Kenya: Isiolo Resort City Plans Trigger Violence?
Thursday, 26 January 2012
As with the case in Lamu where the Kenyan government is planning a large new seaport, allegations of land grabbing are beginning to appear in Isiolo, exacerbated by violence between different ethnic communities. In the past, violence in the region has mostly been connected to cattle rustling. However, Kenyan government is planning to construct a resort city near Isiolo, and rising land prices have added a new dimension to existing tensions. Gideon Kiarie looks at the Kenyan government’s infrastructure plans for the region.

A Vision 2030 flagship project, Isiolo is one of three resort cities to be developed under the proposed Lamu Port- Southern Sudan- Ethiopia Transport Corridor (LAPSSET) project, the other two being planned for Lamu and Lake Turkana. Isiolo has been hit by a series of inter-communal conflicts, typically described in the media as cattle rustling and retaliatory attacks. However, there are unsubstantiated allegations that politicians and other influential persons are using the animosity that has existed between the communities to evict them from perceived prime lands: According to a Kiss TV news report, the escalation of violence in the area is mostly organised and, other than previously portrayed in the media, unrelated to livestock theft and retaliatory action. The station quotes a confidential report alleging that the organisers of the violence have grabbed huge chunks of land in readiness for the expected windfall profits.The report further accuses politicians of fanning ethnic tensions, with some government officials providing weapons to communities to evict perceived opponents’ backers in the upcoming general elections.

Isiolo Land
Japanese Port Consultants, who carried out a feasibility study of the entire LAPSSET project, identified Mulango, an area that is nestled between two hills, Katim and Oldonyo Degishu, as the prime area to set up the city. Mulango, which is about 20km from Isiolo town, and areas around it have now become prime area with media reports indicating that there have been violent and fatal clashes with perceived non-residents being told to keep off the area.

The Ministry of Tourism has reportedly requested the County Council of Isiolo to set aside 6,500 acres for the project that the Council hopes to lease to local and international investors. The land is not owned by individuals: it is community land and the Council acts as the custodian. The current proposal foresees that the government compensate the locals and the Council acquires the title for the said land for which it will charge land rates and rents to investors.

Airport and Road First
How quickly the entire resort city project can and will be developed remains anyone’s guess – while the Kenyan government has proposed several similarly grand projects, the actual implementation typically drags behind. However, the development of the Isiolo airport is expected to be the frontrunner to the development, triggering land acquisitions or consolidations in the area in view of expected price hikes.

The airport, whose rehabilitation was expected to be complete in March 2012 with a 1.4km long, 34m wide runway, has itself already been the subject of conflict between the newly delineated Isiolo and Nyambene counties with the terminal and control towers in the former, but the runway extending into Nyambene. The decentralisation mapped out in Kenya’s new constitution allows the new counties – whose borders are identical with the previous districts – to raise their own revenues, which now renders the airport and its facilities more important to communities on both sides.

The KES640m airport is expected to be able to handle heavy commercial aircraft with a load weight of up to 66,381kgs. This, however, might not mean much if the area fails to grow. There is still limited cargo to date that needs to be flown out of the area. At the moment, there is the small miraa (khat) trade that originates in nearby Meru and has to be transported to Nairobi via road. However, a KES153m abattoir is under construction to give local livestock herders a chance to export livestock products, and fresh produce from Timau area would also benefit from the airport.

Another key development is the construction of the Isiolo-Moyale trunk road. It will form part of the proposed LAPSSET transport route to Ethiopia. Initial designs map it as a road from Nairobi to Moyale on the Ethiopian border, but the Isiolo-Moyale section will be adopted and considered part of LAPSSET, despite its construction preceding the onset of the actual construction of LAPSSET. The road is being constructed in phases and the first phase, the 136km stretch from Isiolo to Merille, was completed in December 2010. There are three more phases: The Merille-Marsabit phase is yet to begin while work is in progress for Marsabit-Turbi and Turbi-Moyale.

PPP Framework

Setting up the resort city is expected to cost about USD184m and is to be financed, just like the entire LAPSSET project, through public-private partnerships (PPPs). In fact, about 70% of Vision 2030 is expected to be funded by PPPs, with the model being praised as a quick way of developing capital intensive projects.

However, the legal framework for this has not yet been completed: The PPP Bill and Policy were approved by cabinet towards the end of 2011 and await the resumption of parliament for debate and any amendments. Although the bill is not very high on the political priority list, it was expected that Ministry of Finance would push for its passing before the budget was read. Whether this timeframe is realistic is not yet clear, given the recent disputes between parliament and the treasury over the still outstanding Finance Bill for the current fiscal year (which began in July 2011) and, even more recently, the confirmation of the International Criminal Court’s charges against Finance Minister Uhuru Kenyatta.

Once the legislation is enacted, the government will set up the cross-ministry body that will run the PPP programme and allow for funding of its setting up and operations by the budget. With Vision 2030 hinged on PPP funding, the government is under pressure to put up necessary policy and structures that will provide security to the private investors. As it is, the country is already lagging behind with these ‘development projects’ if they are to beat the 2030 deadline.

Implementing Projects  
According to its precursor, a subsidiary legislation in 2009 on PPPs under the Public Procurement and Disposal Act,there are various arrangements under which PPPs could be formed. While the final Act might be different, indications point to a build-own-operate scheme in the resort cities under which a private party designs, finances, constructs, owns, operates and maintains the infrastructure facility and provides services for an agreed time period. The Council will own the head title and lease the land out to investors who will put up the physical facilities.

This could, however, be different for sensitive installations like airports where the executing agency, in this case the Kenya Airports Authority (KAA), would build and control the runway and other sensitive facilities, while the private partners would build, own and operate terminal facilities. This had been suggested for Lamu Airport in the LAPSSET feasibility study.

Perspectives: The Bigger LAPSSET Picture
The Lamu Port-Southern Sudan-Ethiopia Transport (LAPSSET) Corridor is a proposed transport route that adds to the existing and practically completed Northern Corridor project anchored by Mombasa port. The LAPSSET proposal is structured so that the new corridor will primarily extend to Ethiopia and Southern Sudan, and will be anchored by a new port in Lamu. The port is expected to handle 13.5m tonnes by 2030. In 2011, President Mwai Kibaki promised that the groundbreaking for the construction of the first three berths would be “soon” and Prime Minister Raila Odinga recently indicated that this would be in February 2012. This could be given a fresh impetus by the January 2012 signing of a memorandum of understanding on the construction of a pipeline through Kenya by South Sudan.

There are, however, serious challenges. The project is expected to be funded with a PPP model with substantial funding from external sources. Ethiopia and Southern Sudan are also expected to contribute considerably, but concerns on the project’s viability and payback period may keep off the international investors. Other factors may also hold back both neighbours:
  • Ethiopia is keen to improve its access to a seaport since it lost a coastline with Eritrea’s independence, but may already be backtracking on the Kenya plans as it has embarked on a massive upgrade of its railway line to Port Djibouti. In December 2011, a second Chinese company was given a contract to construct the second of the two-phase railway project financed by Chinese Exim Bank, Development Bank of China and the Industrial and Commercial Bank of China (ICBC).
  • South Sudan’s greatest contribution to the deal was going to be an oil pipeline, but the country faces a host of problems at the moment, including rebels and domestic instability and strife, the ongoing conflict with the north over the oil transport fees (including the most recent shut down of its oil production) and widening clashes at the border. After French Total – who are awaiting the conclusion of their farm-in into Tullow Oil’s assets in Uganda   announced plans to construct a pipeline to connect to the Uganda-Kenya pipeline, rebels recently warned that they would not let Total construct that pipeline unless the government of South Sudan’s president Salva Kiir was toppled. Total holds a concession in Southern Sudan’s Jonglei state that it cannot exploit due to the violence in the state.

And Kenya itself has a few issues to resolve: Investors will be reluctant to commit before the next elections either in late 2012 or latest by March 2013 to ensure that Kenya can maintain stability. In addition, despite the Kenyan military’s intervention in Somalia, piracy at the East African coast as well as the threat from Islamic militants have not been resolved: Placing a large, expensive, strategic asset such as a seaport as close as possible to both terrorists and pirates carries significant security risks.

So even if President Kibaki and Prime Minister Raila Odinga use the official groundbreaking as a photo opp for an election year, further delays are likely. While Isiolo is excellently placed in the country and borders several parks and conservancies, the main driving force behind its expected growth is the development of the Lamu port and its accompanying infrastructure to Ethiopia and Southern Sudan. With the success of the latter unclear, the full resort city model might stall. And then there remains the not so small matter of security in the area that has been stoked recently by the prospect of rising land prices. In addition, the intended PPP model of resource mobilisation that the town hopes to use is unproven. This will largely depend on the framework that the president finally assents to and whether private sector players will feel sufficiently satisfied with its compensation levels and mechanisms to release their funds – never mind Kenya’s political stability.

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