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The East African : November 25th 2013
The EastAfrican BUSINESS NOVEMBER 23-29,2013 KEY PROJECTS AT STAKE Unspent govt cash hurting growth Kenyan minist≥ies used up only 61pc of the $3.1b allocated to them fo≥ June to Septembe≥ By CHRISTINE MUNGAI The EastAfrican allocated to them in the first quarter of the current financial year, raising questions on the government’s capacity to implement the ever-growing national budget. New data released by Treasury K shows the Ministry of Energy and Petroleum and that of Mining had the lowest absorption capacity of all ministries between June and September this year. Treasury said during the period, ministries spent only 61 per cent of the Ksh264 billion ($3.1 billion) allocated to them for the three months. Economists said the low absorp- tion capacity is hurting economic growth since most of the budgeted development projects are ending up unimplemented at the end of the financial year. They argue, for example, that this is raising questions over Kenya’s ability to position itself as a regional energy powerhouse and bring down the persistently high energy costs, which has dampened the country’s competitiveness and attractiveness to investors. Recurrent expenditure amount- ed to Ksh166.6 billion ($1.9 billion), against a target of Ksh179.2 billion ($2 billion), with underperformance recorded in operations and maintenance, wages and salaries, as well as in pensions. The lag between spending at the district level and reporting to the headquarters attributed to expenditure underperformance, Treasury said. “The long procurement proce- dures are partly responsible for the delay,” said Jason Lakin, senior programme officer and research fellow at the International Budget Partnership. “But this year, there could be more — this administration has taken a long time to sort itself out The Olkaria geothermal plant in Kenya’s Rift Valley. Projects in the energy sector are among those ending up unimplemented due to unspent budgetary allocations. Pic: File in terms of restructuring and reorganising ministries; The effect is that there is confusion over who exactly is authorised to sign off on certain projects.” Lengthy, complicated and bu- reaucratic procurement procedures have been blamed for the low absorption, according to a June 2013 report by Parliament’s Budget and Appropriations Committee presented to the House Speaker. The Committee recommended a reform of the Public Procurement and Disposal Act — the law which regulates procurement procedures in government agencies — as well as an effective reallocation mechanism to channel unused money to other high priority sectors. “The good news is that the econ- omy has stabilised from the uncertainty of the general election. If projects are rolled out in the second half of the financial year, then the impact of the low spending will not be much in the medium term. But policy direction needs to be clear,” said Mr Lakin. $1.9b By JEFF OTIENO The EastAfrican KENYA AND Tanzania have been selected to be part of President Obama’s billion-dollar Power Africa Initiative, which aims to add more than 10,000MW of clean energy to the continent’s power grid. Other countries that will benefit from the initiative announced by the US president on his Africa tour early this year are Ethiopia, Nigeria, Ghana and Liberia. The initiative will be headquartered in Kenya. According to Andrew Herscowitz, the co-or- dinator of Power Africa and Trade Africa, the programme will focus on renewable energy including wind, solar, geothermal, gas and bio- Wind power. Pic: File The majority of Kenya’s min- istries failed to spend half of the funds allocated to them. The Ministry of Energy and Petroleum for instance, only spent 13.3 per cent of the Ksh19.9 billion ($234 million) allocated to it during the threemonth period, an indication that it may take a while longer to get the country’s planned energy projects off the ground. Kenya plans to add 5,000MW to the national grid by the end of 2016. But the country is yet to actualise its well-laid plans. They include the long-awaited 300MW, Ksh70 billion ($823 million) Lake Turkana Wind Power project and a Ksh86 billion ($1 billion) geothermal power deal that Kenya signed with China. The country’s high cost of elec- tricity has been a serious impediment to business productivity. A unit of electricity in Kenya costs an average of 21 US cents, compared with 11.8 cents in Uganda and 7.4 cents in Tanzania. South Africa and Egypt are even cheaper, at 4 cents and 3.1 cents respectively, bringing into question the ability of Kenya’s industries to compete on a global level. The Ministry of Minin spent only Value of recurrent expenditure, against a target of $2 billion. 19.4 per cent of the Ksh286 million ($3.3 billion) allocated to it for the June-September quarter, hamper- SPENDING The majority of Kenya’s ministries failed to spend half of the funds allocated to them. Those that spent at least three-quarters of their budgets include the Ministry of Defence; Commerce, Tourism and East African Affairs; Education, Science and Technology; Health; and Industrialisation and Enterprise Development. The Presidency and the Ministry of Sports, Culture and Arts overspent their budgets, reporting an expenditure of 116 per cent and 145 per cent respectively. ing the country’s prospects of converting its recent high-profile mineral discoveries into tangible returns. The ministry has been embroiled in controversy in the past few months, beginning with a blanket cancellation of 43 exploration licences awarded between January and May this year. Operations have also been delayed in the Mui Basin in Kitui, eastern Kenya, where rich deposits of coal were recently discovered. The government and local communities have failed to agree on a compensation formula. Nai≥obi, Da≥ to get US funding fo≥ powe≥ p≥ojects mass. The Obama admin- istration has already committed more than $7 billion in financial support and loan guarantees, for the first five-year phase, through to 2018. “We will look at the large energy transactions in the pipeline and work with host countries as well as donor agencies like the African Development Bank and the World Bank to find appropriate solutions to obstacles and expedite transaction,” said Mr Herscowitz. Through the Overseas Private Investment Corporation (OPIC), the US has so far provided up to $310 million in financing for the first private geothermal energy plant, the Orpower 4 plant at Olkaria in the Rift Valley. Another project targeted by the initiative is the Kinangop Wind Project, which expects to add 60MW on the grid once completed. “Power Africa will also support the imple- mentation of a grid management programme to assist Kenya in managing integration of intermittent renewable energy,” Mr Herscowitz added. In Tanzania the initiative will help con- struct the Kiwira River Hydro Project, which is expected to produce 10 MW, once completed. enya’s ministries have been unable to spend the bulk of money 37 Ad fi≥ms in new battle fo≥ clients By SCOLA KAMAU Special Correspondent KENYA-BASED advertising firm Redhouse has acquired the TBWA Worldwide licence in the country, a move that will give its clients in the East African region access to global markets. Redhouse Group said Wednes- day it had signed a partnership with TBWA, which had ties with FlameTree Ltd — a firm owned by a former Ogilvy executive, Tim Smythe. A battle has been raging over the past three months for the control of Kenya’s lucrative advertising and public relations business. “The affiliation with TBWA extends to Redhouse Advertising access to global knowledge, tools, network and footprint that is critical in scaling up our operations across multiple markets in Africa”, said Koome Mwambia, the chief executive at Redhouse Group. Late last month, PR firm Gina Din Corporate Communications announced it had merged with marketing firm Imagine IMC, to broaden its offering to include advertising, placements of ads in the media and branding. Boost fo≥ EA bonds By CHRISTABEL LIGAMI Special Correspondent PLANS ARE underway to expand East Africa’s bond market following the signing of an agreement between the Swedish government and the regional bloc. The project, to be carried out through the Swedish International Development Agency, will improve the region’s secondary bond markets by streamlining requirements and regulations, and building regulatory capacity. This is expected to boost liquidity and broaden market participation. Fi≥m to seek oil again By KENNEDY SENELWA Special Correspondent ANADARKO Petroleum Corporation will drill more wells offshore Kenya in 2014 despite not having discovered commercial crude oil and natural gas this year. The New York Stock Exchange- quoted firm spend over $250 million to sink two offshore wells each to a depth of about 3,000 metres on Kubwa prospect in exploration area L7 and Kiboko prospect in acreage L11 B.
November 18th 2013
December 2nd 2013