SUED's Annual Newsletter - 2021/2022

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Supporting Market Driven Growth In Municipalities Avocado Tree in Kisii Municipality


1. Programme Overview Expected Programme Results/Impact/Outcome Where We Work 2. Urban Economic Planning Snapshot: Making the Case for integrating VCs in UEPs 3. Investment Attraction Snapshot: Lessons on Attracting Private Sector Investment 4. Success Stories 131210 14 - 1817 24 - 2627 33 - 44 Boats at rest in Lamu, Kenya

The Deputy British High Commissioner Julius Court, Kisii County Governor H.E. James Ongwae, SUED’s Programme Responsible Owner Eunice Ogolo, and SUED’s Team Leader John Kashangaki witness the Avofresh Director Fernando Marques sign an agreement with Kisii County Government to commence the Avocado Oil Processing Project as culmination of SUED’s support towards the municipality to attract private investment into Kisii.

The Sustainable Urban Economic Development programme is a £70 million six-year programme (2018-2024) supported by the UK Government. The programme’s funding is channeled through two mechanisms; seed funding that is used to de-risk critical climate resilient value chain and infrastructure investments to attract public-private investments into identified projects and technical assistance in three thematic areas i.e., urban economic planning, investment attraction and capacity building.

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Mandera Board Members and Municipal staff take part in a breakaway session during their financial management and revenue enhancement training. The training was aimed at helping the municipal boards and key staff gain knowledge on public finance management to enable them to link the Urban Economic Plans (UEPs) with their roles.


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SUED brings a wide range of experts to work with the county and municipalities to ensure that they not only strengthen their planning but attract investors. This has helped us ensure that the value chains and infrastructure projects that are developed at local level are climate resilient”

The six-year £70 million programme in Kenya supports climate smart municipal urban planning to attract investment for climateresilient infrastructure and value chain projects, thereby reducing vulnerability from climate induced economic impacts.

To help municipalities strengthen their technical and institutional capacities to manage urbanisation by integrating urban economic planning and design, urban legislation and urban investment in climate-resilient infrastructure and value chains, the UK Government is funding the Sustainable Urban Economic Development Programme (SUED) to work with 12 municipalities in Kenya. These include; Lake Region Economic Bloc- Bungoma and Kisii, North Rift Economic Bloc – Eldoret and Iten, Frontier Counties Development Council- Isiolo and Mandera, Mt. Kenya and Aberdares Region Economic Bloc- Kathwana and Kerugoya/Kutus, South Eastern Economic Bloc- Kitui and Wote, Jumuiya Ya Kaunti Za Pwani- Malindi and Lamu.


Implementation Period 2018-2024

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SUED’s DTL Monicah Motshegwe congrat ulates the Bungoma board for finalising their UEP

SUED is working closely with the municipalities to better manage and adapt to climate impacts, supporting integration of early warning systems that respond to specific climate disasters e.g., drought and flooding, to ensure appropriate, speedy, and sustainable climate interventions. Climate vulnerability analysis is integrated into the master-planning processes to find locally applicable solutions and to develop climatesmart urban economic plans. This enables the municipalities to identify infrastructure projects that can be climate proofed to promote resilience in the face of mitigating increased urban carbon emissions.

SUED is partnering with municipalities to strategically take advantage of opportunities for economic growth by following a market-based approach to develop inclusive, climate-resilient interventions that attract private investment.

Seed Fund: The programme has in place a seed fund to equitably fund projects that have been identified in the UEP and have been assessed in the investment attraction phase to ensure that they are economically viable. These projects are incentivised to increase the private sector’s investor confidence.


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Developing an Urban Economic Plan: At the onset, the programme works with municipal and county staff to design a responsive Urban Economic Plan (UEP) that integrates market-based approaches helping the municipalities to identify viable climateresilient value chain projects and supporting infrastructure that will help actualise the economic potential of the municipality. Technical Assistance to Actualise the Plan: Once the municipality has formally adopted the UEP, the programme provides additional technical assistance to ensure that the plan is investor-friendly and attracts investors. To ensure that the municipal and county team implement the recommendations of the UEP, the programme ensures that its support includes a strong capacity building component that aims at building good governance systems and technical competencies for effective management of urban services to sustain SUED’s initiatives beyond the programme’s life span.

The programme utilises a three-step approach in its implementation.

The programme kicks off the UEP develop ment process on Bungoma Municipality. A diving area in Elgeyo Marakwet

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SUED is managed by Tetra Tech International Development. Tetra Tech provides programme management, technical oversight, and coordinates implementation of activities by the subcontractors that comprise of: WS Atkins Global – Atkins is tasked with working closely with the municipalities to develop responsive urban economic plans. The plans identify the economic sectors that the municipalities need to harness to achieve the potential of their urban areas as engines of inclusive and climate resilient growth and positive social change. Open Capital Advisors, KPMG and KCIC: These investment attraction firms utilise the developed urban economic plans to promote the project identified to attract investors. Their work is geared towards attracting publicprivate investment in infrastructure and value chain projects in supported municipalities. Inclusive economic growth and poverty reduction in supported municipalities and the respective counties that they are embedded in Increased investment in selected andclimate-resilientincludingmunicipalitiesinvestmentsininfrastructurevaluechainprojects.


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Through an integrated approach that is demand-driven, working with both public and private actors, SUED key goals are:

SUED’s DTL shares on how the programme will work with the municipality during its investment attraction phase.

SUED | Newsletter 2021/2022 13 WHERE WE WORK Bungoma UEP KickedAttractionAdopted,CompletedDevelopmentandInvestmentPhaseOff Eldoret UEP ProjectAttractionInvestmentandCompletedDevelopmentAdopted,PhaseatSelection Kisii UEP OilInvestmentattractedmentselecteding,IAFPubliclyAdoptedDeveloped,andLaunched,processon-go3projectsforinvestwith1havingPrivate(AvocadoProject) Wote KickedAttractionInvestmentandCompletedDevelopmentUEPAdopted,PhaseOff Isiolo UEP developed and publicly launched, IAF process ongoing, 3 projects selected for investment Kerugoya UEP ProjectAttractionAdopted,CompletedDevelopmentandInvestmentPhaseatSelection Kitui UEP Developed and Adopted Mandera UEP ProjectAttractionAdopted,CompletedDevelopmentandInvestmentPhaseatSelection Lamu UEP KickedAttractionAdopted,CompletedDevelopmentandInvestmentPhaseOff Malindi UEP ProcessingPrivatewithselectedon-going,Launched,AdoptedDeveloped,andPubliclyIAFprocess3projectsforinvestment1havingattractedInvestment(FruitProject) Iten UEP selectedon-going,Launched,AdoptedDeveloped,andPubliclyIAFprocess3projectsforinvestment Kathwana UEP Developed and Adopted Capacity Building: All municipalities have received capacity building sup port throughout the UEP development process and investment attraction process. Apart from Kathwana and Kitui, all municipalities have received training on financial management and revenue enhancement as well urban governance and leadership.

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SUED’s DTL Monicah Motshegwe and SUED’s UEP Team Leader Simon Elliott hand over to Lamu’s board the UEP to commence its implementation and engagement with investors.

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The work that SUED is doing is revolutionary. There are so many lessons not only for Kenya but for the Region. The UEPs provide such a strategic plan in how municipalities can directly engage with investors” Alex Tolgos, Elgeyo Marakwet Governor ( Iten Municipality) 2013-2022.

• Sustainability: The UEP needs to promote climate resilient infrastructure that supports the development urban areas, while minimising the environmental impacts of increased population and economic activity in the future as well as protecting the sensitive ecosystems.

What is an Urban Economic Plan?

Thesectors.purpose of the UEP is four-fold:


The goal is to integrate a market-based approach to develop a portfolio of bankable projects that have a clear definition of why these are needed and alignment to economic growth potential, while they address current and future environmental and climate conditions. Careful project preparation of value chain and infrastructure projects can stimulate development and mobilise investment from both the public and private

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The programme has worked closely with 12 municipalities to fully develop their Urban Economic Plans. (UEPs). The UEPs have been formally adopted by the respective Municipal Boards and have been publicly launched in four municipalities (Isiolo, Malindi, Kisii and Iten) and two (Lamu and Bungoma) publicly kicked off.

principles for developing the Urban Economic Plans are:

• Four, to identify and prepare the value chain and climate resilient projects that are bankable to attract Theinvestmentsguiding

• Three, bring together key stakeholders to decide collectively the future of the municipality

An Urban Economic Plan is a holistic urban development plan identifying and prioritising projects and actions that can help promote economic development, maximise economic and social potential and support sustainable urbanisation. The Plan provides a roadmap for sustainable development setting out a clear link between inclusive economic development, its spatial implications, and requirements for climate resilient infrastructure to support growth. It enables cities and towns to take informed decisions based on the socio-economic, climate and environmental impact of their potential development pathways and sets out participatory implementation requirements

• One, to provide an inclusive economic strategy that can guide future development towards increasing prosperity in the municipality.

• Two, prioritises economic activities and climate resilient and inclusive infrastructure that can support the development of a sustainable economic future.

• Social Inclusion: The UEP needs to be socially inclusive building on the thorough analysis of the status of social inclusion within localities through stakeholder meetings and focus group discussions.

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• Resilience: The prioritised projects will have to be resilient against shifts in the economy, both for domestic and international markets, to remain competitive. They will also need to be adaptive to the climate change impacts specific to the area such as lesser rainfalls and higher temperatures, while ensuring technological advancement through smart solutions can be introduced where possible.

SUED’s Principles Diagram

• Resource Efficiency: To preserve the environmental assets of the abundant rural areas, the UEP will be directing economic growth towards resource efficiency, by integrating economic activities to establish a circular economy promoting minimisation of waste and optimising water and energy use, whilst aiming to promote rural-urban linkages.


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The Sustainable Urban Economic Development Programme (SUED) has worked closely with 12 municipalities in Kenya to better position them as emerging urban centers that will attract more investment for critical infrastructure and value chain projects. The programme’s work in advocating for balanced growth in small and medium sized urban centers that are located along high-economic potential growth corridors is aimed at providing responsive transformational SUED’ endeavors to support growth and sustainable economic development by unlocking private and public investment in the urban sector.

Kenya: towards an inclusive and resilient economy

Examples from the UEPs of various proposed projects


In this snapshot, SUED shares how the programme has worked with 12 municipalities to help them prioritise climate resilient as well as inclusive value chain and infrastructure projects that can support the economic sectors with the greatest potential for inclusive economic growth.

Kenya: towards an inclusive and resilient economy With the promulgation of the 2010 constitution and the 2013 General Elections in Kenya, the country moved from a centralized government with one national government to a devolved one with one national government and 47 county governments. This new devolved system commenced implementation in March 2013. At the time, counties were at different levels of socioeconomic development. These differences were further exacerbated by the varied number of resources that they individually had such as arable land, skilled workers, and infrastructure. This meant that while the intent of devolution was noble the reality was that some counties were at an economic advantage over others.

Over the past years, there has been an appreciation of devolution in how it has brought forward economic priorities of previously marginalised areas. Counties have begun to seek responsive sustainable development that is inclusive. One of the keyways in which they’ve done this is by developing a County Integrated Development Plan (CIDP) that guides development over a fiveyear period. The CIDP details development priorities including transformative projects that will advance the county’s economic potential. Counties have additionally developed spatial plans that help them define how the county physical space including urban centers will be utilised. About the UEP Development Process

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in 12 municipalities is helping them determine how best to harness value chain development for maximum industrial development, job creation and resilient livelihood impact. This value-chain oriented approach to inclusive growth in emerging urban centers objective is to catalyse sustainable urban development while identifying critical climate resilient infrastructure. The programme’s partnership with the municipalities enables the identification of climate-resilient value chain projects that have strong value-addition potential and harness links within their municipalities to leverage on existing structures that promote trade or advocate for the strengthening of value chain development. To do so, the programme employs a structured approach in the development of municipal UEPs by using a phased approach:

About the Urban Economic Plan (UEP)

•Inception Phase: To ensure alignment to the programmes support and the municipality’s asks, SUED holds kick-off meetings. The meetings are geared towards explaining the intricacies of the UEP development process, having the programme team better understand the economic priorities in the municipality as well as how they worked best. This phase is critical in ensuring that the development of the UEP is inclusive and is done in a way that fits within the businessmunicipaland community culture. Further its helps ensure that all stakeholders of the process understand the purpose, scope and intended outcome of their municipal specific UEP. For example, in Kitui, Malindi and Isiolo, the boards had yet to learn about SUED’s work and did not understand the UEP process, this kick-off meeting(s) provided a platform for appreciation of the development process. While for Kisii, Iten and Kathwana, the board and municipal team had engaged with SUED in a consultative forum and gained familiarity with the programme’s processes however they needed information on how SUED would help them identify their priority economic sectors.

•Diagnostic Phase: In this phase, the programme carries out a comprehensive and detailed assessment on the municipality’s demographics, economy, infrastructure, environment, and climatic conditions. This process is crucial in identifying emerging value chain and climate resilient infrastructure projects that have the highest economic growth potential. In municipalities such as Kisii and Iten that had clear economic advantages in some sectors, banana, and sports respectively, this

Diagram showing initial ideas of the Mokowe Ketty upgrade in the Lamu UEP Further, counties have increased the access that they have to various stakeholders with unique expertise that they offer to the counties. These multi-faceted approaches all lacked one unifying factor, a plan that could build on existing work and priorities while identifying new ones and help the counties to have an inclusive economic strategy that would guide future economic development. Our approach To fill this gap, SUED combined local knowledge and international best practices to help supported municipalities to develop Urban Economic Plans (UEPs). The UEPs unique selling point is that they introduce an integrated multi-disciplinary approach to planning for economic growth and advocate for the maximisation of agglomeration SUED’

•Technical Briefing Phase: This phase provides an opportunity for both the municipality and SUED to think through the findings of the diagnostic phase and come up with a development framework that will help them prioritise value chain opportunities and their impact. In addition, the municipality and SUED determine which green infrastructure and value chain opportunities can be taken advantage of. In Kisii, there is little manufacturing activity in its banana value chain, the briefing phase enabled SUED outline how the municipality should utilise the existing facilities to take advantage of the readily available raw materials. Further, Kisii learned how they could co-locate facilities such as processing plants to increase product potential and efficiency.

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•UEP Phase: This is the final stage of the development process. The municipality and SUED set the vision and identify their priority key economic sectors. With the programme’s support, key anchor projects that outline value chain opportunities are determined. For some of the municipalities, there was need to diversify the anchor projects to shield them from sector specific economic stunting. For years, Malindi Municipality’s key signifier was the tourism industry, marine parks, world-renown beach resorts and national parks endeared it to tourists. However, with the pandemic and the tourism sector recording a significant decline in the most recent years, there was need to diversify its economic priorities. The programme worked with the municipality to identify a diversification plan. In it, it outlines how the municipality can prioritise its manufacturing and agricultural sectors. With SUED’s support, the municipality short-listed value chain projects such as fruit processing and fish processing to complement the tourism sector

Within these phases, it is integral to maintain a good-working relationship with respective county and municipal stakeholders. It is critical to ensure that different members of the community drawn from varied areas of expertise feel that their inputs and opinions are incorporated into identification of the value chains. This continual engagement helps in safeguarding future resource mobilisation activities that will need their buy-in. The utilisation of a stakeholder engagement strategy that helps SUED map who to talk to on different topics, how to continue and appropriately engage with various stakeholders across the public and private sector as well as how to maintain a positive and responsive relationship helps strengthen the UEP development process. By maintaining SUED’s accessibility to stakeholders throughout the UEP development process, the programme has harnessed local life experience that brings into focus the contexts of the identified value chain. This inclusion in the decisionmaking process through consultations has ensured that the programme generates and sustains interest in the programme and its future work.

Strong value chains: an investment in the future

The third step comprises of an in-depth evaluation process where an evaluation framework is used to ; a) determine the level of resilience the value chain project has to any shifts in the economy b) assess how resource efficient it would be, i.e. will it be a circular economy that has zero waste c) share how socially inclusive it will be by ensuring the inclusion of vulnerable groups and d) demonstrate how sustainable the project will be i.e. how viable is it to utilise both green infrastructure and green energy on it. In Isiolo, in its industrial cluster, the programme worked with the municipality to see how to better align their abattoir to a circular economy.

For instance, Mandera is a green field with need for significant investment in social and physical infrastructure to draw in subsequent investors. The value chain projects that were under discussion needed to take into account their unique positioning and see how to take advantage of their physical location with regards to their economic offerings. In doing so, they could draw in populations to create a demand for social and physical infrastructure, as such there is a regulatory and policy role that the county needs to play such as zoning and land use demarcation to “open up” the municipality for investment.

It is critical to see how the programme identifies the value chain projects ensuring that they have been assessed against climate resilience and social inclusion. This process is critical as it helps the municipalities determine which of their economic sector is ready for investment. In doing so, it makes it easy to identify potential projects that can catalyse the municipalities economy by highlighting their competitive advantages.

The first step involves the municipality and the programme looking at an extensive list of economic opportunities using a policy and economic lens. This plays a key role in determining not only their economic potential but identifying any business environment barriers that have deterred investors or slowed down the economic growth within a particular economic sector.

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The second step entails assessing the long list using a Strength, Weakness, Opportunities and Threats (SWOT) analysis. The SWOT helps the programme contextualise the key issues that arise from the municipality’s demographics, economic dynamics, development context as well as their prevailing environmental conditions. Further, the SWOT helps look at the existing infrastructure and how it will help advance the value chain projects or hinder it and if the latter what should be done to ensure that there is adequate social and physical infrastructure to complement the value chain projects. Iten, despite being Kenya’s second largest producer of potatoes lacks a capable processing plant to take advantage of the main cropping season. This second step helped the municipality team think through how they could go about establishing a local processing plant that would help farmers have a central location in the county for taking produce increasing their competitive cost base.

Conclusion Due to SUED working across 12 municipalities, the programme is best placed to see the intersectionality of value chain projects across the country. This in-depth value chain project analysis plays a key role in how SUED works with municipalities to synergise economic opportunities. The support towards integrating value chain development into urban economic planning is highlighting the high-economic potential that these urban centers have. With the completed UEPs that demonstrate new ways of ensuring that municipalities lead in implementing circular economies that promote continual use of their resources across the value chain, SUED is making the case for value addition that strengthens the linkages between rural and urban areas

ideas for Wiyoni Bay in Lamu’s UEP Knowledge on their competitiveness, the value chains production potential, demand outlook and location of processing plants and source of produce, the value chain process flow and capacity as well as distribution and sales helps both SUED and the municipalities see what indicative costs would be needed to actualise the projects as well as determine the revenues it should generate to ensure that it would be sustainable beyond the programme’s support.

The fourth and final step is geared towards shortlisting value chain projects through a more vigorous assessment process that helps the municipalities see the costs and revenues of the project as well as determine its competitiveness and land and infrastructure requirements. This wider in-depth analysis helps the municipalities identify where they play a key role. By detailing how the UEP can be actualised with an implementation plan that includes how they can strengthen their urban governance as well as what the implementations costs are, municipalities are able to prioritise whi ch value chain and critical infrastructure projects can be integrated into their wider county planning processes Championing sustainable urban economic growth These four step processes are crucial in helping municipalities see the merits of value addition across the value chain projects that have been identified. They are able to see the importance of a stable off take and pricing, the need for integration of waste management into the value chain, how to link the value chain with the national broader economic agenda as well as identify the employment potential for their


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SUED | Newsletter 2021/2022 24 ATTRACTION3.INVESTMENT

As the UK Government, working with the Kisii County Government seeing an actualisation of the UEPs by having a private investor see the viability of the avocado oil processing project affirms the need to work in emerging urban centers to strengthen their capability to attract investors.”

Julius Court – Deputy British High Commissioner

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Development of urban economic plans:

Investor outreach and identification of preferred investor/operator: Market sounding starts early in the process and informs the project screening and selection and feasibility studies phases. SUED scans for appropriate potential investors, both domestic and Ininternational.identifying and selecting the preferred investor or operator, SUED assesses those investors that demonstrate a willingness to commit including determining their technical, financial and operational capacity; conducting site visits, where possible; and assessing the alignment of the investors’ proposed operating models with SUED objectives. SUED also facilitates engagements between the potential investors and the municipalities and county governments throughout the investment attraction process. Seed funding and financial close: SUED is providing seed funding for the selected projects. The funding is demand led and is intended to provide an incentive to investors to catalyse investment and de-risk the projects. Once a preferred investor is identified, SUED works with them to determine the need, amount and use of seed capital for the project, in line with the conditions set for the seed fund. A due diligence process is undertaken before the seed funding is released to the investor. SUED is also supporting preferred investors with transaction advisory and sourcing additional funding from commercial and other sources in order to realise the projects.

The urban economic plans provide a guide for the municipalities to develop in a planned manner. They offer an integrated multi-disciplinary approach to planning for economic growth, aligning the municipalities’ economic strategies and infrastructure development. They also identify value chain and infrastructure projects with potential to attract investment.

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Ahead of the commissioning of a project in the municipalities, SUED facilitates meetings between the preferred investor and municipality and county representatives to review and confirm the proposed investment for the project and determine any agreements that need to be developed and signed between the investor and the county.

Development of feasibility studies: To assess the viability of the shortlisted projects in detail, gain a deeper understanding of the operating environment and explore their social and environmental impact, SUED develops comprehensive feasibility studies for each project. Investment attraction is central to SUED’s work and aims to realise the most promising projects identified in the UEP. It is implemented through three subcontractors and is supported by the programme seed fund.

Project screening and selection: SUED applies pre-approved criteria to assess the prioritised value chain and infrastructure projects to determine which of these should progress to the feasibility study phase of the investment attraction process. The project screening and selection phase shortlists the most viable projects for investment, usually up to three projects comprising a mix of value chain and infrastructure projects.

Within SUED, the programme endevours to go beyond the development of the UEP to working closely with the municipalities to create the right conditions for inclusive and sustainable urbanisation in order to present opportunities for balanced economic growth. The programme’s investment attraction workstream aims to work closely with municipalities to help them attract investment in value chain and infrastructure projects. The general approach being followed entails a series of activities, described briefly below.

Lessons on Investment into Kenyan

Attracting Private Sector


Initially, the investment attraction process as defined and agreed by SUED and stakeholders involved a progression from urban economic planning to pre-feasibility studies, then immediately moving to a single due diligence stage (see Figure 1). This due diligence was intended to review a single operator, selected from among the range of potential operations identified as capable through the pre-feasibility studies. This process assumed that a highpotential operator within the municipality would be easily identifiable. Based on this assumption, the programme intended to support that operator with raising capital, including transaction structuring with potential support from the SUED Seed Fund, a grant facility to fill defined gaps in high-impact projects and leverage additional private capital. As the SUED investment attraction firm proceeded with this intended process, a number of lessons were learned about how to adjust this typical investment attraction process to the realities of working in intermediary municipalities Municipality boards remain accountable to their respective county governments.

The municipalities are therefore constrained in terms of funding and lack of autonomy. As SUED is aimed at providing support to selected municipalities, which operate under their respective county governments, this requires careful navigation between the municipality and county government stakeholders.

Project implementation is enhanced by the effective engagement of all the stakeholders: Effective engagement and communication with all the stakeholders is necessary. These include the county government, the municipality board and staff and Project Steering Group members.

Lesson 1: Navigating the political landscape

While SUED is providing support at municipal level, the municipalities operate under their respective county governments therefore the latter must also be effectively engaged. The Governors help to provide direction to the county teams in engaging with and facilitating the implementation of the programme. As the selected projects relate to agricultural value chains and infrastructure, the CECMs of the relevant ministries must also be involved.

To provide the public services that fall under their mandate, the municipalities require adequate levels of financing, either from own revenue collection and/or allocations from county governments. This is currently a challenge for municipalities.

The Constitution of Kenya 2010 introduced devolution which created 47 county governments. The Urban Areas and Cities Act (UACA) provides procedures for establishing municipalities and their governance structures, including municipal boards. These are appointed by the county governments and have delegated responsibilities for the management of municipalities.

SUED’s Investment Attraction Process

As SUED is implemented at municipality level, it is vital to keep the municipality board and staff engaged. The focal point for SUED is the Municipality Manager who helps to drive the programme’s implementation, unblocks any impediments, and facilitates engagement with other relevant county government officials when needed, to progress the investment attraction activities.

The appropriate methods and frequency of communicating with the Governors, relevant CECMs and other appropriate senior officers should be determined in line with the programme activities and objectives.

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Investor’s proposed operating model should align with SUED objectives: Demonstrating willingness to commit as well as the required technical, financial and operational capability is not sufficient for selecting a preferred investor or operator. SUED also assesses the potential investor’s proposed operating model and determines if this will deliver the desired outcomes for the municipality and county, and whether it is aligned with SUED objectives.

SUED is building capacity through customised training workshops for selected municipality and county representatives, and handholding in the Iten’s landscape

Lesson 2: Identifying the right investor for the municipality Begin market sounding of investors early in the investment attraction process: The project screening and selection phase involves the review of the urban economic plans which identify the potential projects. During this phase, SUED undertakes further desk research and consults a variety of stakeholders to determine the most viable projects for investment. These are objectively assessed using the pre-determined criteria listed previously. In addition to municipality and county government stakeholders, SUED starts engaging with potential investors for the identified projects. The assessment of the appetite and capability of investors to invest in the projects also helps to inform whether a project should proceed to the feasibility study phase or not. Investor outreach continues during the feasibility study phase, whether it is identifying new potential investors to introduce the projects to or ongoing engagement with previously identified investors to ‘keep the relationship Aimwarm’.to engage multiple investors for each project: There is merit in having more than one potential investor on the table for a project from the start. The investors may have diverse attributes and provide value to the projects in different ways. They may also have different needs and conditions for investment in the municipalities. Having a number of investors to choose from means that SUED is able to assess their suitability across a variety of criteria, sense check the project and select the investor offering the best outcome for the municipality and county in general.

Lesson 3: Capacity building Build the capacity of the municipalities to enable effective contribution and enhance sustainability: Collaborating with the municipalities in the investment attraction process helps to build institutional memory, cumulative skills and knowledge development.

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SUED facilitates engagements between the potential investors and the municipalities and county governments to align expectations on both sides.

SUED has also established Project Steering Groups which guide the implementation of the programme in the different municipalities and consist of representatives from the county governments, municipalities and private sector. Keeping these stakeholders and key decision makers engaged and informed ensures they are updated on the investment attraction progress and can contribute to the process, are aligned with regards to the projects selected for investment and are better able to champion the projects.

SUED is closely collaborating with the municipalities in the investment attraction activities to provide hands-on experience. Municipality and county officers contribute to the project screening and selection process and feasibility studies by sharing their technical knowledge on the targeted value chains and infrastructure projects, and providing guidance based on their understanding of the local context and dynamics on the ground.

need support too: In addition to supporting capacity building of the municipalities, SUED is also handholding and advising potential investors to help realise the investments.

SUED 2021/2022 investment attraction process. The customised training workshops highlighted the importance of each step of the investment attraction process and aspects that investors consider in determining the bankability of a project. The training resulted in a better understanding of the SUED programme, management of expectations in terms of project implementation and investment timeframes and underscored the role of the municipality and county in facilitating the projects.


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SUED also facilitates engagements between potential investors and the municipalities and counties, including investor visits to the municipalities to meet the county and municipality leadership, and municipality team visits to investor facilities. Municipality teams are also supporting in investor outreach for the selected Preferredprojects.investors

SUED is supporting preferred investors in completing the seed fund application and supporting documents for submission to the British High Commission; in developing funding proposals to source funds for the projects and engaging with financial institutions; and in developing company profiles and pitch decks. SUED is also providing transaction support for the projects.


Avofresh staff load the SUED-purchased truck as part of the avocado oil processing project. The collection centers have been set up with the programme’s support and in partnership with Kisii Municipality and County

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Working with Municipalities to Strengthen their Capability to Implement their Mandated Functions

One of the most and important ways in which urban centres’ managers can fully realise the vision of decentralisation in Kenya is by having both human and financial resources, and fiscal

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Municipal Staff and Board Members in Mandera participate in a breakout session during the financial management and revenue enhancement training Group work sessions during the training

Urban areas are the catalyst for economic growth in developing countries. In them lies the solution to responsive local economic development. In developing countries such as Kenya, new urban centers are emerging as a response to the growing population. Areas that were previously townships are under pressure to accommodate the increased urban growth rate. In Kenya, recent past urbanisation has mainly been driven by devolution that has increased the urban rural migration as a result of the annexation of major cities which birthed county headquarters that have driven the increase in infrastructure and resource spread. Urbanisation rates within the country have been much faster within particular localities signaling the need to shift the focus from the historically primary urban areas in the country to smaller emerging urban areas. This shift can only be necessitated by good governance that is based on the capacity of the leaders to manage their urban centers in a way that is inclusive, transparent, and sustainable.

“Prior to the training, there were questions among us on what project would we start with to unlock the municipality for investment. We had not thought through how we could start by costing a unit of work and seeing its correlation to the bigger picture as our first step. The training helped us to better understand how we could allocate costs to identified projects to catalyse investment.” Shared Raymond Omonei, Iten Municipal Manager. The FMRE training highlighted various techniques that the municipal and county leadership could use to carry out high-level financial analysis to determine the ranking

SUED | Newsletter 2021/2022 33 autonomy. Municipal financing remains the largest impediment to meeting the demand for infrastructure and services in urban areas in Kenya. While efforts have been made to build the capacity of emerging urban centers (secondary/intermediary cities or municipalities) managers at local level, the devolvement of powers and functions has been slow paced which has greatly limited their ability to operate locally and manage revenue generating procedures to fund their urban centers. To promote local economic development that is driven towards sustained economic growth, which is owned by local stakeholders, the UK Government through its Sustainable Urban Economic Development Programme (SUED) has provided a multi-faceted training on Financial Management and Revenue Enhancement (FMRE) to over 200 county/ municipal local leaders and staff members. These participants were drawn from SUED’s supported municipalities In its implementation, SUED had worked closely with the municipalities to help them respond to their increased delegated roles that have limited local revenue. This has been through the development of a municipality specific Urban Economic Plan (UEP) that has helped define the economic visioning of the municipality. In doing so, the municipality and county leadership are aware of what they should prioritise with regards to financing as well as harnessing opportunities to draw in investment for value chain and climate-resilient infrastructure. By ensuring that the municipalities have in place a development-oriented vision SUED has helped them accurately identify the roles that they need transferred to be able to effectively manage their urban centers. Further, the UEP has helped them identify the opportunities that they can utilise to increase their own source revenue to self-fund their prioritised economic development projects as well as see how best to work with the private sector to advance the municipality economic vision. “The process of developing the UEPs was quite elaborate and participatory, it helped us see what sectors need to be prioritised and how we could ensure that we were advancing economically.

SUED’s training on financial management and revenue enhancement helped bring to life how we could do that practically.”

By having in place, a consolidated financial management approach, supported municipalities are able to now marry how they will use their financial resources to the respective urban economic plan enabling them to be resource efficient and effective in the way they conduct municipal business. Walking the municipal and county teams through what constituted a strong financial management pillar for them, entailed teaching in a demonstrable way how budgeting, accounting, financial reporting, and auditing will play a key role in helping them make informed decision on the utilisation of funds.

Hassannoor Abdullahi Mandera Municipality. The FMRE training helped the municipalities to strengthen their capability to effectively manage planning, budgeting, procurement, contract management and revenue enhancement processes. By providing an all-encompassing training that provided pragmatic knowledge on how they could work within the devolved system to address their fiscal pressures, the programme enhanced their knowledge on how to manage urban centers. Not only did the training provide theoretical knowledge, but it also complemented the sessions with relevant case studies gleaned globally and regionally to help showcase to the municipal and county leadership the practical ways in which they could implement similar approaches to bring to life their UEPs and show them how they could mobilise municipal resources to better their financial management.

To help them understand this, SUED embedded within the training a deep dive session on the Public Finance Management Act 2012 and how it interlinked with the Urban Areas and Cities Act 2015 to help align with the national governments classification of municipal revenues ensuring that they were able to quickly identify how much money or streams of income they could proactively lobby the county government to manage. This knowledge was critical in helping them determine the potential of their own-source revenue and how they could manage it to improve their capacity to learn how various economic conditions affected their revenue collection and how they could mitigate against low revenue collection. During the training, it was noted that municipalities heavily depend on donor support and to a small extent funding from counties especially for recurrent Municipalitiesexpenditures. were advised to explore raising revenue beyond the traditional revenue sourcing mechanisms espoused in the legislation. To achieve this, municipalities are required to develop policies and legislations necessary for expanding their resource Asenvelope.aresult of the training, Kisii municipality has embarked on developing by-laws and regulations that will guide in enhancing local source revenues. The board has formed a subcommittee to pursue innovative funding mechanisms such as crowd financing.

“I now better understood why we as a municipality needed to link our revenue sources to the services, we provided to ensure that our people were willing to pay the costs that we were asking them to.”

Said Jamil Shamji – Kisii Board Chair.

It was important during the training to ensure that the county and municipal leadership understood the need to distinguish between the sources of revenue that they had at their disposal and the factors that affected the level of those revenues. It was imperative to help them understand that they need to first understand their capacity to provide the public service and the quality they provided prior to demanding revenue from their population. While the drive to increase own-source revenue is high with the supported municipalities, their capability to adequately define the how and as well as the what needs consensus from both the national government and country structure.

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Institutional Frameworks and Leadership and the Role they Play in Kenyan Municipalities

While the national government framework provides structure in how they can carry out that mandate, there are considerations that need to be made with regards to their independence in STORY

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While particular task areas are easy to assign responsibility within the governance structure particular sectors such as urban planning including infrastructure development prioritisation and public participation remains a key mandate of the local urban administrators.

Municipal Staff and Board Members in Iten participate in a breakout session during the Urban Governance and Leadership Training

Municipalities in Kenya post devolution have faced systematic challenges that have hampered their capability to effectively deliver urban services as well as proactively engage with the private sector to attract inward investment into their urban centres. Good urban governance remains one of the keyways in which they can respond to these challenges and make their urban centres inclusive and sustainable. Despite the structurisation of the urban governance sector within local government systems in Kenya, there remains a difference in the way roles and responsibilities are articulated on paper and implemented.

SUED | Newsletter 2021/2022 36 terms of decision making and financing

To better understand the municipal considerations, the UK Government through the Sustainable Urban Economic Development Programme (SUED) carried out a Capacity Needs Assessment (CNA) to assess the capacity of 12 fast growing municipal boards and staff in Kenya. The CNA was aimed at assessing the capability of the municipal boards and staff (urban administrators) to better plan for urbanisation and develop local revenue generation strategies that would ensure financial sustainability of these urban centres. A key component of the assessment was aimed at better determining the governance and organisational effectiveness of the municipalities and whether they had in place fit-for-purpose governance and management structures and systems. The findings of the CNA showed that there was need to support the municipalities to develop credible governance and leadership structures, frameworks, processes, and systems. In doing so, the programme would be able to help the municipalities strengthen their governance structures to implement the urban economic plans and position themselves favourably to potential private sector investors and other development partners.

Janet Jeruto Economic Advisor to the Governor Elgeyo Marakwet County. The programme responded to the gaps identified in the CNA by tailor-making a three-day training on urban governance and leadership for all supported Themunicipalities.urbangovernance and leadership training used a multi-step process. At the onset, the programme utilised a pre-assessment tool on the modules in the training to better understand the knowledge and skill level of the municipal boards and staff, and seconded county staff.

“As a municipality we are extremely grateful to SUED. When the capacity needs assessment was carried out, we were not sure how the programme would help us respond to the gaps identified. Not only has SUED provided training for us in financial management and revenue enhancement, but it has also gone a step further and helped us identify which governance structures and systems we need to strengthen to better serve our population”

The assessment tool played a key role in determining how SUED created the content to suit particular municipalities. This meant that in municipalities where they needed additional knowledge on the various municipal structures and systems that they could leverage for resource mobilisation, the programme customised the training to help them see how they could strengthen them. This customisation played a key role in how the training curriculum was developed. The curriculum helped align the training objectives with the intended outputs and the learning aids that would be utilised to train the municipal board and staff. Prior to the training, the SUED facilitators familiarised themselves with each municipality’s Urban Economic Plan (UEP) to better design the training material to suit specific municipal governance and leadership needs. “What I liked the most about the training was the way the facilitators really broke down the UEP and helped us see where we could as a municipality take lead on its implementation. They took us through its implementation plan and pointed out where our governance systems were a deterrent to investors. As such we have been able to create an action plan to address that.” Shared Ms. Jeruto. During the training, the programme utilised a varied approach in content delivery. It had a mixed sessions which included facilitated sessions, breakout and group discussion sessions, plenary, and case- study discussion sessions as well as the key outcome of the training an action planning session. The training content was geared on enabling the board and senior county and municipal staff to appreciate their roles and gain the skills and knowledge to implement their newly adopted UEPs. By utilising this newly acquired skills, the municipal team would be able to create an enabling environment for private sector growth while providing suitable platforms to proactively engage with key stakeholders to fund the projects identified in the UEPs. By having in place investor ready governance structures, processes and policies, the municipality would have eased the way in which the private sector

The UEPs that the municipalities have provide a roadmap that they can utilise to spur economic growth if implemented. Trainings such as the governance and leadership one, bring to the fore front the oversight role that the board and municipal staff have to play to implements and contribute to not only their wider county economic growth but to the national economy through increased revenue generation and economic opportunities for the private sector. Further by learning about the elements of good governance and how they are enshrined within the Kenyan law, the staff are encouraged to efficiently and effectively position themselves to provide urban services in a way that is responsive to the needs of the population.

The training not only centered on governance aspects but delved deeper into the functions of the board and how they could utilise the board processes and instruments to better service their population. “By talking about the roles and responsibility of the board, the team has been able to put into action what has been captured in legislature. Knowing what you need to do versus learning about how to carry out the role have very varied outcomes. Team members are better placed to administer their roles and avoid duplicating efforts.” Elaborated Ms. Jeruto during the Iten Municipal urban governance and leadership training. With SUED’s support, in the training, the municipalities were able to see how they could strengthen their legal and institutional frameworks to facilitate their access to various financing instruments. By learning what they need to do, the programme has better positioned them to enhance their economic competitiveness and determine how they can be more innovative in the way they raise funds to implement their infrastructure projects. The training additionally delved into how they could strengthen their stakeholder management by increasing transparency and accountability in the decision-making process which would help the municipal key actors and stakeholder understand how the municipality carried out its mandate. In doing so, they would increase the confidence with which external parties can engage with the municipal leadership and invest in the municipality. By articulating the principles of good governance as shared in the Urban Areas and City Acts (UACA) 2011, the programme helped the municipality determine how they would institutionalise good governance while providing strategic leadership in the provision of municipal

“What really helped put things into perspective was when we discussed what our urbanisation challenges were as a municipality and how the UEPs captured our aspirations to address them. By collectively discussing the UEP with fellow team members, we have been able to identify quick wins that we can implement to achieve sustainable results” Ms. Jeruto stated.

SUED | Newsletter 2021/2022 37 conduct business. It was imperative that the programme demonstrate the importance of urban governance to the municipal team, by working with them to identify the critical part that they played in deciding how they planned, financed, and managed their urban areas, SUED was able to show them how they would work with a range of actors and institutions to advance their economic vision.

The training also included a session on risk management to support them to develop a risk management and corporate financing reporting framework that would enhance their risk management practices. “The risk management session helped us determine what risks we were facing and collaboratively discuss how we could mitigate against them. By discussing it as a team, we’ve been able to see that everyone is a risk owner.

By training over 150 county, municipal staff, and board members, SUED has positioned them to engage more effectively with counties, development partners and existing and potential investors to fund the projects within their respective UEPs. The training acts as a catalyst for change aimed at bringing the public sector and private sector to implement interventions that unlock the economic value of sustainable urbanisation. Effective governance and leadership frameworks of institutions at municipal level provide a way that a shared economic vision can be implemented to ensure that critical infrastructure and value chain projects are prioritised in a way that strengthens sub-national capacity to contribute to the national economy.

The mandate doesn’t only lie with the Municipal Manager or Board Chair but all of us in our respective areas of expertise and responsibility. This has helped create a sense of ownership in the implementation of the UEP and in the provision of urban services.” Ms. Jeruto explained.

SUED | Newsletter 2021/2022 38 urban services. “One of the sensitive topics that we’ve always had at the county and municipality has been on performance management. The training has shed light on how we as a municipality can create an enabling and supportive performance-oriented culture. It no longer looks like a faultfinding approach rather one that creates an environment where we can all perform our roles to the best of our abilities.” Shared Ms. Jeruto at the training.

SUED ensured that the training included a broad session on performance management to help the board understand its role in institutionalizing a strong performance management culture and how that impacted municipal urban governance. Further, it helped showcase why it was important to eliminate the silo-approach in the management of public affairs by promoting collaboration in the implementation of similar workstreams.

The Deputy British High Commissioner Julius Court, the Kisii Governor (2013-2022) James Ongwae flag off the inaugural trip for avocados in Kisii during the Avocado Oil Processing Plant Project launch.

The plan built on the municipality’s key economic sectors that identified agriculture as its primary economic driver. In Kisii, agriculture employs over 70% of the workforce directly or Avofresh CEO and County representative exchange signed MoU documents

Economic Plan (UEP).

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Avocado oil is a rich, flavorful, edible oil from the pulp of avocados and is a health source of carbohydrates and good fats. The oil also has antioxidants and is highly moisturising and preferable in beauty and skin care products. The global avocado oil market is primarily being driven by the increasing product demand for it within the food and beauty industry. It has become increasingly popular in the recent past due to the demand growth for it within the health-conscious market in Europe and North America. In its support to Kisii Municipality, the UK Government through the Sustainable Urban Economic Development Programme (SUED) helped the municipality to develop its Urban

Switching to the New Oil as Value Addition

SUED | Newsletter 2021/2022 40 indirectly. One of the agricultural products that has been a major contributor to the agricultural earnings of the municipality has been avocado. Avocado is well suited to Kisii and is grown widely on small scale due to small land sizes as a result of population pressure. As such, majority of the avocado farmers are smallholder farmers who collectively have over 300 hectares (30,000 trees) of Hass avocados in fruition stage. Avocado is one of the primary value chain projects that the Kisii Government and SUED prioritised for investment due to its huge potential to drive socio-economic development. The programme supported the municipality to carry out investment attraction for the avocado oil processing project. This entailed project

“H.E. James Ongwae- Kisii County Governor. The launch event was graced by the Deputy British High Commissioner, Julius Scott. The Deputy British High Commissioner and the then Kisii Governor inspect a truck with avocados at the launch

SUED 2021/2022 41 screening creating a criterion that looked at all the information needed to pitch the project to investors and better understand the county and municipal context and the viability of getting enough avocados to sustain a processing plant in Kisii. Additionally, the programme conducted a pre-feasibility study on the project that outlined the strengths, weakness, opportunities, and threats that the project had. By conducting the prefeasibility study, the programme was able to carry out market sounding to various investors to determine their interest in the project.

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As a result of the detailed investor outreach process, SUED was able to matchmake the avocado oil processing project with a local investor Avo Fresh Limited who together with the programme’s support would set up a 70-tonne avocado oil processing facility. The facility will utilise locally sourced avocado fruits to produce avocado oil mainly for the export market. The investor will invest about £2.6 million to set up the operation in Kisii. The funds will be used to renovate the Agricultural Training Center (ATC) go down in Kisii, purchase equipment (including trucks) set up collection centers, mobilise farmers and create awareness on the preferred avocado type as well as construct a go down.

On 21st of June, the County and Avo Fresh signed a Memorandum of Understanding (MoU) and a lease agreement that would kick-start the avocado oil processing project in Kisii. With SUED’s support, Avo Fresh received 5 10-tonne trucks that would be used in the transportation of the avocado oil from the collection centers to the facility. “I never knew the value of avocado trees until I started travelling internationally. We have a resource in every homestead that can be used to better our economic advancement. Today’s MoU and lease agreement signing starts the process of impacting Kisii farmers.

SUED’s UEP Team Leader and UEP Stakeholder Engagement Lead engage with a Board Member from Wote Municipality during the final UEP workshop where the board adopted the UEP. priorities and helps to provide a focused urban and economic development strategy for the municipalities. The UEP has been co-developed by the county, municipal, public, and private sector stakeholders in respective municipalities.

“One of the things we have appreciated in our UEP is that it includes all voices of the local stakeholders. The SUED team really took the time to listen to our vision for the municipality and have articulated it well. We are proud of our UEP, and we will use it in all our future investor engagement.” – H.E. Alex Tolgos – Elgeyo SUED UEP meetings

The UK Government funded the Sustainable Urban Economic Development Programme (SUED) to work with 12 municipalities to develop Urban Economic Plans (UEPs) that position them to favourably attract investors to implement critical climate resilient infrastructure and value chain projects. Over the past three years, SUED has worked closely with 12 municipalities to develop their UEPs. The UEP is an advisory document that builds on existing county

Creating Right Conditions for Emerging Urban Centres through Strong Urban Economic Planning

SUED | Newsletter 2021/2022 42 SUCCESS STORY3

The UEP has helped us merge the two.”Halake Dadacha Isiolo Municipal Manager. What sets the UEPs apart from other strategy documents is that they introduce a multisectoral approach to planning for economic growth and advocate for the most sustainable and inclusive development approach.

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The programme has helped the municipalities to identify climate resilient infrastructure and value chain projects that have strong value addition potential and harness linkages within the municipalities to leverage on their existing economic potential. “What the UEPs have helped us with is to narrow our economic offering, we had defined sectors in our County Integrated Development Plan (CIDP), however, the UEPs have shown us how to bring them to life and how to pitch them to investors to make them implementable.” – Jamil Shamji – Kisii Board Chair. SUED used four phased approach in developing the UEPs. Initially the programme held kick-off meetings with the municipalities to ensure alignment on the development approach as well as to gain better understanding of their economic priorities. This was followed by an in-depth diagnostic phase that looked into the municipality’s demographics, economy, infrastructure, environment, and climatic conditions. In doing so, the programme was able to gain a better understanding of how to strengthen the sectors for economic development. This was then followed by a technical briefing (outline) phase that entailed re-looking at the findings of the diagnostic phase and beginning to visualise the economic vision of the municipality and highlight which value chain and infrastructure projects to prioritise. This culminated in the final UEP phase that identified the key anchor projects and how they would diversify their economic offering to attract a wide range of investors.

SUED 2021/2022 43 Marakwet Governor.

The four step-approach enabled the programme to support the technical teams at the county and municipal level to see the value in integrating economic offerings and development outcomes.

SUED’s meeting Makueni technical Team

The programme’s work in the 12 municipalities has better positioned the country to synergise economic opportunities across regions helping municipalities to be viewed as high potential economic urban centres that contribute to the national economic offering to investors. “With the completion of all UEPs, the programme can now promote similar value chain opportunities within the supported municipalities to advance the national economic agenda.” Urbanus Mbindyo- Wote Municipal Manager.

SUED’s work is geared towards supporting growth and sustainable economic development by unlocking private and public investment in the urban sector. “When we have previously developed our development plans, we have done so without thinking through how we could fund the projects beyond the public funds. Our approach has primarily been identifying projects that we can implement as the government without seeing where we can partner with the private sector to drive economic development.

The completion of all the UEPs means that the programme has improved the economic planning of 12 intermediary cities and has strengthen their capacity to have public-private dialogue that will result in climate resilient infrastructure and value chain investments made. By increasing the economic development of the municipalities, SUED is strengthening Kenya’s urban resilience while promoting prosperity in Kenya to spur wider economic growth.

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Board members and municipality representatives go through the Lamu UEP during the final workshop. The UEP was formally adopted at the workshop.

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