Financial cooperation between Kenya and the EEC

by Tue ROHRSTED

Financial cooperation between the EC and Kenya goes back to l 975 when Kenya became a signatory of the first Lomonvention. Close commercial, economic, financial and technical links have grown since then through the development programmes and projects funded under Lam, II, and III and through other facilities offered to the ACP States through the Convention.

Kenya’s economy is based on the agricultural sector add the Community’s assistance to Kenya has always been concerned with this sector and on creating rural development for the fast growing population of Kenya. Under LomII, the objectives have in particular been to emphasise food security and address ‘the issue of a better balance between the rural and urban society.

Because of Kenya’s importance as a transit country’ for the landlocked states of eastern Africa, the EC has been engaged, over the three Conventions, in financing important road projects.

Lom - 1975-1980 (4th EDF)

Kenya was allocated ECU 72 million under the 4th EDF as programmable resources. The assistance was concentrated on the rural sector, the biggest projects being the Machakos Integrated Development programme, the Bura Irrigation Scheme and the establishment of veterinary centres, cattle dips and other facilities of livestock in the Taita/Taveta Districts. To enhance rural electrification, the EDF further participated in the Upper Tana River Hydro-power Scheme.

Under Lom, the Commission started its Micro-Projects Programme in Kenya which has since been funded under both LomI and III with new tranches of assistance.

A significant Multi-Annual Training Programme formed part of the Community’s assistance under the first Lomonvention.

The European Investment Bank (EIB) has, over the whole Lomeriod, been actively involved in supporting Kenya’s development: under the First Lomonvention, the EIB provided loans to the tune of ECU 53.6 million.

LomI - 1980-1985 (5th EDF)

Under LomI, the EDF provided ECU 88 million in programmable resources and the EIB, ECU 47.2 million in loans. The most important Community-funded operations were in rural development and transport. The Machakos Integrated Development Programme, continued to be the biggest project in rural development, followed by the Smallholder Rice Rehabilitation programme and the Kisii Valleybottom Integrated Development Programme. The Micro-Projects Programme continued with four new tranches funded under LomI. The transport programme consisted of four roads: Sergoit-Tambach, Turbo-Webuye, Tambach-Biretwo and Kiganjo-Nanyuki. The latter was completed in November 1990. Under education and training, a new Multi-Annnal Training Programme was funded and the Community financed Kenya’s third polytechnic: the Eldoret Polytechnic - which was completed by the end of 1987. In the area of health research, the Community provided funds for the extension of the Institute of Primate Research in Karen. Finally, Kenya benefited from support from the EC for its National AIDS Control Programme. The EC support was utilised for the clinics for Sexually-Transmitted Diseases in Nairobi and Mombasa.

LomII - 1985-1990 (6th EDF)

Two objectives were agreed between the Government of Kenya and the EC for assistance to rural development under LomII. Firstly, the Commission should assist Kenya in achieving and maintaining food self-sufficiency. Secondly, the EC was to assist Kenya in redressing the rural-urban balance.

Outside the area of concentration (rural development) it was agreed that support should be given to strengthen the Northern Corridor Transport Network. A major structural adjustment programme for the cereals sector (CSRP) was initiated with EC assistance, Out of the total allocation of ECU 128 million under LomII for programmable resources, ECU 65 million was allocated for the CSRP.

The purpose of the structural adjustment programme was to liberalise grain marketing by abolishing the monopoly situation of the National Cereals and Produce Board (NCPB) and transform its role to-that of a buyer of last resort and manager of security stocks for the country. The three-year Cereals Sector Reform Programme financed by the EC is expected to be extended by a- further three years to be funded from: resources under LomV.

A part of the EC contribution was utilised as an Agricultural Sector Import Programme for Kenya and the couaterpart funds derived from this programme were used to establish a Crop Purchase Revolving Fund with NCPB to enable farmers to be paid on time for their maize supplies. The package also consists of an investment component particularly to improve storage and transport for the NCPB to reduce handling and storage costs.

Also aiming at achieving and maintaining food self-sufficiency is another major project unde LomII: the Kenya Agricultural Research Institute (KARI), with an EC contribution of ECU 20 million. KARI encompasses all agricultural and livestock research centres in Kenya and is responsible for carrying out applied research to enhance agricultural production. The Community has in particular involved itself in supporting livestock research and soil and water management, including a programme on fertiliser use.

The third larger programme to improve food security is the Arid and Semi-Arid Lands (ASAL) livestock development programme which aims at improving livestock production in nine districts in the ASAL areas of Kenya on a sustainable and ecologically sound basis The Micro-Projects Programme also continued under LomII.

Outside the sector of concentration, the Community funded under LomII, major rehabilitation to the Northern Corridor Transport Network from Nairobi to the Kenya-Uganda border - in total, a stretch of 107 kms.: the Westlands-St Austins, Kabete-Limuru, Eldoret-Turbo and Webaye-Malaba roads.

In the area of cultural cooperation, the EC supported the strengthening of the research capacity of the National Museums Kenya and in the area of wildlife conservation, the Community embarked on the Masai Mara Conservation Scheme.

The European Investment Bank contributed under LomII with an amount of ECU 78.5 million, distributed between loans for the construction of tea factories under the Kenya Tea Development Authority, the Kenya Ports Authority for the improvement of berthing facilities and oil installations for Mombasa Harbour, the Nairobi Water Supply Scheme, an industrial sector import facility and a loan to the Development Finance Company of Kenya.

LomV - First Financial Protocol - 1990-1995

The LomV Indicative Programme allocates to Kenya, ECU 140 million in programmable resources in addition to which ECU 23.5 million (as a first tranche) is available under the Structural Adjustment facility of the Convention.

The programming was carried out in late 1990 and the indicative programme was signed in Nairobi in February 1991 by the Vice-President and Minister of Finance, Prof. G. Saitoti, on behalf of the Kenya Government, and Mr P. Pooley, Deputy Director-General for Development, on behalf of the Community.

It is envisaged under LomV to continue the Community’s support for the food security aspects of the agricultural sector, in particular a second and final phase of the Cereals Sector Reform Programme and further support towards the establishment of a livestock industry in Kenya. The Community investment in road rehabilitation and construction will also continue.

The EIB’s allocation for Kenya under LomV’s First Financial Protocol is ECU 90 million.

Summary of Community aid to Kenya a through the Lomonvention (as at 30.09.1991)

Stabex

Kenya submitted its first application for Stabex compensation for loss of export earnings on coffee for the year 1980. Kenya has since received compensation for the years 1981,1986,1987,1988 and 1989 totalling a transfer from the EC of ECU 115.8million. Kenya’s Stabex claim for 1990 is at present under consideration. The compensation from Stabex has been of crucial importance to Kenya, in particular after the collapse of the International Coffee Agreement as revenue from coffee exports was for long, Kenya’s biggest foreign exchange earner. Now the drop in earnings has changed this situation, placing coffee in third place after tourism and tea.

Regional cooperation

Kenya, being in the centre of much regional cooperation in the eastern Africa region, is host to a number of regional institutions whose programmes receive support from the EC, e.g. the Organisation of African Unity’s Inter-African Bureau for Animal Resources through the Pan-African Rinderpest Campaign, the Desert Locust Control Organisation for Eastern Africa with its Armyworm Project, the International Centre of Insect Physiology and Ecology with its Tse Tse Fly Control project, the International Organisation for Migration’s Reintegration of Qualified African Nationals Project and the construction of the African Medical Research Foundation’s Headquarters in Nairobi. Kenya has benefited from regional funds from the Lomonvention in particular for road projects connected to the Northern Corridor.

Other areas of financial assistance

Outside the Lomonvention, Kenya has, since 1988, had a multi-annual food aid agreement with the EC under which Kenya receives annually, 15000 tons of wheat to assist in covering its deficit in wheat production. The wheat is monetised and the counterpart funds are utilised for rural development projects or to support the CSRP.

A number of research grants have been given to research institutions in Kenya, in particular the National Museums of Kenya and its Institute of Primate Research and the University of Nairobi for research in areas of tropical agriculture and health.

A number of European non-governmental organisations received support for projects and programmes in Kenya under the NGO/EC cofinancing scheme. From 1976 to 1990, a total of 224 projects have received support from the EC.

T.R.