain.
East Africa 24.0 76.0
Central to the design and implementation of
Kenya 46.0 54.0
measures to advance women’s manufacturing
Madagascar 36.0 64.0 employment is the need to ensure that women
Malawi 7.0 93.0 benefit in equal measure to men, and that the creation
Mauritius 22.0 78.0
of employment opportunities is not accompanied
by new patterns of inequality and vulnerability,
Rwanda 27.0 73.0
including poor working conditions and wages. Skills
Tanzania (United
8.0 92.0 training and other support programmes should be
Republic of) designed accordingly. Gender-specific interventions
Source: International Trade Centre (ITC) Non- and proactive complementary measures to leverage
Tariff Measures (NTM) Surveys in 20 developing the benefits of the economic integration for women
countries, 2010 to 2014. Available at: www. in manufacturing may include:
ntmsurvey.org
(i) Promoting women in traditional manufacturing
Regarding employment in exporting firms, the sectors that offer enhanced value addition
picture is mixed, with very low female participation and export-generating opportunities, and in
in the United Republic of Tanzania where only 4.0 per non-traditional export sectors that emerge as
cent of companies employ more women than men; potential growth drivers;
and Malawi (7.0%) but high levels in Madagascar
(52.0%) and Mauritius (47.0%).
92
(ii) Integrating women in priority regional value Kenyan women benefit from increased opportunities
chains that offer high employment potential, of an expanded services sector, which includes
including in female-intensive sectors and in increased job creation and integration in regional
the more capital-intensive sectors; and global value chains. While liberalization of
(iii) Providing targeted support for women services trade has the potential to generate further
participating in manufacturing as small scale employment and income opportunities for women,
home-based producers: facilitate local women it does not automatically lead to improved outcomes
manufacturing entrepreneur groups to form for women. Concerns regarding the effect of services
marketing consortiums; identify buyers of trade liberalization have been raised, including with
products, promote local marketing units for respect to the concentration of women in lower-
women’s products (through trade and/or skilled jobs
marketing associations);
(iv) Access to on-the-job training, re-training, ICT, Table 6.6: Priority services liberalization in various
technical education and skills development RECs
in sector-specific manufacturing activities for EAC COMESA AfCFTA
women to undertake value addition processes 1. Business services 1. Communication 1. Business services
to take advantage of higher-skilled jobs in the
2. Education 2. Financial 2. Communication
manufacturing sector.
3. Financial 3. Tourism 3. Financial
4. Tourism and 4. Transport 4. Tourism

(c) Services sector related services
Services play an important role in employment 5. Transport 5. Business services 5. Transport

generation and GDP. They represent almost 50 per 6. Communication 6. Construction
cent of world exports in value added terms. Services
7. Distribution 7. Energy
are an essential ingredient for increasing efficiency
and productivity, facilitate participation in value Source: Author
chains, overcome market access barriers both when
importing and investing, and as a strategy for the As Kenya negotiates to open up trade in services,
manufacturer to increase the value of products to due consideration should be given to advancing
consumers, strengthen customer relationship and to productive employment and decent jobs for
differentiate products from competitors. women within services trade. Ensuring that women
can take advantage of higher-skilled service jobs
A greater share of women was employed in the in the five identified priority sectors requires an
services sector than men. In 2017, 74.5 per cent inclusive approach in formulation of regulatory and
of women were employed in the services sector policy frameworks, supported by complementary
in comparison to 64.2 per cent of men. Regarding measures. These may include: providing access to
women in the services sector, 36 per cent of women financial services and technology, business networks,
were in education, 12.0 per cent were in public and practical skills development and other demand-
administration, 11.0 per cent were in health/social driven training programmes.
work, 10.0 per cent were in household activities
as employers and 9.0 per cent were in wholesale/ By and large, women share many disadvantages
retail trade. The World Bank Diagnostic Study (2016) commonly shared by women and young people.
indicates that women account for about one-third Industrialization and structural transformation result
of formal tourism employment, and most tourism- in job creation, which require skills beyond the basic
related informal jobs such as selling of curios, clothes numeracy and literacy acquired in primary school.
and providing beauty and salon services. While African countries have made good progress
in terms of increasing primary school enrolment,
Kenya is negotiating services liberalization across completion rates remain low, which translates into
various RECs as indicated in Table 6.6. Adopting a lower transition rates to secondary school (Economic
gender-sensitive approach to prioritization of trade Commission for Africa - ECA, 2015). Gender and
sectors under the various RECs will ensure that
93
income inequalities in education persist; in Sub- volleyball, among others. In addition, PWDs have
Saharan Africa, for instance, poor rural girls are opportunities to engage in creative arts and all other
seven times less likely to complete school than non- forms of occupations, depending on the nature of
poor urban boys. The learning outcomes can be disability.
weak, with students not attaining a minimum level
of competency in writing and mathematics (World
Bank, 2018). 6.4 Key Messages and Recommendations
The limited skills acquired especially by girls makes This analysis reveals that despite measures to end
it difficult to attain formal employment. Accordingly, discrimination against vulnerable groups, there are
young people in Africa may not be able to access several constraints inhibiting equitable access by
the full range of opportunities created by the African these populations to fully exploit their potential in
Continental Free Trade Area (AfCFTA) and will more various economic activities. These constraints include
likely resort to finding employment in the informal weak or ineffective implementation of prioritized
sector or remain either under- or unemployed. programmes, lack of access to credit facilities, cultural/
Vulnerable employment, underemployment and societal beliefs, and lack of information. Domestic
unemployment are higher for young people when and foreign trade offers ample opportunities to
compared to the general adult population (AfDB et growth and development of the vulnerable groups.
al., 2012). Meanwhile, most women are in vulnerable Specifically, increased participation of women and
self-employment, almost exclusively in the informal the youth and people with disability in domestic
sector. This is true for rural and urban areas. Outside and foreign trade has potential to generate a boost
North Africa, women are twice as likely as men to be to growth of the economy, poverty reduction and
contributing family workers (ECA, forthcoming). inclusive development in line with the aspirations of
the Kenya Vision 2030, the Third Medium-Term Plan,
and the “Big Four” agenda.
6.7 Strategic Sectors for Youth
Empowerment in Trade
6.4.1 Key messages
The ICT-aided sectors present the biggest
opportunities for youth employment. These span 1.) Domestic and international trade play an
across various sectors from communications, finance, important role in economic growth and
transport, health, business services and the sports, sustainable development. This is made
arts and creative industries. The sports economy possible through the linkages of production and
is among the largest in the global economy, with markets, enhancing efficiency in production,
several ancillary-related activities necessary for increasing access to more varieties of products
doing sports. Sports organizations have many through the distribution process, and creating
sources of income, including club fees and ticket opportunities for employment.
sales, advertising and sponsorship, television and
2.) Increased participation of women, youth and
media rights, re-distribution of income within the
PWDs in trade has potential to boost the
sport federations, merchandising, public support,
growth of the economy, poverty reduction
etc. Among the visible sports-related sectors
and inclusive development in line with the
are health, education, entertainment, tourism,
aspirations of the Kenya Vision 2030, the
businesses and physical infrastructure. Some of
Third Medium-Term Plan, and the “Big Four”
the leading sports in Kenya are football, athletics,
agenda.
volleyball, swimming and rugby. In the global scene
they include baseball, basketball, American football, 3.) The Government of Kenya has made efforts to
ice hockey (US), football (Europe), athletics, tennis, address inequalities and mainstream gender
rugby, golf, motor rallies, boxing, wrestling, among in trade-related policies and regulations. For
others. In fact, a great number of sports disciplines instance, enactment of the Public Procurement
have been tailored to suit PWDs, with international and Disposal Act 2015 requires 30 per cent
competitions such as athletics, bicycle riding, soccer, of Government tenders to be awarded to
enterprises owned by youth, women and
94
persons with disabilities. Nevertheless, much 6.4.2 Recommendations

more is required to bring about the much-
needed empowerment and inclusivity. 1.) Enhance access by youth, women and PWDs
to regional markets for export, by providing
4.) There are gender disparities in participation
support for tailored capacity building and training
in trade (domestic and international trade)
programmes, including on quality standards and
and employment in various sectors. Over the
links to input distribution networks.
years, women hardly constitute 30 per cent
of total wage employment in the wholesale 2.) Empower women through awareness creation,
and retail trade. Similarly, wage employment civic education and access to information
in agriculture and manufacturing were 37 per on their rights as this is critical to alleviating
cent and 20 per cent, respectively, during 2018. gender inequality. This would also ensure
In the manufacturing sector, women dominate that women are able to participate effectively
in the formal workforce of important labour- particularly in trade and the general economy.
intensive export sectors such as cut flowers 3.) Youth, women and PWDs face the challenge
(65-75% of workers), textiles (75% of workers) of access to credit hence hindering their
and tourism (33% of workers). However, they participation in manufacturing and trade. There
are often employed in low-skilled jobs such as is need to reverse the trend of low participation
sewing and finishing while men often act as of youth and women by enhancing access to
supervisors. credit to leverage on more opportunities for
5.) Key identified obstacles hindering full growth.
participation of women include inadequate 4.) Eradicate barriers preventing youth, women
legal framework to address discriminatory and PWDs from owning a business and
practices against women; inadequate access participating in trade. This can be enhanced
to capital by women-owned enterprises by leveraging technology by encouraging
(due to lack of collateral since women rarely the use of mobile phones to report abuse at
own property); and lack of requisite skills, border crossings.
information and networking to enable
5.) Promote transparency of rules and increase
engagement in productive business-related
awareness of all actors at the border, to reduce
activities. The youth face inadequate technical
misunderstandings and complaints. This will
skills for the job market, weak representation
shorten processing times, facilitate trade
in policy making platforms, and limited access
and ultimately make the border a friendly
to credit by youth-run enterprises.
environment for youth, women and PWDs.
6.) The strategic sectors that can foster women
6.) The Government can promote more
and youth empowerment through domestic
transparency in regulations and lower non-
and external trade include agriculture,
tariff barriers to trade beneficial to small
manufacturing and services sectors. These
firms, particularly to the type of firms typically
sectors have high potential for value addition
owned by women, youth and PWDs. This will
and integration of SMEs in their production
unlock markets for these vulnerable groups
value chains. Besides, there is potential for
and facilitate their access to employment and
expanded markets within RECs.
entrepreneurship.
7.) Gender-based interventions to encourage
7.) Build the capacities of counties to steer the
inclusivity include legislative reforms to address
agriculture, manufacturing and trade sectors
discriminatory practices against women and
to benefit the youth, women and PWDs.
the youth; facilitating access to finance and
other productive resources; improvement of 8.) Strengthen the existing county regional blocs
the business environment, market information for inter-county trade.
and networks; and relevant skills development
and trainings.
95
CONTRIBUTION OF
AGRICULTURE TO FOOD
7 AND NUTRITION SECURITY
AND INCLUSIVE GROWTH
Smallholder farmers constitute a huge proportion of the population in the agricultural sector, and
are therefore important stakeholders in realizing the broader goals of food and nutrition security
and inclusive growth. The agriculture sector can contribute to inclusive growth because it is the main
economic activity for most households living in rural areas. For this to be achieved, enhanced use of
all factors of production (land, labour and capital) including nucleated land settlement is required in
addition to an enabling policy environment. This should be supported by complementary investments
to support provision of extension services, provision of market infrastructure and use of information
and communication technology.
7.1 Introduction Warehouse Receipt System and strengthening
K
commodity fund. Under the manufacturing pillar of
enya has had rather limited success the “Big Four” agenda, potential for agriculture lies
in increasing smallholder agricultural in textile/apparel/cotton, leather, agro-processing
production by enhancing productivity and market access.
and competitiveness, despite numerous
The agriculture sector is guided by the Agriculture
agricultural programmes that have been
Sector Transformation and Growth Strategy (ASTGS)
implemented to achieve this goal. This is due to
2019-2029. This strategy was preceded by the
several challenges, including climate change, which
Agricultural Sector Development Strategy (ASDS)
had led to increased frequency of severe droughts
2010-2020, which focused on transformation of
and floods and outbreak of pests and disease.
smallholder agriculture from subsistence to an
Land sizes are increasingly becoming uneconomic
innovative, commercially-oriented and modern
due to continued land sub-division. This has been
agricultural sector. The ASDS achieved mixed results
compounded by low adoption of technology and
over the last decade because double digit economic
innovation. Investments in the sector by both public
growth has not been achieved. The national food
and private sector have remained low; for instance,
poverty is at a headcount rate of 32 per cent,
public spending is estimated at 3 per cent of total
and food and nutrition security is still a challenge.
Government expenditure (Government of Kenya,
Regarding commercialization of smallholder
2018; 2020).
farming, achievements were realized through the
The Government in the Third Medium-Term Plan Government subsidy programme that promoted
(MTP III) has put in place the “Big Four” agenda to the use of certified seed and fertilizers to improve
guide development from 2018 to 2022. The agenda the yields. This saw an increase in productivity from
includes targets to enhance smallholder productivity 4 bags to 20 bags per acre, and consumption of
under the food security and nutrition pillar, which fertilizer increased by 61,720 tonnes and certified
includes establishment of 1,000 small and micro seed by 4,930 tonnes from zero. In addition, the
enterprises using performance-based incentive distance to access farm inputs reduced from 15-35
model along the entire value chain. Second is to km to 3.9 km; this was done through engagement of
improve access to credit/ input for farmers through village level farm input stocks (Ministry of Agriculture,
Livestock and Fisheries - MoALF, 2018).
96
CONTRIBUTION OF AGRICULTURE TO FOOD AND NUTRITION SECURITY AND INCLUSIVE GROWTH
The ASTGS envisions an agricultural transformation because the discourse is moving from not only
that involves modernization of on-farm production, supporting farmers at the bottom of pyramid to
shifting production towards more value addition. achieving and maintaining subsistence agriculture,
It is envisioned that by transforming agriculture, but also considering the medium and large-
the country can reduce the cost of food, alleviate scale farmers who have a greater potential to be
poverty and deliver 100 per cent food and nutrition competitive by employing economics of scale. Table
security. This policy direction for the agriculture 7.1 summarizes the key priority policy areas in driving
sector is necessary for achieving inclusive growth the transformation.
Table 7.1: ASTGS focus areas and mid-term targets

Focus area Detailed initiatives 2017/18 baseline 2022 target
Increased small-scale farmer, Increase incomes for 3.3 million Kenyan Ksh 465/day Ksh 625/day
pastoralist and fisherfolk farming households
Increase agricultural output and Expand agricultural Gross Domestic Ksh 2.9 trillion Ksh 3.9 trillion
value add Product (GDP)
Grow contribution of agro-processing to Ksh 130 billion Ksh 261 billion
GDP
Increase household food resilience Reduce the number of food-insecure 2.7 million persons 0
Kenyans in the ASALs
Reduce the cost of food and improving Restructure governance
nutrition and operations of the
Strategic Food Reserve
Source: Government of Kenya (2018)
The ASTGS prioritizes three anchors to drive the first five years (2019-2023):
Anchor 1: Increase small scale farmer, pastoralist and fisherfolk incomes: This will be achieved by
working with 1 million farmers in an estimated 40 zones. These farmers will generate a demand for
inputs, equipment, processing and post-harvest aggregation which will be serviced by an estimated
1,000 micro-small and medium enterprises (MSME)s. In addition, the National Subsidy Programme
will use the e-vouchers with digital service delivery to reach out to an estimated 1.4 million registered
vulnerable farmers and provide them with access to a wide range of inputs (seeds, crop protection,
fertilizer, equipment).
Anchor 2: Increase agricultural output and value add. This will be achieved by establishing 6 large-
scale agro- and food processing hubs and putting into production additional 50 large-scale private
farms (>2,500 acres each) with an estimated 150,000 acres under irrigation.
Anchor 3: Increase household food resilience: Among the initiatives that will assure resilience include
the re-structuring of the Strategic Food Reserve (SFR) and introduction of the warehouse receipting
system. This will be supported by price stabilization policies and social protection programmes.
In addition, community-driven interventions will be promoted in the ASAL areas, coupled with
coordination among and between Government, development partners and private sector initiatives.
The three anchors mentioned above will be supported by enablers, namely: knowledge and skills
programmes, research and innovation and monitoring of the food system.
97
Agriculture is the largest sector in the Kenyan The sector experienced improved growth in 2018
economy, generating a third of Gross Domestic where it grew by 6.6 per cent compared to 2017
Product (GDP) and more than half of export earnings at 1.8 per cent (Figure 7.1). This can be attributed
(KNBS, 2019). Domestic production is dominated by to favourable weather conditions in 2018, which
food staples, including maize, rice and wheat, while increased the output in crops and livestock
export production is dominated by horticulture and production. Most of the production in the country is
tea, which contributed 48 per cent of export earnings carried out by smallholder farmers.
in 2018.
Figure 7.1: Real agricultural growth rate, 2014-2019

7
4
Percent
0
2015 2016 2017 2018 2019
Data Source: KNBS (2020), Economic Survey
There has been erratic growth in total value of however, has recorded mixed growth stimulated
aggregate agricultural output over the period under by the intermittent restocked water bodies with
review. Generally, crop production contributes appropriate fingerlings to increase productivity.
the largest share of agricultural growth, recording Livestock production recorded almost stagnated
double digits except in 2017 when the country growth over the years (Government of Kenya, 2020)
experienced an episode of drought followed by Figure 7.2.
floods, which affected the sector growth. Fisheries,
98
Figure 7.2: Trend of growth agricultural output, 2015-2019
7.2 Trends in Input Use

Despite the growing aggregate value agricultural chemicals 18 per cent, and livestock vaccines and
output, the yield gap for most crops has been drugs 9 per cent. This points towards continuous
widening over the last five years. For instance, efforts that the Government had made through the
there is an estimated 50 per cent yield gap in maize fertilizer subsidy programme. However, the gains on
production, and 70 per cent yield gap in legume this investment are yet to be realized due to several
production (van Loon et al., 2018; KIPPRA, 2020). challenges, including weather variability which has
To reduce this yield gap, input use and adoption of resulted in frequent drought and floods, and high
technological factors such as irrigation, fertilizers, pest and disease incidences. Notwithstanding, there
pesticide use, improved seeds, and agricultural are other factors that affect the amount of inputs
mechanization needs to be increased. Figure 7.3 used for production, including: production system,
shows the proportion of inputs used in the sector technical knowhow, supply, quality and the cost of
over the last eight years. Fertilizer accounts for 38 the inputs.
per cent, manufactured feeds 22 per cent, crop
99
Figure 7.3: Proportion of input use, 2011-2019
7.2.1 Input use for crop production According to the Kenya Integrated Household
Budget Survey (KIHBS) 2015/16 (KNBS, 2016), 47 per
cent of households use inorganic fertilizer, while 14
1. Fertilizer use for improved productivity per cent use organic fertilizer and a further 14 per cent
Farmers in the country use an average of 30kg/ use both inorganic and organic fertilizer to produce
ha fertilizer, which is far below the 50kg/ha their crops. Intuitively, it is clear that commodity
recommended under the Abuja Declaration of 2006. grants (tea, coffee and horticulture) are the largest
Empirical evidence suggests that fertilizer use is distributors of fertilizer; they constitute 52 per cent,
rising rapidly, although this trend is concentrated in followed by the private sector who distribute 12
certain agro-ecological regions. There is increasing per cent with the Government distributing only one
use of nitrogen-based fertilizer (Figure 7.4). Despite per cent. This indicates, to some extent, the level
increased fertilizer use, the yields from smallholder of use, which points towards higher consumption
farmers has been stagnant and well below what is of fertilizer in cash crops production compared to
obtained by many commercial farmers. Most farmers food crops. These findings highlight the role of the
lack the financial resources to purchase enough private sector in the distribution of fertilizer, which
mineral fertilizers to replace soil nutrients. The could be upscaled to increase accessibility and use
situation is further aggravated by the fact that even of fertilizer.
the farmers using the inorganic inputs hardly use the Table 7.2 shows where households buy their fertilizer.
recommended rates (60 kg/ha) with most of them It is evident that the private stockists and companies
applying less than 20 kg/ha (Marenya and Barrett, and farmers associations distribute most of the
2009; Mutegi et al., 2012). inorganic fertilizers. However, the Government and
farmer associations distribute the largest share
of both inorganic and organic fertilizers. When
smallholder farmers are considered (Table 7.3) the
Government and NGOs stand out as the main
distributor of fertilizer. Most of the distribution is part
100
of the subsidy programmes. As is expected, most of Management (ISFM) approaches can contribute
the organic fertilizer used is from own production or to increased soil fertility, which results in increased
from other farmers. The use of both inorganic and yield, and thus closing in the yield gap (Roobroeck
organic fertilizer coupled with Integrated Soil Fertility et al., 2015).
Figure 7.4: Trends in fertilizer use, 2002-2017
Data Source: Ministry of Agriculture, Livestock and Fisheries - MoALF (2018)
Table 7.2: Source of fertilizer at household level by type (%)

Fertiliser type Private stockists Other Cooperatives Societies/ Government NGOs Commodity Own
and companies farmers Farmers Associations subsidized grants Production
Inorganic 51.6 6.4 43.2 37.1 37.7 32.8 4.8
Organic 4.3 62.5 4.3 3.0 11.5 45.2 68.2
Both 18.6 5.8 38.5 20.1 13.4 0.0 9.2

None 8.7 12.2 3.1 17.1 8.0 22.0 13.2
N/A 16.7 13.1 11.0 22.8 29.5 0.0 4.6
Table 7.3: Source of fertilizer at household level by type for smallholders (0-5 ha) (%)
Fertiliser Private Other Cooperatives Government NGOs Commodity Own

Type stockists and farmers Societies/Farmers subsidized grants Production
companies Associations
Inorganic 77 16 57 80 76 0 6
Organic 3 75 4 1 2 67 80
Both 19 5 37 18 21 0 10
None 1 2 1 0 1 33 4
N/A 1 0 0 0 0 0 0

Under the “Big Four” agenda for 100 per cent food and with the needed nutrients according to the soil
security in Kenya, there is a goal to have 50 per cent types. The most common fertilizers used in dry
of fertilizer blended. Blending fertilizer enables the blends include urea, triple super phosphate (TSP),
production of fertilizer that is specific to certain areas diammonium phosphate (DAP), and potassium
101
chloride (KCl) (Government of Kenya, 2018). Government and NGOs and 87.0 per cent of the
Most farmers apply only DAP in small amounts of uncertified seed is based on the farmers own
secondary and micronutrients, making soil acidic, production. The smallholder farmers get their
due to inherent soil factors, fertilizer acidification, certified seed from Government (92.0%) and NGOs
and lack of corrective liming, a challenge in many (94.3%); these, intuitively, are subsidy programmes.
parts of the country (Roobroeck et al., 2015). The farmer cooperatives and seed stockists also
play an important role in distribution of certified
County Governments need to step up efforts to seed. The direct importations (41.0%) and under
provide integrated soil fertility management as part contract (80.0%) are horticultural crops, specifically
of their extension packages, including soil analysis vegetables for export (Table 7.4).
and mapping, supported by recommendations
on soil fertility management from the national Kenya is only self-sufficient in the production of
research institutes. Usually, the large commercial certified seed maize, and is wanting in the production
farmers can get their soil and plant analysis done, of seed for other crops such as wheat, potatoes and
with professional recommendation before they horticultural crops (Government of Kenya, 2010;
buy fertilizers. This is not the case for smallholders Funk and Karimi, 2012). Several initiatives have been
who grow a multiple number of crops using blanket undertaken to increase the availability of certified
fertilizer recommendations because they cannot seed since 2010 but the situation remains largely the
afford soil and plant analysis (Marenya and Barrett, same.
2009; Mutegi et al., 2012).
Vegetative and open pollinated varieties are mainly
seedlings, cuttings and suckers which tend to be
2. Seed use for improved productivity more delicate regarding quality control because they
Farmers are involved in multiple seed systems, are easy to propagate. A lot of horticultural crops
depending on the crop or animal that they intend fall in this bracket. In this case, concerted efforts are
to produce, and in most cases participate in both required in providing extension services and training
formal and informal seed systems. The formal seed farmers to facilitate production of clean planting
system has most of the activities, i.e, breeding, material that are high yielding.
seed production and distribution organized and To enable the development of the seed industry in
undertaken by public institutions and large corporate the country, there is need to revise and harmonize
entities and in most cases the seed is classified as several Acts that govern the sector, and which cause
certified (Government of Kenya, 2010; Munyi and De duplication and conflict of mandates. The revision
Jonge, 2015). This seed is guaranteed to produce will allow for issues such as market liberalization,
higher yields when compared to other seed types. Sanitary and Phytosanitary (SPS) regulation and
According to the KIHBS 2015/16 data, over 90.0 even provide for bio-science innovations such as
per cent of certified seed is distributed by the genetically modified seed.
Table 7.4: Source of seed used by households by type of smallholder (0-5ha) (%)
Stockist/ Other Nursery Cooperative Government NGO/ Own Direct Under Other
Retailer farmers society FBO Production Import contract
Certified 73.4 2.8 7.6 81.2 92.0 94.3 2.1 40.9 80.4 15.0
seed
Uncertified 25.8 84.2 3.5 5.2 4.0 4.6 88.1 40.9 10.0 77.6
seed
Seedlings 0.6 2.1 85.1 9.5 1.5 0.2 2.0 9.7 0.0 1.8
Cuttings 0.1 7.3 0.9 1.7 2.0 0.1 4.8 8.5 9.5 5.1
Suckers 0.1 3.6 2.9 2.4 0.5 0.7 2.9 0.0 0.0 0.4
DK 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1
102
3. Pesticide use for crop production consumed in increasing quantities and it is this
fresh produce that is most susceptible to pesticide
About 25-35 per cent loss in agricultural produce is
residues. Figure 7.6 shows that the most commonly
caused by pests and diseases, which can be controlled
used pesticides are insecticides, implying that insect
by use of pesticides. Over-use of pesticides can lead
pests are a challenge. Figure 7.6 also shows the total
to dangerous levels of hazardous chemicals entering
amount of pesticide used in agriculture.
the food chain. Fresh fruit and vegetables are being
Figure 7.5: Amount of pesticide use in agriculture
2500
2000
Metric Tonnes
1500
1000
1000
0
2000 2005 2010 2015 2017
Data Source: FAOSTAT (2019)
Figure 7.6: Proportion of crop pesticides use by type, 2011-2018
There are various policies and regulations about require attention to prevent the accumulation of
the import, export, registration, distribution, obsolete pesticides, although disposal of obsolete
manufacture, and disposal of obsolete pesticides. pesticides requires huge investments (Kaigwara et
However, implementation of most of the policies al., 2002; Loha et al., 2018).
and regulations is rather weak. There are gaps that
103
Stakeholders (pesticide importers, distributors, and Magothe, et al., 2012; Dessie, 2013). However, the
retailers, farmer associations) make efforts to seek majority of poultry are still kept by smallholders in less
ways that would ensure the sector can promote intensive systems. The advantages of these systems
and implement self-regulation (USAID, 2014). The are the low levels of inputs that they require and
Stockholm Convention is a global agreement the unique products they produce. These systems
whose objective is to protect human health and are practiced by people who have few other options
the environment from Persistent Organic Pollutants and it is important that they survive as long as they
(POPs). POPs are a group of organic chemicals that are needed for social reasons, food security and
have been intentionally or inadvertently produced livelihood support. The paper utilizes a Sustainable
and introduced into the environment. Due to their Livelihoods Framework to review how smallholder
stability and transport properties, they are now poultry contributes to households and livelihoods.
widely distributed around the world, and are even It finds that social-capital aspects of smallholder
found in places where they had never been used and poultry production have been given little attention
are known to effect toxicity. Given their long half-lives in research and or in development projects. Poultry
and fat solubility, they tend to bio-magnify along the has played, and still plays, important social and
food chain in living organisms, particularly in long- cultural roles in the life of rural people, not least for
lived species at the top of the food chain. POPs building social relations with other villagers. Institu-
appear at higher concentrations in fat-containing tional structures are not favourable to smallholder
foods, including fish, meat, eggs and milk (Kanja, poultry production. The interventions that could
nd). enhance productivity are well recognized, but the
animal health services needed to promote these
interventions are, in general, poorly developed.
7.2.2 Input use for livestock production Models for developing animal health services for
smallholders are also well known, but the regulatory
reforms needed are not implemented. We hope this
1. Manufactured feeds
report will provide accurate and useful information
The use of manufactured feed is gaining traction in to its readers and any feedback is welcome by the
commercial intensive production systems such as author and the Animal Production Service (AGAP.
poultry because these feeds assure uniformity of Indigenous poultry are the most popular and
quality, and thus give the nutrient balance needed common farm species. According to the Kenya
for optimal growth (Figure 7.7). Empirical literature Poultry Farmers Association (KEPOFA), the poultry
shows that poultry are among the affordable livestock population stands at 32 million, of which 6 million
for the poor, and improving their production level are commercial hybrids and the rest are indigenous
can improve the livelihood of the village farmers, birds. They contribute significantly to the socio-
and thus serve as a stepping stone out of extreme economic and nutritional needs of an estimated 21
poverty (Byarugaba, 2007; Kryger et al., 2010; million people, many living in rural areas.
104
Figure 7.7: Manufactured feeds, 2011-2018
Data Source: KNBS(2019), Economic Survey
2. Pesticide use in livestock production In livestock production systems, it is evident that

Many animal diseases have mortality rates of dip, and spray fluids are the most commonly used
between 50 and 90 per cent in susceptible animals, (Figure 7.8). This implies that insect pests such as tick
depending on the species, age, nutrition and breed of are predominant and are a problem because they
the animal. The most common diseases are Anthrax, transmit diseases, produce paralysis or toxicosis, and
Brucellosis, Rift Valley Fever (RVF), Avian Influenza, cause physical damage to livestock. Most farmers
Avian Tuberculosis, Foot and Mouth disease, and use handheld spraying machines as the community
Rinderpest. Common pests include tick, tsetse fly, managed dips are not operational is most areas.
horn flies and horse bot.
Figure 7.8: Proportion of animal pesticide use by type, 2011-2018
105
Issues of animal health, such as sale of veterinary implying that for any productivity gains to be
medicines and vaccines, and provision of clinical achieved, technology that promotes intensification of
services or vaccinations have largely become production systems must be applied. Comparisons
private sector-driven. Surveillance, early warning, of three household-based surveys show the increase
laboratory diagnostic services, planning, regulation in importance of small scale holdings. There has been
and management of disease-control programmes a 55 per cent growth in the number of smallholder
and assurance of the quality and safety of animal farms (0- 5 ha) from 2.22 million in 1994 to 7.63
products is managed by both the National and million in 2015/16, and a 71 per cent reduction in
County Government. However, challenges exist since the number of farms between 5 and 10 hectares
devolution mainly in the management of epidemic from 93,871 to 15,821. For farm holdings that are
and trade-related diseases due to the ‘broken’ chain more than 10 hectares, there has been a reduction of
of veterinary command that requires a systematic and 86 per cent from 92,498 to 6,714 (Table 7.5). There is
coordinated notification of disease outbreaks, and need to implement the county spatial plans on land
response to disease emergencies and management use to facilitate the development and use of the land
of national disease-control programmes (FAO, 2018; resource in a sustainable manner. Small parcels of
Njehu et al. 2018). land negate economies of scale, thus increases the
cost of production and makes agricultural enterprises
less competitive.
7.3 Land Use Patterns and Inclusive Growth
Land is important as a factor of production; the
agricultural land holding sizes are becoming smaller,
Table 7.5: Farm structure in the country

Size of holding Number
1994 2005/06 2015/16 % change in
numbers
0 -5 ha 2,217,706 2,972,031 7,638,834 55
5 -10 ha 93,871 17,451 15,821 -71
more 10 ha 92,498 19,493 6,714 -86
Total 2,404,075 3,008,975 7,661,369
Data Source: KNBS (Various), KIHBS 1994, 2005/06 and 2015/16
Despite this transformation in land holding size, the national population density of 94/ Km2 (KNBS,
there are 422,513 parcels of agricultural holding 2020). The counties that have the largest proportion
that are more than 10 hectares and are not being of idle land include Nairobi County (mainly because
used for productive purposes. Table 7.6 shows the of the National Park, which cannot be considered for
distribution of land parcels at county level. Meru and agricultural use) Kilifi, Homa Bay, Bungoma, Nakuru
Kakamega have the largest proportion of smaller land and Kakamega counties. This is an interesting
parcels. The population density in these two counties mixture of counties, and further investigation is
is 220/km2 and 618.4/km², respectively, compared to required (KIHBS, 2015/16) to ascertain this finding.
106
Table 7.6: Proportion of farm structure by county

No. County Operated Parcels (Ha) Not Operated Parcels (Ha)
0-5 5 - 10 > 10 > 10

1 Meru 6.08 8.51 0.00 0.84
2 Kakamega 4.68 0.00 0.00 9.22
3 Murang›a 4.64 0.00 0.00 0.71
4 Makueni 3.90 14.84 0.00 1.16
5 Migori 3.88 0.00 0.00 0.42
6 Homa Bay 3.88 0.00 0.00 8.10
7 Kitui 3.84 0.00 0.00 2.51
8 Nakuru 3.78 0.00 0.00 5.25
9 Siaya 3.58 0.00 0.00 1.47
10 Bungoma 3.56 0.00 0.00 11.85
11 Machakos 3.36 17.35 0.00 1.32
12 Kisii 3.24 0.00 0.00 2.23
13 Nyeri 3.12 0.00 0.00 0.41
14 Kisumu 3.07 0.00 0.00 0.74
15 Kericho 2.62 0.00 0.00 2.60
16 Kilifi 2.51 0.00 4.95 13.46
17 Nandi 2.44 6.08 3.75 0.60
18 Nairobi City 2.39 0.00 0.00 14.40
19 Trans Nzoia 2.39 20.47 0.00 0.62
20 Nyamira 2.29 0.00 0.00 2.65
21 Nyandarua 2.26 0.00 0.00 0.58
22 Kirinyaga 2.20 0.00 0.00 0.87
23 Narok 2.18 10.79 14.42 2.41
24 Kiambu 2.18 0.00 0.00 0.00
25 Baringo 2.17 1.18 0.00 0.06
26 Kwale 2.07 0.00 0.00 0.68
27 Bomet 2.02 0.00 3.64 0.04
28 Embu 2.00 0.00 1.20 0.22
29 Uasin Gishu 1.99 9.62 2.88 3.04
30 Tharaka Nithi 1.83 0.00 1.83 1.16
31 Vihiga 1.74 0.00 0.00 0.51
32 West Pokot 1.56 0.00 0.00 0.10
33 Busia 1.50 0.00 4.66 3.51
34 Elgeyo Marakwet 1.47 5.41 4.31 0.51
35 Taita Taveta 1.09 0.00 2.19 0.35
36 Laikipia 0.85 0.00 0.00 1.03
37 Kajiado 0.43 4.89 6.21 0.86
38 Tana River 0.31 0.79 0.00 0.78
39 Turkana 0.26 0.00 1.40 0.51
40 Lamu 0.23 0.08 0.00 0.03
41 Mombasa 0.17 0.00 0.00 1.62
107
No. County Operated Parcels (Ha) Not Operated Parcels (Ha)
42 Samburu 0.14 0.00 0.00 0.18

43 Marsabit 0.05 0.00 0.00 0.08
44 Isiolo 0.02 0.00 0.00 0.29
45 Garissa 0.02 0.00 1.59 0.00
46 Wajir 0.00 0.00 0.95 0.00
47 Mandera 0.00 0.00 46.04 0.00
Total 100 100 100 100
Data Source: KNBS (2016), KHIBS 2015/16
7.4 Enablers for Inclusive Agricultural Growth
7.4.1 Irrigation for increased production plots are used for horticultural and rice production,
Kenya is a water-scarce country, with varied water a good example being the Mwea Irrigation Scheme.
resources in time and between regions. Generally, This scheme has recorded growth in several areas
there are two rainy seasons, with the total yearly including: area under irrigation, number of small-
water withdrawal estimated to be over 2.7km3, or scale holders involved, output and resultant incomes.
less than 14.0 per cent of resources thus the need The scheme is considered a success because when
to use these limited water resources prudently (UN, compared with the other three schemes (Ahero,
World Water Assessment Report 2006). Bunyala and West Kano), Mwea records the largest
proportions in all aspects (Table 7.7).
As a result of climate change, there is increasing
variability in weather patterns resulting in frequent The provision and management of large scale
drought seasons, making reliance on rain-fed irrigation by Government agencies and allowing
agriculture a challenge and necessitating the need smallholder farmers to lease plots as is the case of
for irrigated agriculture. There are three categories Mwea Irrigation Scheme is an example of inclusivity.
of irrigation schemes in the country, namely: private It allows for several farmers to participate in the rice
schemes - these are usually part of commercial run value chain. In addition, there is technology on
enterprises usually and are developed, owned and water use efficiency that allows farmers to deliver
managed by the companies; smallholder community water directly to the plant thus, enabling the farmer
irrigation schemes owned, operated and managed to control the time, location, and quantity of water
by communities; and finally the public schemes which applied. Examples include: drip irrigation systems,
are managed by the National Irrigation Board (NIB). water harvesting ponds, dam lining, use of gravity
and solar pumps and greenhouse management, etc.
Data from four NIB-managed schemes shows that These technologies coupled with drought resistant
they are mainly used for rice production and are crop varieties ensure that productivity is enhanced.
modelled such that smallholders can participate by
leasing plots in the scheme. In many cases, these
108
Table 7.7: Productivity indicator for different irrigation schemes, 2013/14-2017/18 (%)
Mwea 2013/14 2014/15 2015/16 2016/17 2017/18*

Hectares cropped (ha) 54.8 76.0 72.9 78.1 84.3
Number of plots-holders 45.4 55.0 55.0 44.0 54.8
Paddy yields (tonnes) 73.3 78.7 77.6 73.0 79.9
Gross value of output (Ksh millions) 85.4 85.3 83.3 81.0 87.9
Payments to plot-holders (Ksh million) 75.4 86.8 85.8 83.7 91.5
Ahero
Hectares cropped 6.4 12.1 6.4 3.3 2.4
Payments to plot-holders (Ksh millions) 5.3 6.1 3.4 7.7 2.3
Bunyala
Payments to Plot-holders (Ksh millions) 3.5 2.4 2.3 3.2 1.7
West Kano
Payments to Plot-holders (Ksh millions) 5.0 5.8 2.4 2.4 1.9
7.4.2 Agricultural marketing

Marketing is critical for stirring derived demand for Small farms continue to produce 73.0 per cent of
agricultural products. Further, an efficient agricultural total marketed production, emphasizing that the
marketing system leads to optimization of resources countries’ agriculture is predominantly based on
use and output management, implying that if small farms, which can produce surplus that goes to
intensification process such as the expansion of the the market in basic form without any value added
technical innovations and improving efficiencies in (KNBS, 2019) (Table 7.8). There are efforts to facilitate
the production system (Benin and Nin -Pratt, 2016) the transition of small farms into commercial farms
were employed then it would be possible for the that are integrated along different value chains to
producers to experience increased outputs. facilitate some level of value addition.
109
Table 7.8: Gross marketed production from large and small farms, 2012-2018
Large farms Small farms Total %
Year Ksh million Annual change Ksh million Annual change Ksh million Annual change Share of small
farms (%)
2012 93,867 0.7 250,725 5.1 344,612 3.9 72.8
2013 90,375 (3.7) 244,468 (2.5) 334,843 (2.8) 73.0
2014 87,998 (3.0) 239,131 (2.5) 327,129 (2.7) 73.1
2015 101,219 15.0 272,238 13.9 373,502 14.2 72.9
2016 111,591 10.4 301,709 11.0 413,300 10.8 73.0
2017 119,328 6.9 327,593 8.6 446,921 8.1 73.3
2018* 133,933 12.2 363,959 11.1 497,891 11.4 73.1
(a) Cereals (b) Horticultural production

Generally, the value of marketed agricultural Horticultural production, characterized by a vertically
produce for all the broad categories has been integrated value chain facilitated by institutional
increasing steadily over time. Cereals (maize, innovations and investments that support smallholder
wheat, etc) have, however, stagnated (Figure 7.9). production, has continued to record increased
This can be attributed in part to market failure for production and exports. Smallholders have proven
these commodities, occasioned by Government in that it is possible to meet the stringent consumer-
both the input and output markets. Wheat has a driven standards that are a perquisite to their
similar structure where market failure has resulted in participation in the exports market. These customer-
stagnated growth of the commodity, necessitating driven standards are stringent and complex; however,
the continued need for imports to meet domestic they assure food safety, protect worker’s health and
demand. A study carried out by KIPPRA in 2010 on the environment (Agriculture and Food Authority -
price control (Odour, et al., 2010) recommended that AFA, 2019).
for cereal products to thrive, there is need to liberalize
the storage and bulk handling of these products in
addition to providing an enabling environment that
facilitates competition and curtails monopolies.
110
Figure 7.9: Marketed agricultural production at current prices, 2014-2018
*Horticulture is fresh exports data only

(c) Temporary industrial crops (e) Livestock and livestock products

Temporary industrial crops include sugarcane, The livestock industry has a high degree of vertical
pyrethrum, sisal and cotton. These commodities have linkages with upstream and downstream industries.
declined in production and the country continues It is a significant user of products from feed,
to import their by-products to satisfy domestic drugs, vaccines and equipment manufacturing
demand. Kenya will continue importing sugar for industries and is a provider of raw materials (milk,
the foreseeable future. Proposals have been made skins and hides) for agro-processing industries,
to revive these commodities but none is showing thereby creating opportunities for employment and
positive results. For instance, there have been improving household incomes.
proposals to privatize sugar factories to improve
their competitiveness. For all the commodities, there
is need to adopt new varieties that are more yielding
7.4.3 Smallholder participation in markets
to improve the return to the farmers. Smallholders participate in domestic food markets
and international markets as suppliers of raw
material, despite these markets being highly diverse.
(d) Permanent crops
In the case of international markets, the raw food
The role of coffee in the sector has fallen steadily material is processed and traded by a third party.
over time with the volatile world market prices Facilitating smallholders to participate in these value
compared to that of tea. Tea and coffee dominate adding processes can help to create employment
permanent industrial crop production. Tea currently and contribute to local, social and economic
appears to be a success story. Production is at record development. These benefits of value addition will
levels, prices are high, and there have been recent go a long way in improving their livelihoods (Poole
investments in expanding the number and capacity and Poole, 2017).
of smallholder factories. Kenya is among the world’s
largest exporter of black tea. Vertically integrated value chains offer vast
opportunities to generate income, but there are also
111
risks associated with longer food value chains in which guidelines, and focusing on value-added production
external factors play a bigger role and smallholder and marketing. In Kenya, however, the results are
farmers have less control over input and output mixed; cooperatives previously handled over 72.0
prices. Internationally traded commodities such as per cent of coffee sales, 95.0 per cent of cotton sales,
tea, horticulture and coffee generate demand, offer 76.0 per cent of dairy produce sales, and 90 per cent
lower margins for smallholders, and are affected by of pyrethrum sales. However, with the exception of
speculation necessitating the use of both loose and dairy cooperatives whose share in the total market
bidding contracts with actors involved in upstream has remained stable (examples include Githuguri
marketing activities (CFS, 2016; Poole and Poole, Dairy, a successful cooperative that is involved in
2017; Sara, 2010; Simo, 2013). the milk production value chain both downstream
and upstream) most of the other cooperatives are
Empirical evidence shows that producer struggling to stay float (Government of Kenya,
organizations have recorded relative success in 2018; Wanyama, 2009). Table 7.9 shows that most
assisting smallholders navigate the marketing of the cooperatives in the sector were coffee (40%)
system by providing an array of services, including followed by diary (27.0%).
improved market information and food safety
Table 7.9: Membership of cooperative societies by type of society, 2013-2018 (%)

Type of Society 2013 2014 2015 2017 2018*
Coffee 44.9 43.7 42.7 40.6 40.3
Dairy 22.7 24.5 25.3 26.9 27.4
Multi-purpose 8.2 8.3 8.5 9.3 9.7
Other agricultural 8.6 8.6 8.7 9.3 9.6
Pyrethrum 4.4 4.2 4.1 3.9 4.0
Sugar 3.0 2.8 2.8 2.2 2.2
Farm purchase 3.9 3.8 3.8 3.7 3.7
Fisheries 2.2 2.3 2.3 2.2 2.3
Cotton 2.0 1.9 1.8 1.9 1.9
7.4.4 Information technology communication and agriculture production
Digital platforms allow for several actors to be international community to promote information
reached and included along the value chain by exchange and access among stakeholders in the
delivering different services, and is thus an indicator agricultural- sector. There are broadly five types
for inclusivity. Most agriculture-ICT initiatives in of digital services (CTA, 2019; FAO, 2013) that are
Kenya are ran by Government-led projects or available namely:
programmes. The Kenya Agricultural Information
Network (KAINET, 2012) is an information network
1. Advisory and information services
set up to promote information exchange among
stakeholders in the agricultural sector to support Digitally delivered information on topics such as
decision making, promote innovation in agriculture agronomic best practices, pests and diseases,
and subsequently improve livelihoods. It aims weather and market prices, and more sophisticated
to modernize and increase productivity of the digital advisory services and farm management
agricultural sector. KAINET was initiated in April software tailored to the specific farmer, farm or field
2006 in response to demand from the national and that enable smallholder farmers to make decisions
112
that maximize output from their land, improve the digitalization and data analytics services for financial
quality of agricultural production and maximize institutions that enable such institutions to serve
farm revenues and profits through lower costs of smallholder farmers at substantially lower cost and
production, improved ability to identify markets risk.
and/or better price realization.
5. Macro agricultural intelligence
2. Market linkages
Data analytics solutions and digital decision support
Digitally-enabled solutions that link smallholder tools that integrate a variety of data sources on
farmers to high-quality farm inputs (e.g., seeds, smallholder farmers, farms and markets and convert
fertilizers, herbicides/pesticides), production and this information into useful country- and value-chain
post-harvest machinery and mechanization services level insights and decision tools for Government
(e.g., irrigation, tractors, cold storage), or off- policy makers, extension agencies, agronomists,
take markets, including agro-dealers, wholesalers, agribusinesses and investors.
retailers, or even to end-consumers. Digital market
linkage solutions allow smallholder farmers to lower
their costs of production through access to lower- 7.5 Food and Nutrition Security and
cost and/or higher-quality inputs, reduce the costs Inclusive Growth
and risks of finding and transacting with buyers, and
ultimately increase their yields and incomes. Overall, the food supply situation as monitored
through the Food Balance Sheet (KNBS, 2019)
reflected an improving situation, considering the
3. Supply chain management population growth. The energy supply improved
Digital supply chain management solutions from 2,202 kilo calories in 2014 to 2,288 kilo calories
are business-to-business services that help in 2015 before declining to 2,242 kilo calories in
agribusinesses, cooperatives, nucleus farms, input 2018. The food Self Sufficiency Ratio (SSR) improved
agro-dealers and other smallholder farmer value from 74.4 per cent in 2014 to 75.2 per cent in 2015
chain intermediaries to manage their smallholder and increased to 89.0 per cent in 2018. In terms of
relationships in ways that lower costs through greater per caput (per head) supply, there are improvements
efficiency, improve value chain quality through for most food groups except sorghum and products,
better traceability and accountability and ultimately sugar crops, milk and milk products (excluding
increase smallholder farmer yields and incomes by butter), eggs and products, fruits (excluding wine),
making it easier for more commercial players to vegetables (tomatoes, onions, others), nuts and
formally engage with large numbers of smallholder products and groundnuts (shelled equivalent) (Table
farmers. 7.10). This implies that going forward, considerations
need to be made to increase the production of these
4. Financial access commodities, which contribute to nutrition security
through provision of vitamins and micro-nutrients.
Digital Financial Services (DFS) relevant for
smallholder farmers, such as digital payments, How food is produced is not the only facet of the
savings, smallholder credit, and agricultural food production system impacting the sustainability
insurance, which increase financial access and equip and equity of food security but how it is consumed
smallholder farmers to improve yields and incomes has implications as well. Three consumption-side
and invest in the longer-term growth of their farms issues of relevance are food loss and waste, over-
(e.g., via better inputs, mechanization and expansion consumption, and competing uses of food. Due to
to new crops). Also includes business-to-business data challenge, we expound more on food loss and
waste.
113
Table 7.10: Trends in food availability per capita, 2014-2018
Commodity Per caput /Year supply of Food (Kg) Per Caput/ Day Calories
2014 2015 2016 2017 2018 2014 2015 2016 2017 2018
Maize and products 68.2 60 58.6 64.2 69.5 527 524 510 497 547
Wheat and products 31.3 34.3 32 39.1 41.3 227 247 231 280 307
Rice and products (milled equivalent) 19.9 18.1 19.6 22.7 20.6 125 114 123 142 129
Millet and products 0.7 0.5 0.5 1.2 1 6 4 4 11 9
Sorghum and products 2.1 2.3 1.4 2.2 1.9 18 20 12 19 16
Pulses 27.4 29.5 27.9 29.5 28.4 253 272 257 271 262
Starchy roots 80.8 86.1 70.6 72.4 68.2 199 209 177 180 166
Sugar crops 54.2 61.1 64 11.7 13 45 50 53 10 11
Stimulants (tea, coffee, cocoa) 0 0 0 0 1.1 0 0 0 0 1
Meat 13.3 15.7 16.2 17.9 19 65 79 79 88 94
Milk and products (excluding butter) 100.2 122.3 101.5 89.4 93.3 178 216 180 158 165
Fish and sea food 4.5 4.1 3.5 4.1 4 8 7 6 7 7
Eggs and products 1.3 1.8 1.5 1.5 1.6 4 6 5 5 6
Fruits (excluding wine) 72.7 81.1 54.4 55.9 70.5 116 128 79 80 104
Vegetables (tomatoes, onions, others) 51.1 49.1 32.7 30.5 41.8 32 30 21 19 25
Nuts and products 0.9 0.9 30 0.8 1.7 9 9 0.7 6 8
Groundnuts (shelled equivalent) 2.1 2.1 3.5 0.4 0.4 25 23 6 5 4
7.5.1 Food loss and waste

Food loss and waste can occur during any stage of measuring food loss and wastage at the country
of the food value chain, including production or level and across the different stages of the food
harvest, handling and storage in the form of food production and consumption chain (FAO, 2019).
degraded by pests, fungus, and disease. Table 7.11 gives an indication of the amount of
food lost (extracted from the Food Balance Sheet,
Accurate data on the scale of food loss and waste KNBS, 2019). As expected, losses are higher for
along the different supply chain are not available. foods that are consumed fresh such as milk, fruits
This is primarily due to lack of a universal method and vegetables.
114
Table 7.11: Food losses

Losses (1000MT)
2014 2015 2016 2017 2018
Maize and products 606 688 404 600 86
Wheat and products 29 33 32 41 42

Rice and products (milled equivalent 6 4 6 5 2
Millet and products 10 7 9 23 15
Sorghum and products 31 32 20 44 34
Pulses 127 150 145 162 166
Starchy roots 275 345 279 299 262
Sugar crops 0 0 0 0 0
Stimulants (Tea, coffee, cocoa) 12 7 11 5 0
Meat 0 0 0 0 0
Milk & Prod (Excluding Butter) 354 402 369 345 335
Fish & sea food 0 0 0 0 0
Eggs and products 11 15 13 2 0
Fruits (Excluding Wine) 130 119 115 137 193
Vegetables (tomatoes, onions, others) 165 166 79 79 395
Nuts and products 1 1 0 1 0
Groundnuts (shelled Equivalent) 0 0 0 0 1
(a) Food losses at household level
Reducing food losses at household level is among loses account for over 90 per cent of losses for
the instruments that can be used to improve food quantity larger than half a tonne. Regarding storage
security, therefore identifying the cause of the loss related losses Nyeri County (53.0%) and Trans Nzoia
helps in developing measures to mitigate them. County (22.0%) reported the bulk of these losses
Given that most households in the country are small for quantities above half a tonne. These counties
holders any losses at household level has far reaching are predominantly agricultural-based economies.
consequences. Losses at household level are not Counties that reported high transport-related losses
homogenous, therefore, to get an indication of the for quantities over half a ton were Migori (25.0%),
magnitude a sample of the counties was assessed to Kajiado (21.0%), Bungoma (24.0%) and Nyamira
account for over 70.0 per cent of the losses by type (19.0%). These findings require further investigation
using the available variables in the KIHBS 2015/16 to establish the correlation between the food losses
(Table 7.12). Storage related and transport related and the production system in these counties.
115
Table 7.12: Causes of food losses at household level (%) by county

Storage related Transport related
<50kg 50-<100 kg 100-<500 kg >500kg <50kg 50-<100 kg 100-<500 kg >500kg

Kitui - 3 - - - 36 9 -
Kisumu 19 7 - - 4
Siaya 9 - - - 8 - - -
Migori 2 - - 6 - - - 25
Meru 1 4 4 - - - - -
Kwale 13 5 - - 13 - - -
Makueni 1 - - - 4 - - -
Kiambu - - 12 - - - - -
Uasin Gishu 1 2 4 - 2 - 9
Kilifi 1 - - - 4 - - -
Nyeri 1 2 2 53 - - - -
Murang›a 10 3 4 8 4 - - -
Trans Nzoia 1 5 5 22 - - 9 -
Baringo 5 34 29 - - - 9 8
Nakuru 4 - 4 - 20 - 11 -
Kajiado 6 1 - - 6 - - 21
Kakamega - - 2 6 - - - -
Bungoma 1 9 12 - - - - 24
Nyamira 4 2 - - 9 28 23 19
Total 78 76 77 95 73 64 70 97
(b) Household level loss during storage (57.0%), Kericho (18.0%), Tharaka Nithi (9.0%), Tana
River (7.0%) and Baringo (4.0%) (Table 7.11).
It is estimated that weevils, a storage pest, accounts
for an estimated 94.0 per cent of the losses for stored Rodents account for an estimated 70.0 per cent of
grains over 500kg, and over 80.0 per cent for grain the loss for grains up to 500kg. Uasin Gishu County
between 100kg and 500kg. For the smaller quantities reported that 43.0 per cent of the losses between
the losses are at about 70 per cent. This implies that 100kg and 500kg and 27.0 per cent of losses
measures including integrated pest management between 50kg and 100kg were as a result of rodents.
for storage pests are needed to improve storage Other counties which recorded losses of between
of grains at household level. The counties most 50kg and 100kg include Kilifi with 25.0 per cent and
affected for quantities over half a tonne are Kiambu Nakuru with 14.0 per cent (Table 7.13).
116
Table 7.13: Causes of food losses during storage at household level (%) by county
County Weevils Rodents
<50kg 50-<100kg 100-<500kg >500kg <50kg 50-<100 kg 100-<500 kg
Kitui 13 11 8 1 - 6
Kisumu 27 4 1 24 - -
Siaya 9 4 1 15 - -
Migori 3 1 3 2 - -
Meru 1 4 11 - - -
Kwale 5 13 8 13 - -
Makueni 2 2 5 - - -
Kiambu - - 22 57 1 - -
Uasin Gishu 2 15 13 3 27 43
Kericho 1 4 5 18
Tharaka Nithi 3 2 2 9
Tana River 1 2 2 7
Kilifi 1 3 2 25 -
Trans Nzoia - - 8
Baringo 1 2 2 4 3 6 -
Nakuru 1 - 14 -
Kajiado 1 3 1 - -
Kakamega 1 3 5 - 13
Total 74 73 82 94 70 72 70
The estimation of the quantities of food loss and and inappropriate urban food system responses to
wastages from the food balance sheet and from the global food system changes (KNBS, 2018).
household level are useful indicators of how much
the food security situation at household level can Access to food is a key dimension of food poverty.
be improved if storage of food would be managed Food poverty is complex in nature: it depends not
in an improved manner from the current situation only on the buying capacity of citizens, but also on
(baseline 2015/16). On average, most households the ability to transport, store, preserve, and cook
lost more than one year per caput supply of food the foods they can afford to buy (FAO, 2009). Figure
in storage and up to seven times the annual per 7.10 gives a snapshot on the distribution of food
caput supply of food in transportation. This calls for poverty across counties in the country. It is evident
concerted effort to encourage investment in storage that a huge proportion of Kenyans suffer from food
and transport infrastructure for food. poverty, though with varying intensities across and
within counties.
7.5.2 Food poverty Food and nutrition security requires a combination

of coordinated actions in various sectors such as
Traditionally, poverty is defined in either relative finance, health, energy and infrastructure. Likewise,
or absolute terms. “Absolute poverty” measures economic growth alone will not solve the problem
poverty in relation to the amount of income of food poverty (Figure 7.11). Empirical evidence
necessary to meet the basic needs of a household, shows that a 10.0 per cent increase in economic
such as food, clothing, and shelter. Food poverty is growth reduces chronic malnutrition by only 6.0
argued to be driven by a variety of factors, including per cent (Valenti, 2015). This asymmetry illustrates
rapid urbanization, climate change, natural disasters, that economic growth by itself will not resolve the
117
problem of chronic malnutrition, which is a key most of the counties in the county recorded less
variable in any food and nutrition security strategy. that Ksh 80,000 per capita GCP, which is low. This is
worrying because agriculture is the main economic
The counties that have higher gross county product
activity in almost all the counties, implying that if
per capita recorded lower food poverty head count
the sector is transformed, then food poverty will be
percentage, indicating that economic growth
addressed.
contributes to reduction in food poverty. However,
Figure 7.10: Food poverty estimates by county
70
60
Head count rate
50
40
30
20
10
0
Turkana
Mandera
Samburu
Busia
West Pokot
Marsabit
Tana River
Kilifi
Garissa
Elgeyo/Marakwet
Kisii
Baringo
Wajir
Kwale
Kitui
Taita/Taveta
Uasin Gishu
Kajiado
Vihiga
Nyamira
Isiolo
Trans Nzoia
Kakamega
Bomet
Kisumu
Bungoma
Migori
Nandi
Kericho
Tharaka-Nithi
Makueni
Nyandarua
Laikipia
Embu
Siaya
Machakos
Mombasa
Kiambu
Murang’a
Homa bay
Narok
Lamu
Nakuru
Kirinyaga
Nairobi City
Meru
Nyeri
Headcount rate (%) Rural Peri-urban Core Urban
Figure 7.11: County poverty head count (%) and GCP per capita
118
Smallholder farmers are the largest demographic 2.) The profitability of fertilizer use could be
in the agriculture sector, most of them based in the enhanced by improving the aggregate crop
rural areas and more increasingly in the peri-urban yield response rates to fertilizer application. This
areas. They are faced with challenges of competition requires making complementary investments
for land and water, dynamic agricultural markets, in training for farmers on agronomic practices,
rising cost of inputs and climate variability. There soil fertility, and efficient use of fertilizer.
is need for continued support and investment in 3.) Pesticides provide protection of crop quality
the provision of extension services to smallholders and yield, prevent large crop and animal
because this will help them navigate through these losses, thus raising agricultural output and
challenges. farm income. However, issues of safe use of
Smallholders are not fully integrated into value pesticides and minimum pesticide residue
chains and this negates their opportunities for levels need to be considered.
value addition and marketing. Encouraging their 4.) The number of small farm sizes (0-5ha)
participation in farmer organizations could foster have increased by 55.0 per cent based on
economic inclusion of smallholders and increase a comparison between the KIHBS of 1994
their market power, thereby raising their incomes and of 2015/16. This shows a growth in the
and productivity. number of smallholder farms (0-5ha) from 2.22
to 7.63 million. And a significant reduction in
Empirical evidence shows that counties that have
the number of farms between 5-10 hectares
lower country product per capita (less that Ksh
(-71.0%) from 93,871 -15,821 and more than
50,000) have the highest food poverty head count
10 hectares (-85.0%) from 92,498 to 6,714.
rate. Food poverty is complex and considers
This implies that agriculture intensification is
several aspects, including aspects that are indirectly
inevitable.
necessary in supporting agricultural productivity
and competitiveness, such as transport, storage and 5.) The provision and management of the large-
access to markets. However, intuitively, it is difficult scale irrigation project by Government
to establish a relationship between the counties that agencies that allows smallholder farmers to
have high food loss and waste due to storage and lease plots will enhance economic inclusion.
transportation and high food poverty with further This needs to be coupled with water use
rigorous analysis. efficiency technology and drought resistant
crop varieties to enhance productivity.
Nonetheless, it is evident that small scale farmers
6.) Technological improvements will increase
need to adopt appropriate technology and
agricultural output and bringing down costs of
innovation to remain competitive and improve their
food. These technologies need to be supported
livelihoods. This will contribute to their food and
by digital technologies to reduce the cost of
nutrition security thus reduce food poverty.
generating and exchanging information. For
instance, big data, global positioning system
7.6 Key Messages and Recommendations (GPS), drones, and high-speed communication
can be used to deliver extension services,
optimize irrigation, pesticide and fertilizer use.
7.6.1 Key messages Communication technologies also provide a
platform for connecting farmers to markets
1.) The agriculture sector contributes a third of the much more effectively through innovative
country’s Gross Domestic Product (GDP), and methods for aggregation, logistics and supply
is the driver of growth for the economy. The chain management.
sector is the source of income and employment
for most households in rural areas. There has 7.) Smallholders are not fully integrated into
been erratic growth in total value of aggregate value chains, thus incur high production costs
agricultural output between 2014 and 2018. and reduces small farmers’ competitiveness.
Participation in farmer organizations could
119
foster economic inclusion of smallholders and management, etc. ICT can be used to facilitate
increase their market power, thereby raising the process of collection and dissemination.
their incomes and productivity. Communication technologies also provide a
8.) Reducing food losse s at household level is platform for connecting farmers to markets
one instrument that can be used to improve much more effectively through innovative
food security and is critical for maintaining food methods for aggregation, logistics and supply
supply. This can be achieved by investing in chain management.
storage facilities at household level, supported 3.) Promote nucleated land settlements for the
by training on the management of produce in effective management of land resources. This
storage. will allow for provision of services to support
9.) Food poverty is evident across all counties in both human and agricultural development,
the country. A huge proportion of Kenyans and in the long run reduce the sub-division of
suffer from food poverty, though with varying agriculture land into small land parcels.
intensities across and within counties. 4.) Recognize that food and nutrition security
is dependent on the sustainability of food
7.6.2 Recommendations supply, therefore concerted efforts are needed
to reduce food losses and promote value
1.) Promote the adoption of better farming
addition to increase the shelf life of most
technologies to increase agricultural
agricultural products.
productivity and improve livelihoods. This
will involve concerted efforts of both levels 5.) Transform the agriculture sector from
of Government. County Governments must subsistence into commercial enterprises that
reconsider agriculture development plans and can support livelihoods, reduce food poverty
put in place adequate resources in terms of and contribute to economic growth. Include
human and infrastructure to support and the agricultural insurance to support the farmers by
provision of extension services. stabilizing their income, through the provision
of instruments that will allow them to manage
2.) Enhance data management for agriculture.
their production cycles and cushion them from
This will provide information for the different
risks such as price, natural disasters, weather
actors along the value chain to make informed
variability, pest and disease damage.
decisions. The system should include
production, price, weather, pest and disease
120
ENABLING INCLUSIVE
GROWTH THROUGH ACCESS
8 TO AFFORDABLE, RELIABLE,
SUSTAINABLE AND MODERN
ENERGY SOURCES
Access to affordable, reliable, sustainable and modern energy sources is recognized as a key input for
inclusive growth. Inclusive growth is premised on the multidimensional aspects of stable energy supply
systems, equity in access and affordability for all. The significant progress registered in increased share
of renewable energy in the total energy mix and electricity connectivity across the country is a major
boost towards inclusivity. Despite the high number of connections for domestic and small consumer
categories, consumption is still low and the transmission and distribution losses remain high. Wide
disparities are evident in access to clean energy sources for lighting and cooking at national level,
rural/urban areas and across the counties. All regions registered a high dependency on non-clean
energy sources for cooking and low reliance on clean and efficient fuels for cooking purposes. To
enable scale-up of clean cooking solutions, awareness campaigns on the benefits of clean energy
solutions should be incorporated in the energy access programmes and affordability enhanced through
inclusive approaches such as pay as you go model and subsidy for the upfront cost of Liquefied
Petroleum Gas (LPG), bioethanol and biogas. An integrated planning for energy projects is important
to ensure productive utilization, gender mainstreaming and reduced losses. Similarly, there is need to
create awareness on the economic, social, and health benefits of clean energy access programmes to
encourage acclerating uptake.
8.1 Introduction advocates for universal access to electricity and
E
clean cooking fuels for all by 2030. In addition,
nergy is a key infrastructural input for achievement of SDG 7 is expected to spur progress
economic growth as well as an integral across other interconnected SDGs that touches
component for inclusive growth. Access to on poverty eradication, gender equality, climate
affordable, reliable, sustainable and modern change, food security, health, education, clean
energy sources serves as a benchmark in measuring water and sanitation, environment, jobs, innovation,
inclusivity in relation to human development, welfare transport, and displaced people. Therefore, the
and productive gains. Access to clean energy role of energy in enabling inclusivity is premised on
sources is also recognized as key in realization multidimensional aspects of provision of reliable and
of the national development agenda such as the sustainable energy supply systems, equitable access
Vision 2030 and the “Big Four” agenda. The role of and affordability for all. Equally, supportive and
energy in promoting inclusivity is also closely linked effective legal, policy and institutional frameworks
to goals and targets underlined in the Sustainable play a key role in achieving inclusive growth.
Development Goal (SDG) (7). In particular, SDG 7
121
8.2 Legal, Policy and Regulatory diverse energy sources such as geothermal, solar,
Environment and Government wind and natural gas.
Initiatives for the Energy Sector The Government has various initiatives geared
towards inclusivity by addressing the energy
The legal policy and regulatory environment in access gap through grid-extension, off-grid and
Kenya have advanced, with major reforms and clean cooking solutions for across all counties. The
restructuring of the sector taking place in the 1990s initiatives focus on enhancing access to biogas,
and early 2000s. Following the enactment of the electricity connectivity and solar, and increasing
Electric Power Act 1996, policy and regulatory efficiency, reliability and quality of power.
functions were separated from commercial activities.
The generation function was separated from In promoting the use of biogas among households and
transmission and distribution; cost-reflective tariffs institutions across the country, the Ministry of Energy,
were introduced; and generation liberalized through supported by the Dutch Government, commenced
the introduction of Independent Power Producers. implementation of the Biogas Programme in 2009.
Due to drawbacks with the law, the Electric Power Since then, a total of 20,000 biogas plants have been
Act 1996 was repealed by the Energy Act 2006, installed against a target of 38,500 biogas plants,
which came into force in 2007. The law lifted accounting for only 10 per cent of the potential
electricity transmission and distribution function market. Besides low uptake, other challenges facing
from KPLC and paved way for entry of other players. the programme include constant breakdown of bio-
The 2006 Act also provided for establishment of the digestors and low operating capacity. Therefore, there
Electricity Regulatory Board (ERB) the now Energy is need to adopt new technological options such as
and Petroleum Regulatory Authority to regulate the prefabricated plants for sustainability and reliability of
sub-sector and the Energy Tribunal. the biogas plants and create awareness on uses of
biogas among the target population.
In the recent past, key policies have been
instrumental in enabling inclusive growth. For For electricity connectivity, the Rural Electrification
example, the National Energy Policy 2018 focuses Programme was initiated in 2006 with the aim of
on establishing mechanisms to foster access to increasing electricity connectivity in rural areas by
affordable, competitive, sustainable and reliable connecting public facilities and households within
supply of energy at the least cost to attain universal the proximity of transformers and development of
access. The policy stipulates the role of National mini grids in off-grid areas. By 2018, the programme
and County Governments in delivery of energy had connected a total of 22,175 public primary
needs in an inclusive approach. The policy provides schools, 61,728 public facilities and 1.33 million
for the formulation of the National Electrification households. The Last Mile Connectivity Project was
Strategy 2018-22, which defines the roadmap rolled out in the year 2017 as an initiative by the
towards universal electricity access for households Government of Kenya and the African Development
and businesses across the country in fast-tracking Bank (AfDB) to accelerate electricity connectivity in
connectivity. It also recommends for promotion rural and peri-urban areas at a subsidized fee of Ksh
of alternative sources of energy such as Liquified 15,000 from Ksh 35,000. The project aims at closing
Petroleum Gas (LPG), biogas, and solar solutions as the affordability gap by considering a one-off fee or
biomass accounts for about 69 per cent of the total in instalments paid alongside their monthly bills for
primary energy consumption. The policy emphasizes a period of 36 months to cater for the low-income
on mainstreaming issues of gender, youth and persons households. The programme targets to connect 5
with special needs in energy policy formulation, million new households and 15,739 public facilities
planning, production, distribution and use. Similarly, by 2022. In addition is the Slum Electrification
the Energy Gender Policy 2019 provides for equal Project targeting to connect 150,000 people living
opportunities of using energy services in closing the in slums where residents pay a minimal charge of
development gaps. Further, the Energy Act 2019 Ksh 1,160 for connection. The project has connected
provides for establishment of functions and clear over 1 million households in urban low-income
mandates for institutions in the energy sector, and areas and rural areas to the national grid through
further exploration and production of energy from implementation of a subsidized connection fee.
122
ENABLING INCLUSIVE GROWTH THROUGH ACCESS TO AFFORDABLE,
RELIABLE, SUSTAINABLE AND MODERN ENERGY SOURCES
On solar energy, Kenya Off-grid Solar Access these counties. In addition, exemption from import
Programme (K-OSAP) commenced in 2017 and is and value-added taxes for solar products and the
expected to run for five years as an initiative by the adoption of international standards has spurred
Government, with the support from the World Bank import market across the entire solar value chain.
and other development partners. The programme
To increase efficiency, reliability and quality of
focusses on increasing access to clean and modern
power on the grid network through the Kenya
energy sources in the 14 underserved counties of
Electricity Expansion Project (KEEP), various
Kenya14 (Figure 8.1). The project targets 430,000
stations, substations and distribution lines have
households, by connecting 28,000 through mini-
been constructed targeting counties with weak
grids, 250,000 households through solar home
distribution network and increased energy demand.
systems and clean cooking solutions, 1,100
The ongoing work includes installation of automatic
community facilities to stand alone solar systems and
metering infrastructure, which will enable Kenya
620 solar water pumps (Table 8.1). The key inclusive
Power to monitor and control electricity metering
measures taken in implementing the project include
installations. Automation of the distribution network
provision of incentives for solar off-grid companies
and implementation of live-line maintenance will be
currently operating in the more densely populated
crucial in reducing the transmission and distributive
areas of Kenya to expand to underserved counties
losses.
and provide services to off-grid households in
Figure 8.1: Map of targeted counties under Kenya Off-grid Solar Access Programme (K-OSAP)
Source: Author
123
Table 8.1: Components of K-OSAP programme

Component Implementing Funding Targets
agencies
Mini- grids KPLC Implemented under PPP Construct 120 green-field mini-grids and
REREC agreement at a cost of US$ 40 construction of distribution network.
million. Connect 28,000 households.
Solar home systems Ministry of Energy US$ 42 million for SHS 250,000 households.
(SHS) and cooking US$ 6 million for the cooking
solutions for energy.
households.
Stand alone solar KPLC and REREC Private-sectors contractors Electrification of 1,100 community facilities
systems and solar competitively selected to supply, including health centres and schools.
pumping for community install, and maintain standalone Provision of 620 solar water pumps.
facilitiess. solar systems at a cost of US$ 40
million.
Implementation Ministry of Energy US$ 22 million. Consumer education and awareness for the
support and capacity beneficiaries of the various components
building. across the 14 counties.
Implementation support and capacity
building for the sector across the counties.
Source: K-OSAP (2017), Procurement Strategy for Development, 2017
From the foregoing, Kenya has been at the 8.3 Energy Supply
forefront in creating an enabling environment for
inclusive growth in the energy sector. According The total electricity capacity generated from
to Regulatory Indicators for Sustainable Energy renewable and non-renewable energy sources
(RISE), 2018, Kenya attained an overall score of 82 increased from 6,455.6 GWh in 2008 to 11,408.6
per cent for policies and regulatory frameworks that GWh in 2019 (Figure 8.2). Cumulatively, electricity
support the SDG 7 on access to electricity, clean generation from the renewable energy sources
cooking fuels and renewable energy. Electricity including; geothermal, hydro, solar, wind and co-
access policy framework attained a score of 75.0 per generation accounted for 66.8 per cent in 2008
cent which was mainly attributed to the existence of and 88.0 per cent in 2018. In particular, the share
comprehensive policy and regulatory frameworks. of electricity generated from geothermal energy,
Incentives and regulatory support for renewable accounted for 16.1 per cent and 45.9 per cent of the
energy attained a score of 88.0 per cent. However, total generation in 2008 and 2019 respectively. This
network connection and use recorded a score of 25.0 indicates that geothermal continues to be a leading
per cent which indicates that the country is lagging in energy source for electricity as it surpassed hydro
policies that support renewable energy connections in 2015 (Figure 8.2). Geothermal is considered as a
and policies that promote renewable energy outside highly reliable source of electricity and key in ensuring
of the electricity sector such as cooling, heating and a stable baseload15 for electricity generation and that
transport. The policies on standards and labelling of power is availed to the end users in an efficient and
clean cooking fuels attained a score of 50.0 per cent. reliable way. Percentage of electricity generated from
This is an indication that there is need to establish hydro reduced from 50.6 per cent in 2008 to 28.1 per
standards on efficiency, emissions, safety of clean cent in 2019. Electricity generated from wind power
cooking solutions and checking the credibility of also increased from 0.2 per cent in 2010 to 13.7 per
various devices. In addition, more needs to be cent in 2019. The increase was mainly attributed
done in creating awareness on the benefits of clean to additional wind power projects especially from
cooking solutions. Lake Turkana power plant which has a capacity of
124
376 MW. Notably, electricity generation for the grid of geothermal and hydro at Ksh 7 per unit and Ksh
from Garissa solar power was first introduced into 3 per unit, respectively. Reduced reliance on thermal
the national grid in 2018 and accounted for 0.8 per generation is expected to impact positively on the
cent of the total generation in 2019. Garissa County end-user prices as the Fuel Energy Cost (FEC) on
has a high potential for solar power given the high electricity bills is reflective of the cost of operating
irradiation levels available throughout the year. the thermal power plants. From the foregoing, the
country is on the right track on phasing out thermal
Notably, the percentage of electricity generated power and is on a progressive path towards clean
from thermal declined considerably from 33.2 per energy and replacing it with other sources such as
cent in 2008 to 11.5 per cent in 2019. This was mainly natural gas which is an untapped energy source. The
instigated by the substantial growth in generation of potential for renewable energy sources is supported
electricity from geothermal, hydro, wind and solar by Kenya’s vast natural resources which translates to
energy and a progressive path towards renewable low-cost clean energy technologies. For instance,
energy mix. It’s worth noting that the cost of solar and wind power are key for electricity access
electricity generated from thermal power plants is for both grid and off-grid solutions.
estimated at Ksh 21 per unit compared to the cost
Figure 8.2: Percentage share of electricity generated capacity, 2008-2019 (GWh)
Figure 8.3: Percentage share of electricity installed capacity, 2008-2019 (MW)
125
Figure 8.4: Percentage share of electricity effective capacity, 2010-2019 (MW)
The total installed capacity from renewable and non- focuses on increasing geothermal capacity and
renewable energy sources increased from 1,267.9 weaning off thermal sources.
MW in 2008 to 2,818.9 MW in 2019 (Figure 8.3).
The rise was mainly attributed to increased share of The total effective17 capacity increased from 1,412.2
geothermal capacity. MW in 2010 to 2,736.4 MW in 2019. Cumulatively,
the percentage share of effective capacity from
Cumulatively, electricity installed16 capacity from renewable sources stood at 66.8 per cent in 2008
renewable sources, including geothermal, hydro, and 70.2 per cent in 2019. For geothermal, the share
wind, solar and co-generation stood at 67.0 per cent of effective capacity increased from 13.4 per cent in
in 2008 and 73.4 per cent in 2019 with only 26.6 per 2010 to 26.4 per cent in 2019 while the effective
cent of installed capacity from non-renewable sources. capacity for hydro declined from 51.6 per cent to
The increase was partly attributable to injection of 29.4 per cent. The effective capacity for solar, wind
electricity generated from wind and solar into the and co-generation stood at 0.9, 1.8 and 11.9 per
grid in 2012 and 2018, respectively. Specifically, the cent, respectively, in 2019. Thermal also registered a
share of installed capacity for geothermal increased decline from 33.2 per cent in 2008 to 29.8 per cent
from 10.0 per cent in 2008 to 29. per cent in 2019 in 2019.
(Figure 8.3), which was a slight increase from 24.4
per cent in 2018 while hydro registered a decline From the foregoing, the country has made progress
from 56.7 per cent in 2008 per cent to 29.3 per cent in establishing a more reliable power supply system
in 2019. The installed capacity from co-generation by increasing the share of renewable energy in the
plants increased from 0.2 per cent in 2008 to 1.8 per total energy mix in a move to achieve 100 per cent
cent in 2019 while in 2019, wind and solar stood at renewable energy generation by 2030. Notably,
11.9 and 1.0 per cent, respectively. Thermal installed wind and solar which were introduced recently
capacity decreased from 33.0 per cent in 2008 to have shown a great potential in their contribution
26.6 per cent in 2019. This indicates that thermal to the total energy mix. Similarly, there lies a great
is still considered as key in meeting the peak loads potential for geothermal which has a capacity of
and supply power during the dry seasons when 10,000 MW but still unexploited. Similarly, the new
hydropower output is low. Therefore, geothermal developments in off-grid, renewable hybrid mini-
remains the most significant source as the country grid solutions and solar home systems are key in
boosting energy access countrywide.
126
Power system losses: Transmission and quality of power delivered to customers and have
distribution an adverse effect in meeting the expected revenue
targets.
Power losses refer to the amounts of electricity Besides inefficiency losses, poor maintenance and
injected into the transmission and distribution ageing grid infrastructure cause electricity outages
grids that are not paid for by users. Efficiency in which reduce the profitability and disrupt and increase
transmission and distribution of electricity is a key the costs of production (Figure 8.7). According to
aspect that affects the demand side. Electricity Enterprise Survey (2018), Kenya experienced an
transmission and distribution losses increased by average of 3.8 number of power outages which is
61.4 per cent from 1,062.4 GWh to 2,750.5 GWh relatively low compared to the average of 9.1 in
in 2008 and 2019 (Figure 8.5). The transmission Sub-Saharan Africa and 8.3 for lower-middle income
and distribution losses recorded in 2019 accounted countries. Similarly, the percentage losses due
for 24.1 per cent of the total generation, which to power outages stood at 4.3 per cent in Kenya
increases the cost of power (Figure 8.6). The losses which was slightly above the lower middle-income
are mainly attributed to technical causes which countries (3.1%) and lower compared to Sub-Saharan
occur during transfer of energy across transmission Africa (5.4). Improvement of the grid infrastructure
and distribution networks, especially due to poorly will ensure that power losses are minimized and
maintained grid infrastructure. Notably the aging improve the reliability of power from the grid for
transmission and distribution networks largely domestic and commercial and industrial consumers.
contribute to approximately 13.0 per cent system Therefore, the power utility needs to minimize the
loss of the power generated. Non-technical losses losses by addressing the technical and non-technical
arise from unidentified and uncollected revenue, losses through modernizing of the grid system,
arising from meter tampering, illegal connections, smart metering and ensure maximum collection of
metering errors, shortfalls in billing and revenue electricity bill.
collection. Power losses have serious effects on the
Figure 8.5: Transmission and distribution losses, 2008-2019 (GWh)
2750.50
2,444.50
1,965.40
1,937.50
1,641.50
1,476.10
1,404.20
1,339.30
1,248.90
1,191.50
1,062.40
1,051.50
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Data Source: KNBS (Various), Economic Survey
127
Figure 8.6: Transmission and distribution losses as a percentage of generated capacity (GWh)
24.1
22.1
19.7
19.1
18.0
17.4
17.6
17.1
16.5
16.5
16.2
14.9
Percentage
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Figure 8.7: Power outages and related losses across firms in Kenya with comparators
Source: World Bank ( 2018)
8.4 Inclusivity of Electricity Tariff Structures cent of the units consumed and a 16 per cent Value
Added Tax on the total cost except for WARMA,
Section 11 (b) of the Energy Act, 2019 mandates EPRA and REREC levies.
EPRA to set, review and adjust electric power tariffs
and tariff structures that satisfy key policy objectives The tariffs bands are broadly categorized into
on economic, financial and social well-being. Key domestic, small commercial and industrial/
components of electricity bill that impact on end-user commercial consumers. Of keen interest in relation
prices include; energy charge; fuel cost charge which to inclusivity is the domestic lifeline tariff which caters
caters for the generation of electricity from thermal for the lower income segment of the households who
power plants; inflation adjustments made every six are prone to high prices of electricity. The lifeline
months; a levy of 0.05 cents / kWh for hydropower tariff band has undergone several iterations over
generation of above 1 MW passed on to the Water time. For instance, the monthly fixed charge which
Resource Management Authority (WARMA). Other was a key component of the electricity tariff which
costs include EPRA which gets 3 cents per kWh to stood at Ksh 120 and was later hiked to Ksh 150 was
cover its operational costs while REREC gets 5 per abolished in August 2018 (Table 8.2). The lifeline
128
threshold was consistent up to December 2017 of the electricity bill. The current lifeline tariff which
covering consumers within the 0-50 kWh per month commenced in November 2018 is set at Ksh 10 per
consumption band. Another key development was kWh for 0-100 kWh which accommodates 91 per
the abolishment of the fixed charge of Ksh 150 for cent of the domestic consumers. This indicates that
lifeline and all other consumer categories in August all low-income households that are connected fall
2018 to ensure equity and customers only pay for under this tariff band.
power when consumed and reduce the component
Table 8.2: Tracking progress in inclusivity of the retail electricity tariff structures for domestic and small
commercial consumers, 2013-2019
November 2018-date
Code Customer Energy Limit kWh/month Energy charges (KSh/ kWh)
Domestic Consumers (DC, 240 or 415) Domestic Lifeline (DC1) 0-100 10.00
Domestic Ordinary (DC2) 101-15,000 15.80
Small Commercial (SC, 240 or 415) Small Commercial (SC1) 0-100 10.00
Small Commercial (SC1) 101-15,000 15.60
August 2018 to 31st October 2018
Code Customer Energy Limit kWh/month Energy charges (KSh/ kWh)
Domestic Consumers (DC, 240 or 415) Domestic Lifeline (DC) 0-10 12.00
Domestic Ordinary (DC) >11 15.80
Small Commercial (SC, 240 or 415) Small Commercial (SC) 0-100 15.60
Small Commercial (SC1) 101-15,000
December 2017 to July 2018
Code Customer Fixed Charge Energy Limit (kWh/ Energy charges (KSh/ kWh)
month)
Domestic Consumers (DC, 240V) Domestic Consumers 150 0-50 2.50
150 50 - 1 ,500 12.75
150 >1,500 20.57
Small Commercial (SC, 240V) Small Commercial (SC) 150 0-100 13.50
Code Customer Fixed Charge Energy Limit (kWh/ Energy charges (KSh/ kWh)
month)
DomesticConsumers (DC, 240V) Domestic Consumers 150 0-50 2.50
150 50 - 1 ,500 12.75
150 >1,500 20.57
Small Commercial (SC, 240V) Small Commercial (SC) 150 No limit 13.50
Code Customer Fixed Charge Energy Limit Energy charge (KSh/ kWh)
(kWh/month)
Domestic Consumers (DC, 240V) Domestic Consumers 150 0-50 2.50
150 50 - 1 ,500 13.68
150 >1,500 21.57
Code Customer Fixed Charge Energy Limit (kWh/month) Energy charges (KSh/ kWh)
Domestic Consumers (DC, Domestic Consumers 120 0-50 2.50

240V) 120 50 - 1 ,500 11.62
120 >1,500 19.57
Source: Energy and Petroleum Regulatory Authority Schedule of Tariffs 2017-2019
129
Box 8.1: Inclusive approaches incorporated in the electricity

retail tariff for domestic and small commercial categories
December 2017 to July 2018
• Reduction in lifeline threshold from 50 kWh to 10 kWh
• Removal of the fixed charges for all the consumer categories
August 2018 to October 2018
1) Fixed charge of Ksh 150 was abolished
2) Establishment of two major categories for domestic consumers; domestic lifeline and domestic
ordinary. This was to target lower income groups consuming up to 15 kWh which accounts for
3.6 million customers.
3) However, the domestic lifeline energy limit reduced from 50kWh to 10 kWh with an eenergy
charge of Ksh 12.
4) Domestic lifeline increasing from targeting consumers of ≥ 11 kWh at Ksh15.80/ kWh. This was
deemed as unaffordable for most households.
November 2018 to date
1) Increase in the domestic lifeline threshold from 10 kWh to 100 kWh. The energy cost charge for
lifeline was revised from Ksh12/kWh to Ksh 10 /kWh. This was meant to accommodate more
households in informal settlements, urban, peri-urban, and rural areas and cushion them from
the increased cost of living.
2) Two distinct categories under the small commercial were introduced were classified as;
i. SC1-Small commercial category of consumers consuming less than 100 kWh/ month energy
charge rate reduced from Ksh 15.60/ kWh to Ksh 10/ kWh.
ii. SC2-Small commercial category consuming 101-15,000 kWh maintained an energy charge
of Ksh 15.60 /kWh
Source: Energy and Petroleum Regulatory Authority Schedule of Tariffs 2017-2019
From the foregoing it is worth noting that 8.5 Energy Demand and Use
domestic lifeline tariff band has been inclusive by
accommodating majority of low-income earners Besides energy supply, energy demand is equally
especially in the informal settlements, rural, urban a critical measure for sustained energy access. As
and peri-urban areas who consume less than 100 it brings along a balanced system that is needed
kWh. Essentially, it ensures that households are in achieving scale and long-term interventions.
receptive to legal connections as they can afford Focusing too much on supply can lead to future
to pay for basic energy services hence reduction problems with sustainability, as exemplified by the
in the commercial losses due to minimized illegal case with low electricity consumption in many grid
connections while enhancing access and improving extensions programmes.
safety for slum dwellers. There is need for equilibrium
on the structure of the tariffs by first ensuring Over the years, the electricity demand increased
that electricity is affordable to the end-users and among all end-users apart from the off-peak
financially viable for power companies as they are category which declined by 28.0 per cent from 42.2
expected to recoup their costs of supply which GWh in 2017 to 30.4 GWh in 2018 (Figure 8.8). In
would otherwise lock the power sector into a cycle 2018, domestic and small commercial consumers
of low revenue, high debt, inadequate maintenance, accounted for 42.1 per cent of total domestic
under-investment and poor quality of service. demand while large and medium (commercial and
industrial) end-user category accounted for 49.8
130
per cent of total domestic demand. Off-peak, street to grid electricity in rural areas. Despite the high
lighting and rural electrification stood at 0.3, 0.8 number of electricity connection for the domestic
and 6.9 per cent, respectively. Notably, demand for and small consumer categories accounting for 80.0
electricity under rural electrification increased by per cent of connected customers (Table 8.3), the
43.0 per cent from 239.1 GWh in 2008 to 601.3 GWh demand was lower as compared to large commercial
in 2018, indicating a significant growth in access and industrial consumers, accounting for only 42 per
cent of electricity demand (Figure 8.8).
Figure 8.8: Electricity demand across various end-user categories, 2008-2018
Table 8.3: Number of customers connected to electricity, 2008-2018

Year Domestic Off-peak Large Commercial Small Street Rural Total
& Industrial Commercial Lighting Electrification
2008 779,856 659 4,196 112,595 1,723 161,354 1,060,383
2009 931,442 631 2,533 125,418 1,887 205,287 1,267,198
2010 1,071,342 622 2,685 135,849 2,085 251,056 1,463,639
2011 1,286,310 566 2,803 151,953 2,429 309,287 1,753,348
2012 1,485,292 537 2,842 164,397 2,926 382,631 2,038,625
2013 1,691,482 826 2,948 179,095 3,067 453,544 2,330,962
2014 2,045,288 785 3,115 187,071 3,172 528,552 2,767,983
2015 2,704,792 794 3,384 194,875 4,869 703,190 3,611,904
2016 3,704,032 796 3,556 203,947 6,024 972,018 4,890,373
2017 4,685,877 791 3,662 213,396 9,046 1,269,510 6,182,282
2018 5,188,398 1,110 3,887 225,749 9,845 1,332,101 6,761,090

1Voltage losses in power transmission lines
131
The physical energy use for various energy sources at households rely on biomass wood (45.7%) followed
the household level in 2019 amounted to 147,623.4 by biomass wood (43.4%). The sector can tap into
Terajoules (Figure 8.9). Cumulatively, the share of the biomass potential by converting biomass into
energy use from clean sources including electricity clean energy sources such as bioethanol, biodiesels,
and LPG stood at 6.7 per cent. Evidently, majority of and biogas which can be utilized at the household
level.
Figure 8.9: Share of total physical energy use at household level for various sources, 2019

1 Terajoule (TJ)=10^12 Joules
1000 Tonnes=4.184 TJ
1 GWh=3.6 TJ
Notably the consumption of charcoal especially for and charcoal sold dropped by 78.1 per cent to 2,100
cooking purposes is likely to decline significantly in stacked cubic meters (Figure 8.10). Therefore, there
the next few years following the ban on logging of is need to provide alternative clean and affordable
Government forests in 2018 in a move to conserve energy sources for cooking as most households rely
the environment while reducing overreliance on on charcoal as a primary source.
charcoal. Following the ban, the quantity of fuelwood
132
Figure 8.10: Quantity of fuelwood and charcoal sold, 2014-2018 (‘000 stacked cubic metres)
160
147.2
Quantity of fuel/wood and charcoal sold (‘000 140
120
stacked cubic metres)
100
80 70.3
64
60 53.7
45.9 43.7
40
20 9,6
2.1
0
2012 2013 2014 2015 2016 2017 2018 2019
Years
Source: KNBS (Various), Economic Surveys
8.6 Level of Households’ Access to Various Energy Sources for Lighting and Cooking
8.6.1 Level of access to various energy lighting (Figure 8.12). The results indicate that a high
proportion of the urban households use electricity as
sources for Lighting
the main source for lighting with less than a quarter of
the population relying on non-clean energy sources
(a) National, rural and urban areas for lighting purposes.
A major focus on reducing regional and intra-
Rural areas depict a different scenario with highest
regional disparities in access to clean energy
proportion of the households (49.5%) using kerosene
sources and substantial outcomes is a crucial in
as the primary source for lighting. This is followed by
achieving inclusivity. Nationally, access to grid-
solar as the second most used primary source at 22.1
electricity as the primary source for lighting stood at
per cent and electricity at 17. 4 per cent. Cumulatively
42.0 per cent and kerosene at 35.7 per cent which
about 10.9 per cent of the households use fuelwood,
cumulatively comprised more than three quarters of
generator, torches and candles (Figure 8.13).
the households (Figure 8.11). Roughly 14.3 per cent
use of solar power as the primary source for lighting In conclusion there are wide disparities in access to
while 4.9 per cent, 1.6 per cent, 0.9 per cent, and 0.5 various energy sources for lighting at national level
per cent used battery/lamp/torch, fuelwood, candles and across rural and urban areas with electricity
and generators for lighting respectively. used by most households in urban areas while
kerosene is mainly used by rural counterparts. In
Similarly, the highest proportion (73.9%) of urban
addition, results indicate potential for the scale up
households used electricity as the primary source
of solar photovoltaic systems in rural areas which
for lighting while kerosene stood at 18 per cent
is critical in meeting various energy demands for
mainly used by the urban poor. Cumulatively, 8.0
the off-grid areas. Low electricity use in rural areas
per cent relied on solar, batteries/chargeable lamps,
could be attributed to low penetration of the grid
candles and generators as the primary sources for
infrastructure. Therefore, continued effort by energy
133
sector players in extending grid electricity to rural lighting and reduce the dependency on kerosene
areas as part of the basic infrastructure will go a which is deemed inefficient and a cause of indoor air
long way in providing an efficient energy source for pollution.
Figure 8.11: Percentage distribution of households by primary energy source for lighting at national level
45.0 42.0
% distribution at national level
40.0 35.7
35.0
30.0
25.0
20.0
14.3
15.0
10.0 4.9
5.0 1.6 0.5 0.9
0.0
Electricity Kerosene Solar Fuel Wood Generatoe Battery Candles
connection energy Lamp/Torch
from grid
Figure 8.12: Percentage distribution of households by primary energy source for lighting in urban areas
80.0
73.9
% distribution at natin urban areas
70.0
60.0
50.0
40.0
30.0
18.0
20.0
10.0 4.3
0.2 0.4 1.5 1.7
0.0
Electricity Kerosene Solar Fuel Wood Generatoe Battery Candles
connection energy Lamp/Torch
from grid
134
Figure 8.13: Percentage distribution of households by primary energy source for lighting in rural areas
(b) Across the counties by Kiambu at 80 per cent; Mombasa at 78.4 per cent
and Kajiado at 78.4 per cent. Counties that had less
The county level analysis is critical in unveiling
than 10 per cent access include: Turkana at 6.5 per
regional inequalities in access to various energy
cent; West Pokot at 6.9 per cent; Wajir at 8.7 per
sources. This is also backed up by the fact that
cent; Bomet at 9.2 per cent; and Homa Bay at 9.7
counties form the administrative boundaries within
per cent. Notably, only nine (9) counties were above
which various energy access programmes are
the national average of 42.0 per cent. This implies
planned and implemented. Nairobi County recorded
that most counties are still far away from achieving
the highest level of access to electricity as the
universal access (Figure 8.14).
primary source for lighting at 90.7 per cent; followed
Figure 8.14: Percentage distribution of households with access to electricity

as the primary energy source for lighting across counties
135
Use of kerosene as the primary energy source for are in the arid and semi-arid lands (ASALs) where
lighting depicts huge disparities across the counties. grid connection is not viable, hence rely on off-
The counties leading in the use of kerosene as the grid lighting systems such as solar rechargeable
primary energy source for lighting include: Busia torches and solar home systems, which are clean and
(72.8%), Vihiga (65.4%), Bungoma (64.2), Kakamega affordable. Also, the decreasing costs related to solar
(63.8%), and Migori (62.1), and Migori (60.3%), and decentralized solutions under various energy
respectively. Mandera, Wajir, Garissa and Marsabit programmes make it affordable for households in
counties registered the lowest use of kerosene ASALs.
(Figure 8.15). This could be because these counties
Figure 8.15: Percentage distribution of households with usage of

kerosene as the main source for lighting across counties
Source: Computed from KNBS (2016), KIHBS 2015/16
8.6.2 Level of access to various energy sources for cooking
a) National, rural and urban areas charcoal and kerosene at 9.0 per cent and 2.3 per
cent respectively. The uptake of clean energy sources
Besides lighting, access to clean, efficient and
is low with only 2.5 per cent of households use LPG,
sustainable cooking energy sources is imperative
0.3 per cent use electricity and 0.2 per cent using
to attaining SGD 7. Nationally, firewood is the most
biogas (Figure 8.17)
common used primary energy source for lighting
accounting for 55.8 per cent, followed by charcoal On the contrary, the use of firewood as the primary
at 14.9 per cent, and kerosene at 14.3 per cent. source for cooking is minimal in urban areas at 16.6
Notably, the use of clean energy sources for cooking per cent with a highest proportion of households
is minimal with only 13.3 per cent using LPG and 1 relying on kerosene reported at 30.0 per cent
per cent and 0.2 per cent using electricity and biogas and dominates among the urban poor. The use of
respectively (Figure 8.16). kerosene stood at 30.0 per cent and charcoal at 22.6
per cent. The use of LPG, electricity and biogas,
Moreover, disparity in access to various energy
which are considered as clean energy sources for
sources for cooking is also evident along the rural/
cooking, was reported at 28.5 per cent, 2.1 per cent
urban divide. In rural areas, firewood is reportedly
and 0.2 per cent, respectively (Figure 8.18).
the predominant cooking fuel at 85.6 per cent,
136
It is therefore evident that a high proportion of energy sources have significant detrimental health
households rely on firewood, kerosene and charcoal impacts with an estimated 14,300 Kenyans dying
to meet their cooking needs while use of biogas, annually due to illnesses attributable to indoor air
LPG and electricity as primary energy sources for pollution which disproportionately affects women
cooking is still lagging. Over-reliance on non-clean and children (UNEP, 2016).
Figure 8.16: Percentage distribution of households by primary energy source for cooking at national level
Figure 8.17: Percentage distribution of households by primary energy source for cooking in rural areas
137
Figure 8.18: Percentage distribution of households by primary

energy source for cooking in urban areas
(b) Across the counties

Wide disparities in the use of wood fuel is evident at 97.0 per cent, 93.5 per cent, 89.9 per cent and
across counties. Households in Wajir, Bomet, West 89.0 per cent respectively (Figure 8.19).
Pokot and Vihiga counties heavily rely on wood fuel
Figure 8.19: Percentage distribution of households using firewood as the

primary source for cooking across counties
Counties that had the lowest access to wood fuel Charcoal is considered a major source of fuel in
include; Nairobi, Mombasa, Kajiado and Kiambu at Kenya especially at the household level. Tana River,
1.4 per cent, 2.7 per cent, 23.2 per cent and 23.5 per Kisumu, Isiolo and Garissa comprised the highest
cent, respectively. This could be attributed to a high proportion of households relying on charcoal as the
proportion of urban households in these counties main energy source for cooking (Figure 8.21). Tana
who tend to rely more on Kerosene and LPG (Figure River County accounts for 90.0 per cent of charcoal
8.20). produced in trust lands in Kenya. The county is also
dominated by tree species such as Prosobis, Juliflora,
138
Chilensis mainly used for charcoal production. due to low rainfall. This is later sold to other counties
Despite the high production of charcoal carried out mainly dominated by urban population. Charcoal is
across the country, the highest levels of production mainly preferred by the urban dwellers and mainly
occur in ASALs which are dominated by pastoralism substituted with Kerosene and LPG.
Figure 8.20: Percentage distribution of households with using charcoal

as the primary resource for cooking across counties
There is wide disparity in the use of kerosene as County at 20.2 per cent. This could be attributed to
primary source for cooking by county with Nairobi the higher proportion of urban households in these
County at 47.0 per cent, followed by Mombasa counties. Mandera, Wajir, Turkana and Tana River
County at 43.3 per cent, Machakos County at 24.4 counties recorded lower reliance on kerosene as the
per cent, Kiambu County at 21.7 per cent and Kajiado primary source for cooking (Figure 8.21).
Figure 8.21: Percentage distribution of households with using kerosene as the

primary resource for cooking across counties
139
LPG is identified as a cleaner alternative to solid fuels of the major constraints in scale -up of LPG includes;
and kerosene in the short-term, and a promising low consumer affordability due to high initial costs for
transition fuel to more modern cooking technologies cylinders and high LPG fuel costs relative to charcoal
in the long-term. Nairobi County registered the and wood; supply constraints resulting from limited
highest access to LPG at 40.0 per cent followed bulk storage and filling capacity for large demand
by Kiambu (35.6%), Kajiado (35.3%) and Mombasa centres; high upstream costs related to importing
(18.4%) (Figure 8.22). Mandera, Wajir and Garissa and port storage and low enforcement capacity for
and Elgeyo Marakwet had the lowest proportion in existing regulations to protect investments.
the use of LPG as the main source for cooking. Some
Figure 8.22: Percentage distribution of households with using LPG as the

primary resource for cooking across counties
8.7 Mean Monthly Per Adult Equivalent Energy Consumption Expenditure by Income
Groups (Quantiles) Across Rural and Urban Areas
Energy expenditure across the rural-urban divide up spending more due to the inefficiency related
indicate diverse variations along the income to various sources including; purchased firewood,
groups (quintiles). According to Figure 8.23, energy kerosene and charcoal. For the upper quantile the
consumption expenditure generally declines with expenditures are higher in urban areas an indication
rising quantiles across the rural areas while energy that despite dependence on cleaner fuels such as
expenditure increases with the rising quantiles. kerosene and LPG, the expenses are still high. This
This indicates that majority of households in rural shows that energy pricing affects the poor as well as
who mainly rely on non-clean energy source end the non-poor.
140
Figure 8.23: Mean monthly per adult equivalent energy consumption expenditure by
income groups (quantiles) across rural and urban areas (%)

Similarly, the disparities in the mean monthly per Mandera had lowest consumption expenditure. This
adult equivalent energy consumption among could be attributed to the minimal expenses incurred
the poor and non-poor is evident across, with 22 in acquiring various energy sources as they highly
counties having consumption expenditures above depend on off-grid solutions that do not require
the national average. Overall, Bungoma, Nairobi, monthly billing and rely on unpurchased firewood
Nyeri and Kiambu counties recorded the highest and farm residue to meet their cooking and lighting
expenditure, while Garissa, Wajir, Turkana and needs.
Table 8.4: Mean monthly per adult equivalent energy consumption

expenditure among poor and non-poor across counties
County Mean monthly per Adult equivalent energy consumption expenditure (Ksh)
Overall mean Poor Non-poor

National 498.2 220.0 635.5
Urban 698.0 544.6 858.7
Rural 423.4 194.1 302.7
Bungoma 978.1 288.9 1,304.7
Nairobi 923.9 278.9 1,000.5
Nyeri 773.7 342.7 838.0
Kiambu 757.6 431.6 829.7
Kirinyaga 742.3 351.2 807.4
Meru 718.9 360.3 781.8
Mombasa 678.1 266.9 755.6
141
Nakuru 674.1 321.5 770.5

Narok 649.4 277.3 734.2
Nyandarua 616.4 317.3 724.6
Trans Nzoia 593.1 259.8 716.4
Machakos 586.3 230.3 689.7
Migori 585.9 319.5 713.6
Muranga 571.6 275.5 641.0
Lamu 570.6 276.1 644.2
Laikipia 563.4 299.1 703.0
Taita Taveta 562.5 251.4 674.9
Embu 555.2 263.1 634.8
Kilifi 548.3 349.8 638.7
Tharaka Nithi 537.8 233.2 612.0
Isiolo 526.1 268.1 710.4
Siaya 522.6 286.1 629.5
Uasin Gishu 480.5 211.9 612.2
Kisumu 466.3 240.4 567.2
Baringo 461.5 192.9 592.2
Kakamega 436.6 257.3 522.2
Kwale 435.0 253.6 534.4
Nyamira 429.7 223.3 514.0
Vihiga 426.6 254.9 538.2
Homa Bay 423.4 217.5 508.6
Makueni 417.6 216.6 493.6
Marsabit 402.7 244.1 577.9
Kericho 397.4 182.4 474.9
Kajiado 395.9 161.6 551.4
Samburu 393.3 230.4 642.7
Elgeyo Marakwet 393.2 220.3 507.3
Busia 377.0 244.6 557.1
Kisii 353.0 152.3 467.0
Nandi 331.0 151.8 405.7
Kitui 287.1 113.0 396.8
Bomet 270.7 140.7 341.4
Tana River 267.9 157.5 419.3
West Pokot 255.1 162.3 349.7
Mandera 191.7 145.5 335.1
Turkana 189.9 97.4 406.1
Wajir 181.7 123.7 253.6
Garissa 132.2 85.1 218.1
142
8.8 Gender and Energy Access

Equitable development outcomes of energy such as firewood, farm residue and wood waste. On
interventions necessitate consideration of the average, women and children dedicate an equivalent
differences in energy access across gender as energy of 1.36 hours and 0.45 hours in collecting firewood,
needs for men, women and children differ. According respectively, while men spend 0.23 hours. A similar
to Figure 8.24, women and children tend to bear pattern is observed in time spent in purchasing
primary responsibility of acquiring non-clean fuels firewood, firm residue and wood/ process waste.
Figure 8.24: Mean weekly time spent in acquiring various energy sources by women, men and children
Considerable time spent by women and children in Energy Agency (Institute of Economic Affairs - IEA,
acquiring firewood, limits other productive activities 2017) estimated that the average firewood load
such as income generation and takes children away carried by women for several miles daily varies from
from school. In less secure environments, women 25-50 kg. Therefore, lack of access to adequate,
and children are at risk of injury and violence reliable and affordable modern energy sources
during fuel gathering. Similarly, exposure to indoor disproportionally impacts on women and children as
pollution during the combustion of the inefficient well as the communities as it limits their productive
fuels contributes premature deaths each year. In opportunities, enterprise growth and employment,
addition, fuel gathering which involves physical exacerbating income inequality and persistent
labour by carrying loads of wood increases the poverty.
risk of musculoskeletal damage. The International
143
8.9 Key Messages and Recommendations 0.05 per cent of customer base. This implies
non-intensified use of electricity among the
domestic and small commercial consumers.
8.9.1 Key messages consumer electricity for productive purposes.
Factors constraining use of clean sources
1.) Increase in the share of electricity generated include; low consumer affordability due to
from renewable energy sources including; high initial upfront costs and lack of awareness
geothermal, hydro, solar and wind is on the benefits of clean energy solutions.
central to a reliable power supply system.
Generation of electricity from solar, wind and 5.) Wide disparities are evident in access to clean
geothermal demonstrate great potential in energy sources for lighting and cooking at
their contribution to the total energy mix and national level, rural/ urban areas and across
expected to bring down the cost of electricity. the counties. All regions registered a high
The thermal sources take a substantial share dependency on non-clean energy sources
of installed capacity hence, affecting the end- and low reliance on clean and efficient fuels
user prices as fuel energy cost factored in the for cooking purposes. A high proportion of
electricity bills. households rely on firewood, kerosene and
charcoal to meet their cooking needs while
2.) Electricity transmission and distribution losses use of biogas, LPG and electricity as primary
have risen over time and accounts for almost energy sources for cooking still lagging.
quarter of the generated capacity. Losses
mainly arise from non-technical factors due to 6.) Energy consumption expenditure declines
unidentified and uncollected revenue, arising with rising quintiles across the rural areas. This
from meter tampering, illegal connections, indicates that majority of households in rural
metering errors, shortfalls in billing and areas who mainly rely on non-clean energy
revenue collection. Electricity transmission source end up spending more on energy
and distribution losses impact negatively on compared to their counterparts in the upper
the quality of electricity supplied. Power losses quintiles who use more of efficient sources.
have resulted to low supply and quality and of Expenditure in urban areas increases with the
power and revenue collection. rising quantiles, this indicates that energy is
still high especially for the upper quantiles
3.) Domestic lifeline tariff band is inclusive as who are mainly dependent on cleaner sources
it accommodates majority of low-income for various uses.
earners especially in the informal settlements,
rural, urban and peri-urban areas consuming 7.) Women play a significant role in energy systems
less than 100kWh at Ksh 10 per unit. Making as part of their subsistence and productive tasks
electricity affordable to low-income bracket and are disproportionately affected by lack of
ensures that households access energy access to clean energy sources. They bear the
services, minimizing illegal connections burden of collecting firewood which consumes
while enhancing revenue and safety for slum considerable time and limits other productive
dwellers. activities and are at a risk to respiratory illness
due to indoor pollution.
4.) Electricity demand and the number of
customers connected to electricity for domestic 8.) Policies and initiatives in the sector are
and small commercial consumers; large instrumental in achieving universal energy
commercial and Industrial consumers; street access through a combination of access
lighting and rural electrification recorded a grid, mini-grids, off-grid and clean cooking
substantial increase over time. Despite the high solutions. However, the policies and initiatives
number of connections for domestic and small emphasize more on aspects of physical access/
consumer categories accounting for 80.0 per connections. They fail to integrate essential
cent of connected customers, energy demand strategies for ensuring continuous and
was low compared to large commercial and productive use of electricity and clean cooking
industrial consumers who accounted for only solution which limits the beneficial outcomes.
144
8.9.2 Recommendations as pay as you go model and give subsidies

for the upfront cost of LPG, bioethanol and
1.) Due to the cost effectiveness, reliability and biogas.
high potential for electricity generation from
renewable sources, the sector needs to focus 4.) Taking women into account in energy
more on increasing electricity generation interventions is a prerequisite for them to
capacity from wind, solar and geothermal and invest in education, and productive social
hydro as they remain underexploited, and this and economic opportunities. For this cause,
will eventually reduce the cost of electricity. engendering energy projects, programs, and
policies through gender mainstreaming will
2.) Significant reduction in the transmission ensure that women and men participate and
and distributive electricity losses is crucial benefit from energy access in households.
in establishing a stable supply system and
can be achieved by incorporating innovative 5.) A holistic dimension of planning for energy
measures such as grid modernization through projects should be introduced to ensure that
inclusive smart metering programme for all energy access plans and strategies integrating
end-users across and monitoring solutions. the critical aspects on productive utilization.
This can be achieved by incorporating
3.) Diffusion of clean energy sources for cooking key stakeholders, including Ministries,
remains rather limited due to customs and Counties, Agencies, Departments, and non-
perceptions on specific ways of cooking governmental organizations in devising plans
traditional food as well as inability to afford that support productive use of electricity and
clean energy sources such as LPG and biogas. other energy that are uniquely identified across
To enable scale-up of clean cooking solutions counties. Also, as provided in the Energy Act,
awareness campaigns on the benefits of clean 2019 all counties are required to fast track
energy solutions should be incorporated in the development of the county energy plans
energy access programmes and affordability and the National Government to support the
enhanced through inclusive approaches such establishment of county energy offices.
Endnote
14 Garissa, Isiolo, Kilifi, Kwale, Lamu, Mandera, Marsabit, Narok, Samburu, Taita Taveta, Tana River, Turkana, Wajir
and West Pokot.
15 Baseload represents the minimum continuous level of demand in a grid system, and thus requires reliable supply
sources without the risk of output dropping below the baseload level.
16 Installed capacity is the optimal output a power plant is capable of producing when operating at the optimal
levels (100 per cent).
17 Effective capacity refers to the maximum electric output a power station is expected to achieve given current
operating constraintsh and jobs; SDG 9 on supporting industry, innovation, and infrastructure; and SDG 10 on
reducing inequality.
145
PROMOTING SOCIAL
MOBILITY AND INCLUSIVE
9 GROWTH: THE ROLE OF
SOCIAL PROTECTION
Social mobility can be described as the upward or downward movement of individuals, families,
households, or other categories of people within or between social strata. It is typically measured
by socio-economic status indicators such as income or the level of education between parents and
their offspring. The key finding is that access to health, formal education, and job opportunities by
an individual is linked to the education and income level of his/her parent. The education level of a
female head is particularly crucial for improved social outcomes. Children and young persons from the
highest income households enjoy greater access to education, health and labour markets. Moreover,
the growing social assistance interventions by the Government, including cash transfers, education
bursaries and free medical services, do not seem to reach (as they should) a larger proportion of
the targeted lowest income groups. A key overriding recommendation is the need to upgrade the
current social protection single registry into an integrated social assistance service information system
that links all social assistance programmes across Ministries, Departments and Agencies in one easily
accessible online portal.
9.1 Introduction The succeeding sub-sections examine the likely

patterns of social mobility between parents and their
Social mobility is a change in the social status relative offspring using indicators of education, the labour
to one’s current social location within a given society. market, and health outcomes. The role of social
The upward or downward movement of social status protection interventions is also discussed.
may be intra-generational (incorporating personal
life course perspectives) and/or inter-generational
– that is, the changes between parents and their 9.2 Social Mobility in Education and
children or grandchildren. The change in social Labour Market Outcomes
status can be measured by indicators for education
attainment, employment, health, and income. A key finding is that access to formal education
in Kenya hinges on household incomes with the
Policy makers should care about social mobility
highest income households enjoying greater access.
because upward social mobility of the lower income
Although education is considered as a vehicle
groups can solidify the foundations of sustainable
through which social mobility can be enhanced, there
development and inclusive growth. Upward social
are disparities in access between income groups
mobility can reduce the probability of social
across Kenya. On aggregate, about 91.4 per cent of
conflicts, diffuse extremism and create feelings of
individuals aged 3 to 24 years have ever attended
inclusion among disadvantaged groups. A lack of
school based on KIHBS 2015/16 data. If households
upward social mobility is known to undermine social
are split by quintile groups, the highest income
cohesion and productivity – and may thus curtail
group has the largest proportion of individuals aged
a more inclusive economic growth process. In an
3 to 24 years who have ever attended school (96.1%)
environment with limited upward social mobility,
relative to 84.6 per cent for the lowest income group
access to resources is likely to be skewed leading to
(Figure 9.1).
inequalities and various forms of inter-group conflict.
146
PROMOTING SOCIAL MOBILITY AND INCLUSIVE GROWTH: THE ROLE OF SOCIAL PROTECTION
Figure 9.1: Percentage of individuals aged 3 to 24 years who have ever attended
school by household income quintile
The disparities in access are replicated across the in counties in the Arid and Semi-Arid Lands (ASALs).
counties with larger access rates observed for the Most of the largely urban counties have smaller
highest income quintile across the regions. Larger differences – across income groups – in those who
disparities in “ever attended school” are observed ever attended school (Figure 9.2).
Figure 9.2: Percentage of individuals aged 3 to 24 years who ever attended

school for the highest and lowest quintile by county
147
The level of education of one’s parent is associated household heads with at most primary education
with the educational qualification or achievement of does not result in large differences in outcomes and
an individual thus limiting the social mobility of the 36.7 per cent of all 15-year olds in male headed
lower income groups. At 15 years, a child is expected households has a KCPE qualification relative to
to have completed the primary cycle of education and 35.1 per cent in the female headed households.
acquired the Kenya Certificate of Primary Education The differences are large for household heads
(KCPE) as their highest educational qualification. with at least a secondary education with 66.8 per
Although 43 per cent of all children aged 15 years cent of children aged 15 years in female headed
had acquired KCPE – the percentage is higher, about households having KCPE qualification relative
57 per cent, for individuals whose parents have at to 53.9 per cent in male headed households –
least secondary education relative to 36 per cent perhaps underlying the beneficial effects of formal
of 15-year olds whose parents have only attained education of mothers.
primary education (Figure 9.3). Sex differences of the
Figure 9.3: Educational attainment of 15-year-olds by parent educational background
Correspondingly, young adults aged 19 years with educated parents were more likely to be delayed in
less educated parents exhibit lower educational education or have no qualification at all (Figure 9.4).
achievement. At 19 years of age, individuals are Sex differences of the household head did not result
expected to have acquired the Kenya Certificate in major differences in outcomes. For male headed
of Secondary Education (KCSE) or its equivalent households with primary school education or less,
(as their highest educational qualification). While 19.8 per cent of young adults had acquired KCSE
about 39 per cent of individuals aged 19 years certificate relative to 19.1 per cent from female
had a KCSE qualification if the parent was more headed households with at most a primary school
educated (secondary school or higher) only about education. The corresponding proportions with
20 per cent had achieved this qualification if the KCSE for male and female heads with secondary
parent had lower education attainment (primary school education were 39.9 per cent and 37.2 per
school education or less). In addition, children of less cent, respectively.
148
Figure 9.4: Educational attainment of 19-year-old young adults by parents’ educational background

The association of parents’ education and that There is evidence of wide regional disparities in
of their offspring may be attributed to several educational attainment of children aged 15 for
factors including the positive relationship between given educational attainment of their parents (Figure
education and personal support to offspring. Homes 9.5). For parents with at least secondary school
with household heads with more education are education, only about 15 per cent of children in
more likely to have favourable conditions suitable Kilifi County had attained the KCPE at 15 years of
for education of their offspring – such as personal age relative to about 90 per cent in Nairobi. In most
support, role modelling and guidance. In addition, counties, a lower educational attainment of a parent
education of the household head is likely to impact is associated with a lower level of achievement of the
positively on the household’s permanent income. child by age 15.
Thus, offspring of more educated household heads
are less likely to face financial constraints.
Figure 9.5: Proportion of 15-year olds having KCPE qualification by parents’ education
149
Even with these implied differences in social mobility, mobility and alleviate inequality. If parents with
offspring of parents with higher education (and better education and hence higher social status
hence higher incomes or social status) are equally transfer the advantage to their children a vicious
likely to benefit from education bursaries as the cycle may ensue in which the disadvantaged are
disadvantaged pupils/students. This scenario limits trapped in limited options for upward mobility. Box
the envisaged role of the education bursaries (or 9.1 highlights the results of a review explaining why
social protection) to enhance equality of opportunity bursary schemes in Kenya may fail to enhance social
across social groups. The bursary schemes in place mobility.
may thus fail to support or enhance upward social
Box 9.1: Explanations of why bursary schemes in Kenya may fail to be equitable
There are numerous bursary schemes in Kenya provided by both public and private organizations.
Some examples include the Presidential Bursary Scheme, County Governments Bursary
Schemes, and the Jomo Kenyatta Foundation scholarships. The presidential bursary scheme
and the County bursary schemes are examples of the extensive public sector bursary schemes
in place. This scheme like most other schemes targets needy students who have nevertheless
scored specific cut off marks in their national examinations. Even so, there are several observable
design features that may make the schemes less equitable. These features include:
(i) The schemes target poor households/students, but some of the County Acts creating the bursary
funds do not outline clear criteria for identifying the beneficiaries. The poor may thus be left
out.
(ii) The public sector schemes in some cases only target students in public schools (or public
boarding schools) which may result in discrimination of potentially eligible poor students in
private schools (or day schools). For example, the presidential bursary scheme only targets
students in public boarding schools – while it would be expected that most needy pupils would
enrol in the cheaper day schools – and in both public and private schools.
(iii) Some of the schemes cut-off points are way too high (with minimum mean scores at and above
70 per cent) and may inadvertently lock out many poor students who are likely to have modest
scores due to their initial disadvantaged positions.
(iv) For some schemes, such as the County Governments Bursary Schemes, the respective Acts share
the funds equally between Wards and thus disregard the differential needs across Wards –
which has resulted in inequities. In one study Kinuthia (2018) estimated that, if all poor students
would be targeted, the average allocation to poor students in Kirinyaga’s Kiriita Ward would
be Ksh 8,782 while a poor student in Wanjohi Ward would receive about one third (Ksh 2,992) –
as a result of equal allocation for each Ward – that does not make adjustments based on needs.
(v) In some cases, the minimum amount set for the bursaries is inadequate to cover the tuition fees
and other expenses for the respective learning institutions. Poor beneficiaries may thus still fail
to access education.
Regarding tertiary education, a mapping of all young income group were in college or university relative
persons aged 21 to 23 years by level of education to only 5.0 per cent of young persons from the
and income group of the household head reveals lowest income group. The more adverse education
that young persons in higher income households prospects especially of the lower income groups are
are more likely to be in tertiary education (college likely to exacerbate inequality in incomes and wealth
or university) than those in lower and middle income and supress social mobility in the medium to long-
households (Figure 9.6). At 23 years of age, about term.
22.0 per cent of young persons from the highest
150
Figure 9.6: Education status for young adults aged 21-23 years by income
group of households (low, middle and high)
45
Percentage withsecondary, tertiary or others 40
9 1
1
35
3 1
30 9 4
25 12 29 6
15 1
0
20 2
32
5
15
14 22
10 24 18 22
16
15
5 8 8
0 3 1
Low Middle High Low Middle High Low Middle High
Age 21 Age 22 Age 23
Secondary Tertiary Other
It is also clear that across all the income groups, persons across all income groups. Young adults from
most young adults aged 21-22 (the age at which the poor income group were more disadvantaged
individuals are expected to be in college/university) than the rest – and those attending school at 21 or
were not attending school or any academic institution 22 years were more likely to be in lower grade levels
(Figure 9.7). This is suggestive of weak prospects in (primary or secondary rather than the expected
the development of human capital for most young tertiary education level).
Figure 9.7: Percentage of young adults aged 21-22 years not attending school or
academic institution by income group of household (low, middle and high)
70
Percentage not attending school by age
68
66
64
62
60 68 68
67
58 63
62
56
58
54
52
Low Middle High Low Middle High
Age 21 Age 22
151
Although participation in the labour market is the groups. For those aged 25 years, about 53.0
relatively high among young adults across the per cent of young persons from households in the
separate income groups, there is a labour market high-income group work for a wage relative to a
disadvantage for young adults from low and middle- 31.0 per cent from the low-income group (Figure
income groups when focus is given to job quality. 9.8). The labour market disadvantage for the lower
Specifically, individuals from the high-income income groups are most likely linked to their prior
households aged 20 to 29 years are more likely to inferior outcomes in education and a possible lack
work for a wage or a salary (including internship of not only information, but also relevant networks
opportunities) (Figure 9.8). Wage jobs are a good and skills. The disadvantage is likely to translate into
proxy for job quality and differences in the nature lower productivity, lower incomes and supressed
of jobs is an indicator of earnings disparity across social mobility.
Figure 9.8: Percentage of individuals working for a wage, salary or in internship

by age and income (low, middle and high) of household
Percentage wworking for a wage
60 62 59
57 58
54 52 51 53
47 49
46 47
40 38 38 41 39
33
28 31
28
20 21 22 23 24 25 26 27 28 29
Age in years
Although there are ongoing interventions to reduce the costs associated with schooling to reduce
enhance access to education, including the Free incidences of non-attendance of basic education.
Primary Education, Free Day Secondary Education
and numerous bursary schemes, school related costs Disparities are also observable in education
were cited as a major reason for stopping or not outcomes for counties as well as for the different
attending school. Among individuals out of school, income groups within the counties. Based on KIHBS
the school related costs were cited by 39.0 per cent 2015/16 data, the national literacy rate was 69.0 per
of the respondents as the first major reason for cent on a self-reporting basis.18 Nairobi and Nyeri
being out of school. Across all the income groups, counties recorded the highest rates of about 89.0
school costs and parental discretion were the most per cent while Turkana and Samburu had the lowest
important reasons for not attending school. Indeed, rate at 32.0 per cent – indicating relatively wide
ancillary costs of education such as uniforms, regional disparities’ in education outcomes (Figure
provisions for boarders, and other school inputs are 9.9). The highest income quintile outperforms the
known to increase student absence and dropout lowest quintile across most counties. This is likely
rates. This suggests the need to enhance the use of to translate into disparities in opportunities in other
well targeted financial support mechanisms and/or spheres of life such as employment and overall well-
being.
152
Figure 9.9: Proportion of individuals self-reported to be able to read and write in any language by county
9.3 Social Mobility in Health Status and Outcomes
Health status is a key dimension of well-being and to invest in their human capital, in terms of the
may be inherited from one generation to the next. level and quality of health. This explains why public
Childhood health is known to determine not only interventions during prenatal phase and in childhood
educational attainment but also health in adulthood can make a difference and have a long-term impact
and productivity. Health outcomes and its effect on on later outcomes – including social mobility.
education outcomes is usually transmitted through
occupational pathways and wages of individuals. Notwithstanding this background, access to health
Good health makes people more productive and services seems to be lower for the poor relative to
may increase future earnings, whereas poorer the rich. The lower income groups were less likely
health causes low productivity, leading to socially to self-report sickness or injury but when sick or
unacceptable inequalities in earnings as well as in injured were also less likely to be diagnosed in a
wealth accumulation. health facility based on KIHBS 2015/16 data (Figure
9.10). Access to health services is also dependent
Health status is important for equality and social on distance to the nearest health facility. If we proxy
inclusion since inequality is now known to begin at distance to the nearest health facility by the nearest
birth or even before. High inequality hinders the day school, there seems to be no differences in
ability of individuals from low economic backgrounds distance to facilities between the extremely poor
households and other households.
153
Figure 9.10: Proportion of individuals sick or injured in the last four weeks and place of diagnosis–by
income group (quintile)
25.0 66
Diagnosed/hospital/health facilty (%)

Sick or injured in last 4 weeks (%)
65 65
64
20.0 21.8
20.2 20.3 19.9 19.7
62 62
15.0 17.2
61 61
60
10.0 59
59
58
5.0 56
0.0 54
1 2 3 4 5 Total
Quintiless (per capita total spending)

Sick or injured in last four weeks Diagnosed at health facility
About 17 per cent of individuals were covered by enhance access to basic health care and is also a form
health insurance in 2019, with the higher income of social assistance in health. Besides the National
groups enjoying greater coverage. Among those Government programmes, counties have also rolled
reporting illness or injury, coverage by health out health social assistance programmes such as
insurance was 2.8 per cent for the extremely poor the universal health care coverage in Makueni and
individuals and 20.9 per cent for the non-poor Oparanya Care in Kakamega which disburses social
(Figure 9.11). cash transfers to expectant mothers. Amidst these
programmes, only 24.7 per cent reported receiving
The poorest households may not be receiving larger free medical care among the sick or injured. The rate
forms of social assistance in health services. Social for extremely poor individuals reporting receipt of
assistance in health encompasses social health free medical care was 23.5 per cent relative to 22.8
insurance implemented by the National Health per cent for the rest of the population indicating
Insurance Fund through their subsidy programme for weak targeting outcomes. This, combined with the
Orphaned and Vulnerable Children (OVCs), Persons low insurance coverage especially for the lower
with Severe Disabilities (PwSDs), older persons (over income groups, increases the risk of catastrophic
70 years of age) and to secondary school going health spending especially among the poor and
children. Other national programmes include the downward inter-generational mobility on account of
Linda Mama programme that offers free maternal
health.
care. The cash transfers to various groups certainly
154
Figure 9.11: Proportion of individuals reporting illness/injury covered by health insurance and proportion
that received free medical care in the last 12 months by income group
25.0 2.8 22.8

20.9
Percentage of individuals
25.0
15.0
10.0
5.0
2.8
0.0
Extremely poor individuals Non poor
Covered by health insurance Received free medical care

Across the counties, the more urbanized regions coverage (Figure 9.12). But overall, health insurance
such as Nairobi, Kisumu and Kiambu and the higher coverage was below 42 per cent for all the counties
income regions such as Embu, Nyeri and Kirinyaga and lower than 20.0 per cent coverage for 32 out of
counties tend to have higher health insurance the 47 counties.
Figure 9.12: Proportion of individuals covered by health insurance in the last 12 months by county

In just about half of the counties, the poorest was higher than those of the extremely poor (at Ksh
individuals who reported sickness or injury did not 2,515) just about 88 per cent of both groups incurred
seem to receive more free medical care relative to some non-zero health spending during the last 12
the rich (Figure 9.13). Although the median total months.
annual health spending of the non-poor (Ksh 4,500)
155
Figure 9.13: Proportion of individuals that received free medical care in the
last 12 months by county and income status
There are some observable, though not large, The Kenya National Social Protection Policy (2011)
differences across the sexes with respect to access to defines social protection as “policies and actions,
health services. Females were more likely to report including legislative measures, that enhance the
sickness or injury (23.9%) relative to males at 19.1 capacity of and opportunities for the poor and
per cent. A larger proportion of females (14.4%) than vulnerable to improve and sustain their lives,
males (11.2%) were more likely to be diagnosed in a livelihoods, and welfare, …” Social protection
health facility. Among those reporting illness or injury, encompasses social assistance, social security and
a similar proportion of males and females (22.8% social health – and these include pensions, cash
and 22.9%, respectively), were likely to receive free transfers, and public works schemes.
medical care.
The broad programme categories of social
assistance implemented in Kenya are highlighted in
9.4 Social Protection and Social Mobility in Table 9.1. Some of the specific programmes under
Kenya the State Department for Social Protection include:
Cash Transfers to Orphans and Vulnerable Children
We have attempted to look at selected social (CT-OVC), Cash Transfers to Persons with Severe
protection interventions in education and health. Disabilities (CT-PwSD), the Older Persons Cash
The social protection interventions are much more Transfer (OPCT) programmes, and the Presidential
extensive and cut across other social spheres. Bursary for OVCs. Additional programmes domiciled
This sub-section discusses the social protection in other Ministries, Departments and Agencies
interventions and the role of these interventions in (MDAs) are in-kind assistance programmes (school
enhancing social mobility. feeding and provision of books); Hunger Safety Net
programme; homegrown school meals programme;
and the health insurance fee waivers (Table 9.1).
156
Table 9.1: Type, objective, eligibility criteria, eligible population and

coverage of the main social protection programmes in Kenya
Programme Objective Eligibility criteria Eligible population Coverage or

number of
beneficiaries
Cash Transfer Encourage fostering and Household: extremely poor; Approximately 3.6 246,000
to Orphans retention of OVC children have OVCs; not enrolled million children aged households in all
and Vulnerable within their families and in another cash transfer below 18 years are the 47 counties
Children (CT- communities and to programme OVCs, almost one-fifth
OVC) promote their human capital of the total population
development aged under 18 years
Cash Transfer Strengthening the capacities A household must have: a About 3.3 per cent of More than
to Persons of parents and children with person who is severely disabled the total population (or 47,000
with Severe disabilities; and who needs permanent or 1.5 million persons) households
Disabilities (CT- 24-hour care.
PwSD) Improving the livelihoods
of caregivers/parents and The household must be
children with disabilities; and categorized as poor or
vulnerable and must not be
Alleviating multidimensional enrolled in any other cash
poverty transfer programme.
Older People Provide regular and To be eligible, older persons The OPCT
Cash Transfer predictable cash transfer to must be 65 years and 70+ years and Inua
and the Inua poor and vulnerable older and above, respectively. Jamii Pension
Jamii Pension persons 65 years and above scheme 70+
Scheme 70+. (for the older persons cash Not enrolled in any other cash currently covers
transfer) and also Inua Jamii transfer programme. over 310,000
Pension scheme 70+ (for and 523,000
A member of the beneficiary
individuals aged 70 years and households,
household must not be
above). respectively.
receiving any pension and/
or regular income or be in any
gainful employment.
The Presidential The aim of the bursary The beneficiary must be
Secondary scheme is to enhance enrolled in a secondary school
School Bursary secondary school enrolment, and aged under 18 years of
(PSSB) – attendance and completion age at the time of entering the
established in by the orphans and bursary scheme. In addition,
2013 vulnerable children in Kenya. he/she must be an orphan/
vulnerable child from a poor
household. The beneficiary also
must have been a resident of
one of the targeted locations
within a Constituency in the
last one (1) year preceding the
application.
Hunger Safety An individual should be a More than
Net Programme Kenyan citizen and come from 374,000
one of the highest poverty households
counties which currently include: have been
Wajir, Turkana, Mandera and registered in the
Marsabit. programme.
Data Source: Ministry of Labour and Social Protection (2019)
157
Social protection is identified as one of the key (NDMA) which implements the Hunger Safety
instruments in achieving Goal 1 of the Sustainable Net Programme (HSNP), Cash for Assets, Food
Development Goals (SDGs) which seeks to end for assets and General Food Distribution; World
poverty in all its forms everywhere by 2030. Target 1.3 Food Programme and The Ministry of Education
of this goal envisages implementation of nationally who oversee respectively the Home Grown School
appropriate social protection systems and measures Feeding Programme and the Kenya Home Grown
for all including floors and by 2030 achieve substantial School Meals Programme. There are also a host of
coverage of the poor and vulnerable.19 Countries are programmes conceived across the counties amidst
obliged to track the proportion of their populations weak linkages of interventions across the National
covered by social protection floors/systems, “by sex, and County Governments and between them and
distinguishing children, unemployed persons, older other partner organizations.
persons, persons with disabilities, pregnant women,
newborns, work-injury victims and the poor and the Inadequate programme coverage has affected the
vulnerable.” effectiveness of the programmes and projects in the
Sector. Many of the programmes tend to be targeted
Governments in low and middle-income countries to a small proportion of the eligible beneficiaries.
including Kenya are increasingly recognising For example, the Cash Transfer to Orphaned and
the importance of social protection in tackling Vulnerable Children (CT-OVC) covers about 29 per
income poverty, inequality, boosting human cent of the eligible beneficiary population of 1.2
capital and other developmental objectives. When million children.
implemented effectively, social protection transfers
can improve health outcomes and education There is weak legal and policy framework to regulate
attainment particularly for disadvantaged children. the sector characterized by relatively old legislation
Social protection can also increase productivity on social protection. The Kenya National Social
and contribute to stabilising domestic demand Protection Policy (2011) should be reviewed to
and enhancing living standards. Besides achieving incorporate the rapidly changing social protection
developmental objectives, social protection can also environment. Further, there have been delays in
be used to secure the rights of citizens. These include operationalizing established programme funds such
rights such as the right to education, health and as the Social Assistance Fund.
social security as enshrined in various instruments
including the Constitution of Kenya. Social protection 9.5 Coverage and Targeting of Kenya’s
is key in shaping social mobility. Its effectiveness
Social Protection Programmes
is dependent on ensuring the programmes have
adequate coverage and are well targeted to enable Although the Government of Kenya takes a leading
low income households and their dependents to role in funding the social protection sector, only about
have access to public services including affordable 22 per cent of all eligible households are currently
healthcare, social security, and social assistance. supported by the social protection programmes.
Despite progressive policy and institutional reforms Kenya’s coverage is relatively low in comparison
within the social protection sub-sector there are to the relative coverage in other African countries
several challenges facing the social protection including Botswana at 73.8 per cent, South Africa at
interventions. These can be synthesised as follows. 62.8 per cent, Uganda at 60.7 per cent and Rwanda
at 56.3 per cent. The low coverage is likely to have
The social protection programmes are heavily adverse impacts on programme effectiveness.
fragmented across MDAs, the National and County
Governments and other organizations but lack an Expanding programme coverage would be important
integrated mechanism thus resulting in limited in enhancing the impact of the social protection
coordination across programmes. Programme programmes on well-being in Kenya. Available
implementors include: the Social Assistance Unit evidence indicates that poverty headcount reduction
under the Ministry of Labour and Social Protection rates are much lower for Kenya (estimated at 1.7%
(which implements the CT-OVC, OPCT and CT- reduction in the poverty gap) relative to countries
PwSD); the National Drought Management Authority like South Africa, Botswana, and Rwanda which
158
achieved poverty headcount reduction rates of 41.0 The KIHBS 2015/16 dataset offers the latest available
per cent, 20.0 per cent and 4.0 per cent respectively. national household budget survey that can be used
These larger impacts can be partly attributed to the to assess not only coverage but also the targeting
wider programme coverage in these countries. outcomes of some of Kenya’s social protection
programmes including the CT-OVCs and Older
A relatively large proportion of eligible households or People Cash Transfer (OPCT).
individuals are not covered by the social protection
schemes in place. Besides the Older Persons Cash
Transfer (OPCT), the other cash transfer programmes Cash Transfer to OVCs
had relatively large proportions of the eligible To be eligible for the Cash Transfer to OVCs, a
households that were not covered. This has lowered household must be extremely poor and must have
the expected impact of the social protection an orphaned and vulnerable child (OVC). In addition,
programmes. As examples, in 2018/19, the cash the household must not be enrolled in another
transfer for orphans and vulnerable children (CT-OVC) cash transfer programme. Targeting of the poorest
had enrolled 353,000 households, representing 29.0 households is recommended based on evidence
per cent coverage of all the eligible households indicating that it offers the greatest impacts on
with orphaned and vulnerable children.20 The Cash development. The subsequent discussions focus
Transfers to Persons with Severe Disabilities (CT- on comparing the outcomes for the extremely poor
PwSD) had 47,000 beneficiaries, representing 3.0 households relative to other households.21
per cent coverage. The older persons cash transfer
(targeting households with individual(s) aged over Kenya had about 682,000 extremely poor households
65 years) and the Inua Jamii programme (targeting in 2015/16. Out of these about 12 per cent had one
individuals aged 70 years and above) had 833,129 orphan relative to 15.2 per cent of the households
beneficiaries, representing a coverage of 78.0 per not in extreme poverty. Extremely poor households
cent of eligible beneficiaries. had a higher probability of having 2 or more orphans
(at 12.7%) relative to households not in extreme
poverty (at 8.0%) (Figure 9.14).
Figure 9.14: Proportion of extremely poor households and other households by number of orphans
100.0
Percentage of households
80.0 75.3
60.0
40.0
20.0 12.3 15.2 12.7

8.0
0.0
0 orphans 1 orphan 2 or more orphansorphan
Number of orphans
Etremely poor other households
Although it would be expected that a larger About 17.0 per cent of extremely poor households
proportion of the extremely poor households with with OVC received the cash transfer to OVCs while
OVCs (representing 39% of all households with OVCs) a larger proportion – about 20.0 per cent – of the
would receive cash transfers from the Government, non-food poor households with OVCs received the
a relatively lower proportion received the transfers. CT-OVC (Figure 9.15).
159
Figure 9.15: Proportion of extremely poor households and other households

with OVC receiving cash transfers to OVC from the Government
Not extremely poor 19.6
Extremely poor 19.6
16.0 16.5 17.0 17.5 18.0 18.5 19.0 19.5 20.0

Percent of household with OVcs receiving cash transfers
Although extremely poor households received on Older People Cash Transfer and the Inua
average a higher mean cash transfer they received
much less receipts per child. The mean value of
Jamii Pension Scheme 70+
transfers received at household level were Ksh 16,147 In recent years, the Government of Kenya has
per annum for extremely poor households and Ksh increased transfers to older people a phenomenon
15,497 per annum for the other households (Table that has elicited mixed reactions from stakeholders. A
9.2). With respect to the mean value per orphaned common observation is that focus should be shifted
child, extremely poor households received about Ksh to other social groups such as children. However, it is
5,548 relative to Ksh 9,673 for the other households. also important to focus on children and their human
This is due to the relatively larger number of OVCs capital development children are usually under the
in the extremely poor households and a targeting care of other household members including the
mechanism that focuses on the household (perhaps elderly.
rather than the individuals). This is suggestive of the
A focus on the elderly can still be a robust targeting
need to enhance the design of targeting mechanisms
strategy owing to a number of reasons. The first
by focusing on each individual OVC in an extremely
is that evidence from a sample of 15 low income
poor household (Figure 9.15).
African countries that included Kenya found that
With respect to cash transfers, households continue households that include older people are usually
to face challenges in accessing their benefits. A poorer than those that do not. The KIHBS data
major challenge for quite some time has been for 2015/16 indicates that households headed by
delayed disbursement of funds from the National elderly individuals are more likely to be poor (overall
Treasury. Some households also identified long poverty) and extremely poor (or food poor) (Figure
distance to the nearest financial agent as a major 9.16). A related reason is that older people are
challenge affecting access and adequacy of the increasingly responsible for grandchildren especially
disbursements. Because of difficulty in isolating in areas most affected by the HIV/AIDS pandemic.
beneficiaries, duplication of benefits is common, and These areas include counties in the wider western
households receive more than one form of transfer. and coastal regions of Kenya. Households with and
Some jurisdictions have eliminated this challenge by without elderly person(s) as head were both likely to
developing an integrated system of managing social have a mean of 4 children in 2015/16.
assistance programmes.
160
Figure 9.16: Overall poverty and food poor households by age group of household head
10.37
10.44
6.99
3.06
Figure 9.17: Distribution of the number of elderly in households
100.0
Proportion of household with zero
180.0 75.3
to three elderly persons
60.0
40.0
20.6
20.0 10.4
4.1 2.1
0.0
0 1 2 4
Number of elderly
Extremely poor households other poor households
The cash transfer to elderly persons seems to be well Mean transfers values of social protection
targeted. Based on 2015/16 data, about 64.0 per
programmes
cent of households with at least one elderly person
(defined as a person aged 65 years and above) The mean cash transfers was lower for the extremely
received the Older Persons Cash Transfers (OPCTs) poor households for some of the programmes (Table
relative to 3.7 per cent of the household without an 9.2). These include the Cash/Food for Work and the
elderly person. School Feeding Programme. In other transfers, such
as the Bursary Fund and the CT-OVC, there was no
161
clear advantage for the extremely poor relative to was lower for the extremely poor households in
the other households. Some of the transfers had per vulnerable child terms. Poorer households also
inferior performance when individual (rather than received lower remittances on average. This points
household) means were used. Specifically, the mean to the need to enhance the targeting outcomes of
some of the social protection programmes.
Table 9.2: Mean cash transfers received from the National Government by extremely poor households and
other households in the last 12 months
Extremely poor households
(or food poor) Other households Total (all households)
Cash Transfer for Hunger Safety Net
Programme (CT-HSNP) 15,236 14,486 14,873
Cash Transfer for Orphans and Vulnerable
Children (CT-OVC) 16,147 15,497 15,806
Older Persons Cash Transfer (OPCT) 18,629 18,191 18,389
Cash Transfer for Persons with Severe
Disabilities (CT-PwSD) 16,733 13,466 14,971
Cash/Food for Work 2,575 4,394 3,271
School Feeding Programme 9,741 11,301 10,482
Bursary Fund 11,977 11,063 11,505
Other 41,829 39,389 39,874
Total Median remittance 825 2,750 2,667
9.6.1 Key messages Although education is important for social mobility

and a more inclusive growth process, access to
The fundamental idea is that initial conditions, education in Kenya hinges on the income of the
such as the income status of a parent, should not head of the household. Children and/or young
determine the opportunity basket of their offspring. adults from the higher income groups have greater
However, evidence points to initial conditions and access rates. This linkage is observable for access to
parental status as measured by socio-economic not only basic education but also tertiary education.
indicators in education, health and income as There are large disparities in access and outcomes in
important determinants of the status, opportunities formal education across Kenya’s counties – which is
and/or outcomes of offspring in Kenya. likely to perpetuate inequalities in opportunities in
other spheres of life such as employment and overall
1.) Education well-being.
The level of education of one’s parent is associated There are weak prospects in the development of
with the educational qualification or achievement of human capital for most young persons across all
an individual. Children and young adults with less income groups in Kenya. Most young adults were
educated parents are more likely to exhibit delayed not attending school or academic institutions and
entry, lower educational achievement and/or lack of school related costs were cited as the major reason
any formal qualification. for being out of school. Ancillary costs of education
such as uniforms, provisions for boarders, and other
162
school inputs are known to be important barriers – Ministries, Departments and Agencies (MDAs) in
and have been shown to worsen student absence one easily accessible online portal that is able to
and dropout rates. Although participation of young process applications, evaluate beneficiaries, support
adults in the labour market is relatively high across decision making and payments, and audit, report
the separate income groups, there is a labour market and monitor progress.
disadvantage for young adults from low and middle-
income groups when focus is given to job quality. 9.6.2 Recommendations
Evidence indicates that education bursaries were With respect to education, the key interventions
not well targeted and may fail to optimally enhance include:
upward social mobility. Children from higher income
households are equally likely to benefit from bursaries 1.) Reduce the costs related to access of
as the relatively disadvantaged pupils/students. This education especially for the poor households.
is likely to perpetuate underachievement, widen In this respect, the Government and other
inequality and curtail social mobility and inclusive stakeholders should:
growth. (i) Enhance the use of cash transfers that
provide grants to poor families that meet
2.) Health set criteria.
Access to health services and health insurance are (ii) Introduce vouchers for uniforms and
lower for the lowest income households relative to other ancillary school inputs targeting the
the highest income group. The poor are less likely extremely poor households.
to be diagnosed in a health facility when sick and, 2.) Reform the bursary schemes in place to make
health insurance coverage, which is important in them more equitable and pro-poor. The
avoiding downward intergenerational mobility is Government and other stakeholders should:
lowest among the poor households.
(i) Enhance equity by aligning bursary
Even with these disadvantages, the poorest schemes based on needs across
households are not receiving larger forms of social geographical regions i.e. differential
assistance in public health services. Just about 13.0 disbursements by county and wards.
per cent of all households reported receiving free (ii) The public bursary schemes should be
medical care across all income groups (a form of designed to emphasize focus on the
social assistance). extremely poor students irrespective of
school characteristics i.e. whether public
3.) Social protection versus private or day versus boarding.
Although the Government of Kenya fully funds (iii) Target to put in place an integrated
the social protection sector, coverage of eligible database that can inform targeting and
individuals/households is low and only about 22.0 monitoring of beneficiaries.
per cent of all eligible households are currently 3.) Regarding health, there is need to enhance
supported by the social protection programmes. As the implementation of the universal health
a result, the impact of social protection on improving coverage to avoid spending that may hinder
overall well-being is limited. social mobility of the poor. This shall require
The social protection system faces several challenges efficient health service delivery systems,
including a weak targeting system. This has bred adequate health facilities and human
many interrelated problems including duplication of resources and enabling legislation. Specifically,
benefits, ghost beneficiaries, and failure to pass on stakeholders can:
benefits to a larger the proportion of the extremely (i) Enhance investments in social safety nets.
poor households. A fundamental challenge with the Some common innovations to expand
system could be the lack of an integrated system
social protection (safety nets) in health
that links all social assistance programmes across
include: opening voluntary affiliation
163
to self-employed and informal workers; that transfers all the dispersed social
providing public subsidies to social assistance programmes and processes
health insurance systems to enrol the to an electronic platform – that is shared
poor, compulsory universal participation; across MDAs. Such a system has been
and expanding the pool through the successful elsewhere (see Box 1) and can
integration of private health insurance. effectively manage all steps associated
with the social assistance processes i.e.
(ii) Exploit supportive and synergistic
application, assessment of eligibility,
investments in related sectors such as registration, investigation, payment,
water and sanitation which are known to auditing, reporting and monitoring.
improve health outcomes. Similar integrated systems have had
4.) To address the problems associated with several advantages including: getting
social protection interventions including rid of duplication of benefits, efficient
duplication in benefits, targeting of the needy, management of targeting, saving on
ghost recipients, and duplication of effort, the time and resources in delivery of social
Government and other stakeholders could: assistance, and economies of scale in all
services including payments.
(i) Incrementally develop a more
integrated social assistance system
Box 9.2: Lessons from the Turkey’s Integrated Social Assistance Service Information System
(ISAS)
Turkey developed ISAS and standardized, integrated, and converted its previously paper-based
social assistance procedures into an electronic system. Citizens are currently registered for social
assistance via ISAS, where their information is corroborated with several Government databases.
The data collected is used to create a poverty profile that is then used to determine eligibility for
the programmes. The system integrates programmes implemented in over 14 MDAs in Turkey.
The system was:
• Developed through cooperation between multiple Government agencies and developed

using a local public agency (that cut system developmental costs).
• The system was built iteratively and incrementally by assembling modules together between
2009 and 2015. The first module developed was the online application and data management
for the Conditional Cash Transfer program.
• Integrating social protection information has many advantages. From the policy perspective,
consolidating data related to social assistance facilitates better accuracy in targeting citizens
in need. From an operational perspective, the system reduced redundancies and created
efficiencies, reduced fraud, and a more responsive citizenry. The system has improved
information sharing and communication across MDAs involved in social assistance. It has also
enhanced transparency and reduced duplication of social assistance benefits.
Enhance resource allocation to the strengthening partnerships and linkages

sector commensurate to its mandate on with development partners, County
socioeconomic development to ensure Governments, civil society and private
provision of efficient and effective service sector players among other stakeholders;
delivery. This can be achieved through
164
(ii) Enhance equity by considering the (iv) Ensure timely review of relevant policies
differential needs of households (e.g. and fast-track the approval of Bills
poorer households tend to have more by the Attorney General’s Office and
OVCs) Cabinet, and enactment by Parliament to
(iii) Fast-track the operationalization of Funds strengthen the sector’s policy, legal and
institutional frameworks.
like the Social Assistance Fund (SAF);
Endnote
18 One was considered literate is he/she self-reported (or was reported) to be able to “read a whole sentence” and
also “write in any language.”
19 Social protection floors are nationally defined sets of basic social security guarantees that should ensure, as a
minimum that, over the life cycle, all in need have access to essential health care and to basic income security
which together secure effective access to goods and services defined as necessary at the national level.
20 Kenya had about 11.4 million households in 2015/16.
21 In the KIHBS 2015/16 Well Being Report, a household is in hardcore or extreme poverty if their monthly adult
equivalent total consumption expenditure per person is less than Ksh 1,954 in rural and peri-urban areas and less
than Ksh 2,551 in core-urban areas.
165
GOVERNANCE IN
10 INCLUSIVE GROWTH
Good governance, inclusivity in government processes, and a robust institutional framework

are prerequisites in promoting equitable resource allocation and distribution across regions;
representation and inclusivity in the public service; and inclusivity in government decision-making
processes, through public participation. For the devolution process to facilitate regional equality,
timely provision of adequate resources and prudent fiscal management is paramount. There is need
to review the constituency-based funds and have in place a policy to appropriately guide in meeting
their objectives. To achieve diversity and representation in public service, it requires a clear criteria
and parameters to determine individual ethnicity and introduce penalties for non-compliance. There
is also need to enhance monitoring in attaining the set quota for PWDs and gender rule. A clear
framework to guide the conduct of public participation is also needed.
10.1 Introduction democracy are closely correlated with variables such

as GDP growth rate per capita, investment or human
Good governance and a robust institutional capital development, indicating that improved
framework are prerequisites of inclusive growth. indices of “good governance” have positive effects
Good governance, defined as the quality on economic growth (World Bank, North, Mira, 2017).
management and orientation of development Good governance traditions and strong institutions
policies, is assumed by many economists as having seek to ensure that, inter alia, public funds are used
positive influence on economic performance (Mira, efficiently and with accountability, and all people
2017). According to Khan (2004), good governance including the poor and the marginalized are able to
is evaluated by the capacity and capabilities of states access the opportunities.
to drive structural change in institutional, political,
In responding to the challenge of inclusive growth,
economic and social fields to ensure long-term
the public sector has an important role to play with
sustained economic growth. State capabilities are
respect to inclusiveness of the public sector itself,
conceived as the aptitude to conduct policies that
the inclusiveness of policy making processes, and the
enhance good institutions and lead to economic
inclusiveness of the outcomes that governments seek
growth (Khan, 2004). The World Bank indicators of
to promote (OECD, 2015). Among the parameters
good governance include voice and accountability,
for access to opportunities is the need for inclusivity
government effectiveness, regulatory quality, rule
across and within regions. Inequalities often tend to
of law and control of corruption. Institutions include
take a regional dimension, and in Kenya regional or
formal rules (legal, economic, political) and informal
geographic differences are often synonymous with
rules (social, behavioural norms, conventions) that
ethnic differences, as ethnic groups often reside
structure social life. According to North (1990), a
in given geographical regions (Kanyinga, 2006).
distinction can be made between formal and informal
Inequalities, marginalization and other disparities
institutions. Indicators of good governance such as
are therefore assumed to occur across ethnic groups
control of corruption, stability of property rights or
or regions. As a result, intra-regional and intra-ethnic
166
GOVERNANCE IN INCLUSIVE GROWTH
marginalization, inequalities and disparities exist. North Development Authority (ENNDA), Ewaso
There are also stark differences in development Ng’iro South Development Authority (ENSDA), and
opportunities and outcomes across Kenya’s rural- Coast Development Authority (CDA). Their key role
urban divide. was to plan, implement and coordinate development
programmes in regions under their jurisdiction to
Another critical dimension in inclusivity in ensure development through integrated planning
governance is the extent to which the public sector is and management.
representative of the society it serves, and inclusivity
of processes and institutions to counteract the The Government of Kenya also introduced the
forces that produce inequality. Inclusive government District Focus for Rural Development (DFRD)
processes allow the civil society and the wider Strategy in 1983 to bring development planning
public to be involved in policy making, regulation closer to the people. In 1998, the Local Authority
and service delivery. By gathering more input from Transfer Fund (LATF) was introduced in which five per
citizens about their needs and the impact of policies cent of annual income tax revenue was allocated to
on them, open governments make delivery of public local authorities, with the objective to improve and
services more user-driven. extend service delivery to citizens. In 2001, the Local
Authority Service Delivery Action Plan (LASDAP)
was designed to empower local communities to
10.2 Initiatives to Promote Inclusive develop capital investment plans to meet their local
Growth by addressing Regional needs and priorities. In 2003, the Constituency
Disparities and Marginalization Since Development Fund (CDF) was introduced as
Independence part of fiscal decentralization to enhance local
community participation in planning and budgeting
Regional inequality in Kenya can be traced to the of development projects in their constituencies.
British colonial policy that facilitated the use of Kenya’s development blueprint, the Vision 2030 also
local resources, including cheap African labour emphasized decentralization of decision-making and
and promoting investment in areas considered to equitable distribution of resources, before adoption
have potential for high returns. The British invested of devolution which became effective in 2013.
significantly in infrastructural development of
parts of Central Kenya, parts of the Rift Valley and 10.2.1 Role of Devolution in Addressing
western Kenya, all of which were highly productive
Socio-Economic and Political
agricultural lands, also referred to as the “White
Highlands”. Regions such as Northern Kenya were Marginalization
perceived not to offer any economic benefits and, The Constitution of Kenya 2010 opened a new
therefore, received no meaningful investments. chapter in Kenya’s political history, by introducing
These regional disparities in development coincide extensive changes regarding the running and
with ethnic inequalities because the regional management of the country’s governance, social
boundaries correspond to ethnic settlement patterns and economic affairs, and by affording greater say,
or territories. inclusion and participation of people in the affairs and
decisions of their 47 County Governments through
Between 1960 and 1970, the Special Rural
the devolved system of governance. The promise
Development Programme (SRDP) and the Rural
that came with the devolved system of government
Development Fund (RDF) were established to promote
was primarily to address the socio-economic and
and accelerate rural development productivity,
political inequalities, marginalization and exclusivity
including growth in local resources utilization and
that existed under the central system of governance
coordination in planning and development. In
by providing equitable sharing of public resources,
addition, six (6) Regional Development Authorities
enhanced social inclusion and mandatory citizen
(RDAs) were established in the 1980s. These are:
participation in decision-making, thus bridging the
Tana and Athi River Development Authority (TARDA),
gap on regional disparities, socio-economic and
Kerio Valley Development Authority (KVDA), Lake
political marginalization.
Basin Development Authority (LBDA), Ewaso Ng’iro
167
The Constitution, through the system of devolved country including by making special provision for
governance established thereunder, further affords marginalized groups and areas”. Article 202 of the
greater voice, inclusion and participation of people Constitution outlines that revenue raised nationally
in the affairs and decisions of the 47 County shall be shared equitably among the National
Governments. Article 174 of the Constitution and County Governments. However, County
stipulates nine (9) objects of devolution. These Governments may be given additional allocations
include to promote democratic and accountable from the National Government’s share of revenue,
exercise of power; give powers of self-governance either conditionally or unconditionally.
to the people; enhance the participation of the
people in the exercise of the powers of the State Article 203 of the Constitution provides the criteria
and in making decisions affecting them; foster in determining the equitable shares provided for
national unity by recognizing diversity; recognize under Article 202 to include: the need to ensure
the right of communities to manage their own affairs that County Governments are able to perform the
and to further their development; and protect and functions allocated to them; the fiscal capacity and
promote the interests and rights of minorities and efficiency of County Governments; developmental
marginalized communities. Further, is to promote and other needs of counties; economic disparities
social and economic development and the provision within and among counties and the need to remedy
of proximate, easily accessible services throughout them; the need for affirmative action in respect
Kenya; ensure equitable sharing of national and of disadvantaged areas and groups; the need for
local resources throughout Kenya; facilitate the economic optimization of each county and to provide
decentralization of State organs, their functions and incentives for each county to optimize its capacity
services, from the capital of Kenya; and enhance to raise revenue; and the desirability of stable and
checks and balances and the separation of powers. predictable allocations of revenue.
Devolution holds promise as it is premised The Constitution also has provisions for establishment
on addressing past challenges of inequitable of the Equalization Fund of 0.5 per cent of the total
distribution of resources, inequitable development annual national revenue (Article 204) to be distributed
across regions and poor delivery of public services. to marginalized counties to bring them at par with
Devolution also provides the National Government other counties in terms of provision and access of
and the 47 County Governments with opportunities to quality services including water, electricity, roads
formulate policies that are responsive to local needs. and health facilities. This is in addition to getting
County leadership can best discern the needs of the an equal share of the 15 per cent of the country’s
citizen and provide more targeted services, which revenues that will be devolved to the counties. So
are prioritized according to the needs and desires far, 14 counties have been identified as marginalized
of the residents. Further, decentralization to the sub- based on the presence of marginalized communities
county, ward and village level provides citizens with and analysis of historical marginalization. As a result,
opportunities to engage in the governance processes, these counties benefit from the Fund by receiving
including the identification and prioritization of additional funds to the transfers. With the introduction
development projects and programmes, budgeting of a devolved system of governance, counties are
and monitoring. With devolution, counties are in placed in strategic positions to allocate substantial
a good position to allocate substantial amount of amount of resources in development of key sectors
resources in development of key sectors such as such as health, agriculture and infrastructure, which
education, health, agriculture, among others, to are devolved functions, to ensure the well-being
ensure the well-being of the people and improve the of the people and improve the quality of lives,
quality of lives, thus bringing them at par with other thus bringing them at par with other areas of the
areas of the country in terms of development. country in terms of development. Counties are now
in charge of management of public health facilities
According to Article 201(b) (iii) of the Constitution, and services, planning, prioritizing and budgeting
one of the principles of public finance is to promote an for health services, recruitment of health staff and
equitable society - ensuring that public “expenditure building of health infrastructure.
shall promote the equitable development of the
Under the Constitution, County Governments have
168
two principal sources of funding for their budgets. existed thus far have been mainly for Level Five
The first source, funds from the National Government, hospitals, free maternal healthcare, rehabilitation
is shared between the two levels of government of youth polytechnics, and construction of county
from the total sharable revenues of the last audited headquarters.
accounts. The second source is from local revenues
generated by counties from services offered to the Article 218(1) of the Constitution provides that at least
citizens as stipulated in the fourth Schedule of the two months before the end of each financial year,
Constitution of Kenya, 2010. Article 209(3) of the there shall be introduced in Parliament (a) a Division
Constitution empowers County Governments to of Revenue Bill, which shall divide revenue raised by
collect revenues from taxes, user fee and charges. It the National Government among the national and
also empowers County Governments to impose two county levels of government in accordance with this
types of taxes and charges. These sources of County Constitution; and (b) a County Allocation of Revenue
Government revenue in Kenya include property rates Bill, which shall divide among the counties the
and entertainment taxes. The County Governments revenue allocated to the county level of government
can also impose charges for any services they on the basis determined in accordance with the
provide in accordance with the stipulated laws. resolution in force under Article 217. Article 219
These local revenue sources include rates, business of the Constitution provides guidelines on transfer
permits, parking fees, building permits, and fees of equitable share to counties by specifying that
from billboards and advertisements. The County a county’s share of revenue raised by the National
Governments impose the rates and taxes through Government shall be transferred to the county
the Finance Act. “without undue delay” and without deduction,
except when the transfer has been stopped under
The equitable share, which is the money raised Article 225. Further, Section 17(6) of the PFM Act
from ordinary revenue by the National Government, provides that the National Treasury shall, at the
is shared vertically by Parliament between the beginning of every quarter, and in any event not
National and County Governments, with the County later than the fifteenth day from the commencement
Governments getting not less than 15 per cent of of the quarter, disburse monies to County
the total. It forms the biggest source of revenue Governments. Section 17(7) thereafter provides that
for the County Governments. The Senate then the disbursement referred to in subsection (6) shall
allocates the equitable share horizontally among the be done in accordance with a schedule prepared by
counties using a revenue sharing formula developed the National Treasury in consultation with the Inter-
by the Commission on Revenue Allocation (CRA). governmental Budget and Economic Council, with
The equitable share allocated to the counties is the approval of the Senate, and published in the
unconditional; that is, the County Governments can Gazette, as approved, not later than 30th May every
spend the money without any restrictions from the year.
National Government. Therefore, counties receive
distributed revenue from the National Government The Division of Revenue Act, No. 18 of 2019 came
and are empowered to generate and collect their into force on 17th September 2019. The Act allocates
own revenues locally as a means of empowering Ksh 378.1 billion to County Governments for the
them to deliver on their mandates. 2019/2020 financial year, of which Ksh 316.5 (84.0%)
is the equitable share of revenue raised nationally,
County Governments can receive additional while Ksh 61.6 billion (16.0%) comprise of conditional
allocations from the National Government’s equitable allocations to counties. The County Allocation of
share of revenue (from the vertical sharing). These Revenue Bill, 2019 was assented to by the President
additional allocations are known as conditional of Kenya on 18th September 2019. Due to delay in
allocations or conditional grants. They are conditional approval of the Division of Revenue Bill, County
when the National Government imposes restrictions Governments experienced delayed disbursements
on how County Governments will spend them. They in allocation of equitable revenue by the National
are unconditional when the National Government Treasury pertaining to the 2019/2020 financial year.
does not impose any restrictions concerning their The extended delay in the Division of Revenue
expenditure. The conditional grants that have Act approval adversely affected implementation
169
of the counties’ financial year 2019/20 budgets, The key issues for determination included: whether
with negative consequences on socio-economic the allocation of conditional grants in the Division
activities countrywide, and the delivery of crucial of Revenue Act 2016 is made in accordance with
public services. The Policy on Devolved System of Article 202 (2) of the Constitution; whether the
Government, which is main policy document on accounting officer of the National Government can
devolution, identifies challenges such as the different spend money for conditional grants directly in the
timelines in budgeting by both levels of government, counties to undertake devolved functions; whether
which play a role in the discrepancies noted in the the accounting officer of the National Government
absorptive capacity of counties. The stalemate and can spend money for conditional grants in the
delay in enactment of the Division of Revenue Bill in counties to undertake devolved functions without
2019 was the first delay of its nature. the execution of an inter-governmental agreement
under Article 187 of the Constitution; what is
The stalemate on revenue allocation has largely the scope of an inter-governmental agreement
been attributed to ambiguity over Article 203(1) of under Article 187 of the Constitution; what is
the Constitution in the application of the criteria for the meaning of national interest as a criterion of
determining equitable shares of revenue between revenue allocation as per Article 203(1) (a) of the
the two levels of government; and to delay in Constitution; whether the national interest means
enactment of the Division of Revenue Act. While the interest of the National Government and not
the vertical division of revenue from the National of County Governments; whether an allocation for
Government to County Governments is the current national interest ought to be allocated exclusively
model, there is urgent need for concerted effort to the National Government; whether the National
by all actors to avert a similar stalemate in future. Government can use the funds for the national
There is need to develop interim measures that will interest directly to undertake devolved functions;
facilitate flow of funds to the counties in the event and whether the National Government has a
of future delay in the approval of the the Division of constitutional obligation to disburse to counties,
Revenue Bill. In this regard, there is need to amend as conditional or unconditional grants, money
the Public Finance Management Act, 2012 to provide allocated as “national interest” that are earmarked
temporary legislative authorization for withdrawal of for devolved functions.
money from the Consolidated Fund to be transferred
to counties for the purpose of meeting expenditure A key issue regards the base for allocation of
necessary to carry on their services until such a time revenue, which is currently based on the audited
as the Division of Revenue Bill is approved. Such revenue used in vertical allocation which is affected
a measure would facilitate continuity of service by lag in auditing of Government books. Disputes
delivery to citizens. have arisen concerning the base for allocation, with
County Governments proposing that the allocation
There have been disputes over the allocation of be based on the current projected revenues or the
revenue to counties, where the Council of Governors last period actual revenues. In 2019/20, the total
filed a High Court petition (No. 252 of 2016) against allocation to counties was 36.4 per cent of the last
the Attorney General, the National Assembly, audited shareable revenue.
the Senate, the Cabinet Secretary to the National
Treasury, Commission on Revenue Allocation and Often, majority of counties do not receive what they
the Controller of Budget, seeking an advisory on the anticipated from the way of budget estimates (Table
definition of revenue with regard to the two levels 10.1).
of government and seeking an interpretation of
the meaning of “national interest” in the context of
allocation of grants (Council of Governors v Attorney
General & 5 others [2018] eKLR).
170
Table 10.1: County budget estimates, 2015-2018

Financial Year Budget Estimates (Ksh billions) Revenue Out-turn (Ksh billions) Difference (Ksh billions)
2015/16 483.47 445.36 38.11
2016/17 410 387 23
2017/18 399.24 369.45 29.79
2018/19 367.44 343.18 24.26
Source: Commission on Revenue Allocation, 2015-2018
Counties’ demands for revenues are usually not and under-absorption of the county budget as
met. Nonetheless, counties should improve on Own demonstrated in Table 10.2. From the reports,
Source Revenue (OSR) collection to increase their it is apparent that most counties are not able to
capacity to finance their operations and reduce the fully absorb their development budgets. Poor
extent to which they rely on the National Exchequer. utilization of public funds distributed to counties is
It would also close the gaps in any shortfall. County one of the challenges that may hamper realization
OSR is key in raising revenue for county development of development projects. Section 15(2) (a) of the
projects and bridging the gap in socio-economic PFM Act provides that, over the medium-term,
disparity. However, a review of the performance of a minimum of 30 per cent of the National and
County Governments in revenue collection indicates County Governments budget shall be allocated to
that counties have performed poorly against their development expenditure while Section 107(2) (b) of
revenue targets. Their actual revenue collection has the Public Finance Management Act provides that,
remained volatile, not only missing targets but often, over the medium-term, a minimum of 30 per cent of
less revenue is being collected in subsequent years. the County Government’s budget shall be allocated
to development expenditure. This is also reiterated
The inability of County Governments to realize in the County Allocation of Revenue Act 2015. The
targeted revenues has been attributed to the low aim is to make enough provision for development
capacity of counties to collect revenues; unrealistic projects and initiatives intended to deliver key
forecasts, non-compliance with payment of fees projects for utilization by the citizens, failing which
and charges and property rates; pilferage due to there is insufficient commitment of county funds
manual collection systems; and resulting failure towards development projects. However, while the
to adequately report all revenues collected at the law requires County Governments to allocate 30%
county level. This could also be attributed to over- to development, it does not expressly or impliedly
estimation of revenue targets, inadequate measures require them to utilize or spend a certain amount
to ensure realization of revenue targets, or to poor or to prioritize certain activities or projects. The
enforcement of revenue collection. This ultimately PFM Act could be reviewed to require a minimum
impacts service delivery through non-realization expenditure ceiling of the development budget.
of planned and expected projects and services. It
also perpetuates dependency on equitable share. The distribution of functions under the Fourth
Considering this trend, mechanisms must be put in Schedule of the Constitution and Inter-governmental
place for encouraging counties to put greater effort Agreements is governed by Article 6(2) of the
in raising their own revenue. Constitution, which provides that “the governments
at the two levels are distinct and interdependent
10.2.2 County expenditures and function and shall conduct their mutual relations on the
basis of consultation and cooperation”. The Fourth
In spite of measures to ensure equitable allocation
Schedule of the Constitution assigns the two levels
to County Governments, there is poor utilization of
of government specific functions which are outlined
allocated funds as reported by the Auditor General
under Part I and II of the Fourth Schedule. The
and the Office of Controller of Budget. Most
functions are categorized as:
counties report under-expenditure, underutilization
171
a) Exclusive functions being those functions that Schedule. Article 190(3) of the Constitution provides
are limited to a particular level of government. that Parliament shall, by legislation, provide for
b) Concurrent function which is a function or intervention by the National Government if a County
power conferred on more than one level of Government is unable to perform its functions; or
government. does not operate a financial management system
that complies with the requirements prescribed
c) Residual function which is a function or power by national legislation. In applying functional
not assigned by the Constitution or national assignment, various principles apply which include:
legislation to a county and therefore is a
function or power of the National Government. a) The constitutionality - establishes whether the
Whereas the Constitution assigns various functions function has been clearly apportioned in the
to the two levels of government, either level of Fourth Schedule of the Constitution.
government can transfer a function as provided for b) The principle of subsidiarity - whereby a public
under Article 187 of the Constitution, which states service is assigned to the lowest level of
that, “a function or power of government at one government capable of delivering the function
level may be transferred to a government at the (Articles 174 and 187 of the Constitution).
other level by agreement between the governments c) Principles of Public Finance as provided for
if (a) the function or power would be more under Article 201 of the Constitution and
effectively performed or exercised by the receiving the principle of fiscal responsibility provided
government; and (b) the transfer of the function or for under section 107 of the Public Finance
power is not prohibited by the legislation under Management Act.
which it is to be performed or exercised”.
Article 187(2) (b) of the Constitution was invoked
The Inter-governmental Relations Act, 2012, Part
when the Nairobi County Government handed
III also provides for the transfer and delegation of
over its key functions to the National Government.
powers, functions and competencies. Section 24
Pursuant to this Article, the National Government
(a) of the Act stipulates that “subject to Article 186
took over the following functions of the Nairobi
and Article 187 of the Constitution, either level of
County Government: county health services; county
government may transfer its powers, functions or
transport services; county public works, utilities
competencies to the other level of government.”
and ancillary services; and County Government
Further, Section 26 of the Act provides for
planning and development. This was facilitated
agreements on transfer or delegation of powers,
through a deed of transfer agreement. The Nairobi
functions and competencies. Similarly, Article 187(1)
Metropolitan Services (NMS) was established to take
of the Constitution provides that, “a function or
charge of the transferred functions. While Article
power of government at one level may be transferred
187(2) (b) of the Constitution and Inter-governmental
to a government at the other level by agreement
Relations Act provide a framework for the transfer
between the governments…” It can be construed
of functions between levels of government, it has
that an intergovernmental agreement is one that
been argued that in this process, the Nairobi County
involves the transfer of functions and resources
Assembly was not duly notified (contrary to Section
from one level of government to another level of
26(4) of the Inter-governmental Relations Act, 2012)
government. This is reinforced in Article 187(2)(a),
calling into question the legality of whether due
which provides that, “arrangements shall be put
process was followed. Other questions were on
in place to ensure that the resources necessary for
the proper parties required to execute the deed to
the performance of the function or exercise of the
make it a valid agreement and whether they were
power are transferred”.
the duly authorised officers to do so. Other gaps
While noting that either level of government can are the role County Assemblies are to play in this
transfer a function, Article 187(2)(b) provides that the framework given their mandate to oversight actions
constitutional responsibility for the performance of of the Executive. Lack of public participation prior
the function or exercise of the power remains with to signing of the agreement has also raised doubt
the government to which it is assigned by the Fourth as to whether the transfer was procedurally lawful.
172
It is clear from this that the legal and institutional more centralized system of governance. It is only
requirements to facilitate this process are not clearly by reducing inefficiency and wastage that counties
outlined in the law. manage to divert resources into more productive
areas that will enhance economic growth.
The Inter-Governmental Relations Technical
Committee (IGTRC) is established under Section
11 of the Inter-Governmental Relations Act, 2012. Misuse and misappropriation of public funds:
The Technical Committee’s functions include the The Constitution requires efficient, effective and
day-to-day administration of the Summit and of the economic use of public resources and prudent public
Council, in particular facilitation of their activities and finance management. This is to ensure accountability
implementation of decisions. The IGRTC is required in the use of public resources and delivery of
to take over the residual functions of the transition public services. However, corruption, diversion
entity established under the law relating to transition of public funds for private use and gain, fraud
to devolved government after dissolution of such and misappropriation of public resources hinder
entity. However, the unbundling of functions is yet to effective utilization of public funds. Public funds may
be fully resolved. be allocated to public institutions; however, where
these funds are misappropriated or diverted for
10.2.3 Challenges facing devolution and personal use, there is no meaningful public benefit.
Mismanagement of public resources by counties as
hampering realization of inclusive reported by the Office of Auditor General denies
growth citizens from accessing services and receiving value
While devolution has promised to alleviate and for money. Similarly, late disbursement of funds
mitigate regional disparities, this has called into to counties by the National Treasury interferes
question whether the devolved units of government with service delivery. Further, most of the funds
are effectively working to end regional disparities. As are utilized on recurrent expenditures, with little
highlighted above, the replacement of the centralized expenditure being applied towards development.
form of government with a devolved system of
governance was largely and deliberately intended Poor project management: Failure to commence,
to alleviate the historical inequalities brought about deliver, complete or properly implement projects
by colonialism and post-independence. However, according to specifications across counties has
the disparities may continue to be exacerbated been a key challenge undermining the realization
by poor public finance management and poor of value for money. Stalled project implementation,
utilization of public funds. The issues identified in abandonment of projects, or altered project designs
County Governments that are a challenge to ending and outcomes and poor workmanship result in lack
regional inequalities include: of value for money and delayed delivery of services
Imprudent public finance management: Expenditure to citizens. Where funds are not put to good use, this
patterns by some counties as highlighted in reports occasions wastage of money and public resources
raised by the Office of the Controller of Budget and do not benefit the public.
and Auditor General have raised concerns about
prudent utilization of public funds, with concerns
10.3 Constituency-based Funds
over allocations to recurrent and development
expenditure, whereby most of the allocations are
concentrated towards recurrent expenditure. One of (a) Constituency Development Fund
the objectives of public economic policy proposed
by Musgrave is efficient resource allocation, which The Constituencies Development Fund is a portion
is realized when resources are allocated where of the national annual budget devoted to all
needed and utilized in service of these needs constituencies for the purposes of infrastructural
(Musgrave and Musgrave, 1989). Devolution will development, wealth creation and poverty
improve equality within and across counties only if eradication at the constituency level. As such, CDF
resources are utilized more efficiently than under a is characterized as a fund intended to stimulate
community economic development efforts at the
173
constituency level. It is also a Community Driven (NG-CDF) replaced the Constituencies Development
Development (CDD) initiative that is conjured to Fund (CDF). This Act was subsequently succeeded
empower local communities by availing funds by the current NG-CDF Act, 2015.
from the National Government and donors to the
local communities (Namano, 2014). The CDF was, Since 2003/04, the Fund has been supporting projects
therefore, aimed at resolving regional inequalities mainly in the areas of education, health, agriculture,
by fighting poverty through implementation of local roads, security, environment and sports. However,
development projects, and particularly those that the NG-CDF (Amendment) Act 2016 introduces
provide basic needs such as education, healthcare, a major shift in the scope of projects eligible for
water, agricultural services, security and electricity funding. Under this Act, only projects falling within
(Namano, 2014). the functions of the National Government as outlined
in the Constitution of Kenya are funded. This
The Constituency Development Fund (CDF) Act, effectively means the Fund concentrates primarily
2003 was the law that first established the CDF in on education, security, sports, environment sectors
Kenya. Originally, according to the Act, 2.5 per cent and other National Government residual functions.
of the nation’s total revenue collection was to be
channelled directly to the 210 constituencies through The Fund is domiciled within the Ministry in charge of
their sitting Members of Parliament (MPs). This was national economic policy and planning. It is managed
later revised to 3.5 per cent in the 2006/7 fiscal by the National Government Constituencies
year. The Fund was administered by area Member Development Fund Board, which is a body corporate
of Parliament (MP) with a small CDF administrative with perpetual succession and common seal. The
staff that an MP controlled to determine the Board operates at national level and comprises of
allocation of projects and funds, both of which were the Board of Directors and a Secretariat. The Board
targeted to his support base. During the first year derives its mandate from the NG-CDF Act of 2015.
of implementation (2003/4), Ksh 1,260 million was The amount of allocations per county have fluctuated
released to the constituencies. This amount was fully over the years. However, the counties that have
disbursed to the 210 constituencies in accordance received the highest and lowest allocations have
with the CDF Act 2003, with each constituency remained relatively the same between 2013/14 and
receiving Ksh 6 million for projects. In subsequent 2018/19 (Figure 10.2).
years, 2004/05, 2005/06 and 2006/07, Ksh 5.6, 7.2
and 10.03 billion, respectively, was allocated for the In 2018/2019, the counties that received the highest
CDF projects. percentage share of NG-CDF allocations were
Nairobi (5.9%), Kiambu (4.1%), Kakamega (4.1%),
The CDF Act has undergone a series of amendments Nakuru (3.8%), Kisii (3.1%), Bungoma (3.1%) and
over the succeeding years to stay abreast with the Meru (3.1%). The counties that received the least
evolving changes and dynamics of the society, CDF allocations are Laikipia (1.0%), Tana River (1.0%),
such as replacement of the 1963 Constitution with Tharaka Nithi (1.0%), Samburu (1.0%), Lamu (0.7%)
the 2010 Constitution on 27th August 2010, and and Isiolo (0.7%) (Table 10.3).
transition to a devolved system of government. In
January 2013, the CDF Act 2003 (as amended in The amount of allocations per county have fluctuated
2007) was repealed and replaced with the CDF Act over the years. However, the counties that have
2013, which aligned the operations of the Fund to the received the highest and lowest allocations have
new devolved government structures. The National remained relatively the same between 2013/14 and
Government Constituencies Development Fund 2018/19 (Figure 10.1).
174
Figure 10.1: Total CDF allocations by county, 2013-2018
Source: National Government Constituency Development Fund - NG-CDF (2015)
The total CDF allocations have varied across specific However, the CDF has been marred by poor project
sectors. Most allocations have gone to the education implementation, stalled projects, expenditure on
sector (51.0%) followed by water (9.0%), health projects not approved, misuse of funds and lack
(7.0%) and roads and bridges (7.0%) (NG-CDF, 2015). of supporting documentation for expenditure as
After 2015/16, the Fund has concentrated primarily reported by the Auditor General in audit reports for
on education, security, sports, environment sectors the constituencies. The key aspect in utilization of
and other National Government residual functions. the CDF is efficiency and transparency.
175
Further, the criteria for determining allocations of • Support of affirmative action groups through
NG-CDF is based on an equal amount disbursed bursaries and scholarships to access education
equally to each constituency. This may fail to take opportunities;
into account specific or unique needs of various • Establishment of drugs and substance abuse
regions. and rehabilitation and counselling centres
in conjunction with relevant government
(b) National Government Affirmative agencies; and
Action Fund (NGAAF) • Conducting civic education and community
The National Government Affirmative Action Fund sensitization on National Government
(NGAAF) was enacted through Legal Notice No.18 of affirmative action programmes and policies.
2012 pursuant to Section 24(4) of the Public Finance
Management Act, 2012. The Fund is governed by The fund seeks to address the plight of vulnerable
the Public Finance Management Act, 2012 (National groups through enhanced access to financial
Government Affirmative Action Fund), Regulations resources for socio-economic empowerment among
2016. women, youths, PWDs, needy children and the
elderly. The Public Finance Management (National
The Fund is one of Government initiatives anchored Government Affirmative Action Fund) Regulations,
on the Kenya Vision 2030 under the social pillar to 2016 provide that the National Government
address the plight of vulnerable groups by reducing Affirmative Action Fund vests in and is to be
poverty and inequality through enhanced access to operated by the National Government Affirmative
financial facilities for socio-economic empowerment Action Fund Board (which is established as a body
among women, youth, persons with disabilities, corporate). The Board shall disburse from the Fund
needy children and elderly persons in the country. an equal amount to each constituency. The Board
The Fund also provides an avenue for promotion shall disburse funds out of the Fund bank account
of enterprise and value addition initiatives. The to each county Affirmative Action Fund account at
objectives of the Fund include: the beginning of the first quarter of each financial
year. Each disbursement to a National Government
• Enhancement of access to financial facilities Affirmative Action Fund Committee from the Fund
for affirmative groups; must be for a specific project approved in accordance
• Support of value addition initiatives by the with the Regulations.
affirmative action groups;
Similar to the NG-CDF Allocations (Table 10.2) NGAAF
• Socio cultural development and nurturing of gets allocations from the National Government with
talent for affirmative action groups, including Nairobi, Kiambu, Kakamega, Nakuru, Bungoma and
promotion of art, music and sports; Kisii receiving the highest allocations and Lamu and
• Enhancement of access to services for survivors Isiolo counties receiving the least allocations (Table
of gender-based violence, female genital 10.2). This is mainly because, as per the Act and the
mutilation, child or forced marriages through Regulations, the initial disbursement by the Board to
establishment of rescue centres and legal aid each county committee after the commencement of
centres and other similar facilities; the Regulations shall be equivalent to 25.0 per cent
of the annual allocation for the county.
176
Table 10.2: NGAAF funds disbursed since inception, 2014-2017 (Ksh millions)
County 2014/2015 2015/2016 2016/2017 1, 2, 3rd qt Total for Funds

2017/2018 Disbursements (Millions)
1. Nairobi 77.3 109.4 113.6 83.8 384.2
Kiambu 54.6 77.2 80.2 59.2 271.2
Kakamega 54.6 77.2 8.2 59.2 271.2
Nakuru 50.0 70.8 73.5 54.2 248.6
Bungoma 40.9 57.9 60.2 44.4 203.4
Kisii 40.9 57.9 60.2 44.4 203.4
Meru 40.9 57.9 60.2 44.4 203.4
Kitui 36.4 51.5 53.5 39.5 180.8
Machakos 36.4 51.5 53.5 39.5 180.8
Homa Bay 36.4 51.5 53.5 39.5 180.8
Migori 36.4 51.5 53.5 29.6 171.0
Murang’a 31.8 45.0 46.8 34.6 158.2
Busia 31,8 45.0 46.8 34.6 158.2
Kisumu 31.8 45.0 46.8 34.6 158.2
Kilifi 31.8 45.0 46.8 34.6 158.2
Mombasa 27.3 38.6 40.1 29.6 135.6
Garissa 27.3 38.6 40.1 29.6 135.6
Wajir 27.3 38.6 40.1 29.6 135.6
Mandera 27,3 38.6 40.1 29.6 135.6
Makueni 27.3 38.6 40.1 29.6 135.6
Uasin Gishu 27.3 38.6 40.1 29.6 135.6
Nandi 27.3 38.6 40.1 29.6 135.6
Baringo 27.3 38.6 40.1 29.6 135.6
Turkana 27.3 38.6 40.1 29.6 135.6
Siaya 27.3 38.6 40.1 29.6 135.6
Kericho 27.3 38.6 40.1 29.6 135.6
Narok 27.3 38.6 40.1 29.6 135.6
Nyeri 27.3 38.6 40.1 29.6 135.6
Bomet 22.7 32.2 33.4 29.6 118.0
Vihiga 22.7 32.2 33.4 24.7 113.0
Nyandarua 22.7 32.2 33.4 24.7 113.0
Trans Nzoia 22.7 32.2 33.4 24.7 113.0
Kajiado 22.7 32.2 33.4 24.7 113.0
Embu 18.2 25.7 26.7 19.8 90.4
Kirinyaga 18.2 25.7 26.7 19.8 90.4
West Pokot 18.2 25.7 26.7 19.8 90.4
Elgeyo 18.2 25.7 26.7 19.8 90.4
Marakwet
Nyamira 18.2 25.7 26.7 19.8 90.4
Kwale 18.2 25.7 26.7 19.8 90.4
Taita Taveta 18.2 25.7 26.7 19.8 90.4
Marsabit 18.2 25.7 26.7 19.8 90.4
177
County 2014/2015 2015/2016 2016/2017 1, 2, 3rd qt Total for Funds

2017/2018 Disbursements (Millions)
Tana-River 13.6 19.3 20.1 14.8 67.8
Tharaka Nithi 13.6 19.3 20.1 14.8 67.8
Samburu 13.6 19.3 20.1 14.8 67.8
Laikipia 13.6 19.3 20.1 14.8 67.8
Lamu 9.1 12.9 13.4 9.9 45.2
Isiolo 9.1 12.9 13.4 9.9 45.2
TOTAL 1,320.0 1,865.5 1,938.3 1,427.0 6,550.8
Source: The National Government Affirmative Action Fund (2019)
The criteria for determining allocations of NGAAF At independence, Kenya inherited a system where
may not be achieving the intended outcomes. While Europeans dominated virtually all positions in the
this maintains certainty, consistency and predictability civil service. In Sessional Paper No. 10 of 1965,
across allocations, this method perpetuates the the Government committed itself to guaranteeing
same trends and groups of beneficiaries. There is every citizen full and equal political and economic
need to consider whether a targeted, prioritized rights to ensure the participation of every person
and more inclusive criteria could be developed and in the running of the country. The Government also
formulated for various funds. committed to train, educate and mobilize all Kenyans
to fully participate in the country’s development. The
NGAAF has reported challenges that have Government undertook to ensure positions in the
constrained full achievement of planned activities, civil service, which had hitherto been dominated by
including inadequate budgetary allocation and Europeans were transferred to Africans.
delay in release of funds (NGAAF, 2018).
(a) Regulatory and institutional framework

10.3 Representation and Inclusivity in the
The National Cohesion and Integration Act,2008
Public Service defines “ethnic group” as a group of persons
defined by reference to colour, race, religion, or
In responding to the challenge of inclusive growth,
ethnic or national origins. “Ethnic relations” are
the public sector and Government has a critical
defined to include racial, religious, tribal and cultural
role to play with respect to inclusiveness within the
interactions between various communities, and the
public sector. This includes representation in terms
words “ethnic” and “ethnicity” are to be construed
of ethnicity, gender and persons with disabilities
accordingly.
(PWDs). This section discusses the distribution of
staff within the public service (including National A number of legal provisions have been established
Government and County Governments) by ethnicity, to promote inclusivity and diversity in the public
gender and inclusion of PWDs. The Government service, while ensuring a reflection of Kenya’s
endeavours to promote inclusivity by being inclusive diverse communities across various Government
within itself. More so, it must be felt that the institutions (Table 10.3). This is intended to promote
Government represents the communities it seeks inclusivity and ethnic representation in the public
to serve and reflects the face of Kenya. Inclusivity service and reduce over-representation of only
and diversity within the public service and public a few communities in the public service. Indeed,
institutions are key in ensuring that the needs, the preamble to the Constitution of Kenya 2020
aspirations and experiences of a diverse range of pronounces that Kenyans are proud of their ethnic,
citizens are reflected in the decision-making process. cultural and religious diversity, and are determined
to live in peace and unity as one indivisible sovereign
nation.
178
Table 10.3: Policies and legislation on inclusivity and representation within the public service
Policies and Legislation Key Provisions on Representation
Agenda 2063 Aspiration No. 6 focuses on, “an Africa whose development is people-driven, unleashing the potential
of its youth and caring for children. According to Africa’s Agenda 2063, Africa shall be an inclusive
continent where no child, woman, or man will be left behind or excluded, on the basis of gender,
political affiliation, religion, ethic affiliation, locality, age or other factors”.
Sessional Paper No. Provides a framework for fostering national unity, inculcating patriotism, redressing marginalization,
8 of 2013 on National and promotion of an accountable and democratic electoral process. It seeks to guarantee accountable
Values and Principles of exercise of executive authority by both the National and County Governments and ensure equitable
Governance. distribution of resources and opportunities. The policy identifies five key areas through which the values
and principles would be promoted and realized: the development of a strong national identity, effective
representation and leadership, equitable allocation of resources and opportunities, good governance
practices, and sustainable development.
Constitution of Kenya, Article 10 on National Values and Principles of Governance include patriotism, national unity,
2010 inclusiveness, equality, non-discrimination and protection of the marginalised.
Article 11 recognizes culture as the foundation of the nation and as the cumulative civilization of the
Kenyan people and nation.
Article 21 (3) provides that all State organs and all public officers have the duty to address the needs of
vulnerable groups within society, including women, older members of society, persons with disabilities,
children, youth, members of minority or marginalized communities, and members of particular ethnic,
religious or cultural communities.
Article 27 of the Bill of Rights stipulates that every person is equal before the law and has the right to
equal protection and equal benefit of the law. Further, equality includes the full and equal enjoyment of
all rights and fundamental freedoms. Women and men have the right to equal treatment, including the
right to equal opportunities in political, economic, cultural and social spheres. In addition, the State is
prohibited from discriminating directly or indirectly against any person on any ground, including race,
sex, pregnancy, marital status, health status, ethnic or social origin, colour, age, disability, religion,
conscience, belief, culture, dress, language or birth. Moreover, no person shall discriminate directly
or indirectly against another person on any of the grounds specified or contemplated as mentioned
hereinbefore.
Article 27 (4) of the Bill of Rights provides that the State shall not discriminate directly or indirectly
against any person on any ground, including …ethnic or social origin…culture… language or birth.
Article 28 of the Constitution further provides rights for every person to have inherent dignity and the
right to have that dignity respected and protected.
Article 32 guarantees the right for every person to freedom of conscience, religion, thought, belief and
opinion. Further, every person has the right, either individually or in community with others, in public
or in private, to manifest any religion or belief through worship, practice, teaching or observance,
including observance of a day of worship. Further, it specifies that no person may be denied access to
any institution, employment or facility, or the enjoyment of any right, because of the person’s belief or
religion. In addition, a person shall not be compelled to act, or engage in any act, that is contrary to
the person’s belief or religion.
Article 73 of the Constitution, 2010 which is part of Chapter Six on Leadership and integrity, also has
provisions that guide appointments in the public service. Article 73(2) (a) provides that the guiding
principles of leadership and integrity include selection on the basis of personal integrity, competence
and suitability.
Article 90 (2) (c) mandates that, with the exception of County Assembly seats, each party list for elections
for the seats in Parliament must reflect the regional and ethnic diversity of the people of Kenya.
Article 130 stipulates that the composition of the National Executive shall reflect the regional and
ethnic diversity of the people of Kenya.
Article 131(2) (d) mandates the President of the Republic of Kenya to promote and enhance the unity of
the nation; and promote respect for the diversity of the people and communities of Kenya.
179
Article 232 (g) provides that subject to paragraphs (h) and (i), fair competition and merit are the basis
of appointments and promotions. Therefore, values of merit and fair competition are subject to the
greater considerations and values of ethnic, regional and gender diversity. Impliedly, competence
and merit can be undermined on the basis of gender, disability or diversity. Merit and competence
alone cannot be the basis for making public appointments but the appointing authority must take
into account regional, gender and ethnic diversity. However, even where the diversity is required, the
minimum threshold requirement for any appointment is competence and merit determined through a
fair and competitive process.
Article 232 (1) (h) underscores that one of the values and principles of the public service include
representation of Kenya’s diverse communities.
Article 232 (1) (i) of the Constitution, 2010 on Principles and Values of the Public Service requires that
adequate and equal opportunities for appointment, training, advancement at all levels of the public
service of men and women; the members of all ethnic groups; and persons with disabilities.
Article 250(4) of the Constitution, 2010 provides that appointments to commissions and independent
offices shall take into account the national values in Article 10 and the principle that the composition
of the commissions and offices, taken as a whole, shall reflect the regional and ethnic diversity of the
people of Kenya.
Article 241 (4) stipulates that the composition of the command of the Defence Forces shall reflect the
regional and ethnic diversity of the people of Kenya.
Article 246 (4) mandates that the composition of the National Police Service shall reflect the regional
and ethnic diversity of the people of Kenya.
Article 250 (4) requires that all appointments to commissions and independent offices shall take into
account the national values referred to in Article 10, and the principle that the composition of the
commissions and offices, taken as a whole, shall reflect the regional and ethnic diversity of the people
of Kenya.
The National Cohesion Section 7 (1) of the National Cohesion and Integration Act, No. 12 of 2008 stipulates that “All public
and Integration Act, No. establishments shall seek to represent the diversity of the people of Kenya in the employment of staff”.
12 of 2008
Section 7 (2) of the National Cohesion and Integration Act provides that “No public establishment shall
have more than one third of its staff from one ethnic group”.
The County Section 65 of the County Government Act requires that the County Public Service Board shall ensure
Governments Act, No. that at least 30% of the vacant positions in county employment are filled by persons from the non-
12 of 2012 dominant communities.
The Public Service Section 10 of the Act requires balancing of the principles on fair competition and merit, as a basis
Values and Principles of appointment and promotion, and the principle of representation of all communities in the public
service. It allows use of affirmative action in instances where; a community is under-represented, taking
Act, No. 1 of 2015 into account the community’s national population census, the two thirds gender principle has not been
met or Persons With Disabilities (PWDs) are underrepresented.
Public Service In making appointments or promotions, the PSC is bound by the constitutional principles which require
Commission Act, 2017 that — no applicant or candidate is discriminated on any ground; no one gender constitutes more
than two thirds of those appointed; at least five percent of the appointments constitute persons
with disabilities; there is proportionate representation of all ethnic communities; and the youth are
appointed.
Source: Author
180
Table 10.4: Institutional frameworks on representation and inclusivity

Institution Establishing Mandate and functions
Statute
National Cohesion The National The National Cohesion and Integration Commission (NCIC) is a statutory body
and Integration Cohesion established by the National Cohesion Integration Act enacted after the 2007 post-
Commission Integration Act of election violence.
(NCIC) 2008
The mandate of the NCIC is to: promote the elimination of all forms of discrimination
on the basis of ethnicity or race; discourage persons, institutions, political parties and
associations from advocating or promoting discrimination or discriminatory practices
on the ground of ethnicity or race; promote equal access and enjoyment by persons
of all ethnic communities and racial groups to public or other services and facilities
provided by the Government; investigate complaints of ethnic or racial discrimination
and make recommendations to the Attorney-General, the Human Rights Commission
or any other relevant authority on the remedial measures to be taken where such
complaints are valid; investigate on its own accord or on request from any institution,
office, or person any issue affecting ethnic and racial relations; ethnic relations.
Directorate of Administratively, oversight of national values and principles of governance issues
National Cohesion falls under the Directorate of National Cohesion and National Values in the Ministry
and National of Interior and Coordination of National Government. The Directorate’s mandate is
Values to spearhead and coordinate mainstreaming of national cohesion, national values,
national reconciliation and healing. The mission of the Directorate is to spearhead the
building of a harmonious, cohesive and integrated society with shared values through
national cohesion and integration programmes.
Public Service Article 234 of the Its mandate includes to establish and abolish offices in the public service; appoint
Commission (PSC) Constitution of persons to hold or act in public offices, and to confirm appointments; exercise
Kenya (which was disciplinary control over and remove persons holding or acting in those offices;
operationalized by promote the values and principles referred to in Articles 10 and 232 throughout the
the Public Service public service; evaluate and report to the President and Parliament on the extent to
Commission Act which the values and principles referred to in Articles 10 and 232 are complied with in
No. 13 of 2012) the public service; and hear and determine appeals in respect of County Governments’
public service.
The National Gen- The National The mandate of NGEC is to promote gender equality and freedom from discrimination
der and Equality Gender and in accordance with Article 27 of the Constitution; monitor, facilitate and advise on the
Commission Equality integration of the principles of equality and freedom from discrimination in all national
(NGEC) Commission Act, and county policies, laws, and administrative regulations in all public and private
2011 institutions; investigate on its own initiative or on the basis of complaints, any matter in
respect of any violations of the principle of equality and freedom from discrimination
and make recommendations; and conduct audits on the status of special interest
groups, including minorities, marginalized groups, persons with disabilities, women,
youth and children.
County Public Section 57 of The CPSBs are mandated to, inter alia, establish and abolish Offices in the County Public
Service Boards the County service; appoint persons to hold or act in offices of the County Public Service; exercise
(CPSBs) Governments Act, disciplinary control over, and remove, persons holding or acting in those Offices;
2012 prepare regular reports for submission to the County Assembly on the execution of the
functions of the Board; promote in the County Public Service the values and principles
referred to in Article 10 and 232 of the Constitution; and evaluate and report to the
County Assembly on the extent to which the values and principles referred to in Articles
10 and 232 of the Constitution are complied with in the County Public Service.
Source: Author
181
“Status of the Public Service Compliance with the

(b) Ethnic representation in the
Values and Principles in Articles 10 and 232 of the
National Government Constitution” established that for the institutions
that fall under its jurisdiction, there has been gross
The promulgation of the Constitution in 2010 over-representation of the Kikuyu and Kalenjin
brought with it an expectation that appointments tribes. This is followed by the Luo and Kisii tribes
to public office will be conducted in a manner that which are over-represented in the public service.
is competitive, transparent, adheres to the values The Kenyan Somali are grossly under-represented,
of good governance and promotes equality, equi- while the Luhya, Mijikenda and Turkana are reported
ty and regional and ethnic diversity. Under Article to be under-represented in the public service
73(2), there are other considerations for leadership (Table 10.6). The findings corroborate those by the
besides competence, which include integrity, suit- National Cohesion and Integration Commission
ability and diversity. (NCIC) in 2012 Ethnic Diversity and Audit of the Civil
The Public Service Commission (PSC) has developed Service. Thus, there is lack of ethnic representation,
a criteria for assessing representation, which refers regional diversity and regional inclusivity in the
to representation of the community in the public public service workforce. This means that there is
service relative to their national population size. This skewed, unbalanced and unequal representation of
is intended to assess proportionate representation certain ethnic communities within the public service,
of all ethnic communities in line with Article 232(1) being propagated 10 years after the promulgation
(h) of the Constitution 2010, which stipulates that the of the Constitution. While there are legal frameworks
values of the public service include representation requiring ethnic representation, these frameworks
of Kenya’s diverse communities. However, the lack sanctions and enforcement mechanisms for non-
2018/19 Public Service Commission Report on compliance by public institutions, which undermines
the effectiveness of the legal frameworks.
Table 10.5: Ethnic representation in the public service
Ethnic Community Total Population % Contribution Total In-post % of total Status of Representation
(2009 census) In-post
Bajuni 69,110 0.18 595 0.3 Normal Representation

Basuba 139,271 0.36 342 0.2 Normal Representation
Boni/Sanye 0 0 35 0 Normal Representation
Borana 161,399 0.42 1,863 0.9 Normal Representation
Burji 23,735 0.06 153 0.1 Normal Representation
Dasnach/Shangila 12,530 0.03 11 0 Normal Representation
Dorobo 35,015 0.09 67 0 Normal Representation
Elmolo 2,844 0.01 23 0 Normal Representation
Embu 324,092 0.85 2,922 1.4 Normal Representation
Gabra 89,515 0.23 357 0.2 Normal Representation
Galjeel 7,553 0.02 4 0 Normal Representation
Gosha 21,864 0.06 6 0 Normal Representation
Gureeh/Galla 8,146 0.02 424 0.2 Normal Representation
Kalenjin 4,929,469 12.9 35,541 16.6 Gross Over-Representation
Kamba 3,893,157 10.19 19,906 9.3 Normal Representation
Kenyan American 2,422 0.01 1 0 Normal Representation
Kenyan Arab 40,760 0.11 250 0.1 Normal Representation
Kenyan Asian 46,782 0.12 75 0 Normal Representation
Kenyan European 5,166 0.01 6 0 Normal Representation
Kenyan Somali 2,388,732 6.25 4,664 2.2 Gross Under-Representation
182
Ethnic Community Total Population % Contribution Total In-post % of total Status of Representation
(2009 census) In-post
Kikuyu 6,622,576 17.33 45,401 21.2 Gross Over-Representation

Kisii 2,205,669 5.77 16,235 7.6 Over Representation
Konso 1,758 0 1 0 Normal Representation
Kuria 260,401 0.68 846 0.4 Normal Representation
Leysan 5,941 0.02 2 0 Normal Representation
Luhya 5,338,666 13.97 25,398 11.9 Under Representation
Luo 4,044,440 10.58 25,895 12.1 Over Representation
Maasai 841,622 2.2 3,650 1.7 Normal Representation
Makonde 0 0 2 0 Normal Representation
Mbeere 168,155 0.44 770 0.4 Normal Representation
Meru 1,658,108 4.34 10,113 4.7 Normal Representation
Mijikenda 1,967,474 5.15 7,725 3.6 Under-Representation
Njemps/Ilchamus 32,516 0.09 140 0.1 Normal Representation
Nubi 15,463 0.04 92 0 Normal Representation
Orma 66,275 0.17 214 0.1 Normal Representation
Other Kenyan 446,047 1.17 581 0.3 Normal Representation
Other Nationalities 0 0 197 0.1 Normal Representation
Pokomo 94,965 0.25 884 0.4 Normal Representation
Rendille 60,437 0.16 297 0.1 Normal Representation
Sakuye 26,784 0.07 51 0 Normal Representation
Samburu 237,179 0.62 991 0.5 Normal Representation
Swahili-Shirazi 110,614 0.29 520 0.2 Normal Representation
Taita 273,519 0.72 3,518 1.6 Normal Representation
Taveta 20,828 0.05 230 0.1 Normal Representation
Teso 338,833 0.89 1,328 0.6 Normal Representation
Tharaka 175,905 0.46 337 0.2 Normal Representation
Turkana 988,592 2.59 1,516 0.7 Under Representation
Walwana 16,803 0.04 3 0 Normal Representation
Total 214,182 100%
Source: Public Service Commission (2018), Report 2018/2019
Further, there is lack of clarity and consensus on and regional affiliation for women, and in particular
how to determine an individual’s ethnicity and the inter-ethnic married or divorced women in Kenya.
criteria and parameters for consideration. That is, The result is that there is risk of arbitrarily assigning
whether the determination should be based on ethnicities to individuals with no consistency or
an individual’s place of ordinary residence, home objectivity in the factors to be considered to
district, background, name, preferred ethnic identity, determine their ethnicity. The criteria used for
personal choice, socialization, marital association, assessment and determination may consequently
patriarchy or parental lineage or origin. This lack of be based on subjective judgement. Further, ethnic
clarity is further perpetuated, whereby an individual appellations and profiles may be erroneously or
is from a mixed parentage or mixed cultural or incorrectly assigned to individuals. There are no
ethnic background, noting that Kenya is considered constitutional, legislative or policy guidelines on
a patrilineal society. This is particularly the case for what constitutes ethnic or regional background or
the criteria employed for determining the ethnic how ethnicity or ethnic affiliation of a person is to
183
be determined. In addition, there are no indicators ethnic diversity. This is mainly because the mandate of
whose basis would enable an objective analysis. NCIC is limited to investigations only. NCIC conducts
Whereas there is a basis for consideration of regular ethnic audits on all public institutions and
ethnicity and regional balancing in public service conducts investigations when complaints are raised
appointments, the terms have not been well and by the public, or on its own motion. However, legal
exhaustively expounded to enable an objective enforcement is lacking for non-compliance of ethnic
determination of the same, thus leaving it to the representation requirements. To this end, sanctions
selectors to exercise their subjective views, thereby could be specified for non-compliant institutions,
creating controversy and possible grievous errors in including requiring direct accountability and liability
the selection of public officers. Consequently, in the of human resource officers and heads of institutions.
absence of standardized and objective principles, For inclusivity to be attained, the public service
the basis relied upon by selectors in determining within itself ought to take the lead in promoting
ethnicity is seemingly obscure and open to and guaranteeing representation of diverse
abuse. In addition, there is no clear precedent communities. Ethnic diversity is a necessary factor for
for appointments especially in determining how consideration for appointment to the public service.
ethnicity is to be attributed to a person, particularly The public service ought to be comprised of public
in cases of inter-ethnic marriage. Moreover, other servants who have attained the highest standards
gaps in the framework include how principles of of professionalism, qualifications, competence,
equal opportunity and non-discrimination are to be suitability and integrity and reflect the face of
reconciled with principles of ensuring regional and Kenya. The composition of the public service ought
ethnic diversity. In attributing ethnic affiliation to an to reflect ethnic and regional diversity of Kenya to
individual, what concerns, and considerations should entrench a sense of belonging for all communities.
be given. Conforming to the constitutional principles of ethnic
While the constitutional provisions requiring ethnic inclusivity would build public confidence and sustain
representation in the public service are intended to the momentum and impetus for inclusion within the
ensure regional diversity, the consequence is that, at wider Kenyan society.
times, the most qualified, competent, top-ranked and
best-performing candidates following an interview (c) Ethnic representation in the County
process are locked out of and disqualified from Public Service
appointments on the basis that their community is
already represented. A key challenge is maintaining a The mandate regarding employment in the
balance between competence and competitiveness counties is vested on the County Public Service
while achieving the ethnic and regional diversity Board, which is established under Section 57 of the
in a manner that promotes nationality and social County Governments Act, 2012. Section 59(1) of
cohesion and integration. Considerations of ethnic the County Governments Act outlines the functions
and regional diversity should not be used to deny of the County Public Service Board, which include
deserving persons opportunities or promote the establishment and abolishment of offices in
negative ethnicity. The process behind balancing the County Public Service and the appointment of
of ethnicity and merit requires clarification. Further, persons to hold or act in offices of the County Public
the PSC and NCIC could develop clear criteria for Service, including in the boards of cities and urban
determining one’s ethnicity. NCIC, in collaboration areas within the county and to confirm appointments.
with PSC, the Office of the Attorney General and In setting a concrete threshold, Section 65(1) of the
Department of Justice and the Judiciary could County Government Act directs that in selecting
undertake more concerted efforts to demystify and candidates for appointment, the County Public
clarify public understanding on what defines an Service Board shall consider the standards, values
individual’s ethnicity or social origin. and principles set out in Articles 10, 27(4), 56 (c) and
232 (1) of the Constitution. Article 10 outlines the
In addition, the mandate of NCIC is ineffective in national values and principles of governance which
redressing or enforcing any breaches by public include unity, patriotism, non-discrimination, equity,
institutions on reflection of Kenya’s regional and inclusiveness and protection of the marginalized.
184
Article 56 stipulates provisions for affirmative action County Ethnic group with Percentage
programmes to ensure inclusivity of marginalized and highest Number
minority groups. Article 232 requires representation Lamu Bajun 48.6
of Kenya’s diverse communities as a value and
Nakuru Kikuyu 50.9
principle of the public service.
Embu Embu 55.6
Further, Section 65 (i) (e) of the County Government
Narok Maasai 55.6
Act 2012 stipulates that “in selecting candidates for
appointment, the County Public Service Board shall Garissa Somali 56.8
consider, inter alia, the need to ensure that at least Busia Luhya 59.8
thirty percent of the vacant posts at entry level are
Trans Nzoia Luhya 63.3
filled by candidates who are not from the dominant
ethnic community in the county”. Further, Section Migori Luo 65.1
3(3) of the Employment Act presupposes that Laikipia Kikuyu 67.4
both levels of government are under an obligation
to promote equality in access to employment Source: National Cohesion and Integration
opportunities. An audit on Ethnic and Diversity of Commission (2016)
Counties conducted by the National Cohesion and
Integration Commission in 2016 established that The other 32 counties were in contravention of
new appointments made since the counties were the County Governments Act. Table 10.7 and 10.8
established (2013-2016) had contravened the law below illustrate this.
(NCIC, 2016). Within the study period, only 15
counties (31.9%) had adhered to Section 65 of the
Table 10.7: Counties that contravened the County
County Government Acts by giving more than 30 per
Governments Act in new appointments, 2013-2016
cent of the vacancies at entry level to members of
ethnic groups that are not dominant in their regions. County Ethnic group Percentage
The study found that 68.1 per cent of the counties with highest
number
had hired more than 70 per cent of their staff from
Nyamira Kisii 97.9
one ethnic group (NCIC, 2016). This implies that
in spite of the existing law, new recruitments at Bomet Kalenjin 97.9
county level have been done in contravention of the Kirinyaga Kikuyu 97.8
provisions of the law. Elgeyo Marakwet Kalenjin 97.6
The study found that only 15 counties, namely Kisii Kisii 97.5
Laikipia, Migori, Trans Nzoia, Busia, Garissa, Embu, Tharaka Nithi Tharaka 95.6
Narok, Nakuru, Lamu, Taita Taveta, Isiolo, Mombasa, Kericho Kalenjin 95.3
Nairobi, Tana River, and Marsabit had complied with Murang›a Kikuyu 95.2
the County Governments Act (Table 10.6).
Uasin Gishu Kalenjin 94.4
Turkana Turkana 93.4
Table 10.6: Counties that complied with the County
Governments Act in new recruitments, 2013-2016 Nyandarua Kikuyu 93.0
Machakos Kamba 92.9
County Ethnic group with Percentage
highest Number Nandi Kalenjin 92.8
Siaya Luo 92.7
Marsabit Gabbra 28.0
Meru Meru 92.6
Tana River Pokomo 29.1
Samburu Samburu 92.4
Nairobi Kikuyu 37.7
Makueni Kamba 91.6
Mombasa Mijikenda 39.6
Homa Bay Luo 91.1
Isiolo Borana 45.8
Kitui Kamba 90.8
Taita Taveta Taita 47.8
185
County Ethnic group Percentage County General New

with highest
number
Staff appointments
(Majority (highest
West pokot Pokot 89.6
ethnic ethnic group)
Vihiga Luhya 88.8 group)
Nyeri Kikuyu 88
Meru 84.6 92.6
Mandera Somali 86.1
Kisii 89.9 97.5
Kisumu Luo 82.3
Nyamira 90.4 97.9
Wajir Somali 81.6
Kericho 88.4 95.3
Kakamega Luhya 81.2
Kwale Mijikenda 80
Isiolo 41.0 45.8
Bungoma Luhya 78.8 Elgeyo 93.0 97.6
Marakwet
Baringo Kalenjin 78.4
Kisumu 78.0 82.3
Kilifi Mijikenda 77
Kajiado Maasai 75
Kirinyaga 93.9 97.8
Kiambu Kikuyu 74.4 Bungoma 75.2 78.8
Vihiga 85.1 88.8
Source: National Cohesion and Integration
Commission (2016) Homa Bay 87.4 91.1
Wajir 78.6 81.6
Table 10.8: Ethnic composition in County Mandera 83.0 86.1
Governments Nakuru 48.4 50.9
County General New Murang›a 93.4 95.2
Staff appointments Bomet 96.6 97.9
(Majority (highest Busia 58.8 59.8
ethnic ethnic group)
group) Garissa 56.9 56.8
Migori 65.2 65.1
West Pokot 49.1 89.6
Nyandarua 93.7 93.0
Kajiado 38.4 75.0
Tana River 36.5 34.7
Uasin Gishu 64.9 94.4
Mombasa 42.3 39.6
Turkana 67.3 93.4
Embu 58.8 55.6
Tharaka Nithi 74.7 95.6
Baringo 81.5 78.4
Samburu 73.6 92.4
Marsabit 33.2 28.0
Trans Nzoia 47.3 64.0
Taita Taveta 53.4 47.8
Lamu 32.7 48.6
Nyeri 95.3 88.0
Kwale 64.1 80.0
Laikipia 77.1 67.4
Machakos 79.0 92.9
Narok 66.0 55.4
Siaya 78.9 92.7
Kiambu 85.4 74.4
Kilifi 64.4 77.0
Nairobi 51.8 37.7
Nandi 81.0 92.8
Kakamega 96.6 81.2
Makueni 81.1 91.6
Kitui 80.6 90.8 Source: National Cohesion and Integration
Commission (2016
186
Employment in the county public service is not CPSBs and the PSC. However, the same standards
only inequitable but skewed towards the dominant used in the Public Service Commission should be
groups within the county. Therefore, this may applied in the CPSBs, with the County Assembly
have perpetuated sentiments of protectionism, being strengthened to oversight the CPSBs.
tribalism, isolationism, county-ism, clannism, and
self-advancement within counties in spite of the There is also a gap in the County Governments
letter and spirit of the Constitution, which intended Act, which overlooks the issue of clannism as it only
to dispel regional inequalities. Local groups, as requires balancing of ethnic communities. While a
is witnessed in recruitments by counties, seek to county may meet the threshold as prescribed for
maximize their representation in county leadership ethnic communities, the composition may comprise
positions. only of selected clans to the exclusion of others.
In as much as county may meet the threshold for
Some of the issues in achieving and releasing the ethnicity, the composition may comprise of only one
quotas include weak oversight and enforcement clan. Further, the terms “dominant” and “minority”
mechanisms for non-compliance, and weak are not clearly defined.
institutional frameworks in institutions mandated
to oversee matters concerning representation, While the 30 per cent provision is motivated to
cohesion, values and diversity. Further, the legal encourage applicants from other ethnicities to seek
frameworks do not prescribe any sanctions for non- and obtain employment in other regions, it is highly
compliance. In addition, there are no incentives to likely that certain ethnicities will dominate certain
comply or to diversify, as leaders are motivated to regions as the two are often synonymous in Kenya.
maintain popular public opinion by providing jobs The PSC and NCIC could similarly develop an index
to residents within the county. for representation across counties. Nonetheless,
failure to maintain ethnic representation and diversity
Further, there are weak institutional linkages in the public service diminishes the prospects of
between County Public Service Boards, the Public regional balancing, diversity and reflection of varied
Service Commission and National Government, ethnicities in National and County Government
which results in inadequate systems for checks entities. This, if not properly checked, may result in
and balances of County Public Service Boards. marginalization of minority communities based on
There is also poor oversight of County Public ethnicity, clan or religion among other considerations,
Service Boards, which ultimately means that even resulting in skewed allocation of resources.
where County Public Service Boards are found to
have breached the law, there are no enforcement The above points to the need to ensure inclusivity
mechanisms prescribed by the law. While the County in both National and County Government
Governments Act, under Section 77, provides that appointments. The Public Service Commission,
“any person dissatisfied or affected by a decision National Cohesion and Integration Commission and
made by the County Public Service Board or a County Public Service Board need to implement
person in exercise of disciplinary control against concerted measures to promote inclusivity, eliminate
any County Public Officer may appeal to the Public discrimination and protect diversity in the public
Service Commission against the decision”, there is service at national and County Government levels.
no other oversight or enforcement mechanisms over In this regard, incentives should be developed to
the County Public Service Boards regarding non- encourage public institutions to embrace diversity,
compliance with the requirement to ensure that 30 besides imposing a statutory quota. Alternatively,
per cent of the vacant posts at entry level are filled sanctions could be imposed on errant members
by candidates who are not from the dominant ethnic of County Public Service Boards, including Human
community in the county. An aggrieved party may Resource Officers, who should receive an adverse
only have recourse and seek redress through the report submitted to their professional regulatory
court system. As it is, there is no link between the body, the Institute of Human Resource Management.
187
(d) Representation of Persons with or appropriate support available. Further, lack of

Disability in the Public Service accessibility often discourages PWDs from accessing
employment. Infrastructure, including public
The Constitution of Kenya, Persons with Disabilities accommodation, transport systems and information
Act of 2003, and the Convention on the Rights of are often inaccessible or customized for PWDs, which
Persons with Disabilities (PWDs) recognize the may discourage them from seeking work.
inability of PWDs to competitively participate in
socio-economic activities leading to their socio- Educational outcomes and completion rates for
economic marginalization. The right to work is a children and adults with disabilities are also an
fundamental right recognized in Article 27 of the issue. In 2016, the National Survey on Children
United Nations Convention on the Rights of Persons with Disabilities and Special Needs in Education
with Disabilities (UNCRPD), which Kenya has ratified. reported that the number of special needs learners
Article 27 of the UNCRPD recognizes the right at primary school level was 251,542, with 97 per cent
of persons with disabilities to work on an equal of the learners enrolled in public primary schools
basis with others, which includes the right to gain and 3 per cent in private schools. At secondary
a living by working freely in a chosen or accepted school level, there were 14,098 learners with
labour market and work environment that is open, special needs enrolled, 90 per cent of whom were
inclusive and accessible to PWDs. This signifies the enrolled in public schools, which is indicative of low
right of PWDs to earn a livelihood in a profession transition rates. Access to basic education is a key
individually chosen, and to work with equal rights factor in empowering PWDs to obtain meaningful
with others to improve the financial situation and employment.
support personal empowerment of PWDs. Further,
To ensure protection and inclusion of PWDs, Kenya
the UNCRPD mandates state parties to promote
has put in place various laws and institutions to cater
employment opportunities and career advancement
for their well-being. The Constitution of Kenya 2010
for PWDs in the labour market, and assistance in
in Article 27 entitles every person to equality before
finding, obtaining, maintaining and returning to
the law and prohibits direct or indirect discrimination
employment.
on any ground, including disability. Furthermore,
This requirement is critical particularly because Article 27 of the Constitution provides that the state
PWDs experience higher rates of unemployment shall take legislative and other measures including
and under-employment compared to persons affirmative action programmes and policies
without disabilities, and therefore merit special designed to redress any disadvantages suffered by
consideration. Employment precedes and is a individuals or groups because of past discrimination.
prerequisite for realization of the right to human Article 54 stipulates specific entitlements for PWDs,
dignity as it enables individuals to fully participate including the right to be treated with respect and to
in the economy and society. Employment provides be referred to in a manner that is not demeaning, the
the impetus for achievement of the right to human right to access educational institutions, reasonable
dignity and socio-economic development. The 2019 access to public transport, information, the use of
Kenya Population and Housing Census conducted sign language, braille or other appropriate means of
by the Kenya National Bureau of Statistics revealed communication and access to materials and devices
that 918,270 people aged 5 years and above had to overcome constraints arising from the person’s
a disability, and further that more females (523,883) disability. The State is also obligated to ensure
than males (394,330) had disabilities (KNBS, 2019). progressive implementation of the principle that at
Further, the 2019 census found that nationally, the least 5 per cent of members of the public in elective
proportion of PWDs was 2.2 per cent with rural areas and appointive bodies are persons with disabilities.
having a higher proportion of 2.6 per cent compared
Article 55 of the Constitution requires the State
to 1.4 per cent for urban areas. For persons with
to take measures, including affirmative action
disabilities, obstacles to their full participation are
programmes, to ensure that PWDs have access to
represented not only by the physical environment,
relevant education and training, opportunities to
transportation, ICT, but also by access to facilities,
associate, be represented and participate in political,
information and services due to lack of adequate
social, economic and other spheres of life; and
188
access employment. Article 56 of the Constitution sectors. Moreover, the Public Procurement and
requires the State to put in place affirmative action Disposal Act 2015 and Regulations 2006, reserves
programmes designed to ensure that minorities 30 per cent of public procurement for women,
and marginalized groups are provided with special youth and PWDs as a means of empowering them
opportunities for access to employment. The and granting them access to opportunities. The
Constitution elaborates on the rights of PWDs PSC has also developed the Diversity Policy for the
to ensure their inclusion and participation in the Public Service (2016), which is a guideline for the
legislature. Article 81 requires that the electoral public service on mainstreaming and management
system shall ensure fair representation of persons of diversity issues in the public service.
with disabilities. The composition of the National
Assembly, County Assembly and Senate at both The Persons with Disabilities Act, No. 14 of 2003,
levels of government must ensure that it maintains has been the legal instrument ensuring respect for
a number of special seat members to ensure that persons with disabilities prior to promulgation of
persons with disabilities have representation, as the Constitution. The Act establishes the National
prescribed by the Constitution. Article 232(1) Council for Persons with Disability (NCPWD) and
of the Constitution stipulates that one of the sets out the rights and privileges of PWDs. The
principles and values of the public service is to Act sets out general conditions to be complied
provide for fair competition and merit as the basis with to facilitate the employment and inclusion of
of appointment and promotion while ensuring that PWDs. Section 12 postulates that PWDs should
persons with disabilities are afforded adequate and not be denied access to opportunities for suitable
equal opportunities for appointment, training and employment. A qualified employee with a disability
advancement at all levels of the public service. is also subject to the same terms and conditions
of employment and the same compensation,
In addition, Section 10 of the Public Service privileges, benefits, fringe benefits, incentives or
(Values and Principles) Act, 2015 which gives effect allowances as a qualified able-bodied employees.
to Article 232 of the Constitution allows public Section 15 (5) of the Persons With Disabilities Act
institutions, for purposes of ensuring representation requires an employer to provide such facilities
of PWDs and other marginalized groups, not to and effect such modifications, whether physical,
unduly rely on fair competition and merit as the administrative or otherwise, in the workplace as may
sole basis for appointments or promotions, which reasonably be required to accommodate persons
may often disadvantage PWDs. The Act provides with disabilities. Section 16(2) provides incentives
for circumstances under which affirmative action to a private employer who improves or modifies
measures may be applied in the appointment and the physical facilities or avails special services to
promotion of public officers in the public service and provide reasonable accommodation for employees
allows use of affirmative action in instances where with disabilities. Section 21 of the Act entitles PWDs
PWDs are under-represented. The Public Service to a barrier free and disability friendly environment.
Commission Act, 2017 defines affirmative action as This is to enable them to have access to buildings,
the measures designed to overcome or ameliorate roads, social amenities, assistive devices, and
an inequity or the systematic denial of opportunities. other equipment to promote their mobility and
Section 48 of the Public Service Commission Act accessibility. Nonetheless, the Act is in need of
requires the Public Service Commission to make review to include and operationalize the rights and
regulations to give effect to the requirements of the entitlements envisaged in the Constitution.
Constitution regarding inclusivity in terms of, inter
alia, persons with disabilities. The Public Officers’ Other requirements and obligations for facilitation of
Ethics Act, 2003 creates an environment that nurtures PWDs are similarly imposed on various Government
respect for diversity, including disability. The Act institutions to enhance their access to public
requires public officers to treat fellow public officers, services. The Persons with Disabilities Act requires
including PWDs, with respect while discharging their the Chief Justice to publish rules providing for the
mandate. The Employment Act 2007 recognizes provision, to persons with disabilities who attend
disability and prohibits discrimination on grounds of court, of free sign language interpretation, braille
disability in employment both in public and private services and physical guide assistance. In this regard,
189
the Constitution of Kenya (Protection of Rights and
Total Number of PWDs (%

Representation)
2018/19
54(1.02%)
880(0.98%)
320(1.18%)
1,094(1%) 1,297(1.39%)
16(1.03%)
2,567(1.2%)
Fundamental Freedoms) Practice and Procedure
Rules, 2013 under Rule 7 requires the Court to
pursue access to justice for all persons including
persons with disabilities. Nonetheless, there is still
2017/18
16(1.5%)
680(1.2%)
349(1.7%)
16(1.2%)
216,958 1,312(1%) 2,155(1.1%)

need for more targeted and comprehensive rules
comprising the specific mechanisms and structures
that the Judiciary shall establish to ensure access to
justice and public services by PWDs.
2016/17
40(1%)
457(1%)
---
813(1%)
2(1%)
Table 10.9: Representation of PWDs in the Public Service by service sector, 2016-2018
Participation in the electoral process by various
groups, including PWDs, is a key factor in enabling
their subsequent representation. During elections,
Total Number of Officers
2018/19 2016/17 2017/18 2018/19

5,304
89,778
27,162
93,154
1,560
the Persons with Disabilities Act stipulates that all
Source: Public Service Commission (Various) Reports 2016-2018

persons with disabilities are entitled to be assisted
by persons of their choice in voting in presidential,
1,452
86,145
29,501
79,521
1,500
198,119
parliamentary and civic elections. Moreover, the Act
requires polling stations to be made accessible to
persons with disabilities during elections, and that
such persons should be provided with the necessary
3,016
72,032
---
66,952
264
142,264
devices and assistive devices and services to facilitate
the exercise of this right. Further, Article 82 of the
Constitution stipulates that that voting at every Compliant Institutions
0
5
6
election should take into account special needs of
PWDs. In spite of this, PWDs still face challenges
that impede their effective participation in electoral
2017/18
1
1
8
10
processes, including lack of access to information,
facilities and services.
As noted above, the Constitution requires that at
2016/17
0
---
2
2
least 5 per cent of appointments in the public sector
should comprise persons with disabilities. However,
compliance within the public service has been
low. In 2018/19, the Public Service Commission of
Total Number of Institutions
2016/17 2017/18 2018/19

11
47
32
184
281
Kenya in its report on “Status of the Public Service
Compliance with the Values and Principles in Articles
10 and 232 of the Constitution”, noted that out of
7
44
33
162
251
the 216,958 officers in the public service institutions

that fall within its jurisdiction, only 2,567 (1.2%) were
PWDs against the constitutional threshold of 5 per
9
37
---
114
164
cent, indicating low levels of compliance with the

legal requirements. This further points to inadequate
inclusion of PWDs in the public service (Table 10.9).
Constitutional Commissions
While there has been some improvement in the

Statutory Commissions and
and Independent Offices
percentage representation of PWDs in the public

State Corporations and
service, the improvement has been marginal.

Ministries and State
Public Universities
While recognizing that the public service is one of

the biggest employers in the country, it ought to
Department
be reflective of Kenya’s diverse populations and

Authorities
promote diversity and inclusion from within.

SAGAs
Total
190
Further, a majority (73.1%) of PWDs serve at state corporation may specify such appointments in
technical level Job Group E-M while only (3.2%) its establishing statute or articles of association, the
and (0.2%) of PWDs serve at Senior Management State Corporations Act ought to expressly specify
and policy level job group R-U, respectively (Figure the minimum number of positions to be maintained
10.2). This may be due to lack of specific legislation for PWDs in boards of state corporations. This would
regulating appointments of PWDs at higher levels. enable increased inclusion of PWDs at higher levels
For instance, the State Corporations Act, Cap 446 of management. While the law has made various
which regulates state corporations fails to provide attempts to secure accessibility to public services
a number of reserved positions for appointment by PWDs, there is absence of targeted guidelines
of PWDs in boards. While the Mwongozo Code across various sectors and professions to ensure
generally requires that all board appointments be adequate inclusion of PWDs while considering the
made in line with Article 27 of the Constitution, and a specific disability.
Figure 10.2: Status of representation of PWDs by Job Grade, 2018-2019
From the above, it is evident that unemployment Moreover, lack of rigorous and comparable data
among PWDs remains rife and pervasive within on disability in the private sector and evidence on
the public sector, with disparities becoming more programmes that work often impedes understanding
prominent at higher job levels. Although Kenya has and action.
laws on accessibility, compliance in public buildings
is often very low. In addition, the communication Considering measures taken in other jurisdictions
needs of people with disabilities are often unmet. to enhance employment opportunities for PWDs,
Information is frequently unavailable in accessible we find that, for example, the United Kingdom (UK)
formats, and some persons with disabilities are has established the National Disability Authority,
unable to access information and communication which has developed guidelines for employers
technologies such as telephones and television. in the public sector to ensure proper integration
191
of PWDs in the public service. The guidelines service are used to integrate PWDs in the public
recommend the need to ensure colleagues have service at all levels and cadres of the service.
received disability awareness training; ensure
procedures, information and communication Of importance is the maintenance of data on PWDs
at work are accessible to staff with disabilities; in all sectors in a consistent and prescribed format,
increase contact with people with disabilities helps which may be achieved by ensuring that all PWDs
to build more inclusive attitudes towards disability, register with the National Council for Persons with
work placements, work-shadowing and mentoring Disabilities for maintenance of their data. Such data
schemes; employ disability training for all staff, should be disaggregated further by age and gender.
including senior management; plan for an accessible This would ensure monitoring of the status of PWDs.
work environment and build-in the requirement to Further, the NCPWD in collaboration with public
have at least 5 per cent of staff with disabilities into sector institutions, the National Gender and Equality
the institution’s long-term recruitment strategy, and Commission and the Public Service Commission
into each recruitment process being undertaken by could maintain a database to document case
the institution. Additionally, the National Disability studies of strategies and programmes that are not
Authority underscores the importance of maintaining working. Moreover, annual reports ought to provide
accurate and disaggregated data in relation to the a summary of the actions public bodies are taking to
effectiveness of specific models of good practice meet their statutory and constitutional obligations
in the employment of persons with disabilities and and document any progress public bodies are making
learning from good practice in the public sector, in increasing employment opportunities for persons
through liaison with similar institutions that have with disabilities. Through data-driven accountability,
achieved success, and through the relevant public concerted, targeted and sustained strategies can
service networks. be implemented to ensure better employment
prospects for PWDs. The enactment of the Kenyan
In addition, issuance of awards by the National Sign Language Bill, 2019, which seeks to promote
Council for Persons with Disability (NCPWD) to the use of Kenyan Sign Language is paramount
employers and businesses which have provided to enhance inclusion of deaf persons in public
PWDs with opportunities in education, training and processes. A review of the Persons with Disabilities
to use their professional skills may also incentivize Act, alongside other complimentary laws, is key in
employers, as is done in the European Association ensuring realization of the rights envisaged in the
of Service Providers for Persons with Disabilities Constitution to ensure PWDs achieve meaningful
annual Employment for All Award. employment in their career of choice.
Persistent under-employment of persons with
disabilities needs to be addressed with immediate (e) Gender representation in the
action to end the situation of exclusion from public service
employment opportunities. Positive support
This section assesses gender representation at
measures in this sense are key to unlock job
various levels and sectors in the public service.
potential and shift the focus from the disability on to
The Constitution of Kenya has laid the groundwork
skills and competences. Targeted programmes and
for a more progressive and inclusive approach to
measures could be established, which are specific
ensuring parity in the public service, and mandates
to the individual disability and sector. All public
the State to take affirmative measures to address
institutions could establish customized facilities
gender inequalities. The Kenya Constitution 2010
and services for use by PWDs, including personal
promised a new era of equality for women free
aides, access ramps, reserved parking spaces, sign
from discrimination in various spheres including in
language interpreters, braille materials, customized
employment and political representation. Article
sanitary and customized lifts as required in the law.
10(2) (b) of the Constitution envisions Kenya’s
The Public Service Commission should finalize and
national values and principles of governance as
cascade the draft Disability Policy and Guidelines
promoting and ensuring human dignity, equity, social
for the Public Service (2018) to ensure that the
justice, inclusiveness, equality, human rights, non-
strategies for disability mainstreaming in the public
discrimination and protection of the marginalized.
192
Further, Article 27 entrenches the fundamental Other important milestones that have been made
right to equality and freedom from discrimination in the public service include the establishment of
by providing that women and men have the right a Ministry responsible for Public Service, Youth
to equal treatment, including the right to equal and Gender affairs, and the establishment under
opportunities in political, economic, cultural and it of the State Department of Gender Affairs. The
social spheres. Further Article 27(4) prohibits the Department is charged with, among others, the
State from discriminating directly or indirectly on responsibility of promoting gender equality and
any ground including, inter alia, sex and prohibits empowerment of women in Kenya, and of ensuring
any person from discriminating against another that gender is mainstreamed in all activities carried
person on these grounds. Article 27(6) creates out by Ministries, Departments and Agencies,
a duty on the State to take legislative and other County Governments and, and in the private sector,
measures, including affirmative action programmes by establishing national principles and a national
and policies, to redress any disadvantage suffered gender action plan.
by individuals because of past discrimination.
Affirmative action is defined in Article 260 as including Nonetheless, gender inequalities exist in the public
“any measure designed to overcome or ameliorate service. The PSC reported that in 2018/19, although
an inequity or the systemic denial or infringement of the two thirds gender principle has been met at the
a right or fundamental freedom”. In addition, Article ratio of (63.2%) male to (36.8%) female, the male
56 provides further protections for “minorities gender still dominates decision-making positions
and marginalised groups”, a classification which in the public service (Figure 10.5). For example, in
encompasses all those vulnerable to discrimination. 2018/19, males dominated in job group A–D at 68.3
In addition to the measures under Article 27 (6), per cent, E–H at 66.6 per cent, J–M at 55.8 per cent,
Article 27(8) requires the State to ensure that N–Q at 63.8 per cent, R–T at 68.1 per cent and U
not more than two thirds of the members of any above at 69.7 per cent whereas females were less
elective or appointive body are of the same gender. represented in the various job groups: A–D at 31.7
Furthermore, Article 232 (h) (i) of the Constitution on per cent, E–H at 33.4 per cent, J–M at 44.2 per cent,
values and principles of the public service requires N–Q at 36.2 per cent, R–T at 31.9 per cent and U
the affording of adequate and equal opportunities and above at 30.3 per cent. This is contrary to the
for appointment, training and advancement, at all spirit of Article 232(1) (i) of the Constitution which
levels of the public service, of men and women. requires equal representation at all levels.
Table 10.9: Gender representation by service sector in the Public Service, 2016-2018
Total Number of Officers % Female % Male
(Male + Female)
2016/17 2017/18 2018/19 2016/17 2017/18 2018/19 2016/17 2017/18 2018/19
Constitutional Commissions and 3,030 1,061 5,304 41% 40.7% 40.8% 59% 59.3% 59.2%
Independent Offices
Ministries and State Department 69,991 57,219 89,778 31% 62.3% 34.3% 69% 37.7% 65.7%
Public Universities --- 20,749 27,162 --- 40.8% 43.0% --- 59.2% 56.9%
State Corporations and SAGAs 63,202 113,211 93,154 28% 31.6% 37.1% 72% 68.4% 62.9%
Statutory Commissions and 255 1,369 1,560 48% 51.1% 45.4% 52% 48.9% 54.6%
Authorities
Total 136,478 193,609 216,958 30% 34.6% 36.8% 70% 65.4% 63.2%
Source: Public Service Commission (Various) Report 2016-2018
193
and Authorities
Total 136,478 193,609 216,958 30% 34.6% 36.8% 70% 65.4% 63.2%
KENYA ECONOMIC REPORT

Source: Public 2020 Commission (Various) Report 2016-2018
Service
Figure 10.3: Gender representation by service sector and level, 2016/17

Figure 10.3: Gender representation by service sector and level, 2016/17
Source: PublicSource:
ServicePublic Service Commission
Commission (2017),
(2017), Report Report 2016/17
2016/17
Figure 10.4: Gender representation at various job group levels, 2018/19
241
44.20%
33.40% 36.20% 31.90% 36.80%
31.70% 30.30%
194
From the above, it is clear that men still dominate discrimination. Political parties ought to develop
the public service, with the gender inequality more internal democratic structures and mechanisms to
pronounced at higher job grade levels. The absence ensure that they encourage and have more female
of a high number of women in decision-making candidates on the ballot. An even playing field
positions is one of the causes of lack of action on within political parties should be created. Political
gender parity in the public service. More concerted parties are the main route to political participation,
affirmative action programmes in the public service and it is therefore paramount to ensure women’s
are required to ensure that the ratio of men to representation and advancement within political
women progressively achieve the principle that not parties.
more than two-thirds (2/3) of its employees shall be
of the same gender at all levels. Increased lobbying
and advocacy are required to prioritize this. 10.4 Role of Public Participation in
Building Inclusive Processes
The Kenyan Constitution in Articles 27 (8) and 81 (1)
(b) has provided increased opportunities for women’s The Government has demonstrated its commitment
political participation and provides for no more than to ensuring public participation through legislative
two thirds representation of one gender in elective provisions on public participation across various
and appointive positions. Further, in regularizing legislative instruments. This is to enable citizens,
political representation of women, minorities and at both national and county level, gain individual
marginalized communities, the Constitution through and collective power to demand public service,
Articles 27(8), 81, 90, 97, 98, 177(2) provide for non- end poverty and challenge inequalities while
discrimination and the nomination or election of benefiting from an enabling environment. As such,
marginalized groups including women, Persons with the Constitution and key legislations such as the
Disabilities (PWDs) and youth by political parties Public Finance Management Act and the County
by both the national and County Governments. Governments Act 2012 place strong emphasis on
The Constitution further elaborates on the rights strengthening public participation as part and parcel
and fundamental freedoms for PWDs, minorities of public service delivery, which promotes inclusive
and marginalized groups to ensure their protection leadership and citizen-driven decision making, a
and inclusion. The platform provided by a County tenet of transformative leadership.
Assembly ensures that it comprises a number of
special seat members to ensure no more than two- Public participation not only strengthens and
thirds of the membership of the Assembly are of the legitimizes Government actions, but is a critical
same gender; and marginalized groups, including element of good and democratic governance.
persons with disabilities and the youth, have Public participation is, indeed, the very foundation
representation, as prescribed by an Act of Parliament for a true democracy. Public participation aims to
(Article 97 of the Constitution). This notwithstanding, transition leadership from planning for citizens to
there is still political exclusion and discrimination of planning with them. This encourages community
marginalized communities of minorities in elective ownership and enhances mutual social accountability
and nominated positions in County Governments where citizens validate decisions reached by
where youth, women, minorities and PWDs are often leaders. Public participation emphasizes openness,
left out in appointments. accountability and meaningful engagement of the
public in decision making. There are requirements
Despite the Constitution requiring that there be no on public participation in matters concerning
more than two thirds gender representation of any planning, budgeting and implementation of projects
one gender, Parliament is yet to pass the necessary and development programmes that continue to be
legislation to operationalize these requirements implemented. Thus, devolution promotes the values
despite Article 27(6) of the Constitution mandating of “bringing Government closer to the people”
the State to take legislative and other measures, and provides the people greater accessibility to
including affirmative action programmes and local authorities. This close interaction with local
policies, designed to redress any disadvantage authorities enhances direct accountability and
suffered by individuals or groups because of past responsibility. The focus of devolution in Kenya
195
has, inter alia, been on establishing channels for likely to be affected by a decision or public policy.
increasing citizen participation in selecting political
representatives and in the policy and legislative Several challenges face the efforts to entrench public
process. Devolution enables enhanced public participation in policy making processes, including
participation by increasing accessibility of political lack of consistent and harmonized processes,
representatives and increasing participatory strategies and approaches to public participation,
opportunities and forums at devolved levels of and weak coordination mechanisms; weak feedback
Government. and reporting mechanisms; and reluctance by some
counties to complete and operationalize public
Section 5 of the Statutory Instruments Act, 2013 participation laws. Furthermore, public officers
requires a regulation-making authority to, before consider that the benefits and value of public
issuing a statutory instrument, to make appropriate participation are not commensurate with the time
consultations with persons who are likely to and cost invested in carrying out the exercise and is
be affected by a proposed instrument. Section largely carried out for purposes of compliance. Other
5(3) (a) of the Act requires a regulation making challenges include resource constraints, demand for
authority to notify, either directing or through incentives from citizens before attending meetings,
advertisement, bodies that, or organizations citizen apathy, deliberate political interference in
representative of persons who are likely to be the public participation process, and low uptake of
affected by the proposed instrument. The form citizen views.
of consultation includes to involve notification,
either directly or by advertisement, of bodies or
organizations representative of persons who are 10.5 Key Messages and
likely to be affected by the proposed instrument, Recommendations
or invite submissions to be made by a specified
date or might invite participation in public hearings
to be held concerning the proposed instrument, 10.5.1 Key messages
consult persons having expertise in fields relevant
to the proposed statutory instrument, and ensure Inclusive governance contemplates equitable
the persons likely to be affected by the proposed resource allocation and distribution across regions,
statutory instrument have an adequate opportunity ethnic representation in the public service, and
to comment on the content. inclusivity in Government processes.
Although there are legislative instruments regulating 1.) The Constitution introduced major reforms
public participation, including the Statutory in governance, resource allocation and
Instruments Act, 2013, there is also need to provide the structure of the public service with the
clear and consistent guidelines and steps to be applied intention of curing, inter alia, socio-economic
and followed by National and County Governments inequalities and skewed resource distribution
and Governmental ministries, departments and that were inherent in the centralized system
agencies on the process of conducting public that existed prior to devolution.
participation, including which activities require
public participation, the people who should be 2.) With the introduction of a devolved system of
consulted, the composition of stakeholders, the governance, counties were placed in strategic
number of people who should be consulted, the positions to allocate substantial amounts of
form of consultation, and mechanisms for feedback. resources in development of key sectors such
A key gap is what amounts to sufficient or adequate as health, agriculture and infrastructure, which
participation. There is also need to distinguish and are devolved functions, to ensure the well-
elucidate the concepts of public participation and being of the people and improve the quality
stakeholder engagement. While public participation of lives, thus bringing them at par with other
envisions a wider reach to members of the public, areas of the country in terms of development.
stakeholder engagement involves consultation of 3.) In spite of measures to ensure equitable
technical stakeholders within the industry who are allocation to County Governments, there is low
utilization of allocated funds by some County
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Governments (Annex Table 10.2), delays institutions, and lack of appropriate resources
by the National Treasury in disbursing the to ensure accessibility by, and accommodation
equitable share of revenue raised nationally, of, PWDs. Representation of PWDs is
and incidents of misappropriation, misuse paramount in realization of inclusivity within
and wastage of public funds which threaten the public service, particularly because PWDs
to encumber the realization of the objectives experience higher rates of unemployment
of devolution to alleviate socio-economic and compared to persons without disabilities and,
regional disparities. therefore, merit special consideration.
4.) Devolution has the potential to minimize socio- 9.) Gender inequalities exist in the public service
economic inequalities and bridge the gap in despite constitutional requirements to ensure
socio-economic marginalization. However, that not more than two thirds of members
this requires equitable and timely allocation of of any elective or appointive body are of the
revenue to County Governments, and prudent same gender. In 2018/19, the PSC reported
public financial management. that although the two thirds gender principle
5.) In ensuring inclusivity, representation of diverse has been met at the ratio of (63.2%) male
groups, communities and individuals in society to (36.8%) female, the male gender still
in the public service is key. Ensuring the public dominates positions in the public service,
service is reflective of the society it serves with the gender inequality more pronounced
and that the individual needs, experiences, at higher job grade levels. The absence of a
aspirations and situations of these groups are high number of women in decision-making
incorporated in the policy making process is positions is one of the causes of lack of
paramount. prioritization and action to promote gender
equality in the public service.
6.) The public service in Kenya exhibits ethnic
inequalities and skewed representation in 10.) Some of the issues in achieving and realizing
favour of certain communities, indicating that the statutory quotas imposed on public
it is not inclusive. In 2018/19, the PSC reported institutions on representation include weak
that there was gross over-representation of the oversight and enforcement mechanisms for
Kikuyu and Kalenjin tribes. This was followed non-compliance, weak institutional frameworks
by the Luo and Kisii tribes. The Kenyan in institutions mandated to oversee matters
Somali are grossly under-represented, while concerning representation and diversity, lack
the Luhya, Mijikenda and Turkana are under- of sanctions for non-compliance, and lack of
represented in the public service. incentives to diversify.
7.) Employment in the County Governments is 11.) Strong and inclusive public processes through
similarly inequitable and not inclusive. Most public participation are fundamental in
counties have employed more than 70 per countering the forces that create inequality.
cent of their staff from one ethnic group that Inclusive Government processes also allow
is dominant in the region despite the existing the public to be involved in policy making,
law. Employment in the County Public Service regulation and service delivery on matters that
is not only inequitable but skewed towards affect them.
the dominant groups within the county. 12.) However, despite the existence of a
8.) Representation of PWDs in the public service legal framework entrenching ideals and
remains low and below the prescribed requirements of public participation in
constitutional threshold that at least 5 per policy making processes, public participation
cent of members of the public in elective and initiatives are conducted in a haphazard
appointive bodies should be persons with manner, and there is lack of consensus on what
disabilities. In 2018/19, the PSC reported amounts to sufficient public participation.
that only 1.2 per cent of officers in the public 13.) Among the challenges facing efforts to
service were PWDs. Realization of the quota of entrench public participation in policy
5 per cent is hampered by low compliance by making processes are lack of consistent
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and harmonized processes, strategies and lobbying campaigns, and sustained court
approaches to public participation. action to compel institutions to comply.
8.) The NCIC in collaboration with relevant
10.5.2 Recommendations
stakeholders such as the PSC, the Office of the
1.) The National Treasury could endeavor Attorney General and Department of Justice
releasing funds based on the prescribed could develop principles and guidelines on
disbursement schedule under the County how regional and ethnic diversity can be
Allocation of Revenue Act 2015 to ensure determined. Further, the financial and human
that budget implementation and delivery of resource capacity of the National Cohesion and
services are not affected. Integration Commission should be enhanced
to enable it to perform and discharge its
2.) Nonetheless, counties should improve on Own
mandate effectively.
Source Revenue (OSR) collection to increase
capacity to finance their operations to reduce 9.) To enhance inclusion of PWDs, it is of paramount
the extent to which they rely on the National importance to establish a framework for
Exchequer. maintenance of data on PWDs in all sectors
in a consistent and prescribed format, which
3.) Prudent fiscal management is key in ensuring
may be achieved by ensuring that all PWDs
public funds are utilized for the benefit of the
register with the National Council for Persons
public and towards the purposes for which they
with Disabilities for maintenance of their
were allocated. It is through this that effective
data. Such data should be disaggregated
public service delivery may be achieved, and
further by age, gender, nature of disability,
regional equality attained.
education level and qualifications. This would
4.) To enhance inclusivity and ethnic ensure monitoring of the status of PWDs. All
representation within County Governments, sectors should maintain data (disaggregated
the County Public Service Boards and NCIC by age, gender, education, qualifications and
ought to undertake and publish audits on the nature of disability) on PWDs in all sectors in a
status of ethnic diversity in the county public consistent and prescribed format through the
service. Further, this should consider matters NCPWD.
concerning proportionate representation
10.) Further, the NCPWD in collaboration with
within County Governments.
public sector institutions, the National
5.) To ensure compliance with the legal quotas Gender and Equality Commission and the
on representation, stronger sanctions and Public Service Commission should maintain
penalties should be imposed on non-compliant a database to document case studies of
institutions. This should include pursuing court strategies and programmes that are or are not
remedies and redress by relevant institutions working.
such as NCIC, NGEC and PSC suo moto or
11.) To enhance the inclusion of deaf persons, the
upon complaint, for non-compliance with the
Kenyan Sign Language Bill, 2019 should be
legal requirements on representation.
enacted to promote the use of Kenyan sign
6.) To ensure that recruitment within the public language and accommodate the needs of
sector is fair in terms of the ethnic diversity deaf persons.
of the country, managers of public institutions
12.) To incentivize employers to engage PWDs
could be called to account in line with the
in meaningful employment, NCPWD, NGEC
provisions of the Constitution and the laws
and PSC should create a forum for issuance of
made thereunder.
awards to recognize employers and businesses
7.) Further, more affirmative action initiatives are that have provided PWDs with opportunities
required to ensure gender equality within in employment, training and to use their
the public service and to bring females up to professional skills.
par with their male counterparts. This should
13.) To promote the inclusion of PWDs in
be complemented by more advocacy and
employment and other sectors, the Persons
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with Disabilities Act, 2003 ought to be reviewed fundamental principle to ensure that all are
to include and operationalize the rights and accountable to the laws that are enacted.
entitlements envisaged in the Constitution.
16. A human rights-based approach should be
14.) To clarify the process on public participation, adopted to empower people to be aware of
clear guidelines should be established through and exercise their rights. This would increase
enactment of the Public Participation Bill. the ability and accountability of individuals
15.) Overall, the rule of law should be upheld by and institutions responsible for respecting,
all Government institutions and officers as a protecting and fulfilling human rights.
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PARTNERSHIPS FOR
INCLUSIVE GROWTH
In line with the principle of “leave no one behind”, Kenya has embraced partnerships at the local,
regional and global levels as one of the keys to unlocking sustainable development. At the national
level, the most visible intra-governmental partnerships include collaborations between the Executive,
the Legislature, and the National Assembly. There are also inter-governmental relationships between
the National Government and County Governments. At the county level, there are partnerships
between the County Executive and the County Assembly. Similarly, the Government of Kenya
collaborates with the private sector through two avenues: Public-Private Partnerships (PPPs) and the
Public Private Dialogue. At the regional and global levels, the government engages both bilateral
and multilateral institutions guided by the country’s foreign policy. The weakest link in partnerships
in Kenya is the relationship between the state and civil society. To make partnerships more effective,
policy focus will require a reform of north-south cooperation towards equality, respect for national
sovereignty, non-conditionality and national ownership. Existing gaps in devolution can be dealt with
by formulating new policies and laws. Measures to strengthen public-private partnerships include a
review of the PPP policy and law to accommodate public participation during the project cycle. To
enhance public private dialogue, the finance and lobbying capacity of private sector associations
at the county level should be strengthened. To mitigate confidence rifts between the Government
and NGOs, the regulatory capacity of the NGO Co-ordination Board should be enhanced and self-
regulation within the sector strengthened by expediting the review and gazettement of the Public
Benefit Organizations Act (2013).
11.1 Introduction Partnerships have been receiving increasing policy

focus since the beginning of the 21st century.
Partnerships are voluntary agreements between The genesis of the concept on “partnerships for
Government, private sector and/or civil society development” is associated with three major global
actors aimed at solving social problems or supplying events. The first is the 2000 Millennium Summit of
collective goods by pooling competencies, sharing the UN, which adopted Agenda 2015 containing
risks, responsibilities, resources, costs and benefits. In eight Millennium Development Goals with Goal 8
partnerships, the actors have equal rights and agree focusing on global partnerships for development.
to work together in ways that lead to mutual benefit The second is the 2002 World Summit on
– reducing duplication of effort and achieving results Sustainable Development (WSSD) in Johannesburg,
that could not be achieved by a single actor. To ensure which promulgated multi-stakeholder partnerships
effectiveness, partners establish alliances that are (including private and civil society) as a complement
recognizable, autonomous, stable, permanent and to the increasingly unpopular single actor inter-
flexible. In addition, they are guided by a common governmental approaches towards sustainable
vision, compatible targets, convergence of interest, development. In fact, the introduction of multi-
complementarity of resources and shared value. stakeholder partnerships remains the flagship
of the second Earth Summit. The last event is
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PARTNERSHIPS FOR INCLUSIVE GROWTH
the Monterrey consensus, which emerged from environment is defined by certain principles as
the 2002 International Conference on financing espoused in local, regional and international policies,
for development. The conference birthed a new laws and regulations that provide for respect of the
partnership for global development. In 2015, the freedom of association and the rights of individuals
UN General Assembly adopted Agenda 2030 to form, join and participate in an association. A
containing seventeen (17) Sustainable Development good environment will also protect the right for
Goals (SDGs) as global effort to end poverty, protect organizations to operate freely without unwarranted
the planet and ensure that all people enjoy peace state intrusion or interference. Other rights to be
and prosperity. protected include freedom of peaceful assembly,
freedom of expression, communication and co-
Agenda 2030 advocates for “inclusive partnerships” operation with others in all sectors. Individuals and
and lays emphasis on integrating Persons with organizations will also be free to participate in the
Disabilities (PWDs) and the marginalized in policy processes through institutionalized, inclusive
development processes. The SDGs underline the and transparent multi-stakeholders dialogue fora.
principle of “leave no one behind” with Goal 17
stating that partnerships will be required to achieve At the global level, the main policy and legal
the Agenda 2030. Consistent with Goal 17, a coalition frameworks affecting partnerships for inclusive
of partners including UN Capital Development growth in Kenya are the UN Agenda 2030, AU Agenda
Fund, International Trade Centre, International Fund 2063, African Continental Free Trade Area (AfCFTA)
for Agricultural Development, CARE International and the East African Treaty. Whereas SDG No. 17
(Kenya), Smart Africa, Stop TB Partnership, and requires the inclusion of developing countries in
Bamboo Capital Partners established a US$ 500 partnerships, trading systems and decision-making,
million investment platform or SDG500 – to help Goal 19 of Agenda 2063 sees Africa as a major partner
achieve SDGs. The fund will provide equity and debt in global affairs and peaceful co-existence. Goal 11
capital to spur the transition of small businesses from of Agenda 2063 captures democratic processes
start-up to growth phases in emerging and frontier (democratic values, practices, universal principles
markets of Africa, Asia, Latin America, the Caribbean of human rights, justice and the rule of law) while
and the Pacific regions. Goals 18 and 5 foresee development processes that
integrate women, youth and girls. Other frameworks
Partnerships are best understood by looking at that affect partnerships include:
development as an individual as well as a collective
responsibility. With a world that is becoming • Universal Declaration of Human Rights (UHDR)
increasingly globalized and policy issues becoming (1948) Article 20 “Everyone has the right to
more complex, partnerships are becoming more freedom of peaceful assembly and association”
relevant. Emerging developmental challenges
exceed the capacities of any one single actor – • International Covenant on Civil and Political
suggesting multi-stakeholder approaches. The Rights and the First optional Protocol (ICCPR)
message that is wrapped in “partnerships for (1976). Article 22 “Everyone shall have the
development” is that development actors can right of freedom and association with others,
achieve much while acting alone but they can including the right to form and join trade
achieve much more while collaborating with others. unions for the protection of his interest”
In other words, development actors can and should • International Convention on the Elimination of
contribute to solving developmental challenges in All forms of Racial Discrimination (1969)
collaboration with others. • Convention on the Elimination of All Forms of
Discrimination against Women (1989)
11.2 Policy and Legal Framework for • Convention of the Rights of the Child (1990)
Partnerships • UN General Declaration on the Right and
Responsibility of Individuals, Groups and
The environment for partnerships is defined by Organs of Society to Promote and Protect
“the conditions under which the private sector, Universally Recognized Human Rights and
civil society and Government actors work”. Such
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Fundamental Freedoms (UN Defenders in its development efforts. To deliver the Vision,
Declaration) (1999) the document explicitly identifies the need for
At the national level, the main frameworks that define Government ministries and departments to
the policy and legal environment for partnerships collaborate with the private sector, civil society and
include the 2010 Constitution and numerous Acts other relevant stakeholders.
of Parliament including the County Government Act
2012, Transition to Devolved Government Act 2012, Public-Private Partnerships (PPPs) are now a key
Inter-governmental Relations Act 2012, Urban Areas aspect of Government infrastructure investments.
and Cities Act 2011, Public Finance Management PPPs are usually undertaken to attract private
Act 2012, Transition County Allocation Revenue Act sector partners in financing and managing
2013, County Public Finance Management Transition infrastructural investments. The public entity and
Act 2013 and National Government Constituencies private party enter into a contract or concession to
Development Fund Act 2015, Non-Governmental finance, construct, operate, equip or maintain any
Organizations Coordination Act No. 19 (1990), infrastructure or development facility. Thus, their
Non-Governmental Organizations Coordination benefits emanate from the fact that they allocate
Regulations (1992), Non-Governmental Organizations responsibilities to the party (private or public) that
Coordination (Amendment) Regulations (2010), has a comparative advantage in performing a given
Non-Governmental Organizations Council Code function. The Government of Kenya defines a PPP as
of Conduct (1995), Companies Act No 17 (2015), “an agreement between a public entity and a private
Societies Act - Chapter 108 of the Laws of Kenya party under which the private party undertakes to
(1968), Trustees (Perpetual Succession) Act - Chapter perform a public function or provide a service on
164 of the Laws of Kenya (1987), Trustees Act - behalf the public entity; the private party receives
Chapter 167 of the Laws of Kenya (1982), Income a benefit for performing the function, either by way
Tax Act - Chapter 470 of the Laws of Kenya, Income of compensation from a public fund, charges or fees
Tax (Charitable donations Regulations) (2007), Public collected by a private party from users or customers
Benefit Organizations Act (2013) (not yet gazetted), of a service provided to them or a combination of
Public Private Partnership Act No 15 of 2013, Public such compensation and such charges or fees; the
Private Partnership Regulations 2014 and Project private party is generally liable for risks arising from
Facilitation Fund regulations 2017 . the performance depending on the terms of the
agreement.” (Government of Kenya, 2011).
The national policy framework is based on the Kenya
Vision 2030, the Third Medium-Term Plan (MTP III) The 2011 PPP policy is explicit on stakeholder
2018-2022, “Big Four” agenda, Kenya External participation by stating that “stakeholders to be
Resources Policy (2015), Public Private Partnerships consulted include employees, their trade unions,
Policy 2011, Kenya Foreign Policy 2014, Policy on the public, the people who will use the assets and
Devolved System of Government 2016, Public Debt services provided, local communities, sectoral
and Borrowing Policy 2019, Sessional Paper No. interest groups, amongst others”. The policy was
1 of 2006 on NGOs, among others. Formulation developed to articulate Government commitment to
of the 2010 Constitution and the Kenya Vision PPP and to provide a basis for the enactment of the
2030 recognize all the dimensions of inclusivity. PPP law. The policy also provided the institutional
Ideally, processes that produced these documents framework for championing the PPP agenda. The
were consultative. In urban areas, workshops were institutions include the PPP Committee, the PPP
convened with stakeholders from all levels of the Unit (domiciled at the National Treasury), PPP
public service, the private sector, civil society, the Nodes in the public entities responsible for the
media and NGOs while in rural areas, provincial development and management of PPP projects,
consultative forums were held throughout the and a Project Facilitation Fund to provide an avenue
country. The opinions and views were compiled by for Government support to PPP projects. The main
a team of experts. In addition, the third Medium- criticism of the PPP regime in Kenya is that project
Term Plan (2018-2022) and the “Big Four” initiatives prioritization and identification process do not
(2018-2022) are explicit on how the Government involve citizen participation. The local private sector
of Kenya seeks to integrate the inclusion concept is also not involved. This has been attributed to
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absence of a clear framework and structure within threats are complex and cross-boundary, no single
the PPP Act to facilitate public participation. Other actor possesses the knowledge, skills or resources
challenges facing PPPs include high cost of capital, to tackle them. By aggregating the competencies
failure to realize value for money, low competition of diverse actors at the local, regional and global
during bidding resulting in high prices, poor project levels, solving such problems becomes much easier.
implementation, political interests, lack of awareness
on the concept of PPPs, unrealistic procedures, lack Most of these issues confronting the global community
of risk and PPP management skills and issues of are so big and the targets are so challenging that
transparency. no individual institution or government can provide
the solution. For example, the recognition by the
In 2019, the PPP programme had a pipeline of global community that the fight against three of the
about 64 bankable projects22 distributed as follows: deadliest infectious diseases (AIDS, tuberculosis and
agriculture, livestock and fisheries (1), education (14), malaria) was complex and cross-boundary resulted
energy and petroleum (5), health (6), tourism, trade in the establishment of a global fund in 2002, which
and industrialization (3), transport and infrastructure brought together governments, civil society, technical
(23), water and sanitation (10), and privately initiated agencies, the private sector and people affected by
investment proposals (4). Out of the 64 projects, 64 the diseases. During the period 2020-2022, Kenya
per cent are at the pre-procurement stage, 27 per has pledged US$ 6 million for the Global Fund’s
cent at the procurement stage while 9 per cent are Sixth Replenishment. The country is both a donor
at the post-procurement stage. to the Global Fund and an implementer of Global
Fund-supported programmes such as self-test kits
and pre-exposure prophylaxis to malaria vaccine and
11.3 Motivations for Partnering child-friendly tuberculosis medicines.
Development actors enter into partnerships because Response to disasters and crises: Partnerships may
of both internal and external factors. Drivers of be motivated by the need to become ethical and
partnerships include resource mobilization, dealing socially responsible. Usually, they take the form of
with complex and transboundary challenges, as private (for profit)/non-profit actors coming together
a response to crises, to build credibility, mitigate to solve “social capital” deficits. Ideally, partnerships
governance deficits and exploit the competency of of this nature try to strike a balance between equity
other partners. concerns of the society and efficiency orientation of
the market. When there are distributive injustices,
Resource mobilization: Development partners have inequalities, oppression and social justice is deficient,
been central to Kenya’s external policy and strategy. partnerships may evolve to raise public awareness
External funding as a proportion of total Government and extend mutual assistance towards the victims of
expenditure was 12.1 per cent in 2019/2020 (KNBS, these situations. The desire of such partnerships is to
2019 Statistical Abstract). Through Overseas build public awareness and provide redress to crises
Development Assistance (ODA), for instance, and disasters to make the world better. In Kenya, this
the country has been able to attract budgetary was exemplified by the 2011 “Kenyans for Kenya”
resources, gain access to technical assistance, famine appeal. This was a rapid response initiative
networks (including business and political leaders), mooted by a coalition of companies and civil society
capacity building, creative innovative products and including Safaricom Foundation, Kenya Commercial
markets, and as risk-sharing. Bank, Gina Din Corporate Communication, and
Dealing with complex and cross-boundary the Media Owners Association. Administered by
challenges: Currently, Kenya is facing a rising the Red Cross, the fund was established to offer
exposure to threats emanating from the global emergence assistance to about 3.75 million Kenyans
system. Such threats include global warming, who were on the verge of death from starvation in
terrorism, cybercrime, human trafficking, tsunami, 13 counties. The initial target was to raise Ksh 500
earthquakes, and epidemics (such as Ebola, Avian flu, million. However, after an overwhelming response
HIV/AIDS, coronavirus and many others). Because the from Kenyans, both locally and in the diaspora, the
target was upgraded to Ksh 1 billion.
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Partnerships have been instrumental in tackling overseen by the People’s Commission of Kenya.
humanitarian crises in the region. Between 1984 These actions made the Government to concede to
and 1985, Ethiopia experienced one of the worst their demands by establishing a merged commission
droughts and humanitarian crises of the 20th century – Constitutional of Kenya Review Commission in
– 8 million people were famine victims and 1.2 2002. At the continental level, the African Peer
million died. This crisis attracted the attention of Review Mechanism under New Partnership for
the world after a British Broadcasting Corporation Africa’s Development (NEPAD) was established as
documentary, which shook the world with graphic partnership within African countries to deal with
images of the starving, the dying and the dead. In political, economic and corporate governance
response, many foreign nations brought food relief challenges.
and humanitarian assistance. In addition, charity
supergroup called Band Aid released a song “Do Leveraging on competency of partners: In
they know it is Christmas” which raised Ksh 1.1 Public-Private Partnerships (PPPs), Government
billion for famine relief. In 1985, another group ministries and authorities have access to dialogue
called United States of America (USA) for Africa opportunities at the political level, while private
released a song “We are the World”, which sold 20 companies tend to have money, market experience
million copies worldwide. In total, the international and technology. These differences create potential
aid appeal raised Ksh 19 billion. enablers for partnership. In return, private partners
expect to earn profits, access new markets and gain
Build trust, credibility and legitimacy: Legitimacy new investment opportunities. The public sector
refers to the social acceptance of an actor based aims to lower budgetary constraints, transfer risk,
on the actor’s conformance to expected societal take advantage of private sectors technology and
norms. Generally, legitimacy is based on laws, technological expertise and get value for money.
regulations, rules, norms, values, beliefs and so When actors possess diverse sets of knowledge, skills
on. For example, Kenya has acceded to the United and capabilities, there is mutual benefit in partnering
Nations and African Union Charters to give the because each partner can acquire complementary
country legitimacy among the global community of capabilities. The two parties complement each
nations. Because of this recognition, the country was other by undertaking their entrusted responsibilities
entrusted with spearheading peace diplomacy in better than the other party.
Sudan and Somalia. The country has also supported
UN Peacekeeping by contributing troops and police.
For example, the African Union Mission in Somalia 11.4 Partners and Types of Collaboration
had about 3,664 troops from Kenya while the
United Nations hybrid operation in Darfur had 191 The main actors in partnerships are the state (or
troops and police. Because of the country’s role in government), the market (or private sector) and the
peacekeeping on the continent and globally, Kenya civil society. Partnerships usually take many forms
is slated to become one of the non-permanent (see Figure 11.1). Bi-partite partnerships can be
members of the UN Security Council. either public-private, public-CSO or private-CSO.
Multi-stakeholder or tri-partite partnerships bring
Mitigating institutional deficits: Tri-partite together the three actors. Partnerships can also take
partnerships evolve to bridge the “institutional a local, regional and global dimension.
void” created by either failing governments,
markets or civil society. In Kenya, the Ufungamano23
(a) Government partnerships
Initiative, which was established in 1999 by uniting
54 different human rights organizations, faith The government plays a leading role in creating
groups, women rights organizations, youth groups an enabling environment for partnerships, and
and political parties to force the Kenya African promoting inclusive development. The government
National Union (KANU) government adopt a has a legitimate authority and coercive sanction to
people-driven constitutional review process was preserve social order. In addition, it is obliged to
a result of democracy deficits. The movement design, implement, monitor and evaluate policies
launched a parallel constitutional review process and to establish a legal system that protects and
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enforces the constitution, laws and regulations. Development Fund Act 2015. In addition, the Policy
The government is also responsible for framing the on Devolved System of Government was launched
“national vision” upon which short and medium-term in 2016.
strategies are developed. Given these functions,
the government can demonstrate inclusivity in the To ensure the smooth operation across different
following ways. First, it can do this internally by state actors, Constitutional mandates of the actors
ensuring that its own policies, systems, processes are clearly outlined. The President and the Cabinet
are inclusive. It can also do this by ensuring that bear the duty to discharge the functions assigned to
the public policy process is inclusive. Compared the National Government by the Constitution (Fourth
to other actors (private sector and civil society), Schedule) while Parliament (Senate and National
the government has a comparative advantage due Assembly) and the Judiciary are shared national
to its capacity to garner financial, administrative institutions. The Governors and their Executive
and technical resources to undertake large-scale Committees are responsible for the discharge of
projects. The government is also able to influence functions assigned to the County Governments by
other actors to achieve its objectives. the Constitution, while the County Assemblies are
vested with the legislative authority of the respective
The overarching framework guiding partnerships counties.
in Kenya is the 2010 Constitution, which devolves
power, resources and functions. The devolved Inter-governmental relations as provided for in the
system of government became operational in Constitution enhance the principles of consultation
March 2013 by creating a two-tiered governance and cooperation by providing the processes,
system comprised of the National Government and channels, structures and institutional arrangements
47 County Governments. These 48 Governments for both bilateral and multilateral interactions. The
were created to be distinct, yet inter-dependent, Inter-Governmental Relations Act 2012 created a
which imposed cooperation and consultation as tri-partite structure comprising the Summit, Council
their main modality of working together. Article of Governors (CoG) and IGRTC. The Summit, which
174 of the Constitution gives the following state comprises the President, the Deputy President
organs the responsibility and mandate to facilitate and the 47 Governors is the highest organ of
the transition and implementation of the new the country’s framework for inter-governmental
constitutional order: National Parliament and County relations. The Summit provides a forum for
Assemblies; the National Executive and County consultation and cooperation between the National
Executive; the Judiciary and Independent Tribunals; and County Governments on all matters related to
and Constitutional Commissions and Independent their respective mandates. Section 19 of the Inter-
offices. Governmental Relations Act 2012 established the
CoG, which consists of all the 47 Governors as a
Apart from the governance structure established forum for consultation, coordination and exchange
by the constitution, other independent inter- of information among County Governments, to
governmental bodies were also set up. These include share information on performance of the counties
the National and County Governments Coordinating in execution of their functions, facilitate capacity
Summit; Inter-Governmental Budget and Economic building for Governors and consider reports from
Council (IBEC); the Inter-Governmental Relations other inter-governmental forums on national and
Technical Committee (IGRTC), the Council of county interests, among other functions. The Council
Governors (CoG) and Transition Authority (TA). has power to establish other forums – intercity and
In addition, the following laws were enacted to municipality forums. It is also allowed to establish
legitimize devolution: County Government Act 2012, sectoral working groups or committees in discharging
Transition to Devolved Government Act 2012, Inter- its functions. IGRTC ensures the functioning of the
Government Relations Act 2012, Urban Areas and National and County Government Coordinating
Cities Act 2011, Public Finance Management Act Summit (the Summit) and the Council of Governors
2012, Transition County Allocation Revenue Act 2013 (CoG). It facilitates the work of the Summit and CoG,
and County Public Finance Management Transition and implements the decisions of the two organs.
Act 2013, National Government Coordination Act
2013, and National Government Constituencies
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Although Kenya’s devolution process has progressed sectoral committees lack legal frameworks, while
well, it is faced with several challenges. These include joint committees lack guidelines on how they should
inter-governmental and inter-county frictions, varied be established and operate. The CoG is heavily
interpretations of the mandates of the institutions dependent on donor funding, which is risky in
that were established to facilitate devolution leading terms of financial sustainability. Regarding resource
to incessant conflicts, and failure to embrace the mobilization, counties are not allowed to borrow
alternative dispute resolution mechanism in dealing unless they do it through the National Treasury.
with both inter-county and inter-governmental Taxation and licensing are uncoordinated, and
disputes. Similarly, the secretariat of the CoG and benefit sharing frameworks are lacking.
Figure 11.1: Disentangling partnerships
Government
Private sector Civil Society
Disentangling partnerships
Global level
Private Government Civil
sector Society
Regional
level
Private Government Civil Domestic

sector Society level
Source: Adapted from Kolk (2013)
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Bilateral and multi-lateral partnerships are finding solutions to global challenges. In this regard,
coordinated by the Ministry of Foreign Affairs in the country adheres to the principles of the UN
line with Kenya’s foreign policy framework (2014). Charter including supporting the work of the UN
The policy lays emphasis on Regional Economic in the following areas: promotion of international
Communities (RECs) as critical tools for regional peace and security, trade, human rights and
integration. Among priority countries are East Africa democracy, refugees, sustainable development and
Community member states, which are Kenya’s reform of the UN system. Kenya is a member of the
strategic trading partners. At the international International Monetary Fund (IMF), World Bank,
level, Kenya seeks to diversify its economic Africa Development Bank (AfDB), Commonwealth,
relationships and partnerships with increased focus the South-South cooperation, Indian Ocean Rim-
on the emerging economies and economic zones. Association of Regional Cooperation (IOR-ARC) and
The country pursues bilateral diplomacy through other multi-lateral organizations.
establishment of diplomatic missions in countries
of strategic importance and exchange of high-level The Government of Kenya has had a longstanding
visits. To promote trade, investment and stability, relationship with development partners. These
regional integration is one of the cornerstones efforts were enhanced by signing the Paris
of Kenya’s foreign policy. The principal avenues Declaration on Aid Effectiveness together with over
for pursuing this goal include the East African 100 developed and developing countries, heads of
Community (EAC), Common Market for Eastern and multilateral and bilateral development cooperation.
Southern Africa (COMESA), the Inter-Governmental Efforts to streamline and harmonize donor aid at
Authority on Development (IGAD) and the Tripartite the global level started in 2003 when donors and
Agreement between the COMESA, EAC and the partner countries held the High-Level Forum on
Southern African Development Community (SADC) Aid Effectiveness in Rome on 24-25 February 2003.
signed on 10th June 2015 and the African Union. This meeting birthed the Rome Declaration on
Harmonization, whereby Development Assistance
In the area of trade, Kenya has over 34 bilateral Committee (DAC) donors were required to better
agreements with other countries including harmonize their interventions. This was followed by
Bangladesh, Canada, China, Comoros, Congo, forums in Paris (2005), Accra (2008), Busan (2011),
Democratic Republic of Congo (DRC), Djibouti, Egypt, Mexico (2014) and Nairobi (2016).
Ethiopia, Hungary, India, Iran, Iraq, Lesotho, Liberia,
Mauritius, Mozambique, Netherlands, Nigeria, The Busan Partnership Agreement stands out as
Pakistan, Russia, Rwanda, Somali, South Africa, South the most radical because it captured the spirit
Korea, Sudan, Swaziland, Tanzania, Thailand, Turkey, of “leave-no-one-behind”. It was significant for
Ukraine, Zambia, Zimbabwe and Libya. Kenya is also two reasons. First, it shifted the debate from aid
a signatory of three Preferential Trade Agreements, effectiveness (reducing transaction costs of aid) to
namely, WTO’s Generalized System of Preferences development effectiveness. Secondly, it promoted
(GSP), the African Growth Opportunity Act (AGOA) inclusivity by allowing, for the first time, civil society
of the United States and the Economic Partnership organizations, private sector, philanthropies, South/
Agreements (EPAs) of the European Union (EU). The South and Triangular cooperation to participate in
African Caribbean Pacific - European Union (ACP-EU) their official capacity unlike in the past when they
is a body created with, among other functions, to participated as mere observers. In other words, non-
enhance international cooperation and partnerships. state actors became “full and equal participants”
The body has a cooperation programme in the field in setting the agenda and framing the Busan
of higher education, science and technology. ACP- Partnership Agreement. Inclusive development
EU also promotes trade relations for the countries partnership is one of the four principles of the
involved. It has also established a joint parliamentary Busan Partnership Agreement. Following the Busan
assembly for regional parliaments as provided for Partnership Agreement, the Global Partnership for
under Article 14 of the Cotonou Agreement. Effective Development co-operation was launched
as an all-inclusive forum that takes place every
In pursuing multilateralism, Kenya seeks to promote two years, bringing together development actors
international cooperation and collaboration in from governments, parliaments, international
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organizations, trade unions, private sector, civil sector, academia and local think tanks. Under this
society and the foundations. mechanism, the performance of a State is examined
and assessed either by other States or by designated
Inclusive growth agenda requires donors to avoid institutions or by a combination of the two. Since
duplication of efforts and ensure policy coherence by 2003 when it was started, it has been piloted in
familiarizing with development efforts at the national Ghana, Kenya, South Africa, Rwanda and Mauritius.
and sub-national levels. Following the signing of About 38 African countries have acceded to APRM
the Paris Declaration in 2005, the Government of and 17 have accepted to be peer reviewed. However,
Kenya and development partners developed a APRM is confronted with challenges emanating from
comprehensive structure of engagement in 2009 waning interest to implement recommendations of
by forming the Aid Effectiveness Group, which in country review reports and action plans, failure to
turn established the aid co-ordination structure. The garner sustainable funding, and failure to develop
structure has six organs including the Development structured ways of engaging civil society.
Partners Forum, Government Co-ordination Group,
Development Partners’ Group and Aid Effectiveness
Secretariat. In addition to entrenching partnership (b) Collaboration and partnership with
through the aid effectiveness structures, Kenya private sector
participates in South-South and triangular co- Private sector: The private sector is the main driver
operation and has established a south-south centre. of value addition, employment and exports in
At the continental level, African countries adopted Kenya. Its contribution to GDP and employment
New Partnership for Africa’s Development (NEPAD) is about 80 per cent and 70 per cent, respectively
as a new partnership paradigm that would accelerate (IFC, 2019). The sector is dominated by informal
economic cooperation and integration among African firms (95%) whose employment share is huge (70%)
countries and change the face of Africa among the but contribute less to GDP (22%). Although private
community of World nations. Among other things, enterprise is characterized by self-interest and
it was meant to promote productive partnership by profit maximization, the private sector is a strategic
improving the practice in aid relationship, delivery partner in development because it is the main driver
and reporting thereby improving development co- of growth and employment, rather than the public
operation effectiveness. Unlike previously, the new sector. Its health is directly correlated with the health
regime would develop mutually agreed performance of the economy. Businesses can promote inclusion
standards and targets for both donors and recipients. by producing goods and services, creating jobs
These changes were expected to devolve delivery and through social innovations. Creating jobs and
systems, empower local communities and put income can lead to a more equitable distribution
Africans in charge of their development efforts. of national wealth, and diversification of goods and
Similarly, the new regime aimed to lower transaction services produced, which in turn positively impact on
costs, which are involved when dealing with many poverty reduction. Microenterprises are instrumental
donors. Aid flows were expected to be more stable in achieving these gains not only because their
and predictable. Finally, local capacity to execute labour absorption propensity is higher among the
development projects would be strengthened. poor but also because they spread their services to
rural areas and poor urban areas.
To promote political, economic and corporate
governance on the continent, the African Peer The private sector can champion inclusivity by
Review Mechanism (APRM) was birthed as one of the implementing base-of-the-pyramid strategies.
most outstanding innovations of NEPAD. Currently, Socially responsible businesses create policies and
APRM is a semi-autonomous specialized agency of strategies that enhance the trade-off between the
the African Union and is also charged with the task of profit motive, and ethical behaviour and social goals.
tracking both Agenda 2063 and Agenda 2030. Ideally, Such policies include philanthropy, volunteerism,
APRM provides a forum that speaks an “African voice “go-green” initiatives, ethical practices (such as
to Africans” in an effort to provide “African solutions “fair wage”, “fair trade”) and so on. They make
to African problems”. It is attractive because of its investments whose benefits extend beyond the
inclusivity - the peer review process is conducted shareholders towards contributing to the welfare of
in consultation with civil society, the media, private society and the environment. For such businesses to
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affect inclusive growth, low-income and marginalized challenge for the sector is to tap the potential
individuals should participate productively in value contained in the informal sector, which is huge,
chains either as consumers, producers, employees growing fast and dynamic yet poorly understood
or entrepreneurs. This way, value is shared between and supported. Nine out of every ten workers are
shareholders and the society. employed in the informal sector, but there are
productivity gaps between the formal (which is
Kenya’s private sector is well developed and large by
healthy and productive) and the informal sector.
African standards. However, the main developmental
Table 11.1: Private sector associations in Kenya
Umbrella Associations
Kenya Private Sector Alliance (KEPSA): Established to give a single voice to all private industry sectors. In terms of governance, it
works through 17 sector boards that represent 17 economic sectors. The main decision-making organ is the Governing Council
comprised of the chairs of the 17 sector boards.
Kenya National Chamber of Commerce and Industry (KNCCI): Established as a trade support institution which protects commercial
and industrial interests of members. Has branches in all the 47 counties
Kenya Association of Manufacturers (KAM): Established to give voice to industrialists. It works through seven chapters (Coast,
Central Kenya, Industrial Area, Nyanza/Western, Nakuru, Machakos, Uasin Gishu)
Sectoral associations
Finance, business support and investment Federation of Kenya Employers (FKE)
Association of Microfinance Institutions (AMFI)
Kenya Association of Investment Groups (KAIG)
Construction Kenya Federation of Master Builders (KFMB)
Kenya Property Developers Associations (KPDA)
Agriculture and horticulture Kenya National Farmers Federation (KNFF)
Fresh Produce Exporters Association of Kenya (FPEAK)
Kenya Flower Council (KFC)
East Africa Tea Trade Association (EATA)
Agrochemical Association of Kenya (AAK)
Kenya Coffee Traders Association (KCTA)
Kenya Tea Growers Association (KTGA)
Laikipia Wildlife Forum (LWF)
Fish and livestock Kenya Livestock Producers Association (KLPA)
Kenya Livestock Marketing Council (KLMC)
Kenya Veterinary Association (KVA)
Kenya Fish Producers and Exporters Association (AFIPEK)
Kiambu Fish Farmers Association (KFFA)
Industries, motor and manufacturing Kenya Association of Manufacturing (KAM)
Tourism and gastronomy Kenya Tourism Federation (KTF)
Kenya Association of Tour Operators (KATO)
Kenya Association of Hotelkeepers and Caterers (KAHC)
Pubs, Entertainment, Restaurants Association of Kenya (PERAK)
Kenya Association of Travel Agents (KATA)
Rural Tourism Network (RTN)
Logistics and transport Matatu Owners Association (MOA)
Kenya International Freight and Warehousing Association (KIFWA)
Source: Delegation of German Industry and Commerce (2016)
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Internally, the private sector is organized into business enact laws, the Speakers Round Table provides a
associations. These associations are at two levels: mechanism for private sector to engage parliament
umbrella and sectoral. Umbrella associations enlist and lobby for inclusion of private sector concerns
both corporates and Business Member Organizations in legislation. At the sub-national level, the private
(BMOs) as members. In Kenya, umbrella associations sector lobbies the leadership of County Governments
include the Kenya National Farmers Federation through the Council of Governors’ Forum, which is
(KENAFF), Kenya Tourism Federation (KTF), Kenya held annually.
Private Sector Alliance (KEPSA), Kenya Association of
Manufacturers (KAM) and Kenya National Chamber Although private sector engagement with the
of Commerce and Industry (KNCCI). While KEPSA Government seems more structured and seamless,
and KNCCI are cross-sectoral, KENAFF, KTF and the associations are confronted with several
KAM are sectoral umbrella associations. Sectoral challenges. First, most of the associations, especially
associations enlist only corporates as their members. the umbrella associations, lack finances to support
Table 11.1 lists some of the sectoral associations the broadening and deepening of their activities to
operating in Kenya. These associations are formed improve their sub-national presence and to improve
to provide a link between the private sector and their staff capacity. Second, County Governments are
state actors. They do this by providing “influence” yet to integrate associations in their policy making
and “services” to members. Influence is achieved processes. Thirdly, many associations’ activities are
through advocacy and lobbying while services reactionary rather than proactive. They expend most
offered include education, vocation training, industry of their effort and resources in firefighting rather
standards, codes of conduct, branding and so on. than strategy formulation. Finally, associations are
confronted with the problem of unclear roles and
One way of promoting inclusive policy making is functions of the National Government vis a vis
through dialogue between the private sector and County Governments.
the Government. Public-Private Dialogue (PPD) is
basically a consultation between Government and (c) Partnership with civil society
businesses. The Government learns about factors
that constrain the performance of the private sector Non-State actors complement the action of
and responds by designing appropriate interventions States by delivering services to citizens. The civil
while the private sector can foster a good business society is usually defined to include an array of
climate for their operations. Dialogue builds trust, organizations that are formed to promote public
bridges gaps thereby leading to joint problem good. This category includes civil society (which
analysis and identification of policy and institutional comprises Non-Governmental Organizations
reforms for a better business environment for private (NGOs), Community-Based Organizations (CBOs),
sector. Faith-Based Organizations (FBOs), self-help groups,
charities, foundations, associations) and so on.
Currently, PPD in Kenya is spearheaded by KEPSA, They are characterized by their ability to organize
which is the umbrella body for business member people to pursue shared interests in the public
associations and corporates and the Ministry of domain. Usually, they represent the interests of
Industrialization and Enterprise Development. There those perceiving their interests as marginalized.
are four platforms through which PPD is exercised: Since they enable people to claim their rights, they
Presidential Round Table, Ministerial Stakeholders promote rights-based approaches to development.
Forum, Speaker’s Roundtable Meetings and Council These rights are claimed by seeking to influence
of Governors’ Forum. The overarching platform is public policy outside the formal structure of elected
the Presidential Round Table, which brings together government.
the President, the Cabinet and private sector twice a
year to deliberate on the business environment and Kenya’s civic norms can be traced to the traditional and
find solutions to bottlenecks. Ministerial Stakeholder communal structures that promoted mutual interest,
Fora are sectoral platforms held bi-monthly between resource pooling (including Harambee movement)
Government ministries and private sector boards in and social justice. When the country was colonized
KEPSA. Since the main function of Parliament is to from 1920s until 1963, the colonial government
restrained freedom of association but allowed
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the operation of a few religious and philanthropic the Government and PBOs. Unfortunately, the PBO
associations. Civil Society Organizations (CSOs) were Act is yet to be operationalized and implemented.
opposed to the new systems that promoted white Since the PBO Act 2013 originated from a private
supremacy and disenfranchised Africans. Given members bill, it did not receive input from the
this fact, CSOs were mainly involved in liberation Treasury and the Attorney General’s Office. Usually,
struggles to free the country. After independence, bills that have financial implications are required to
CSOs fully supported the development efforts of the receive approval from the Cabinet Secretary of the
new government. However, by the 1980s and 1990s, National Treasury while those that have proposals
many Non-Governmental Organizations (NGOs) and of a legal nature should receive the approval of
faith-based organizations (FBOs) were swayed by the Attorney General. The PBO Bill by-passed
donor demands that tied development support to this process, thereby pitting the Executive arm of
Government on governance and democratization. As Government against the NGOs.
a result, they advocated for multi-party democracy –
putting them at loggerheads with the Government. To address some of the shortfalls of the PBO Act
Later, these advocacy efforts were directed at 2013, the Government has made four attempts to
constitutional reform and good governance. amend the Act, but these have been resisted by the
CSOs. The High Court has ordered the Government
The coming into power of the National Rainbow on two occasions (Oct 31, 2016 and May 12, 2017)
Coalition (NARC) Government in 2003 ushered in to operationalize the PBO Act. The first order was
a new dispensation, which created more space for issued after CSOs filed a suit seeking a declaration
Government-CSO dialogue and engagement. This from the court that the Cabinet Secretary for the
partnership has prevailed despite the shortcomings Ministry for Devolution and Planning contravened
of CSOs. They acknowledge that they are yet to the Constitution by failing to appoint a date for
address issues of competence, credibility and the coming into force of the PBO Act. The second
sustainability. order followed contempt of court proceedings filed
against the Cabinet Secretary for the Ministry of
Generally, the legal environment within which CSOs Devolution and Planning, the Ministry of Interior and
operate is supportive of civil society. However, the National Coordination, and the Attorney General
legal framework is characterized by multiple laws, for failing to obey court orders to commence the
which are implemented by different Government PBO Act. Consultations are ongoing between the
ministries, agencies and departments. The diverse Government and CSOs, the outcome of which will
and sometimes overlapping laws present difficulties be a bill to amend the PBO Act. The Government
for the Government in developing harmonized, has committed to operationalize the PBO Act during
systematic and coordinated plans and approaches to the Third Medium-Term Plan 2018-2022.
civil society. To compound the problem, some of the
regulatory agencies are under-resourced and find it The NGO sector in Kenya is huge and fast growing.
difficult to manage their basic functions effectively. Resource mobilization within the sector is also huge.
For example, although the NGO Co-ordination There are 3,028 reported NGOs, which received Ksh
Board can issue directives on the need for NGOs to 165.97 billion, of which 88 per cent was raised from
file their annual returns, it lacks the capacity to carry sources outside Kenya. In 2018-2019, a total of 98
out inspections and ensure that that NGOs adhere NGOs were registered. By 30th June 2019, Kenya
to these directives. had a cumulative 11,262 NGOs. Most of these NGOs
are driven by two main goals: “advocacy”, through
NGOs anticipate that the Public Benefit Organizations which they explicitly seek to influence public policy
(PBO) Act 2013 once operationalized will address and private behaviour and “empowerment” through
some of the challenges that they face under the which they provide physical relief to disadvantaged
Non-Governmental Organizations Act 1990. The groups or communities.
PBO Act provides for the PBOs to self-regulate
effectively, sets up an independent regulator, and In pursuit of their advocacy and empowerment
specifies requirements for the transparent and goals, NGOs are presumed to be more participatory,
speedy registration of PBOs. In addition, the PBO community-oriented, democratic, cost effective and
Act provides a framework for partnership between better at targeting the poorest of the poor. Because
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many of them work directly with local communities, challenges faced by partnerships by following these
they can be strategic partners in engaging differences.
communities and in identifying policy gaps at the
grassroots level. There exists documented success Inter-Governmental Relations
stories of NGO interventions. Despite these, Inter-governmental relations between the National
many NGOs have failed at making a substantial and County Government remain cordial but the
impact upon the perceived beneficiaries. They framework for alternative dispute resolution as
are increasingly criticized for losing touch with provided in the Inter-Governmental Relations Act
their constituencies. They have been criticized for (2012) is behind schedule. Regulations that are
worsening the “dependency syndrome’, are more meant to correct this position have been drafted
vulnerable to external shocks and external control but are yet to be approved by Parliament and
leading to patron-client relationship between NGOs operationalized. Other challenges include inter-
and donors. Donor dependency raises doubts about
governmental and inter-county disputes and varied
their legitimacy and accountability (accountability
interpretations of the mandates of the institutions
is shifted “upwards” away from the grassroots
that were established to facilitate devolution, leading
or “downwards”, where it should be). Although
to incessant conflicts. Similarly, the secretariat of the
NGOs have been presumed to democratize civil
CoG and sectoral committees lack legal frameworks
society, they tend to adopt top-down approaches
while joint committees lack guidelines on how they
as a result of poor understanding and misuse of the
should be established and operate. The CoG is
participation concept, and NGO staff end up thinking
heavily dependent on donor funding, which is risky in
for the community. NGOs suffer the disadvantage of
terms of financial sustainability. Regarding resource
limited scope and reach. NGOs also have a challenge
mobilization, counties are not allowed to borrow
of low sustainability, relatively low compliance with
submission of annual reports to the regulator, and unless they do it through the National Treasury, and
problems related to poor governance. taxation and licensing are uncoordinated. There is
misalignment in the economic planning processes at
In policy discussions, the faith sector includes faith- the national and county levels, and benefit sharing
based CSOs, informal faith-based programmes, frameworks are lacking.
initiatives and community-based organizations,
larger national and international NGOs, religious North-South Cooperation
congregations and groupings, faith-based institutions
(schools, hospitals, vocation and technical colleges, Kenya is a member of many multi-lateral and bilateral
orphanages, homes for the elderly, children homes arrangements. Relationships within such arrangements
and so on), networks (including Christian Health are usually asymmetric in favour of developed
Association of Kenya - CHAK, Inter Religious Council countries. The agenda of these partnerships is usually
of Kenya - IRCK, Kenya Episcopal Conference, set by the “big brothers”. Developing countries
National Council of Churches in Kenya – NCCK and are in most cases powerless as they are excluded
Supreme Council of Muslims of Kenya -SUPKEM). not only at the agenda setting stage but also in the
main decision-making organs. Such relationships
The origin of FBOs has its roots in religion. Each result in interference in domestic affairs of sovereign
religion is differentiated by its philosophical States, come with conditionalities, are asymmetric
orientations. Christianity gives preference for the and lack national ownership. This has been the
poor, Judaism advocates for justice, Hinduism lays case in the UN Security Council whose structure has
emphasis on social service, Islam demands action permanent members and non-permanent members.
and charity while African traditional religions call for
Permanent members tend to have veto power, which
mutual assistance.
is not the case with non-permanent members. Trade
negotiations under General Agreement on Trade and
11.5 Challenges facing Partnerships Tariffs (GATT) and World Trade Organization (WTO)
has been characterized by the weak bargaining with
As discussed in earlier sections, partnerships in the strong.
Kenya take many forms. Each type of partnership
has unique challenges. This section discusses the
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The patron-client model seems to drive the poor plans for procurement, delays may be caused
government-donor relations. Usually, most of the by failure to comply with the donor’s procurement
past and present aid conditions are politically system. Finally, when conditions and guidelines for
oriented and centre around good governance, utilization of funds are not followed, it leads to delays
human rights and anti-corruption measures. When in disbursement. For example, when accountability
these conditions are violated, an aid freeze is reports are submitted late, they delay the release of
imposed. In addition, due to the principle of cross the next tranche.
referencing, the aid freeze by one donor triggers aid
freezes by like-minded donors. This was the case Most bilateral and multilateral arrangements
in Kenya in 1991 when the Government failed to involve state agencies and do not provide for the
implement reforms to restore multi-party democracy participation of civil society and private sector.
and human rights. In mid-1997, the Government On this account, they have been seen to be
suffered another aid freeze by the IMF under the less representative of the interests of business
Enhanced Structural Adjustment Facility (ESAF) due community and the poor. For example, the Busan
to failure to deal adequately with the Goldenberg Partnership Agreement represents a paradigm
scandal. Both multi-lateral and bilateral donors shift in discussions on development effectiveness
will always refer to the IMF to check on the fiscal because civil society organizations, private sector,
status of the country and the macroeconomic risks. philanthropies and South/South and Triangular
When they are satisfied, they proceed with the cooperation participated as “full and equal
assistance. However, where a country does not participants” in setting the agenda and framing the
have a relationship with IMF, it is difficult to secure Busan Partnership Agreement. Previous meetings in
a relation with other development partners. This Paris (2005), Accra (2008) had excluded non-state
herd-like behaviour has worked to advantage of low actors.
income countries especially in rallying the donors to When donor interests change, their lending
provide debt relief. Currently, the IMF does not give policy follows. This was the case with the shift in
conditionality on corruption cases per se but looks disbursement of donor money through NGOs. This
at the fiscal side and advocates for tools of prudent shift began in 1992 with the US announcing that it
fiscal management. had stopped channelling development assistance
Usually, the terms, conditions and cost of borrowing through corrupt regimes but would rather do it
depend on the negotiating capacity of the parties. through NGOs. The major donors (Britain, Germany,
Kenya, like most developing countries, face the France, Netherlands) followed suit. The donors
disadvantage of weak bargaining and negotiation followed this path on the basis that NGOs were
skills. This implies that the country has an superior in advocacy and participatory approaches
opportunity to build capacity of negotiating teams of development that were closer to the people.
by availing human, financial and technical resources. Some of these donor countries had suspended aid to
Once skilled, such negotiators would be able to some countries and were looking for an alternative
understand the negotiating context, which will help avenue of reaching to communities. NGOs provided
them to define negotiation tactics and strategy. They an alternative. The donor model was criticized on
will also be able to undertake technical analysis on the basis that NGOs were not corruption-proof.
the potential impacts of negotiation outcomes on It was also felt that donor focus on Government
domestic economy. corruption ignored the role of private companies
and multinational companies in offering bribes.
Another challenge with donor funds is the delay in
disbursements, which results in low absorption. This
South-South Cooperation
is due to many factors. Where the loan agreement
requires counterpart funding, delays may be The idea of South-south cooperation among
occasioned by the failure by the Government to fulfil developing countries was hatched to address the
this pre-condition. Similarly, delays may be caused marginalization of developing countries in global
by bureaucracy in Government ministries or on decision making. Such relations were based on the
the donor’s side. Similarly, when project staff have principles of equality, respect for national sovereignty,
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non-conditionality and national ownership and modern 450 rooms five-star hotel at Jomo Kenyatta
independence. China has become more influential International Airport (JKIA) by Qatar is said to have
in applying most of these principles in lending to been engulfed with challenges in transparency
other developing countries. In Kenya, the Chinese especially in the procurement processes and
have been involved in several road projects and in a unworkable processes, which led to lack of project
power-grid upgrading project. Although there have implementation. Similarly, the PPP regime in Kenya
been fears that Chinese loans amount to predatory does not involve citizen participation during project
lending and civil society in Kenya have claimed that cycle. The local private sector is also not involved.
the projects lack transparency, the blame cannot be This has been attributed to the absence of a clear
apportioned to China. The terms and conditions framework and structure within the PPP Act to
imposed on loans depends on negotiation capacities facilitate public participation.
of the parties, and Kenya had a chance to negotiate
a better deal with China. Based on complementary Public-Private Dialogue
advantage, the Kenya-China cooperation should be
seen as a channel through which Kenya has been able First, most of the associations, especially the
to access external capital, technology and technical umbrella associations, lack finances to support the
expertise. In return, China has been able to access broadening and deepening of their activities to
markets and support on global issues. Kenya is a improve their sub-national presence and to improve
member in many south-south outfits including EAC, their staff capacity. Second, County Governments
COMESA, IGAD, ICGLR (International Conference are yet to integrate associations in their policy
on the Great Lakes Region), NEPAD, APRM, G24 making processes. Therefore, the private sector
among others. The main challenge with this has associations feel “excluded” especially at the sub-
been overlapping memberships. Again, many of national level. Thirdly, many associations’ activities
these outfits are fighting for survival due to under- are reactionary rather than proactive. They expend
funding. most of their effort and resources in firefighting
rather than strategy formulation. Finally, associations
are confronted with the problem of unclear roles and
Public Private Partnership functions of the National Government vis a vis those
The 2011 PPP Policy identifies funding and fiscal of the County Governments.
risk issues in relation to PPPs in Kenya. Regarding
contingent liabilities arising from borrowing, it Government-NGO Relations
states that “All public entities including County
Governments, local authorities and the PPP Unit In Kenya, the relations between NGOs and the
will be required to seek approval from the State Government have suffered due to lack of trust
Department Responsible for Finance/Treasury for and legitimacy loss. There is mistrust between the
all direct contingent exposure arising form any PPP NGO Co-ordination Board and the NGO Council.
project” and in allocating risk, the policy states that There is also mistrust between NGOs and the NGO
“the principle that the Government will follow in Council and between local NGOs and international
allocating risks of a PPP project will be to optimize NGOs. This has been brought about by leadership
rather than maximize the transfer of project risks to wrangles, politics and infighting at the Council and
the private party”. among NGOs. Currently, the NGO Council has two
opposing groups, each claiming to be the “official
PPPs in Kenya have been accompanied by higher representatives” of the sector. The confidence rift
cost of capital, failure to realize value for money, between local NGOs and international NGOs is due
lack of competition, which makes bidders quote to competitive tendencies between them by, for
high prices, poor project implementation resulting instance, international NGOs “poaching” key staff
in white elephants, political interference, corruption, from local NGOs and paying them hefty salaries.
poor understanding of PPPs resulting in their International NGOs have been accused of paying
opposition, unrealistic procedures, limited capacity in Government officers extra allowances to participate
managing PPPs and risk management, and issues of in their projects, whereas local NGOs have no
transparency. For instance, the deal to build an ultra- resources to do the same. The NGO Council is lacking
214
in terms of good governance, and the NGO Code through member fees and subscriptions, while
of conduct is outdated. NGOs also face challenges others lack capacity to broaden their scope
in terms of raising funds or resource mobilization as and deepen their activities at the sub-national
they are heavily regulated. They also lack autonomy levels. Their presence at the counties is yet to
and are faced with Government interference. There is be felt.
therefore a general lack of an enabling environment 5.) The environment for civil society to operate
for the thriving of NGOs in Kenya. in Kenya is being rolled back by the extended
delay in operationalizing the Public Benefit
11.6 Key Messages and Organizations Act (2013) and the absence of
a PBO policy. Currently, the financial and staff
Recommendations
capacity of the NGO Board to regulate the
sector countrywide is limited. Self-regulation
11.6.1 Key messages of the sector has been curtailed by leadership
wrangles within the NGO Council, which has
1.) Devolution in Kenya has been largely brought about a confidence rift between the
successful, but there remains gaps in terms NGO Council and the Government. This has
of alternative dispute resolution, legislating made it hard for the government to establish
the CoG Secretariat and sectoral committees, formal ways of engaging the civil society.
granting borrowing powers to counties,
harmonizing cross-county taxation and 11.6.2 Recommendations
licencing, aligning economic planning at the Based on the foregoing discussion, the following
national and county levels, and formulating recommendations could enhance the effectiveness
benefit sharing frameworks. of partnerships to promote inclusive growth:
2.) Whereas the Government of Kenya has
established very structured ways of engaging Inter-Governmental Relations
development partners, there are concerns Given its constitutional mandate, the IGRTC should
that some collaborations are asymmetric, and lead the process of developing alternative dispute
the Government of Kenya is not adequately resolution mechanisms to mitigate conflicts between
involved in the agenda setting and in decision the National and County Governments. Although
making. In some cases, principles of equality, the regulations have been drafted and are awaiting
non-conditionality, national ownership and approval by Parliament, the IGRTC will play a key role
independence are not followed. Similarly, the in making them operational. To resolve the issues
private sector and civil society are not engaged surrounding the legality of the CoG and sectoral
as equal players. committees, the CoG and the respective Ministry
3.) PPPs are becoming an increasingly popular should draft a bill. IGRTC, CoG and the Summit
mode of investing in public infrastructure should address issues related to borrowing powers
in Kenya despite their criticism and even to counties, harmonizing cross-county taxation and
abandonment in some countries. However, licencing, aligning economic planning at the national
local communities are not engaged at any and county levels, and formulating benefit sharing
of the stages of the project cycle and PPP frameworks.
projects suffer from inflated cost of capital,
low competition during procurement, political North-South Cooperation
interference, corruption, weak capacity to Kenya should become more proactive in championing
manage PPPs and risk, and lack of transparency. reforms of international arrangements that violate
4.) The PPD structure at the national level in principles of equality, national sovereignty, non-
Kenya has been hailed as a success story in conditionality and national ownership. Such reforms
international platforms, but most private should prioritize the inclusion of civil society and
sector associations are struggling to mobilize private sector as “full and equal” participants. Where
financial resources for their operations possible, the Government should deepen south-
south cooperation.
215
Public Private Partnership strategy to be as outcome-oriented as possible. As

an umbrella body, KEPSA should work with other
Existing legislation and policy for PPPs should
associations to replicate the national structure (which
be reformed with a view to integrating principles
has been very successful) at the county level.
of public participation, especially by engaging
communities in feasibility studies, project design,
implementation and monitoring and evaluation. Government -NGO Relations
The gazettement of the PBO Act (2013) should be
Public-Private Dialogue expedited. The NGO Co-ordination Board and the
NGO Council should initiate structured dialogue
The sustainability of umbrella, sectoral and primary
platforms for engaging the Government by
associations should be enhanced by building their
borrowing from the existing structures for engaging
capacity on efficient ways of collecting membership
the private sector. Similarly, the regulatory capacity
fees, marketing the associations, and what to offer
of NGO Coordination Board should be enhanced
members to incentivize their payment of fees and
by providing additional budgetary and institutional
subscriptions. Capacity building effort should also
support to strengthen its oversight role. NGOs
evaluate current policy advocacy and lobbying
should be encouraged to diversify their funding
strategy, review it and introduce new approaches. In
away from donors towards sustainable financing
addition, associations should design their lobbying
through social entrepreneurship.
Endnotes
22 This is according to the profiles (name, sector, county, stage, contracting authority and value) of these projects as
at 27th March 2020, accessed at http://www.pppunit.go.ke/
23 Ufungamano is a Kiswahili word for “unity” or “collaboration”.
216
CONCLUSIONS AND
RECOMMENDATIONS
12.1 Conclusions and inequality across counties, the Government

has made commendable effort through budgetary
allocations, with counties with higher poverty rates
Macroeconomic Performance and Medium- receiving relatively larger allocations of the sharable
Term Prospects equitable transfers. That said, while these counties
have spent a significant proportion of the budget
Kenya has made remarkable progress in poverty
in expanding investments, the expanded capacity
reduction in the last two decades, largely driven
for economic activity is yet to yield the expected
by a robust economic growth experienced in that
outcomes.
period. However, the rate of reduction of poverty
was not commensurate with the economic growth Significant disparities exist at the county level, with
rate; poverty reduction pace was relatively slower counties in ASALs contributing proportionately less
compared to economic growth. While inflation to GDP, while only 10 out of the 47 counties had real
remained within the target band, food-related GCP per capita above the national GDP per capita
inflationary pressures tend to push some of the low- of Ksh 96,799.8 as of 2017. Most of the counties
income households to below the poverty line, with were heavily dependent on agriculture, with only
the prices of vegetables driving the general prices. It 7 out of the 47 counties (15.0%) having significant
is also worth noting that inequality in Kenya remains manufacturing activities. The limited diversity in
high, across gender, residence (rural and urban economic activity can partly explain the low own
settings) and income groups. source revenue collections by County Governments.
As of 2018/19, only seven (7) counties managed
The robust economic performance was not
to collect more than Ksh 1 billion, depicting over-
commensurate with growth in employment especially
reliance by counties on the exchequer.
in highly productive sectors. A large proportion
of labour was absorbed in the agricultural sector, While economic growth has remained resilient, Kenya
which saw a significant reduction in productivity. faces significant downside risks, including growing
The industrial and services sectors that exhibited fiscal pressures coupled with narrowing fiscal space,
increased productivity between 2000 and 2018 outbreak of coronavirus pandemic, desert locust
recorded a slower employment growth. This could invasion, and weather uncertainty. Kenya also has
explain the high poverty levels in rural areas where opportunities to exploit, including the coming to
agriculture is the key economic activity. effect of AfCFTA, the declining world oil prices and
securing the UN Security Council non-permanent
Poverty rates vary widely across counties, ranging
seat. Should the downside risks materialize, this
from as high as 79.4 per cent in Turkana County to as
would reduce the medium-term economic growth to
low as 16.7 per cent in Nairobi County. It is notable
less than 4.0 per cent.
that counties with low GCP per capita have the
highest overall food poverty rates in Kenya and are It is strong growth of all the counties that would see
mainly in the ASALs. Further, hardcore poverty was the country deliver a higher economic growth rate
highly prevalent in rural areas. To address poverty of above 7.0 per cent in the medium-term. For this
217
to happen, counties need to enhance investments in Contribution of Agriculture to Food and

supporting the key sectors that are sources of growth, Nutrition Security and Inclusive Growth
including agriculture, manufacturing and wholesale
and retail trade. Upscaling the economic growth of The agriculture sector contributes a third of the
counties has the potential to improve inclusivity. country’s Gross Domestic Product (GDP), and is the
driver of growth for the economy. With an estimate
70 per cent households living in rural areas, the sector
Enhancing Financial Inclusion for Inclusive has become a key source of income and employment.
Growth Although the sector has seen a gradual increase in
While national access to financial inclusion has total value of aggregate agricultural output, the yield
increased to 82.9 per cent from 26.7 per cent in gap for most crops has been widening; for instance,
a decade, there are significant disparities across there is an estimated 50 per cent yield gap in maize
counties, gender and the youth. Counties with most production, and 70 per cent yield gap in legume
access to finances, either credit, savings or insurance, production.
are mainly counties with big urban areas such as The number of small farm sizes (0- 5ha) have increased
Nairobi, Mombasa, Nakuru, and Kiambu. There is by 55.0 per cent based on a comparison between
gender disparity in favour of males (85.6%) relative the KIHBS of 1994 and 2015/16. This shows a growth
to females (80.3%), but this has significantly reduced in number of smallholder farms (0-5 ha) from 2.22 to
since 2006 when it was at 12 percentage points, with 7.63 million, and a significant reduction in number of
males at 33.0 per cent and females at 21 per cent. farms between 5 and 10 hectares (-71%) from 93,871
A significant proportion of the male youth (23.5%) -15,821 and more than 10 hectares (-85.0%) from
and female youth (25.4%) do not have formal access, 92,498 to 6,714. This implies that to increase output,
which could be due to high cost of accessing the agriculture intensification is inevitable.
various financial products/services and high levels of
unemployment. Farmers in the country use an average of 30kg/
ha fertilizer, which is far below the 50kg/ha
Access varies across the various products and recommended under the Abuja Declaration of
providers. Access to savings was above the global 2006. Over 90 per cent of the certified seed used by
level while insurance is lowest especially with crop smallholders is distributed by the Government and
and livestock insurance. Mobile money agents are NGOs, while 87.0 per cent of the uncertified seed
the nearest providers and, therefore, have the lowest is based on the farmers own production. Pest and
cost of accessing financial services. However, it is disease continue to be a challenge and can cause
the banks that have highest trust. Financial literacy damage to an estimated 25-35 per cent of crop
is relatively low and excessive documentation is a produce, while animal diseases can cause mortalities
barrier to financial inclusion. The advent of mobile- of between 50 and 90 per cent. These losses can be
based financial services has transformed financial reduced with the use of pesticides.
systems and payments in Kenya, helping more
people to access financial services. The country is water-scarce, with varied water
resources in time and between regions. Generally,
Mobile money agents present a potential solution there are two rainy seasons, with the total yearly
for many of the barriers to closing the financial water withdrawal estimated to be over 2.7 km3, or
inclusion gap and reaching the excluded. About less than 14.0 per cent of resources, thus the need
57.0 per cent of the population would not need to to use these limited water resources prudently.
spend to reach the nearest mobile money agent. The provision and management of the large-scale
This is because they use mobile phones and agents irrigation project by Government agencies and
to deliver financial services, without the high costs of allowing smallholders farmers to lease plots as is the
construction and bank staff that underlie traditional case of Mwea Irrigation Scheme is an example of
brick-and-mortar banking institutions, improving enabling inclusivity; it allows for several farmers to
accessibility to existing customers and new ones. participate in the rice value chain.
218
CONCLUSIONS AND RECOMMENDATIONS
Small farms produce 73.0 per cent of the total recorded lower food poverty head count percentage,
marketed production, emphasizing that the country’s indicating that economic growth contributes to
agriculture is pre-dominantly based on small farms. reduction in food poverty.
These smallholders are not fully integrated into
value chains, and thus incur high production costs,
Enabling Inclusive Growth Through Access
which reduces their competitiveness. Participation in
farmer organizations could foster economic inclusion to Affordable, Reliable, Sustainable and
of smallholders and increase their market power, Modern Energy Sources
thereby raising their incomes and productivity. Increase in the share of electricity generated from
Overall, the food supply situation as monitored renewable energy sources, including geothermal,
through the food balance sheet (KNBS, 2019) hydro, solar and wind, is central to a reliable power
reflects an improving situation, considering the supply system. Although generation of electricity
population growth. The food Self Sufficiency from these sources has potential to bring down the
Ratio (SSR) improved from 74.4 per cent in 2014 cost of electricity, thermal sources are more costly
to 75.2 per cent in 2015 and increased to 89.0 per but take a substantial share of installed capacity.
cent in 2018. In terms of per caput supply, there Even with advances in modernization of the grid
are improvements for most food groups, except system, Kenya faces rising electricity transmission
sorghum and products, sugar crops, milk and milk and distribution losses, which account for almost
products (excluding butter), eggs and products, a quarter of the generated capacity. Losses mainly
fruits (excluding wine), vegetables (tomatoes, arise from non-technical issues, including meter
onions, others), nuts and products and groundnuts. tampering, illegal connections, metering errors and
This implies that going forward, considerations need shortfalls in billing.
to be made to increase the production of these
commodities, which contribute to nutrition security Despite the high number of connections for domestic
through provision of vitamins and micro-nutrients. and small consumer categories accounting for 80
per cent of connected customers energy, demand is
Reducing food losses at household level is among low compared to demand from the large commercial
the instruments that can be used to secure food and industrial firms, which account for only 0.05 per
supply and therefore improve food security. Losses cent of customer base. This implies non-intensified
at household level are not homogenous. Storage use of electricity among the domestic and small
and transport-related loses account for over 90.0 per commercial consumers.
cent of loses for quantity larger than half a tonne.
During storage, it is estimated that weevils accounts Wide disparities are evident in access to clean
for an estimated 94 per cent of the losses for stored energy sources for lighting and cooking at national
grains over 500kg, and over 80 per cent for grain level, rural/urban areas, and across the counties.
between 100-500kg. For the smaller quantities, the All regions registered a high dependency on non-
losses are at about 70.0 per cent. This implies that clean energy sources and low reliance on clean
measures including integrated pest management for and efficient fuels for cooking purposes. A high
storage pest are needed to improve storage of grains proportion of households rely on firewood, kerosene
at household level. On average, most households and charcoal to meet their cooking needs while use
lost more than one year per caput supply of food of biogas, LPG and electricity as primary energy
in storage and up to seven times the annual per sources for cooking is still lagging. Further, gender
caput supply of food in transportation. This calls for disparities exist in that women are disproportionately
concerted effort to encourage investment in storage affected by lack of access to clean energy sources
and transport infrastructure for food. and bear the burden of collecting firewood, which
consumes considerable time, limits their productive
Food poverty is evident across all counties in the activities, and exposes them to respiratory illness
country; it is evident that a huge proportion of due to indoor pollution.
Kenyan suffer from food poverty, though with varying
intensities across and within counties. The counties Policies and initiatives in the sector are instrumental
that have higher gross county product per capita in achieving universal energy access through a
219
combination of access grid, mini-grids, off-grid and accessible online portal. All these challenges have
clean cooking solutions. However, the policies and stifled the expected impact of social protection
initiatives emphasize more on aspects of physical programmes.
access/connections. They fail to integrate essential
strategies for ensuring continuous and productive
Governance in Inclusive Growth
use of electricity and clean cooking solutions.
Good governance and strong institutions are
prerequisites for inclusive growth. The Government
Social Mobility and Social Protection has over time undertaken various measures to
Upward social mobility is important for sustainable alleviate the regional socio-economic inequalities
development and inclusive growth and can enhance and marginalization that has existed since
social cohesion and create feelings of inclusion independence. This includes introduction of a
among disadvantaged groups. Effective social devolved system of governance, which has a key
protection interventions that are well targeted to the objective to ensure equitable sharing of national and
neediest population groups can enhance the desired local resources throughout Kenya. Other initiatives
social mobility. to address regional inequalities and marginalization
have included the Constituency Development Fund
Even so, Kenyan data points to low levels of (now the “National Government Constituency
social mobility. Access to education and health by Development Fund”) and the National Government
individuals hinges on the income and education of Affirmative Action Fund.
their parents. Individuals with more educated parents
and those in the highest income group enjoy greater This notwithstanding, equitable resource allocation
access to all levels of education. In addition, access to to County Governments face various challenges,
health services is lower for the lowest income group. including poor utilization of allocated funds; delays
With respect to the labour market, individuals from by the National Treasury to disburse the equitable
the high-income households aged 20 through 29 share of revenue; and incidents of misappropriation,
years are more likely to work for a wage or a salary. misuse and wastage of public funds. Further, the CDF
The disadvantage is likely to translate into lower has been marred by poor project implementation,
overall productivity, lower incomes and supressed stalled projects, expenditure on projects not
social mobility. approved, misuse of funds and doubtful expenditure
due to lack of documentation, as reported by the
The apparent low levels of social mobility do not Auditor General in audit reports for the constituencies.
seem to be adequately addressed by the social Also, the criteria for determining allocations of NG-
protection interventions in place. This observation CDF is based on an equal amount disbursed equally
is premised on several broad findings, one of which to each constituency, which may fail to take into
is that the lowest income quintile is not receiving account specific or unique needs of various regions.
larger forms of social assistance in education, health While NGAAF seeks to promote affirmative action
and employment (cash/food for work). As examples, for women, youths, PWDs, needy children and the
the lowest and highest income groups are equally elderly, inadequate budgetary allocation and delay
likely to benefit from education bursaries and the in release of funds are constraints in full achievement
proportion who received free medical care was about of planned activities.
equal across the groups at just about 13 per cent. The
lack of positive discrimination implies that the lowest In addition, inclusivity in the policy making process
income groups may face greater risks of downward may be hampered by haphazard public participation
inter-generational mobility. This scenario can be initiatives. Although there is an existing legal
traced to challenges that affect the social protection framework requiring public participation in policy
sector, which include: weak targeting systems and making processes, there is lack of consensus on
outcomes, lack of adequate coordination, low what amounts to sufficient public participation. Also,
programme coverage, and duplication of benefits. delays in approval of the Public Participation Policy
Other challenges include ghost beneficiaries, and and enactment of the Public Participation Bill are
lack of an integrated system that links all social significant impediments.
assistance programmes across MDAs in one easily
220
Further, the public service at both national and county expand their production, increase incomes
level continues to exhibit inequalities, non-inclusion, and lower poverty.
marginalization and inadequate representation of Maintain the momentum in deepening
certain ethnic communities, women and persons with financial inclusion
disabilities, which hampers progress in enhancing
inclusivity. 3.) Expand agent-based banking and other
cost-effective delivery channels to reach the
financially excluded. Regulatory interventions
Partnerships for Inclusive Growth to allow use of low-cost delivery channels such
Partnerships are premised on SDG Goal 17, as local retail shops to serve as agents for
which requires effective partnerships to support financial service providers for different level of
the achievement of the other goals. In Kenya, service. Such an approach can cost-effectively
partnerships exist at various levels: local, regional expand the physical presence of financial
and global levels. Locally, partnerships have service providers while providing meaningful
been instrumental in facilitating consultation and benefits to those reached.
cooperation across the different levels and arms 4.) Promote financial literacy to help individuals
of Government within a devolved governance understand their financial circumstances.
structure. The governance collaborates with private To this end, a financial curriculum could
sector through PPPs and PPDs while cooperation be developed by the National Treasury, in
at the regional and international levels is mainly collaboration with the Central Bank of Kenya,
through bilateral and multilateral alliances. Due to to build capacity in this area.
lapses in self-governance within the NGO sector,
5.) Consider establishing the proposed Biashara
engagements between the Government and the
Fund, by consolidating the Uwezo Fund, Youth
NGO sector remain unstructured.
Enterprise Development Fund and the Women
Enterprise Fund. This would ensure the
12.2 Recommendations challenges facing these funds are adequately
addressed especially in achieving self-reliance
and adequately targeting women and youth
Secure macroeconomic performance groups.
1.) Maintain macroeconomic stability including Enhance the contribution of agriculture to

by ensuring enough food supply to stabilize inclusive growth
food inflation. This can be achieved through
promoting irrigated agriculture; facilitating 6.) Promote the adoption of better farming
distribution of food from surplus areas to deficit technologies to increase agricultural
areas; adopting modern farming technologies productivity and improve livelihoods among
to enhance agricultural productivity and the smallholders. County Governments to
enhancing value chain systems. Stable food adequately budget to support investment in
inflation reduces vulnerability of the poor into the sector.
falling into deeper poverty levels. 7.) Enhance data management system to provide
2.) Accelerate economic growth across the timely and relevant information to the
counties with increased development spending different actors along the value chain to help
and economic diversification. Infrastructure them make informed decisions. The system to
development will serve to create an enabling include production, price, weather, pest and
environment that encourages increased disease management.
private investments in manufacturing. County 8.) Use communication technologies to provide
Governments in ASALs can establish tanneries, a platform for connecting farmers to markets
leather and meat processing factories to much more effectively through innovative
empower the pastoralist communities to
221
methods for aggregation, logistics and supply registration, investigation, payment, auditing,
chain management. reporting and monitoring.
9.) Promote nucleated land settlements for the 17.) Expand the coverage of social protection
effective management of land and reduce programme to reach all deserving cases and
the sub-division of agricultural land into ensure appropriate mapping of beneficiaries.
uneconomical small land parcels. 18.) Strengthen partnerships and linkages
10.) Promote value addition to reduce food losses with development partners to facilitate in
and increase the shelf life of most agricultural mobilizing adequate resources.
products.
Improve governance structure for inclusive
11.) Transform the agriculture sector from
subsistence into commercial enterprises that growth
can support livelihoods, reduce food poverty
19.) Ensure timely disbursement of funds to
and contribute to economic growth.
counties for effective implementation of
Promote access to affordable, reliable, budget and delivery of public services.
sustainable and modern energy sources 20.) Enhance Own Source Revenue (OSR) collection
by growing the private sector activity at county
12.) Focus on enhancing electricity generation level and reducing on revenue leakages.
capacity from wind, solar, geothermal and 21.) Entrench prudent fiscal management to
hydro as they remain underexploited. This will ensure public funds are utilized for the benefit
serve to increase access to renewable energy of the public.
and bring down the cost of electricity.
22.) Impose stricter sanctions and penalties to
13.) Invest in grid modernization through inclusive non-compliance in achieving diversity and
smart metering programmes for all end-users representation in public service at both
and grid monitoring solutions. This would national and county level.
reduce electricity transmission and distributive
electricity losses, creating a stable electricity 23.) Define clear criteria and parameters to guide in
supply system. appropriately identifying individual ethnicity.
14.) Incorporate in energy access programmes 24.) Establish clear guidelines on public
sensitization of households on productive participation process through enactment of
uses of electricity in boosting their income the Public Participation Bill.
generating activities, and awareness 25.) Strengthen the affirmative action for gender
campaigns on the benefit of clean energy equality in senior positions in public service
solutions for cooking and lighting. and elective positions.
15.) Engender energy projects, programmes, 26.) Enact the Kenyan Sign Language Bill, 2019
and policies to ensure both women and men to institutionalize the use of Kenyan Sign
participate and benefit from access to clean Language, and review the Persons with
energy sources. Disabilities Act, 2003 to align it to the rights
envisaged in the Constitution, 2010.
Strengthen social mobility
Exploit partnership opportunities
16.) Develop a more integrated social assistance
system that transfers all the dispersed social 27.) Finalize and operationalize the alternative
assistance programmes and processes to an dispute resolution mechanisms to mitigate
electronic platform shared across CMDAs. conflicts between the National and County
Such a system to effectively manage all steps Governments. The regulations have been
associated with the social assistance processes drafted and are awaiting approval by
including application, assessment of eligibility, Parliament, and the IGRTC will play a key role
in making them operational.
222
28.) Draft a Bill to give the Council of Governors communities in feasibility studies, project
and sectoral committees a strong legal design, implementation and monitoring and
foundation. evaluation.
29.) IGRTC, CoG and the Summit to address issues 32.) Building capacity of umbrella, sectoral
related to borrowing powers by counties, and primary associations for effective and
harmonizing cross-county taxation and sustainable engagement. KEPSA as an
licencing, aligning economic planning at the umbrella body to work with other associations
national and county levels, and formulating in replicating the national structure (which has
benefit sharing frameworks. been very successful) at the county level.
30.) Build the capacity for the negotiation teams 33.) Expedite the gazettement and
to ensure the interests of the country are operationalization of the PBO Act (2013)
adequately represented in memberships. and have a structured dialogue platform for
Where possible, exploit south-south the NGO Co-ordination Board and the NGO
cooperation. Council to engage.
31.) Reform existing legislation and policy for 34.) Enhance the regulatory capacity of NGO Co-
PPPs with a view to integrating principles of ordination Board with a diversified funding
public participation especially by engaging and institutional support to strengthen its
oversight role.
223
KENYA ECONOMIC REPORT 2020 KENYA ECONOMIC REPORT 16287
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229
A ANNEX
Annex Table 4.1: Gross domestic product per capita, current prices (US dollars)
Country 2016 2017 2018 2019 2020 2021 2022 Average
Botswana 6,958 7,584 7,973 7,859 8,116 8,453 8,585 7,933

South Africa 5,267 6,120 6,354 6,100 6,193 6,332 6,493 6,123
Nigeria 2,180 1,972 2,033 2,222 2,400 2,602 2,830 2,320
Ghana 1,941 2,038 2,217 2,223 2,266 2,386 2,473 2,221
Kenya 1,522 1,684 1,831 1,998 2,152 2,294 2,455 1,991
Zambia 1,253 1,501 1,503 1,307 1,236 1,203 1,179 1,312
Tanzania 966 1,003 1,040 1,105 1,159 1,214 1,274 1,109

Ethiopia 777 817 853 953 1,066 1,162 1,249 982
Rwanda 735 774 787 825 873 928 993 845
Uganda 677 702 724 770 823 874 938 787
Malawi 295 325 350 371 386 398 413 362
Burundi 298 312 307 310 313 316 324 311
South Sudan 282 273 353 275 243 244 278 278
Source: IMF, World Economic Outlook Database, October 2019
Annex Table 4.2: County growth projections 2020-2022

Code County 2014 2015 2016 2017 2018 2019 2020 2021 2022
28 Elgeyo Marakwet 5.0 12.2 13.9 9.0 10.0 10.0 10.0 10.0 10.0
18 Nyandarua 7.9 12.6 9.5 7.2 9.3 9.3 9.3 9.3 9.3
31 Laikipia 6.4 12.9 14.8 0.1 8.6 8.6 8.6 8.6 8.6
41 Siaya 10.6 12.7 4.1 6.0 8.4 8.4 8.4 8.4 8.4
13 Tharaka Nithi 6.0 7.2 4.2 15.8 8.3 8.3 8.3 8.3 8.3
32 Nakuru 10.2 5.8 10.0 4.7 7.7 7.7 7.7 7.7 7.7
39 Bungoma 16.2 1.5 5.7 6.9 7.6 7.6 7.6 7.6 7.6
30 Baringo 7.8 14.5 3.4 4.2 7.5 7.5 7.5 7.5 7.5
40 Busia 7.6 6.7 3.5 10.9 7.2 7.2 7.2 7.2 7.2
44 Migori 8.8 5.1 3.4 11.0 7.1 7.1 7.1 7.1 7.1
36 Bomet 6.7 1.2 11.5 4.0 7.0 7.0 7.1 7.2 7.3
230
Code County 2014 2015 2016 2017 2018 2019 2020 2021 2022
14 Embu -3.4 11.6 -3.5 5.7 7.0 7.0 7.1 7.2 7.3
7 Garissa 2.3 4.2 3.4 3.0 7.0 7.0 7.1 7.2 7.3
43 Homa Bay 6.4 3.8 6.6 4.4 7.0 7.0 7.1 7.2 7.3
11 Isiolo 5.5 6.5 2.3 5.5 7.0 7.0 7.1 7.2 7.3
34 Kajiado 5.7 6.9 9.6 1.3 7.0 7.0 7.1 7.2 7.3
37 Kakamega 5.7 6.5 3.0 2.7 7.0 7.0 7.1 7.2 7.3
35 Kericho 4.7 2.7 7.7 0.6 7.0 7.0 7.1 7.2 7.3
22 Kiambu 6.6 8.3 7.0 5.2 7.0 7.0 7.1 7.2 7.3
3 Kilifi 2.9 10.4 0.7 5.4 7.0 7.0 7.1 7.2 7.3
20 Kirinyaga 6.2 3.9 5.5 3.5 7.0 7.0 7.1 7.2 7.3
45 Kisii 5.1 5.9 4.4 5.6 7.0 7.0 7.1 7.2 7.3
42 Kisumu 5.3 2.5 4.2 2.0 7.0 7.0 7.1 7.2 7.3
15 Kitui -3.8 20.5 -10.0 7.3 7.0 7.0 7.1 7.2 7.3
2 Kwale 4.2 5.8 5.2 7.4 7.0 7.0 7.1 7.2 7.3
5 Lamu 0.0 11.1 -0.4 9.4 7.0 7.0 7.1 7.2 7.3
16 Machakos 3.2 10.3 1.7 5.0 7.0 7.0 7.1 7.2 7.3
17 Makueni 4.7 9.9 2.1 -1.1 7.0 7.0 7.1 7.2 7.3
9 Mandera 4.7 4.5 4.4 4.2 7.0 7.0 7.1 7.2 7.3
10 Marsabit -1.7 12.2 4.1 4.9 7.0 7.0 7.1 7.2 7.3
12 Meru 7.8 6.2 4.4 2.4 7.0 7.0 7.1 7.2 7.3
1 Mombasa 5.3 3.8 7.8 9.3 7.0 7.0 7.1 7.2 7.3
21 Murang’a 5.4 3.5 6.3 3.2 7.0 7.0 7.1 7.2 7.3
47 Nairobi 3.9 5.8 6.6 6.0 7.0 7.0 7.1 7.2 7.3
29 Nandi 3.7 3.5 8.8 -1.5 7.0 7.0 7.1 7.2 7.3
33 Narok 2.2 5.6 6.7 4.0 7.0 7.0 7.1 7.2 7.3
46 Nyamira 7.1 -1.7 17.3 -3.3 7.0 7.0 7.1 7.2 7.3
19 Nyeri 12.0 1.2 7.2 7.1 7.0 7.0 7.1 7.2 7.3
25 Samburu 7.5 0.2 13.0 0.8 7.0 7.0 7.1 7.2 7.3
6 Taita Taveta 10.4 1.8 11.3 2.4 7.0 7.0 7.1 7.2 7.3
4 Tana River 25.2 -17.4 10.9 2.6 7.0 7.0 7.1 7.2 7.3
26 Trans Nzoia 5.7 6.5 -0.6 4.9 7.0 7.0 7.1 7.2 7.3
23 Turkana 5.1 8.2 2.9 0.7 7.0 7.0 7.1 7.2 7.3
27 Uasin Gishu 8.7 5.4 6.2 -0.3 7.0 7.0 7.1 7.2 7.3
38 Vihiga 8.0 7.6 5.4 4.0 7.0 7.0 7.1 7.2 7.3
8 Wajir 2.7 5.3 2.9 3.9 7.0 7.0 7.1 7.2 7.3
24 West Pokot 6.1 6.9 7.4 -0.3 7.0 7.0 7.1 7.2 7.3
Total 5.6 6.1 6.0 4.8 7.2 7.2 7.3 7.4 7.5
Annex Table 4.3: County economic growth rates 2014-2017

Code County 2014 2015 2016 2017 Averages
1 Mombasa 5.3 3.8 7.8 9.3 6.5
2 Kwale 4.2 5.8 5.2 7.4 5.7
3 Kilifi 2.9 10.4 0.7 5.4 4.8
4 Tana River 25.2 -17.4 10.9 2.6 5.3
231
Code County 2014 2015 2016 2017 Averages

5 Lamu 0.0 11.1 -0.4 9.4 5.0
6 Taita Taveta 10.4 1.8 11.3 2.4 6.5
7 Garissa 2.3 4.2 3.4 3.0 3.2
8 Wajir 2.7 5.3 2.9 3.9 3.7
9 Mandera 4.7 4.5 4.4 4.2 4.4
10 Marsabit -1.7 12.2 4.1 4.9 4.9
11 Isiolo 5.5 6.5 2.3 5.5 5.0
12 Meru 7.8 6.2 4.4 2.4 5.2
13 Tharaka Nithi 6.0 7.2 4.2 15.8 8.3
14 Embu -3.4 11.6 -3.5 5.7 2.6
15 Kitui -3.8 20.5 -10.0 7.3 3.5
16 Machakos 3.2 10.3 1.7 5.0 5.1
17 Makueni 4.7 9.9 2.1 -1.1 3.9
18 Nyandarua 7.9 12.6 9.5 7.2 9.3
19 Nyeri 12.0 1.2 7.2 7.1 6.9
20 Kirinyaga 6.2 3.9 5.5 3.5 4.8
21 Murang’a 5.4 3.5 6.3 3.2 4.6
22 Kiambu 6.6 8.3 7.0 5.2 6.8
23 Turkana 5.1 8.2 2.9 0.7 4.2
24 West Pokot 6.1 6.9 7.4 -0.3 5.0
25 Samburu 7.5 0.2 13.0 0.8 5.4
26 Trans Nzoia 5.7 6.5 -0.6 4.9 4.1
27 Uasin Gishu 8.7 5.4 6.2 -0.3 5.0
28 Elgeyo Marakwet 5.0 12.2 13.9 9.0 10.0
29 Nandi 3.7 3.5 8.8 -1.5 3.6
30 Baringo 7.8 14.5 3.4 4.2 7.5
31 Laikipia 6.4 12.9 14.8 0.1 8.6
32 Nakuru 10.2 5.8 10.0 4.7 7.7
33 Narok 2.2 5.6 6.7 4.0 4.6
34 Kajiado 5.7 6.9 9.6 1.3 5.9
35 Kericho 4.7 2.7 7.7 0.6 3.9
36 Bomet 6.7 1.2 11.5 4.0 5.9
37 Kakamega 5.7 6.5 3.0 2.7 4.5
38 Vihiga 8.0 7.6 5.4 4.0 6.3
39 Bungoma 16.2 1.5 5.7 6.9 7.6
40 Busia 7.6 6.7 3.5 10.9 7.2
41 Siaya 10.6 12.7 4.1 6.0 8.4
42 Kisumu 5.3 2.5 4.2 2.0 3.5
43 Homa Bay 6.4 3.8 6.6 4.4 5.3
44 Migori 8.8 5.1 3.4 11.0 7.1
45 Kisii 5.1 5.9 4.4 5.6 5.2
46 Nyamira 7.1 -1.7 17.3 -3.3 4.8
47 Nairobi 3.9 5.8 6.6 6.0 5.6
Total 5.6 6.1 6.0 4.8 5.6
232
Annex Table 4.4 County sectors value added (% of total)
Agriculture, forestry and fishing
Wholesale and retail trade
Financial and insurance
Transport and storage
Public administration
Manufacturing
Construction
Education
Real estate
County
Code
1 Mombasa 0.4 4.3 11.1 9.4 26.6 10.7 11.2 3.6 1.3
2 Kwale 45.9 0.3 5.9 5.7 4.9 6.6 3.7 5.3 6.2
3 Kilifi 32.1 7.1 5.1 7.3 9.6 12.2 1.9 5.4 7.7
4 Tana River 54.7 0.0 9.0 6.5 2.8 2.2 0.1 9.4 4.5
5 Lamu 57.7 0.1 8.8 2.2 12.9 3.7 0.5 6.6 2.8
6 Taita Taveta 38.6 0.2 10.9 8.8 6.1 7.8 4.3 10.0 4.8
7 Garissa 42.8 2.9 6.3 0.7 3.6 6.6 3.8 17.2 8.6
8 Wajir 53.9 0.0 5.6 4.1 0.7 2.1 7.5 13.9 5.3
9 Mandera 40.4 0.1 5.6 4.0 3.3 8.8 7.2 13.5 7.5
10 Marsabit 47.2 0.0 3.7 0.9 1.0 6.0 21.5 9.1 4.4
11 Isiolo 21.0 0.1 12.8 5.0 6.5 8.1 10.9 21.5 6.8
12 Meru 54.2 2.3 4.1 11.2 8.3 4.2 2.1 3.8 4.6
13 Tharaka Nithi 57.2 0.2 9.7 3.9 3.5 4.2 4.8 4.8 5.6
14 Embu 38.4 2.3 7.3 6.9 10.2 4.9 7.7 7.0 4.0
15 Kitui 41.2 0.1 5.1 11.3 7.0 6.2 2.5 7.4 10.6
16 Machakos 24.1 16.5 7.5 8.4 5.5 11.0 7.4 3.1 4.2
17 Makueni 47.2 0.4 5.8 7.0 5.2 5.4 5.7 6.9 9.4
18 Nyandarua 85.4 0.5 1.7 2.1 1.7 2.2 0.3 2.0 2.1
19 Nyeri 53.1 2.1 4.1 10.7 7.0 7.0 1.3 4.1 3.4
20 Kirinyaga 40.9 6.6 4.8 9.3 9.7 5.2 0.8 5.7 4.2
21 Muranga 51.4 4.3 2.5 11.9 4.0 6.0 4.7 4.1 4.7
22 Kiambu 31.4 11.8 3.9 10.0 6.9 10.1 13.1 3.4 2.8
23 Turkana 53.0 0.1 3.3 2.8 9.9 3.2 6.0 4.5 8.0
24 West Pokot 41.3 0.1 4.9 7.1 8.3 4.0 1.1 9.4 10.3
25 Samburu 40.9 0.1 16.4 5.2 4.7 4.7 2.5 12.8 6.4
26 Trans Nzoia 43.4 0.7 8.2 13.5 6.8 7.7 2.6 4.4 6.2
27 Uasin-Gishu 38.8 4.9 12.0 10.6 10.8 7.9 4.4 3.9 3.9
28 Elgeyo Marakwet 80.2 0.0 2.2 2.8 2.2 3.7 0.9 3.1 2.5
29 Nandi 59.5 3.4 3.6 10.0 2.8 4.2 1.1 4.2 6.4
30 Baringo 57.8 0.2 5.0 9.8 5.1 3.3 1.4 6.5 5.5
233
Agriculture, forestry and fishing
Wholesale and retail trade
Financial and insurance
Transport and storage
Public administration
Manufacturing
Construction
Education
Real estate
County
Code
31 Laikipia 43.8 0.9 8.8 7.7 7.3 6.1 6.9 7.4 4.3
32 Nakuru 58.2 2.9 3.4 5.9 5.9 5.1 3.2 2.7 2.7
33 Narok 67.2 1.2 2.1 8.5 2.6 4.2 0.8 4.4 3.9
34 Kajiado 14.8 4.7 6.1 16.1 7.3 21.9 8.9 4.5 4.3
35 Kericho 45.9 10.0 5.5 11.4 4.2 5.9 2.5 4.4 5.5
36 Bomet 71.5 2.9 2.8 4.6 1.6 1.5 4.4 2.4 4.8
37 Kakamega 52.1 4.4 4.4 5.5 4.1 6.0 1.6 4.4 9.1
38 Vihiga 34.1 0.6 6.1 10.6 3.9 10.7 7.1 7.8 10.0
39 Bungoma 58.8 0.9 3.6 5.4 5.7 5.0 2.2 4.8 8.6
40 Busia 57.7 0.2 6.1 1.0 3.8 4.3 6.1 7.4 8.5
41 Siaya 53.2 0.2 2.1 6.5 4.0 6.7 4.8 5.6 8.8
42 Kisumu 26.5 11.9 13.5 4.5 10.1 10.5 6.3 5.5 4.4
43 Homa Bay 59.8 0.5 3.4 4.2 5.0 4.0 1.6 6.0 9.4
44 Migori 42.4 2.8 3.8 7.1 6.9 7.2 1.1 5.9 10.2
45 Kisii 52.3 1.8 4.4 8.9 5.9 5.3 2.8 6.4 7.5
46 Nyamira 54.9 5.2 2.6 11.2 3.2 4.6 2.7 5.1 5.4
47 Nairobi 0.3 25.1 19.7 9.6 12.4 11.8 11.8 2.7 0.9
Total 37.7 8.6 8.2 8.1 8.0 7.6 6.0 4.4 4.3
234
Annex Table 10.1: Total allocations to County Governments

(Equitable and Conditional Transfers) in Ksh millions 2012-2018
County 2012/13 2013/2014 2014/2015 2015/2016 2016/2017 2017/2018 2018/2019
1 Baringo 228.85 3630.41 4057.79 4671.46 5038.84 6,959.39 8,125.03
2 Bomet 238.88 3715.22 4273.85 4955.77 5328.03 6,241.91 8,133.98
3 Bungoma 350.69 6515.26 7409.08 8077.64 8728.06 11,253.39 12,765.31
4 Busia 266.49 3678.77 5407.98 5716.20 6165.42 7,449.02 8,826.48
5 Elgeyo
184.76 3136.51 2992.89 3459.77 3738.00 4,944.69 5,601.08
Marakwet
6 Embu 206.16 3364.28 3961.47 4244.96 4653.03 6,165.24 6,827.24
7 Garissa 278.98 4696.47 5240.06 6365.61 6814.38 7,969.05 10,722.24
8 Homa Bay 273.82 5726.22 5132.23 5955.85 6420.71 7,568.99 8,467.34
9 Isiolo 176.73 2423.48 2749.26 3217.69 3470.19 4,340.81 5,484.10
10 Kajiado 227.76 3511.79 4063.81 4630.30 5001.25 8,188.01 9,605.25
11 Kakamega 397.09 7356.21 8934.57 9713.67 10518.27 12,905.26 14,489.42
12 Kericho 231.26 3612.81 4035.90 4756.58 5139.10 6,540.46 8,417.97
13 Kiambu 342.66 6264.44 6747.63 8246.78 8923.10 12,585.56 16,914.35
14 Kilifi 341.83 5820.42 6634.89 7834.44 8456.34 12,126.91 14,482.48
15 Kirinyaga 194.83 2829.92 3364.32 3741.94 4029.20 5,695.00 5,911.46
16 Kisii 328.76 5824.26 6428.78 7839.67 8460.23 10,897.35 12,011.00
17 Kisumu 275.56 4866.68 5416.11 6334.18 6811.41 9,214.72 11,875.53
18 Kitui 335.27 5834.40 6640.22 7542.54 8135.22 11,243.35 11,688.67
19 Kwale 254.65 4029.40 4641.03 5406.16 5846.20 9,315.49 11,518.02
20 Laikipia 191.50 2757.83 3164.92 3662.03 3946.32 5,706.50 6,927.96
21 Lamu 138.85 1599.99 1881.73 2192.83 2461.63 3,019.06 4,846.74
22 Machakos 316.51 5473.70 6365.70 7377.47 8006.98 10,078.52 14,965.22
23 Makueni 286.43 4721.15 5518.01 6242.67 6739.21 9,674.90 10,651.72
24 Mandera 398.87 6780.54 7905.62 9235.57 9978.40 12,246.86 13,709.96
25 Marsabit 257.03 4068.45 4619.59 5377.27 5813.25 7,730.88 8,718.80
26 Meru 306.17 5507.87 7314.18 7071.67 7712.95 10,739.55 12,556.10
27 Migori 281.42 4760.06 5309.30 6193.18 6684.78 8,166.90 8,801.12
28 Mombasa 257.35 4347.58 4876.50 5920.73 6309.69 12,634.45 14,456.50
29 Murang’a 263.30 4321.83 5007.17 5622.57 6063.31 8,318.24 8,850.78
30 Nairobi 551.08 9896.24 12945.53 13633.21 14614.50 33,649.69 33,068.25
31 Nakuru 367.29 6961.31 7538.21 8949.39 9598.50 16,098.93 18,478.94
32 Nandi 240.67 3886.85 4269.60 4995.87 5391.65 6,847.93 8,426.86
33 Narok 260.74 4146.38 4819.16 5526.97 5979.39 9,805.63 10,194.86
34 Nyamira 218.07 3317.08 3779.00 4396.95 4741.18 6,111.70 6,959.07
35 Nyandarua 223.82 3435.12 3904.07 4522.15 4874.17 6,105.18 7,669.54
36 Nyeri 229.17 4071.32 4396.89 5068.37 5442.28 7,961.11 8,836.54
235
County 2012/13 2013/2014 2014/2015 2015/2016 2016/2017 2017/2018 2018/2019

37 Samburu 195.35 2805.09 3190.66 3712.56 4009.87 4,832.66 5,861.12
38 Siaya 249.70 3971.59 5011.62 5302.22 5700.17 6,845.34 8,443.59
39 Taita 186.23 2626.48 2979.26 3496.11 3765.97 5,524.40 5,987.45
40 Tana River 211.64 3118.81 3599.93 4155.86 4592.14 5,913.76 7,573.36
41 Tharaka 4,632.23 5,721.00
Nithi 179.75 2434.59 3436.19 3316.93 3571.51
42 Tranzoia 253.67 3923.01 4541.68 5347.14 5779.34 6,628.53 8,042.56
43 Turkana 456.26 7894.40 9235.14 10751.07 11634.57 10,964.75 15,352.30
44 Uasin Gishu 257.11 4066.89 4626.10 5490.76 5845.778 8,062.14 9,958.06
45 Vihiga 207.40 3028.54 3789.12 4097.18 4416.704 5,581.63 7,002.57
46 Wajir 333.99 5647.52 6402.55 7486.06 8091.461 9,362.31 13,175.69
47 West Pokot 224.04 3592.83 3859.88 4517.46 4885.157 5,649.11 6,369.51
TOTAL 12678.42 210000.00 242419.14 276373.48 298327.8 410,497.48 483,473.12
Source: Commission on Revenue Allocation, 2012-2018
236
Annex Table 10.2: County expenditure/Absorption rates, 2013-2018
Annex Table 10.2: County expenditure/Absorption rates, 2013-2018
County 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19

Recurrent Development Recurrent Development Recurrent Development Recurrent Development Recurrent Development Recurrent Development
Expenditure Expenditure Expenditure Expenditure Expenditure Expenditure Expenditure Expenditure Expenditure Expenditure Expenditure Expenditure
Absorption Absorption Absorption Absorption Absorption Absorption Absorption Absorption Absorption Absorption Absorption Absorption Rate
Rate Rate Rate Rate Rate Rate Rate Rate Rate Rate Rate
Baringo 99.7 30.7 99.5 59.5 96.5 53.9 96.1 56.2 99.3 36.4 97.0 32.2
Bomet 94.5 92.4 96.4 99.6 101.2 94.6 84.9 89.3 93.1 46.9 93.0 70.0
Bungoma 69.5 15.3 96.1 46.7 86.4 76.1 92 48.7 92.6 42.3 84.3 55.9
Busia 85.3 17.6 88.1 85.3 92.2 69 87.6 63.9 93.5 45.1 91.4 52.8
Elgeyo 72.7 49.9 98.3 75.5 94.1 45.6 96.9 63 97.1 49.0 98.7 54.1
Marakwet
Embu 49.9 12.2 93.3 39.5 88.8 40.1 88.3 81.4 92.0 59.0 97.7 62.8
Garissa 51 31 96.4 72.4 96.2 78.8 98.3 87 98.3 42.7 101.3 56.6
Hombay 84.4 61.9 107.6 101.2 93.4 79.1 93.2 67.6 80.6 42.8 88.3 32.5
Isiolo 88.2 51.1 85.4 82.2 93.3 76.8 95 88.6 81.3 72.4 90.5 53.7
Kajiado 89 46 96.8 50.2 87.5 56.8 87.5 47.1 78.7 37.2 91.4 63.4
Kakamega 91 27.2 80.3 60.6 87 72.4 93.2 82.4 91.5 69.0 93.6 73.2
Kericho 88.6 54.3 97.4 73.8 91.6 78.1 92.8 82.7 92.9 48.8 98.8 38.9
Kiambu 93.3 54 93.3 66.7 98.4 71.2 94.3 69.9 91.0 66.1 89.2 75.4
Kilifi 77.3 20.7 85.9 64.9 85.1 62.6 87.8 65.5 81.5 73.1 69.7 61.8
Kirinyaga 70.5 34 90 57.6 94.2 70.5 93.9 57.8 97.1 42.3 98.3 62.6
Kisii 86 55 92.7 79.9 96.8 70.6 93.9 54.3 88.7 56.5 90.8 57.2
Kisumu 91.3 4 86.6 47.4 82.3 45.3 77.9 62.6 90.3 23.6 78.7 57.8
Kitui 83.5 17.6 87.9 58.3 87.4 69.6 80.4 70.7 87.4 72.0 93.0 71.4
Kwale 71.9 56.9 84.9 55.8 89.4 68.4 87.9 56.8 85.4 52.1 94.2 42.6
Laikipia 97 34 96.2 53.9 88.8 60.7 90.4 62.7 99.4 53.5 95.1 63.7
Lamu 53.1 24 83 50.8 90.4 64.4 76.6 38.3 84.6 35.8 86.2 30.4
Machakos 87.9 104.5 54.5 21.9 96.2 44.6 77.3 99.1 91.0 33.3 89.4 57.4
Makueni 81.7 30.7 86.6 37.3 85.1 31.7 94.8 73.4 91.7 44.8 92.7 60.1
Mandera 71.9 28.1 73.1 88.3 97.3 74.8 91.1 80.6 87.2 67.4 94.8 81.3
Marsabit 90.4 34.4 90.1 63.8 95 72.7 92.8 87 93.7 74.0 89.9 81.5
Meru 115.9 19.7 90.9 67.5 84.3 58.8 88.2 69.6 79.6 25.3 90.8 56.3
Migori 84 61 98.9 65.4 91.9 66.8 83.2 62.7 74.7 68.6 88.5 49.6
Mombasa 73.1 2.4 84.1 65.7 84.6 87.9 83.5 68.8 83.9 76.0 93.2 71.5
Muranga 101.9 51.3 107.2 75.3 93.8 81.1 93.4 58.1 82.7 72.5 88.5 69.7
Source: Controller of Budget, 2013-2018

Source: Controller of Budget, 17999-18000
237

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KENYA ECONOMIC

Creating an Enabling Environment

Bishops Garden Towers, Bishops Road

Rights and Permissions

ISBN 978 9966 817 32 7

Other Available Kenya Economic Reports

2019: Resource Mobilization for Sustainable Development of Kenya

2018: Boosting Investments for Delivery of the Kenya Vision 2030

2016: Fiscal Decentralization in Support of Devolution

2015: Empowering Youth through Decent and Productive Employment

2012: Imperatives for Reducing the Cost of Living in Kenya

2011: Transformative Institutions for Delivering Kenya Vision 2030

2010: Enhancing Sectoral Contribution towards Reducing Poverty, Unemployment

Statement By Cabinet Secretary, the National Treasury and Planning........................................................... xi

F FIGURES AND TABLES

Figure 2.24: Social protection spending by categories, 2013/14-2018/19.................................................... 25

Figure 3.1: Average real GCP growth rate, 2014-2017 (%)............................................................................ 39

Figure 4.1: County average growth rates, 2014-2017............................................................................... 58

Figure 5.1: Financial access by gender, youth and counties..................................................................... 69

Figure 6.1: Kenya’s balance of trade, 2014-2019...................................................................................... 83

Figure 7.1: Real agricultural growth rate, 2014-2019................................................................................ 98

Figure 10.1: Total CDF allocations by county, 2013-2018......................................................................... 175

Figure 11.1: Disentangling partnerships................................................................................................... 206

Table 4.1: Economic projections for 2019-2022.......................................................................................... 55

Table 4.2: Economic projections for 2019-2022 (with risks materializing)................................................... 57

Table 5.1: Access to savings........................................................................................................................ 70

Table 7.1: ASTGS focus areas and mid-term targets................................................................................... 97

Table 8.1: Components of K-OSAP programme....................................................................................... 124

Table 9.1: Type, objective, eligibility criteria, eligible population and

Table 11.1: Private sector associations in Kenya.......................................................................................... 209

STATEMENT BY CABINET SECRETARY, THE NATIONAL

Hon. (Amb.) Ukur Yatani, EGH

Dr Linda Musumba Chairperson

ACP-EU African Caribbean Pacific - European CPI Consumer Price Index

GNI Gross National Income K-OSAP Kenya Off-grid Solar Access

ILO International Labour Organization MoALF Ministry of Agriculture, Livestock and

IPP Independent Power Producers NCCK National Council of Churches of Kenya

IRCK Inter-Religious Council of Kenya NCIC National Cohesion and Integration

NSSF National Social Security Fund Community

RDF Rural Development Fund UNSC United Nations Security Council

RECs Regional Economic Communities USA United States of America

REP Rural Electrification Programme VAT Value Added Tax

Macroeconomic Performance Inequality in household consumption is higher in

Increased spending on development is critical for

The ideals of ethnic diversity and inclusivity are yet

Table 2.1: Kenya’s key macroeconomic and inclusive growth indicators

Female poverty, 2015/16 (%) 30.2

Data Source: Kenya National Bureau of Statistics (Various), Economic Survey

Figure 2.2: Overall poverty at national level and by residence, 1997/98-2015/16

Poverty headcount rate (%)

National Poverty Rural Peri-urban Core urban

Data Source: KNBS (2006; 2016), KIHBS 2005/06 and 2015/16

Figure 2.3: Trends in hardcore poverty at national and residence level

National Poverty Rural Peri-urban Core urban

Data Source: KNBS (2006; 2016), KIHBS 2005/06 and 2015/16

Figure 2.4: Poverty by age groups, 2015/16

20 41.5 32.5 36.2 39.1

National Rural Peri-urban Core urban

Data Source: KNBS (2016), KIHBS 2015/16

Rural Urban National