Redesigning Investment Climate in Kenya’s Intermediary Cities: A Look into the UK Government’s Granu

Redesigning Investment Climate in Kenya’s Intermediary Cities: A Look into the UK Government’s Granular Approach in Kisii Municipality Context: In Africa, rapid urban growth is happening in towns and municipalities driving social and economic transformation. These secondary/intermediary cities, especially those along regional borders struggle to accommodate this rapid expansion because of the varied population influx.

This necessitates the need to put priority on helping them build economic resilience to strengthen the link between the rural areas and the urban centers in order to balance between traditional and industrial economic opportunities. In doing so, intermediary cities will move from a development-oriented approach based on artificial dependency between primary and secondary cities to one that is geared towards harnessing the secondary cities unique offerings to ensure an interdependent system that spurs economic growth.

While the aim is to ensure that these upcoming cities of the future, build equitable, inclusive, and sustainable urban centres, they currently need a lot of technical support to enable them to develop in a way that is built upon local socio-economic priorities and within the context of their local economic development ecosystem. To do this, a shift has to be made at leadership level to enable them to own as well as drive decisions that will drive economic change in their locality in a way that is responsive to the needs of the populations they serve.

Previous efforts of addressing economic concentration have seen the uptake of industry clusters around large cities making autonomy, transparency, responsiveness, and accountability of intermediary cities difficult. There is need to support upcoming intermediary cities to have the right urban policies as well supporting legal and enabling frameworks. The policies and regulations should define the roles of the devolved government and the private sector to ensure sustainable urban economic development. In doing so, these regulatory frameworks will support intermediary cities to create an enabling business environment that attracts new sources of investment leading to local economic transformation.

Programme Intervention and Approach In Kenya, the Urban Areas and Cities (Amendment) Act 2019 empowers intermediary cities to create public policies that will create an enabling environment at all levels to encourage inward investments into their urban centers. To assist with this, the UK Government funded Sustainable Urban Economic Development Programme (SUED) worked with one of its 12 supported municipalities, Kisii Municipality, to develop responsive policies to provide a regulatory framework for investors. The priority was on supporting Kisii to address policy and regulatory constraint to private sector led urban growth by creating a favourable business environment for investment attraction and implementation of the Urban Economic Plan (UEP) developed through SUED. To achieve this objective the programme undertook a Capacity Needs Assessment (CNA) to identify the capacity gaps, challenges and opportunities within the municipal boards and staff on 1

the municipal business environment and investment readiness. The CNA identified the constraints in the business environment that dissuade investors from investing in the value chain projects and infrastructure projects. It proposed the interventions in the form of legislative, policies, and governance structures that were needed to create a conducive environment for private sector growth.

One of the much-needed interventions in Kisii was the development of investor readiness policies and the enactment of relevant legislation to create a favourable business environment.

Kisii has had to position itself as a strong intermediary city that has growth potential and is proactively prioritising investment by having consistent policies that focus on an effective delivery system. This delivery system is aimed at championing a pro-investment planning approach that is proactive towards facilitating inward investment.

To advance this, Kisii Municipality developed the Fund Bill, eight by-laws and a Municipal Board Charter. The by-laws were aimed at enhancing the municipality’s capability to enhance its ownsource revenue and attract investors, while the fund bill was to ensure that the municipality was able to safeguard its financial and operational independence to enable it to have adequate resources for its function. The Board charter helped provide a guide that informed the Board members on how they would fulfill their responsibilities. The municipality was keen to have in place appropriate mechanisms that would demonstrate its institutional stability to leverage its governance, legal and regulatory environment to harness its investment potential.

Kisii Municipality was motivated by their need to drive economic growth and demonstrate their urban centers competitiveness to attract financial investments by delivering urban services more efficiently. To support the municipality to ensure that the structure they have in place would provide confidence to investors, SUED worked closely with the municipal and county leadership to review and finalise these policy and legislative documents. The programme did this through a multi-step approach: a) Technical Review: SUED was keen to support Kisii Municipality to restructure its urban legislation in a way that would ensure that they had appropriately utilised clauses that empowered the decentralised power that they had and would promote private sector engagement. This entailed the review of Kisii’s municipality Urban Economic Plan, Municipal Board Charter, municipal plans as well as existing policies and legislation.

Further, the review was guided by the following drafting considerations and principles: alignment with applicable legal frameworks; conformity to the Kenyan drafting style and language; clarity in drafting language; enforceability and capacity for implementation, target audience and complexity and alignment with the Municipality’s need and priorities.

Additionally, as the Fund Bill and the by-laws are aimed at promoting the implementation of the urban economic plan, there was need to review them with that in mind. Some of the gaps that were identified in the drafts developed was that they did not conform with the standard structure of legislation as provided under the Kenyan law. In some instances, some of the delegated functions had not been captured in the drafts while other provisions included did not conform with Kenyan law acts. The technical review: i.

Ensured alignment with applicable legal frameworks: It was important to ensure that the anchoring legislation and regulation at the national and county levels were incorporated to enhance their implementation upon adoption. ii.

Assessed the adequacy in addressing the issues that they intend to regulate: the situation analysis that was conducted helped to determine the extend to which 2

the Bill and the by-laws would help the municipality to achieve the goals in the UEP. iii.

Ensured alignment with the municipality’s needs and priorities: It was important that the bills and the by-laws as well as the charter were guided by the municipality’s vision, needs and priorities as captured in its planning and policy documents. iv.

Assessed the enforceability and capacity for implementation: It was important that the provisions included in the bill and by-laws were easily enforceable. b) Stakeholder Engagement: To better understand from a local perspective how policy and institutional reforms could promote urban economic development and determine the existing regulatory barriers, SUED mapped the stakeholders in Kisii with who to engage to inform the process. It was important to determine how the structure of the regulatory framework would be enforced by independent regulators. By engaging a wide range of stakeholders both within and outside of the municipality, the programme was able to determine how the by-laws, fund bill and board charter would be utilised. SUED together with Kisii Municipality saw the value in having stakeholder participation in policy discussions to enable the open negotiation of the methods that would be utilised in the implementation of the reforms. The engagement helped provide clarity on the: i.

Social, economic, and environmental pressures that the regulations would operate within. ii.

Level of interest among the stakeholders and determination of which local institutions would be affected by the finalisation of the regulations. iii.

Level of information that had been captured in the drafting of the legislation and if they were reflective of the needs of the electorate and staffers in Kisii Municipality.

The programme developed an exhaustive list on which stakeholders would be consulted in the finalisation of the legislation ensuring that all the key parties were engaged. This helped determine the communications approach in which to engage them to ensure buyin of the legislations once complete. The team circulated the draft bills, by-laws and charter to all relevant stakeholders and held consultative workshops and meetings which were geared towards garnering inputs and by-in. Emphasis was placed on building familiarisation with the bills to ensure their enactment once they were tabled at the County Assembly. c) Finalisation of the drafts for validation and sign-off by the municipal board and key county staff: In the finalisation process, the programme identified all the anchoring laws, regulations and policy documents that would need to be considered in the drafting process. The process also helped tease out how the municipality would exercise its delegated power. Once the drafting was completed, SUED held three validation meetings, two-day public forums with significant interest groups and a half-day forum with the County Assembly Committee on Lands, Physical Panning, Housing and Urban Development and a one-day validation meeting with the Municipal Board. As a result of the exhaustive validation meetings, the stakeholders approved the draft Fund Bill, Bylaws and the Municipal Board Charter and expressed a keen desire to see them operational as they would provide a management structure for the municipality and ensure that its staffers were able to discharge their mandate.

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As a result, the programme was able to collaborate with the Municipality and deliver the Kisii Municipality Funding Bill, 2022, Kisii Municipal Board Charter, eight By-laws (Informal Trading By-Law, Parking By-Law, Car Wash By-Law, Traffic Management By-Law, Outdoor Advertising By-Law, General Nuisance By-Law, Integrated Waste Management By-Law, and Public Health By-Law).

Best Practices to Replicate The support towards Kisii Municipality was timely and important as it helped address the key concerns in the municipality. During the stakeholder engagements, the interest by the stakeholders to put in place laws and frameworks to establish order in the municipality demonstrated the commitment towards sustainably urbanising in Kisii’s leadership. SUED’s work with Kisii showed that the frameworks, policies and regulations provided structures and systems through which intermediary cities could effectively discharge their mandate.

Ensure Continual Engagement: Through collaboration with the municipality, the programme worked closely with the Municipal Manager, the Board Chair, the Municipal Board, County officials as well as other internal stakeholders to gain insights on how the programme would support them. This included partnership during the stakeholder meetings and public facing engagements to ensure that the audiences appreciated the work that the programme was doing in finalising the legislations. The proactiveness of the leadership greatly contributed to the process.

Gain Political Good Will: It was important to prioritise engagement with the Kisii County leadership at the onset of the assignment. SUED held entry meetings with the Governor and had the municipal team share with him and his cabinet on the work that SUED would be supporting the municipality to accomplish. This early meeting helped the team gain traction on its activities with the relevant departments as they would be the implementers and or the enactors of the legislation. Further, they would be the ones who would formalise the bills and by-laws at the County Assembly making them into law and eventual implementation and enforcement of the same.

Donor Collaboration: The programme appreciated the context in which it was working in, for instance the World Bank was keen to support the municipality to establish, operationalise and strengthen its institutional framework for urban management, urban finances, urban infrastructure, and service delivery. The programme saw value in ensuring that the legislation developed would ensure that the municipality would benefit from such support. In addition, the By-Laws, the Board Charter, and the Municipal Fund Bill would be successfully implemented if and when funds were collated to advocate and advance them.

Give Considerations for Public-Private Engagements: It was important as the finalisation of the legislation was being conducted to build trust and goodwill for the implementation of the policies both by the public and private sector. The early on stakeholder meetings to gain their insights on how the development of the policies would be implemented were critical to determine their willingness to accept the new legislation.

Develop a Robust Stakeholder Engagement Strategy: SUED initially mapped the stakeholder who needed to be part of the process and then developed a stakeholder segmentation which informed the ways in which the programme would engage with the stakeholders. For some, in-person key entry meetings were needed, for other town hall like 4

meetings made the most sense to have, while for others key informant interviews elicited the most insights. The selection of the participants for the stakeholder and validation meetings were based on a specific and clear rationale which prioritised the right balance between the internal and external stakeholders. This enabled the programme to elicit varied opinions and positively informed the process and finalisation of the legislation.

Integrate Varied Capacity Building Approaches: In the development of the legislation, it was important that the programme ensured that mentorship, on-the job trainings, and coaching were incorporated in the development of the bill, by-laws, and charter to ensure that the municipal leadership and staff were properly trained on their content and implementation.

In conclusion, SUED’s support towards the strategic development of urban areas in Kenya is ensuring that growth drives economic productivity through functional multi-level governance. In doing so, the programme is providing a workable legal framework that is capable of creating patterns of governance that attract inward investment into the supported municipalities. By having implementable laws and bills, SUED is actively contributing to the growth of urban centers within strong legal frameworks which ensure intermediary cities are managed, planned, governance and financed in a more sustainable, inclusive, and efficient manner.

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