USAID FY 1996 Congressional Presentation - Kenya

FY 1996 Development Fund for Africa Request	$23,845,227

FY 1996 Development Assistance Fund Request	$7,775,000

FY 1996 P.L. 480 Title II Request       	$6,951,000

Kenya was one of sub-Sahara Africa's best economic performers until the late 1980s. It has both human and natural resource potential for sustained development. Kenya is currently in a difficult transitional stage, making halting progress toward improving democratic governance following the multi-party election in December 1992. Nevertheless, Kenya continues to maintain a stable, pro-Western government and a free-market economy with a vibrant private sector. The government continues to be responsive to U.S. interests, collaborating with the United States on humanitarian and refugee operations in Ethiopia, Rwanda, Somalia, Sudan, and other neighboring countries located in the Greater Horn of Africa. In this regard, Kenya is the logistical hub for the region and plays a vital function in U.S. efforts to restore regional stability and prevent further crises. Through the Greater Horn of Africa Initiative, Kenya can maintain its significant role in regional trade, investment, infrastructure development and general economic cooperation for the region. U.S. assistance to Kenya also supports broader U.S. interests in promoting a pluralistic society and democratic governance, in maintaining a stable and open market economy which benefits regional economic growth, and in responsive humanitarian relief.

The Development Challenge.

Though significant progress was made over the past year with economic liberalization and structural reforms, the continuing challenge is to maintain the gains to date and encourage further progress on democratic governance. The challenge for the United States is to continue to engage the Government of Kenya (GOK) in constructive policy dialogue and to reinforce donor coordination in pressuring for accelerated reform. The United States intends to continue working toward improvements in economic policy and the political environment while addressing the longer-term development challenges of reducing population growth, while improving health services, and promoting sustainable, broad-based economic growth and employment opportunity.

During the past year, progress was made in stabilizing and liberalizing the economy. Inflation was brought under control and continues to decline. The budget deficit has been reduced and interest rates have come down. Other reforms include decontrol of all prices, abolition of trade and foreign-exchange controls, and some progress on parastatal and civil service reforms. Results on political reform and progress on accountability and governance were mixed, and remain a major challenge for the USAID program. Since November 1991, USAID has decreased economic assistance to Kenya pending progress on a variety of economic and political reforms.

Strategic Objectives (SOs).

USAID supports three strategic objectives in Kenya. The program also has cross-cutting themes which include building democracy, training, enhancing household food security, and strengthening capacity of private voluntary and non-governmental organizations (PVOs/NGOs).

STABILIZING POPULATION GROWTH ($14,883,035 of which $6,608,035 DFA and $7,775,000 DAF).

S0 1. Reduce Fertility and Incidence of HIV/AIDS ($14,383,035).

Kenya's population grew from 5.4 million in 1948 to 25.7 million in 1994. If this annual population growth rate of 3.0% were allowed to continue, by the year 2020 there would be 11 million more people to feed, millions more job seekers than jobs, 5,000 more Kenyans per hectare of arable land; a decline in health expenditures per capita; and 5.7 million more students to educate.

HIV prevalence among Kenyan adults increased from 3.5% in 1990 to 5.7% in 1993. By the end of 1995, an estimated 1.2 million Kenyans, or nearly 5% of the population, will be infected with HIV. Without an aggressive prevention program, HIV prevalence could increase to 9% by the year 2000, young adult deaths could increase from 90,000 in 1993 to 280,000 annually and the annual number of children dying from AIDS could be as high as 50,000 by 2005 (versus 10,000 due to measles and malaria). The cost of caring for AIDS patients alone could consume most of Kenya's health budget, and, in economic terms, the costs of AIDS could reach as high as 15% of Kenya's gross domestic product.

Population growth and AIDS, if unchecked, will continue to retard economic growth and could contribute to political instability in Kenya.

Activities. USAID has developed activities which will: (a) expedite replication of Kenya's successes in family planning (FP) and health-care financing; (b) seek to achieve measurable success in AIDS prevention; (c) assist Kenyan NGOs become self-sustaining and accelerate the privatization of health services and health insurance; (d) support implementation of progressive new Kenyan Government health policies to improve the efficiency, impact, and sustainability of FP and health services.

Indicators. The impact of USAID-supported activities will be measured by: (a) increases in the modern method contraceptive prevalence rate among all women of reproductive age (from 21% in 1993 to 30% in 1998); (b) decreases in fertility; (c) increases in use of the condom from 12% of all men in 1993 to 25% in 2000; and (d) decreases in the incidence or prevalence of STDs.

Feasibility and Cost-effectiveness. The Kenyan family planning program is succeeding. Surveys and evaluations in Kenya indicate that improved access to high-quality family-planning information and services has increased contraceptive use, which has been the main determinant for Kenya's rapidly falling fertility rate and overall population growth rate. Further significant declines in fertility are feasible by "doing more of the same" and meeting documented demand for family planning.

By contrast, the Kenyan HIV/AIDS control program is still evolving, but impact is expected in the future. Relatively rapid change in sexual behavior on a national scale is possible. USAID is using the extensive FP/Maternal Child Health (FP/MCH) service delivery infrastructure to broaden access to the information and services (condoms, counseling, testing, STD treatment) people require to avoid HIV infection.

Progress in 1993-1994. The modern method contraceptive prevalence rate among all women of reproductive age increased from 9.0% in 1984, to 21.0% in 1990-1993, and is projected to reach 28% in 1995. The total fertility rate decreased from 8.1 in 1977-1978 (one of the highest in the world), to 5.35 in 1990-1993 (one of the lowest in sub-Saharan Africa), and should fall below five percent in 1995. The population growth rate (PGR) decreased from 4.1% in 1980-1985 to a preliminary projection of 2.68% in 1995. Had the PGR which prevailed in the early 1980's persisted, Kenya's projected population could have been 120 million versus 49 million in 2025.

USAID directly contributed to these hopeful demographic trends -- and the myriad health and development benefits which ensue -- by being the largest and most dependable source of financial and technical assistance to the national family planning program, accounting for 60% of FP program costs in 1993.

No slowing in the rate at which HIV is spreading has been documented nationally. However, due to program efforts to date, many of the ingredients for impact are in place: basic AIDS control program components are functioning; government commitment is growing; 90% of Kenyan adults possess basic AIDS knowledge; 66% of men and 50% of women believe they are at personal risk; monthly sales of the USAID private-sector social-marketing condoms rose from 40,000 in 1990 to 500,000 in 1994 and distribution of USAID condoms in the public sector rose from 9 million in 1989 to 45 million in 1993; 12% of men currently use condoms in contrast to 1989 when condom use was virtually nil; and progress has been made integrating HIV/AIDS with FP/MCH services. Recent surveys suggest that behavioral changes are under way in Kenya which bode well for controlling AIDS: the practice of polygamy is decreasing, the median age at marriage is rising, and age at first intercourse for girls has risen slightly.

USAID is the lead donor supporting Kenya's efforts to increase local funding for health care and reduce dependence on foreign aid. A national cost-sharing program is now fully functioning throughout the public sector, generating about $60,000 monthly for primary health care alone. Five countries in the region are studying Kenya's cost-sharing experience in preparation for launching similar initiatives.

Donor Coordination. Due to the leadership of USAID, a new action-oriented, consolidated population and health donor coordination group was launched in 1994. USAID is, for the first time, participating on World Bank (WB) missions in the public health sector. USAID is collaborating with the Japanese Government under the Common Agenda/Global Issues Initiative which has jointly planned a Small-Scale Grants Assistance program for Kenyan NGOs and has completed a first-ever joint assessment of the public health sector.

Constraints. The following constraints may impede achievement of this strategic objective: declining public health sector resources per capita, particularly for preventive health care; insufficient public support and understanding of the needs of youth for protection against unwanted pregnancy and STDs; and the lack of a viable female-controlled HIV/STD prevention method.

ENCOURAGING ECONOMIC GROWTH ($11,791,514).

SO 2. Increase Agricultural Productivity and Farm Incomes ($7,835,002 of which $4,600,000 is for Economic Growth and $3,235,002 is for Protecting the Environment).

Agriculture contributes 28% of gross domestic product, provides 60% of export revenues and employs over three-quarters of the work force. It is anticipated that the sector will absorb about 40% of the four million additional workers expected to enter the labor force by the year 2000.

Activities. USAID's strategy focuses support on technology development and transfer, fertilizer and grain-marketing liberalization, policy research, and natural-resource management. Geographic focus is on high- and medium-potential agricultural areas encompassing 20% of land area and 80% of the rural population.

Funds to protect the environment are assisting the Kenya Wildlife Service (KWS) in implementing a community conservation approach to wildlife management. KWS also provides assistance to NGOs in wildlife management, training and community development activities.

Related Activities. While land productivity has increased, labor productivity has not, which is due to rapid population growth and slow expansion of non-farm employment opportunities. Fortunately, technology-driven per-hectare yield increases have militated against an almost three percent per annum labor- productivity decline. These relationships illustrate key cross- sectoral links to the employment and population strategic objectives of USAID.

Indicators. The impact of USAID-supported activities is measured by annual growth rates of: 1) value of agricultural production per-hectare (target growth rate 3.7%); 2) value of agricultural production per-worker (target growth rate 1.1%); 3) maize yields MT/hectare (target growth rate 4%); and 4) agricultural-sector value added (annual target growth rate 4%).

Feasibility and Cost-effectiveness. Freer fertilizer and grain markets accelerate the adoption of hybrid and improved grain varieties by farmers. This, in turn, leads to increased land and labor productivity. Land saved by increased maize productivity is then available for higher-value crops. Higher yields lead to improved food security and a larger marketable surplus. With efficient markets, this grain is able to reach deficient regions and households. Increased labor productivity stimulates not only improvement of farm technologies, but also increased consumption of goods and services from the larger economy, higher savings, and off-farm investment. The aggregate effect is stimulation of economic growth and development.

Progress in 1993-1994. Policy reforms on macroeconomic, trade and sectoral levels have improved agricultural-market performance, creating the potential for growth. The major reform during the past year was liberalization of maize marketing throughout the country, (adopted into law in December 1993). This policy change alone will do more to raise farm incomes and improve the incentive structure for farmers than any other investment. Complementary liberalization of the grain markets took place in early 1994, permitting the country's private sector to import commercial foods, thus ensuring that the country was well supplied in all markets. For the first time since 1963, there were no food queues, no panic buying or hoarding; government and relief donors were able to concentrate resources on those sections of the population who could not afford food. Macroeconomic liberalization is doing fairly well and, in tandem with agricultural sector-specific policy reform, has led to significant efficiency gains in commodity-market performance. Liberalization of the trade regime, together with unlimited access to foreign exchange, led to all- time high commercial nitrogen fertilizer imports.

Donor Coordination. Coordination of policies by donors has been instrumental in liberalization of the cereals sector with USAID leadership through its Kenya Marketing Development project. USAID is also assisting in improvement of agricultural road infrastructure along with Denmark, Sweden, and Finland. Germany provides assistance for a network of wholesale market places and the European Union (EU), Japan, United Kingdom, Germany and the WB are funding rehabilitation of Kenya's international and trunk road network.

In parks/wildlife management, major donors including the WB, the United States, Japan, the EU, the United Kingdom (UK), Germany and the Netherlands under the auspices of the WB Protective Areas and Wildlife Services Program collaborate on strengthening the management of Kenya's national park and reserve system by promoting environmentally sound tourism practices in the wildlife sector. Coordination of policies among donors has improved Kenya Wildlife Service management.

Eleven donors, including the United States, the WB, the EU and UK support agricultural research; the WB and Japan support agricultural education and extension, and the Nordic countries, the EU, Germany, the Netherlands, the International Fund for Agricultural Development, and the United Nations Development Program finance development of arid and semi-arid lands. Agro- forestry extension projects are being implemented by Denmark, the Netherlands and Sweden.

Constraints. Declining agricultural-sector growth and productivity have resulted from poor rainfall since 1990 in many key agricultural regions of Kenya. Reduced production has led to declines in per-capita agricultural production and food availability. The uncertain policy and overall economic environments also inhibit growth and productivity. Where political will has flagged, there have been instances of policy reversals and backtracking on conditionality.

SO 3. Increase Private Enterprise Employment ($6,716,514).

Nearly 500,000 people enter the labor force every year in Kenya. Only a portion of these new entrants find jobs, leaving Kenya with a burgeoning unemployment rate, estimated at 23% in the urban areas. Two categories of private enterprises--non- traditional exporters and medium, small and micro-enterprises-- are supported by USAID as high- potential employers for most of the new job seekers.

Activities. Non-traditional exports (everything except tea, coffee, and petroleum) are an area of focus because of this sector's capacity to absorb large numbers of individuals into productive employment. USAID's Kenya Export Development Support program assists Kenyan firms and related support organizations to expand non-traditional exports. USAID has assisted more than 30 firms in areas such as overseas marketing and product-quality improvement. USAID also supports trade associations that work with the GOK to improve export incentives for industries, and promote exports through trade shows. The labor-intensive, small and microenterprise (SME) sector creates more than half of Kenya's new jobs. Hence, in FY 1995, USAID initiated the Private Enterprise Development II project which: a) targets a few major subsectors (such as agro-processing) that have potential to create many microenterprise jobs, b) strengthens Kenyan organizations which provide support services to SMEs (much of which is microenterprise lending and business association development), and c) seeks to improve markets for this sector by reducing constraining regulations.

Related Activities. The current Kenyan labor force numbers 11 million, and is expected to reach 14.6 million by the year 2000. There are far too few jobs being created to employ these new entrants. Curbing Kenya's high population-growth rate will narrow this discrepancy. Since nearly 40% of all SME employment is in the agro-processing subsector, increasing agriculture productivity is essential to supply raw materials for small agribusinesses.

Indicators. The major indicator to measure progress in achieving this objective is an increase in private-sector annual employment growth from 5.2% in 1985 to 7.0% in 1995. Complementary indicators include: a) an increase in number of non-traditional exporting firms (from 1500 in 1990 to 2000 firms in 1995); b) policy improvements for exports (reducing foreign-exchange overvaluation from 18% in 1991 to zero percent in 1995); c) policy constraints for SMEs to reduce the number of goods under price controls from 61 to zero between 1985 and 1995; and d) annual increase in profitability of small firms by five percent between 1990 and 1995.

Feasibility and Cost-effectiveness. USAID focuses on two areas-- small enterprise development and non-traditional exports--which generate the bulk of the jobs in Kenya. SMEs provide more than half of all new jobs annually. USAID increasingly targets smaller firms because jobs created in micro-enterprises absorb more workers and require far fewer aid resources (less than $500 per job) than those created by larger and more formal firms. Most of these new jobs stem from small loans (less than $1,000) made at commercial rates with a 95% repayment rate.

Progress in 1993-1994. Non-traditional exports, as a percentage of total exports, have increased from 42% in 1989 to nearly 50% to date. This is due to an improved trade policy environment and implementation of the Duty and Value Added Tax Remission Scheme, designed to make Kenyan exports price competitive. Horticulture, which is now the fourth-largest foreign-exchange earner with a predominantly female work force, increased exports by nine percent in 1994. Under the PED project, assistance to nearly 25,000 firms has helped create about 16,000 jobs, a figure that substantially exceeds our target.

Donor Coordination. The Netherlands, United Kingdom and European Union are the major donors involved with small-business programs. Many donors coordinate support for technologies appropriate to small scale entrepreneurs.

Constraints. Maintaining the momentum of economic liberalization, which leads to higher growth rates necessary for job creation, is an immediate challenge. In addition, rapid population growth has meant that employment opportunities have not kept pace with the growing labor force.

Cross-cutting Issues.

BUILDING DEMOCRACY ($1,460,676).

Consistent with the goal of promoting sustained broad-based economic growth, USAID provides assistance to democracy and governance activities. These activities include election monitoring, voter education, training of refugees and promotion of human rights through civic education. They also serve to promote a more informed civil society, and civil and political rights.

The December 1992 multiparty elections for Kenya brought a transformation to the political system, but problems continue. The challenge remains to promote a more tolerant and effective political culture. The Strengthening Democracy and Governance (D/G) project specifically addresses these concerns. The project includes a legislative performance component to enhance quality of staff support for legislative operations and improve skills of members of Parliament. To improve accountability and governance, the project will assist the Ministry of Finance in improving the revenue collection and budgetary information system, enhancing skills of the staff of the Controller General and Auditor General offices and the members of the Public Accounts and Public Investment Committee. Other components of the project include policy analysis, through support to a newly-established Institute for Policy Analysis and Research, and a strengthening civil- society component, with support to NGOs promoting civil and political rights.

Strengthening Institutional Capacity of NGOs/PVOs ($1,000,000).

Kenya has a large PVO community, with most of its activities focused on implementation of integrated development projects at the grassroots level. The role of these organizations is becoming more critical as the effects of structural adjustment and other socio-political issues constrain the GOK's ability to provide public services. PVOs are critical actors in the D/G arena as well as implementors of food and disaster assistance programs. One critical element in the implementation of PVO activities is the institutional capability of the organizations to carry out the work, as well as evolve into sustainable organizations. USAID supports this effort through its sectoral programs as well as through an umbrella PVO-support project. This strategy supports institutional capacity development among organizations engaged in activities consistent with USAID/Kenya's strategic objectives.

Training ($300,000).

The Mission portfolio supports two other training activities: the Human Resources Development Assistance and Training for Development. These provide long and short-term technical training across the three USAID/Mission strategic objectives, making possible greater participation and improved sustainability.

PROVIDING HUMANITARIAN ASSISTANCE ($6,951,000).

The P.L. 480 Title II activities address problems of food insecurity in Kenya through development and emergency programs implemented by UN and PVO partners. In addition to the three PVO partners with which the Mission is currently collaborating (Catholic Relief Services, Food for the Hungry, World Vision), two PVOs (TechnoServe, World Concern) have expressed an interest in starting up food security programs in 1996. These activities would complement agricultural productivity objectives. Emergency programs have addressed immediate food and related emergency needs for vulnerable groups affected by drought/food deficit and civil disturbance. In 1992, resources for emergency assistance (from USAID's Bureau for Humanitarian Response) were funded at over $27 million to 2 million beneficiaries; in 1993, over $54 million to 1.4 million; and in 1994 over $28 million to approximately 950,000.

Other Donor Resource Flow.

In 1993, the U.S. was the fourth largest bilateral donor and the sixth largest overall donor, providing about 7% of all bilateral and 3% of total donor funding. The leading donors in Kenya are the World Bank, the European Union, Japan, United Kingdom, Germany and the United States.

Acting USAID Mission Director: George Jones


Home

Anthem

Map

Language

History

Culture

People

US Govt Info

Sports

Links

Search

©1996-2004 Timothy F. Bliss