After repeat delays, President Kibaki finally presided over the groundbreaking of what has been marketed as East Africa’s first technology hub, the Konza Technology City. The great photo op was conveniently timed to happen before the end of his second presidential term. |
The USD8.5bn city will be developed in a Public Private Partnership (PPP) format with the government leasing the land to developers and providing the basic infrastructure both in the 5000-acre city and to connect it to the capital Nairobi. When complete, the city is expected to have a central business district, a business process outsourcing tech park, residential areas, a science park, a university campus, conference facilities etc. The city’s master plan indicates that it is to be developed in four stages, with the ICT Park expected to be the focus of the first phase together with some city amenities and residential development.
Recently, Information Minister Samuel Poghisio appointed the board members to manage the Konza Technopolis Development Authority (KTDA) which paves the way for their appointing an executive team to run the city. According to the project’s website, the team is expected to be appointed in early 2013 and will have a broad range of responsibilities, including:
- Ensuring capital budget allocation from government in order to build the public roads and parks,
- Sign concession agreements with third party utility providers for electricity, water and sewerage, telecommunications, public transportation operations, and solid waste management,
- Coordinate with government ministries and county governments to provide services such as schools, police, fire, postal service and others.
According to official estimates, infrastructure development is projected to cost about KES26bn:
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- A dual-carriage road is to be constructed from Konza to Athi River in two phases, with the World Bank providing part of the funding. It is expected to start in early 2014 and be completed in two years.
- The Nairobi-Konza segment will be part of the construction of a standard-gauge railway line from Mombasa. This project has been in the planning stages for a while and is supposed to be extend to Uganda. A feasibility study is currently being done.
- The African Development Bank will provide financing of KES16bn for the construction of the multi-purpose Thwake Dam, intended to supply water to Konza as well as some irrigation for the neighbouring areas.
- Kenya Power is also set to extend power to the city.
The Government of Kenya hopes that the project will deliver 200,000 jobs in 20 years and spur huge investments in ICT as well as other sectors such as health, education, manufacturing, financial services etc.
’We have received 250 applications from local and international firms that want to invest in the project, 18 of them want to start immediately, while 30 have indicated that they will put up investment after the March 4 general elections, reports Business Daily cites Information PS Dr Bitange Ndemo.
A number of corporates have reportedly promised to invest in the city: Research in Motion, Telemac, South Korea’s electronics giant Samsung, Chinese Huawei Technologies; and locally Safaricom, Craft Silicon, Nairobi Hospital, KEMRI and University of Nairobi.
Konza groundbreaking has received much media coverage, and the bulk of it uncritically repeated the official message without questioning how realistic the grand projections were. Do we detect a whiff of white elephant?
- With a total anticipated investment volume of USD8.5bn (or possibly USD10bn), Konza is a massive undertaking. Kenya’s government has not previously proven very adept at handling large-scale, complex projects. Even a quick glance at the current state of basic infrastructural services – water, energy, Nairobi traffic, waste disposal – show underwhelming progress.
- Tatu City, a privately-financed satellite city near the capital Nairobi with mixed commercial and residential properties, has only just now been able to wind up court cases. Are there any lessons to be learned from this, or will the fact that government is backing Konza be able to override such difficulties?
- Konza is not the only large, expensive, complex undertaking that the Kenyan government will seek financing for – there is also the Northern Corridor/Lamu Port LAPSSET complex. Potential investors will look towards government to take the first steps and put its money where its mouth it, beyond the photo ops of groundbreaking ceremonies.
- A new tech city may not be the strongest draw for any investor: It will be the overall investment landscape that will matter to them. A company with a strong business case – and the willingness to deal with everything that makes Kenya difficult – might be just as happy with real estate in Upper Hill, or Industrial Area along Mombasa Road.
- To date, the government’s efforts to attract a sizeable outsourcing industry have not come to much, despite this having been a policy priority for several years. Real estate, however, is not the reason for this.
- In the Business Daily, Kwame Owino, CEO of the Institute of Economic Affairs (IEA) – who called Konza ‘high on rhetoric and short on prudence’ - argues: ‘The culmination of this (USD8.5bn) investment of public and private funds is the creation of 200,000 direct jobs over 20 years. Even allowing for the fact that up to three additional jobs may be created indirectly from each of these high calibre jobs, it is questionable whether this is an appropriate cost relative to alternatives that exist.’
The upcoming elections in early March will certainly play a key role: if there is a repeat of the 2007/2008 violence, then Kenya’s economic and investment prospects will deteriorate significantly. If the elections are held reasonably peacefully – because there will no doubt be localised violence -, then Kenya can look forward to an overall increase in investment: Despite its difficulties, the country is still the most mature, diversified economy in the region, a key thoroughfare for transport, a financial services centre, an exporter of human resources and investment to the region, and will receive a boost from the nascent oil and gas sector and related services and infrastructure development.
Even with a relatively peaceful election, there will no doubt be a lot of reshuffling of key economic players. Once all this has settled, maybe it’s time for a more pragmatic view?
- Konza may not necessarily mushroom into the landscape of glass and steel towers that the ‘artist impressions’ currently foresee, but could succeed as one of several areas around the capital city that thrive on their own, backed by improved infrastructure – e.g. like Thika.
- There is no doubt that Nairobi is bursting at the seams, and the current management of the city has not helped address its many challenges, from the ever more chaotic traffic jams to electricity, water, drainage and others crumbling under the pressure of rapid growth and construction. Setting up the Nairobi Metropolitan Ministry under the 2008 Grand Coalition government has not been effective – and it is by no means clear that Nairobi will elect a competent governor
- Or will the tech city then face competition from any of the new counties lucky enough to have a competent, enterprising, business-oriented governor?
- The move from the original idea of an ICT Park to a technology city may have improved the chances of success. The inclusion of the BPO, a financial district and university campus may make the overall concept more attractive.
- The Permanent Secretary in the Ministry of Information, Dr Bitange Ndemo, is certainly respected in the industry for his efforts to build the sector and bring key infrastructure like fibreoptic cables to Kenya. Similarly, the appointment of respected banker John Ngumi as the chair of the KTDA lends credibility.