2022/2023- SUED's Annual Newsletter

NEWSLETTER 2022/2023

SUSTAINABLE URBAN ECONOMIC DEVELOPMENT PROGRAMME (SUED)

SUED | Newsletter 2022/2023

1

SUED | Newsletter 2022/2023

2

Supporting Market Driven Growth In Municipalities

A Chilli Farm in Malindi Municipality

SUED | Newsletter 2022/2023

3

TABLE OF CONTENTS

SUED | Newsletter 2022/2023

4

1. Programme Overview

8

Expected Programme Results/Impact/Outcome

12

Where We Work

13

2. Urban Economic Planning

14 - 22

SUED On-boarding of Governors 3. Investment Attraction

23 24 - 29

SUED Investments in Kilifi County 4. Success Stories

30 33 - 44

Sweet Potato Farm

SUED | Newsletter 2022/2023

5

The British High Commissioner, H.E. Jane Marriott and Kisii County Governor H.E. Simba Arati cut the ribbon at the commissioning of the Avocado Oil Processing Plant in Kisii Municipality

SUED | Newsletter 2022/2023

6

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.

SUED | Newsletter 2022/2023

7

1.PROJECT OVERVIEW The Senior Responsible Owner, Ms. Eunice Ogolo shares with Makueni Governor, H.E Mutula Kilonzo Jr, SUED offerings and how the County Government can support the Municipality to proactively position itself favourably for inward private sector investment.

SUED | Newsletter 2022/2023

8

The work that SUED is doing at granular urban level has the capability to turn around the economies of town centers in Kenya’s regional hubs. The intention of the programme to help municipalities develop plans that can be utilised to anchor value chain and infrastructure projects and attract inward investment is an approach that should be emulated in the Country” Makueni Governor, H.E. Mutula Kilonzo Jr

SUED | Newsletter 2022/2023

9

PROGRAMME OVERVIEW 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.

Implementation Period 2018-2024 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 projects, 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. The programme is working with 10 of them to attract investors.

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.

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 | Newsletter 2022/2023

The British High Commissioner, H.E Jane Marriott, the Elgeyo Marakwet Governor Wisley Rotich, Chief Executive Officer (CEO) for Select Fresh celebrate the signing of Letter of Understanding between Select Fresh and Elgeyo Marakwet at the launch of the Irish and Sweet Potatoes Project

10

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

1 Developing an Urban Economic Plan:The programme worked 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.

2 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 Avofresh Director, Srinivas Palacheria explains to the British High Commissioner H.E Jane Marriott and Kisii Governor H.E Simba Arati how the avocado oil processing is conducted at the launch of the SUED supported processing plant in Kisii Municipality

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

The SUED team carry out field visits in Kerugoya-Kutus Municipality

SUED | Newsletter 2022/2023

11

EXPECTED PROGRAMME RESULTS/OUTCOME/IMPACT Through an integrated approach that is demand-driven, working with both public and private actors, SUED key goals are:

1

Inclusive economic growth and poverty reduction in supported municipalities and the respective counties that they are embedded in

2

Increased investment in selected municipalities including investments in climate-resilient infrastructure and value chain projects.

IMPLEMENTING PARTNERS: 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 – The Atkins Team developed 12 UEPs. 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 UEPs to promote the project identified to attract investors.

Their work is geared towards attracting public-private investment in infrastructure and value chain projects in supported municipalities.

SUED | Newsletter 2022/2023

The Elgeyo Marakwet Governor and the British High Commissioner visit a potato farm in Elgeyo Marakwet

12

WHERE WE WORK

Kathwana

UEP Developed and Adopted

Isiolo

UEP developed and publicly launched, 1 deal signed in the Investment Attraction Phase

Eldoret

UEP Developed and Adopted, 3 deals under development in the Investment Attraction Phase

Iten

Mandera

Bungoma

Kitui

UEP Developed Completed and Adopted

UEP Developed, Adopted and Publicly Launched, 1 deal signed and 2 deals under development in the Investment Attraction Phase

UEP Developed and Adopted

UEP Developed and Adopted

Kisii

UEP Developed, Adopted and Publicly Launched, 1 deal signed and 2 deals under development in the Investment Attraction Phase

Lamu

UEP Developed and Adopted,3 deals under development in the Investment Attraction Phase

Wote

UEP Developed and Adopted, 3 deals under development in the Investment Attraction Phase

Malindi Kerugoya UEP Developed and Adopted,3 deals under development in the Investment Attraction Phase

UEP Developed, Adopted and Publicly Launched, 3 deals closed in the Investment Attraction Phase

Capacity Building: All municipalities have continued to receive capacity

building support through the investment attraction process. Kisii Municipality has received support to develop their Fund bill and Board charter as well as eight by-laws

SUED | Newsletter 2022/2023

13

2.URBAN ECONOMIC PLANNING British High Commissioner, H.E. Jane Marriott and Uasin Gishu Governor Jonathan Bii acknowledge the value that SUED has provided to Eldoret Municipality through the development of the Eldoret’s UEP

SUED | Newsletter 2022/2023

14

The resources that the UK Government has provided to support Eldoret to position itself as an investment hub through the development of a forward looking Urban Economic Plan is commendable. As a County, there are priorities that we will draw from it to ensure that we position our urban center to become a wellplanned city” H.E. Jonathan Bii, Uasin Gishu Governor.

SUED | Newsletter 2022/2023

15

URBAN ECONOMIC PLANNING Delivering Green Growth through Urban Economic Planning - Thought Piece on the Prioritisation of UEP development in Intermediary Cities in Kenya The Organisation for Economic Cooperation and Development (OECD) defines green growth as “fostering economic growth and development while ensuring that natural assets continue to provide the resources and environmental services on which our well-being relies.” There is no one size fits all and achieving green growth has to reflect the local conditions, including comparative and competitive advantages for development. However, there is need to consider development through the design of plans to enable identification of practical opportunities to deliver green growth.

How do you deliver green growth?

In order to deliver green growth through programme design and implementation: •

•

•

The methodology must require clear actions for the development of sectors in their own right, as well as promoting ecosystems of economic projects, and identifying appropriate climate-resilient and inclusive infrastructure proposals to support growth across different sectors. Economic sectoral work should be designed to be developed in synergy rather than in silos, meaning that some actions are likely to be cross-sectoral and also consider the challenges related to sustainability, climate resilience, inclusivity, circular economy and conflict sensitivity.

The outputs must encompass high value capital investment projects (e.g., transport infrastructure) alongside soft interventions such as education and training, changes to systems such as skills development, technology availability and smaller infrastructure recommendations at local or household level.

The evaluation framework needs to be grounded on robust economic sectoral analysis to guide the identification of specific activities as part of an entire sectoral supply chain identifying key bottlenecks at various stages. In other words, it requires consideration of requirements beyond a specific facility or activity and how to efficiently bring in materials as well as how to link with markets

Specific examples to consider in the development of Urban Economic Plans include: Promoting value addition and job creation through circular economy Plans need to identify and define any opportunities that: •

•

Focus on creating value addition through processing and collection of previously overlooked waste and by-products. Examples from SUED include banana fibres and coconut which can be used to produce a range of products, including absorbent pads, rope, cardboard, tea bags, textiles, and matting or agri-processing waste for feedstock.

Commercialise process of waste such as sewage sludge to form charcoal briquettes or through processing with black soldier fly larva (BSFL) to produce protein and compost or carbonising and pressing into charcoal briquettes as well as biogas production.

The benefits of such an approach are not constrained to job creation and revenue generation but also address key environmental and infrastructure challenges such as minimising waste which can negatively impact the health of residents and provision of affordable energy.

SUED | Newsletter 2022/2023

16

Providing an enabling infrastructure framework Plans need to set out infrastructure and economic projects with implementation in mind and focus on how these can be delivered not just what can be delivered.

In doing so it is important to acknowledge and accommodate both design and their implementation/financing requirements depending on delivery i.e., under the authorities’ responsibility to deliver, those that can attract donor funding and also those projects that would leverage private sector investment including climate finance. This is particularly important considering public finance deficits and availability of private finance.

Infrastructure Projects with Private Sector Investment Potential

Prioritisation and phasing of development Prioritised infrastructure projects are directly linked to key economic activities within the municipalities with the aim of supporting economic growth. Naturally there is a concentration of certain economic activities within specific locations, such as Central Business Districts (CBD) and town centres for trade and commerce and industrial areas for agri-processing/manufacturing, hence a development framework and associated infrastructure projects within each UEP would best deliver having a locational focus. Similarly, there are certain key activities that go beyond the urban boundaries such as part of a supply chain for key economic activities thus identified infrastructure projects can be municipality/city wide.

SUED | Newsletter 2022/2023

17

The aims and purposes of the infrastructure do not differ significantly across towns. Broadly speaking the motivation and need for infrastructure is driven by the following: • •

The first purpose for infrastructure is to safeguard the livelihoods of the locality’s residents and workers (e.g., all weather road access).

The second purpose is to unlock new opportunities and attract private investment through their revenue generating potential (e.g., municipal solid waste, biogas, transport orientated development).

Appropriate phasing of the infrastructure projects is a critical element and needs to be considered carefully. While there are some commonalities in terms of urgency and timing of certain projects such as ensuring infrastructure is in place, phasing for each UEP has to be developed specifically to reflect current provision and future needs: • • •

Take into consideration urban growth plans and significant spatial constraints of the planning area Sequence projects based on optimising their individual and collective impact on urban and economic development whilst minimising costs Consider capacity and availability of funding for delivery.

Protecting the Environment and Natural Resources Regardless of location, climate zone, physical geography, and population and economic size, cities and towns rely on inputs from natural and social support systems within their wider urban catchment areas. Water, food, and biodiverse natural habitats are all critical resources, and risks to any of these, especially when they touch upon clean energy, water and/or food supply systems within wider urban catchments, can endanger the ability to deliver basic services and affordable food to urban populations. We have set out below key targets that protect the environment and natural resources in tandem with economic development: Promote Green Cities: Improving the environmental performance of cities through low carbon and environmentally sensitive actions not only helps adapt to climate change risks but has clear health benefits for society. Redefining green spaces and the way city centres are designed for business as well as traffic management can be a critical short-term solution that has valuable long-term planning benefits. Multi-functional river parks – sponge cities – which also act as flood storage, while sustainable urban drainage and natural flood management features can be incorporated in the revitalisation plans for towns and cities.

SUED | Newsletter 2022/2023

18

Ensure integrated nature-based approaches. Future growth is highly dependent on a region’s water and natural resources, which can be under significant stress. Pressures come from rapid and uncontrolled urbanisation, poor economic practices, pollution, and degradation of resources, as well as climate change.

A nature-based approach can be introduced to facilitate the sustainability of agri-processing activities by focusing on the protection of water and natural resources and enhanced environmental resilience. This, in turn, will soon improve the health and wellbeing of all citizens and foster a growing community.

Provision of potential soft and hard solutions should aim to manage a set of interlinked challenges, which could be achieved by adopting a Green Blue Development (GBD) approach.

Similarly, a blue economy approach can be adopted for areas rich in marine and coastal resources with the potential for utilization that can support economic growth, jobs, livelihoods, food, and energy security. These areas besides their importance for biodiversity, provide climate protection through carbon sequestration from the atmosphere (also called ‘blue carbon’ when taken and stored in marine environments), and support nature-based tourism and coastal protection. This carbon sequestration and storage potential can also be used to attract private investment to fund mangrove or seagrass conservation initiatives through voluntary carbon markets where businesses fund the conservation projects that lead to carbon sequestration and in that way offset their own emissions.

Promote sustainable industrial activity decoupling the prosperity generated from industrial activities from excessive natural resource use and negative environmental impacts. Processing and industrial activities often require substantial volumes of water to operate. In order for the industrial sites to be sustainable and not exacerbate current pressures on water supplies they often need dedicated water infrastructure. Wastewater treatment works and plant to manage and recycle grey water which can be reused by the processing facilities or for irrigation.

SUED | Newsletter 2022/2023

19

The majority of locations can supplement the existing water supply with smaller scale infrastructure such as: • • • •

A designated water supply to the industrial park using infiltration galleries Water supply to site through construction of new boreholes, pump, and chlorination system Supplementing existing water supply (e.g., with a borehole) Wastewater treatment works and plant to manage and recycle grey water which can be reused by the processing facilities or for irrigation.

Introduce new technologies, such as solar hot water systems, energy management systems (smart meters) and home insulation can facilitate efficient use of resources. Innovations such as off-grid small-scale distributed renewable energy systems that can integrate power for homes are likely to transform current models for energy production and distribution, moving away from reliance on state-provided energy. Distributed, networked systems for energy generation and storage could improve the resilience of power systems and critical energy infrastructure systems to natural disasters. Promoting sustainable industrial activity will also assist in improving air quality within cities, decoupling the prosperity generated from industrial activities from excessive natural resource use and negative environmental impacts.: Promoting Social Development We cannot talk about green growth and sustainable development without thinking about its social dimension. Social development is both an outcome and a process to ensure the wellbeing of all people regardless of their socioeconomic background, ethnicity or race, religion, gender and sexual orientation, disability, age, and so on. Among its objectives, social development aims at reducing inequalities, eradicating poverty, and promoting communities’ socio-territorial integration.

Social development is important since local economic development does not always (or directly) translate into pro-poor, inclusive growth.

Moreover, ensuring that all communities are able to access the benefits from urban economic SUED | Newsletter 2022/2023

development is not only the right thing to do, but it is too costly to ignore. Inclusive urban economic development contributes to enhance local economies’ productivity and the diversification of talent, reduces social services’ costs, and improves the quality of life of future generations.

How do you work towards social development?

Mainstreaming gender and inclusion from the outset Social development cannot be achieved if local communities are seen as mere beneficiaries of development projects; their voices, needs and agency need to be acknowledged. Mainstreaming gender and inclusion means embedding these considerations throughout the project cycle and in each of its activities. Doing this requires: •

•

•

As a first step, training team members and experts to become more aware about the intersections between gender and inclusion and their own disciplines.

Deploying different methodologies to understand from the beginning who is being excluded and why, and design inclusion strategies in a multidisciplinary and participatory manner. This may require iteratively zooming in and out the different proposed interventions to ensure they are inclusive and accessible to all.

Working with all beneficiaries - not separately with marginalised groups. While inclusive consultation often requires targeted efforts, the design and implementation of inclusion strategies should be a collective endeavor, developed carefully and in a culturally appropriate way to avoid retaliation or unintended negative consequence.

Women in the farm in rural Kenya.

20

Deploying a multidimensional approach to inclusion SUED projects incorporated a multidimensional approach to inclusion, based on the World Bank’s framework for inclusive cities, to tackle exclusion in a holistic way. This approach considers three dimensions: •

•

•

Spatial inclusion: understanding that infrastructure is not intrinsically accessible to all nor gender neutral and designing infrastructure and urban interventions that contribute to facilitate communities’ social, economic, and cultural development. This means assessing all interventions in terms of their accessibility and safety, as well on strengthening links to social infrastructure whenever possible. This assessment should be based on a thorough understanding of the local context, social norms, and existing barriers to inclusion.

Economic inclusion: creating job and skill development opportunities that are available and accessible to marginalised, low-income groups so they can enjoy the benefits from urban growth. Doing this also requires understanding the vibrant role of the informal economy and focus on integrating these stakeholders in the planning and design of urban economic development and emerging markets.

Social inclusion: ensuring that local communities and marginalised groups’ voices are heard in the entire project cycle. This is done by ensuring their active participation through different stakeholder and consultation processes, as well as the recommendations above.

Addressing the intersections with major challenges such as conflict or climate change The dynamics that generate exclusion in a certain community might sometimes be evident, but often not. Conflict is, perhaps, one of the most evident barriers to social development. Yet, its causes and potential solutions are not always straightforward. In conflict settings, interventions should aim at ‘doing no harm’. As a minimum, this means considering the mutual influence that exists between the conflict-affected environment and a project’s actions. This should be done by: Understanding the context and drivers for conflict and insecurity, the interactions between the project and this context, understand who is being directly and indirectly impacted by this context, and design solutions aiming at avoiding any negative impacts, and, whenever possible, to strengthen positive, de-escalating and peace-promoting impacts.

Similarly, less evident challenges to social development such as the climate change-poverty nexus were identified.

Climate change poses a serious challenge to poverty reduction efforts since its impacts disproportionately affect vulnerable populations such as low-income or remote communities, women, the elderly, persons with disabilities, or persons with chronic illnesses. Understanding this link allowed to plan and design inclusive climate resilient solutions. These interventions aimed at ensuring that adaptation strategies do not act to reinforce or deepen existing inequalities, and that are accessible to groups that are already marginalised within their communities.

SUED | Newsletter 2022/2023

21

Plans need to: •

•

Design climate-resilient technologies and interventions that are affordable, culturally appropriate, and accessible to all, as well as accompanied by capacity building and targeted technical support.

Make the roles and actions of disadvantaged groups in climate change mitigation and adaptation more visible, while better integrating them in value chains development, as the example below shows:

Adapting to Climate Change and Finance Opportunities Urban development will not be sustainable unless it is also resilient to climate risks, both those faced at present, and emerging risks driven by climate change. We also need to recognise that the impacts of climate change are not felt evenly, and that existing vulnerable and marginalised groups will be disproportionately affected.

Integrating climate resilience into urban economic plans provides an opportunity to reduce the impacts of existing hazards like flooding and heatwaves, while preparing for future changes.

Importantly, it also provides an opportunity to attract investment, drawing on the increasing number of sources of sustainable and climate finance. “open up” the municipality for investment.

First, climate resilience integrated throughout the development process, and used to guide the selection and development of economic activities and infrastructure projects, so that as a minimum requirement, the proposals contained in the plans take into account the relevant climate risks.

For example, urban regeneration proposals included sustainable drainage features, and additional shade and cooling in order to increase their resilience, while for value chain proposals assessments were carried out to ensure that the supply of raw materials could be maintained despite climate change, and that the proposed sites included suitable flood risk assessments, and year-round access.

interventions should be proposed to build resilience of the municipalities more generally.

This includes assessing with stakeholder where opportunities exist for investments that could strengthen the enabling environment for climate resilience In Wote, for example, building on the awareness created by the County Climate Change Fund, a climate smart agricultural hub was proposed, comprising targeted extension services, tailored climate information, and facilitating access to financial products such as crop insurance that can be used to support a more resilient agricultural system.

Third, the potential for accessing a number of different sources of climate finance, and the process of screening infrastructure investments designed in such a way as to meet some of the initial requirements around risk assessment.

Linkages between project development, and potential sources of sustainable finance should be strengthened, with a focus on delivering bankable investments that would meet sustainable finance criteria. Bringing potential financiers into the process of project development could both enhance stakeholder engagement in the process and increase the likelihood of successful implementation of projects.

Second, for towns with greater stakeholder interest in climate change as a topic, specific

SUED | Newsletter 2022/2023

22

SUED ON-BOARDING OF NEW GOVERNORS

H.E Anne Waiguru, Governor Kirinyaga County address the press after a SUED entry meeting with the British High Commissioner and larger SUED

The SUED programme had to induct the newly elected Governors on the programme’s offerings, the work that has been done so far in their jurisdiction as well as how we would continue to work together to attract inward investments. The programme had the meetings with Governors from the following counties; Kilifi (Malindi Municipality), Lamu (Lamu Municipality), Kirinyaga (KerugoyaKutus Municipality), Kisii ( Kisii Municipality), Bungoma (Bungoma Municipality), Elgeyo Marakwet (Iten Municipality), Uasin Gishu County (Eldoret) and Makueni (Wote Municipality). The meetings were also aimed at familiarising the Governors on the completed UEPs and how they incorporate them in their CIDPs as well as an investment tool when engaging with investors. Further, it provided a platform through which the programme advocated for favourable investment climate for investors as well as the prioritisation of the institutional strengthening of municipalities.

H.E Issa Timamy, Lamu Governor symbolically recieves the Lamu UEP after an on-boarding session by the SUED and BHC team at his offices

H.E Simba Arati, Kisii Governor addresses the press after an on-boarding session with the SUED and BHC team SUED | Newsletter 2022/2023

23

H.E Simba Arati, Kisii Governor together with the British High Commissioner tour the Avofresh Facility in Kisii that is processing Avocado Oil

3.INVESTMENT ATTRACTION

SUED | Newsletter 2022/2023

24

The UK Government’s support towards Malindi Municipality and wider Kilifi County to bring in investments that have a wide impact is appreciated. The two new projects will create jobs, provide a market for farmers and will economically empower the community. As a County our priority is in creating an enabling environment where these investments can succeed. We will ensure that our farmers are sensitised and linked with the chili processors as well as the drying facility to take advantage of having a ready market within the locality” Kilifi Governor, H.E Hon. Gideon Mung’aro

SUED | Newsletter 2022/2023

25

Investment Attraction Lessons from SUED’s Initial Deals- Unlocking Green Investment and Creating Climate Resilience for Kenya’s Secondary Municipalities Introduction Primary cities in Africa cannot accommodate the rapidly increasing population, as such, there is need to strengthen the role that secondary and tertiary cities play in the contribution on nationwide economic growth. This approach has not been favoured in the recent past, but its merits are beginning to show with the unapparelled potential and opportunity that they provide for eradicating poverty, fostering innovation, and including a larger number of the population in inclusive and resilient growth while recognising the uncertainty associated with climate change.

SUED’s initial deals have been domiciled in two municipalities, Isiolo and Malindi. Over three years, SUED has worked closely with the local municipal government, private sector companies and investors, and other experts to identify, structure, and support green investments. The programme focused on projects identified by local government, private sector, and community stakeholders that could accelerate climatefriendly economic growth and urban development, as identified in the Urban Economic Plans produced under the first phase of the SUED programme. The projects pursued included waste and circular economy, sustainable agriculture, and flood water management.

The investment attraction process proved challenging given the smaller size of these municipalities, making opportunities less attractive for larger operators and investors, but we were able to complete five transactions that will have significant, long-term benefits to each local community. In Isiolo and Malindi municipalities the programme will result in raising a total of ~GBP 5.3 million and creating an estimation of ~10,000 jobs (direct, induced, and indirect), including significant gains in climate resiliency from improved waste systems to drought-resilient agriculture. The below case studies demonstrate three of these transactions as well as lessons learned for future sustainable urban development projects.

Case Study 1: Commercialisation of Sewage Sludge in Malindi Project highlights: Project details Waste-to-Value (W2V) facility to process sludge from Malindi Water and Sanitation Company (MAWASCO’s) upcoming Faecal Sludge Treatment Plant into briquettes Funding ~GBP 1.8 million from the World Bank Beneficiaries 120,000 Malindi residents Expected jobs ~250 direct and indirect jobs Expected impact Over 600,000 trees saved from deforestation for fuel usage, offsetting 120,000 tonnes of carbon

Urban sanitation has been a significant and growing challenge in Malindi. When we started engaging the municipal water and sanitation provider, MAWASCO, they were under-resourced and the cost of establishing sewer lines in Malindi was prohibitive, meaning that faecal waste was typically dumped untreated in an open-air landfill site. To address this, MAWASCO was looking to establish the municipality’s first faecal sludge treatment plant (FSTP) and had considered adding in a waste-to-value facility to generate revenue from a recycled product.

Through SUED’s engagement, the programme conducted a pre-feasibility study on the waste-to-value (W2V) concept and validated the opportunity to establish a plant to convert faecal sludge into fuel briquettes. Thereafter, we conducted more in-depth due diligence on this proposal and once verified, submitted the concept of the W2V facility to the World Bank, which had already agreed to fund the faecal sludge treatment plant.

SUED | Newsletter 2022/2023

26

Based on SUED’s work at the pre-feasibility and due diligence stages, the World Bank agreed to invest an additional GBP ~1.8 million to construct the briquettes plant.

Once commissioned, the new FSTP will prevent faecal sludge dumping in the environment, while the W2V facility will then safely commercialise the faecal sludge, to offset the costs of waste treatment. The plant is expected to produce 3,000 metric tons (MT) per annum of briquettes for sale to industrial customers and create ~70 direct and indirect jobs. Further, the briquettes will offset the cutting of trees for wood fuels, thereby saving up to 200,000 trees per year and the associated carbon emissions.

Case Study 2: Fruit Processing in Malindi Projects highlights: Projects details Funding Expected jobs Expected impact

Greenfield set-up of a mango drying facility by Milly Fruits Processors Ltd. and expansion of Equator Kenya Limited (EKL)’s chilli processing capacity ~GBP 1.5 million private investment by Milly Fruits, with ~GBP 500K from a SUED Seed Fund grant & ~GBP 1 million private investment by EKL, with ~GBP 250K in SUED Seed Fund grant ~4,100 new jobs over three years for Milly Fruits project and ~5,600 new direct and indirect jobs for EKL project with support to ~6,300 farmers Improved climate change resilience for ~15,000 new and existing farmers through use of renewable energy in production & utilisation of climate-smart technologies

Over the past three years, Malindi has experienced prolonged drought and erratic rainfall due to climate change and this has severely impacted agribusinesses and farmer livelihoods. As such, Malindi’s Urban Economic Plan identified the agri-processing value chain as a priority for enhanced climate resilience.

Under the SUED programme, SUED evaluated the fruit processing landscape in Malindi and developed prefeasibility findings that validated that the fruit value chain was attractive across specific investment and impact assessment parameters. After engaging with over 40 industry stakeholders including investors, private operators, and government and non-government agencies, SUED identified two strong operators for support from the SUED Seed Fund. Milly Fruit Processors, a fruit processor located in Mtwapa, Kilifi County, was looking to set up and operate a new climate-friendly fruit drying facility. Secondly, Equator Kenya Ltd., a chilli processor based in Malindi since 2010, was looking to expand their processing capacity to support chilli farmers with climate resilience and drive financial sustainability.

SUED attracted Milly Fruits to set up this greenfield facility in Malindi, 100 km north of their existing plant in Mtwapa, thereby diversifying Malindi’s economy. This was achieved by holding a series of consultations with the Milly Fruits’ management to align on their growth strategy and the fruit drying facility project costs, reviewing their business strategy and project documents and developing an application for the SUED Seed Fund support. In June 2022, the British High Commission approved a grant commitment of ~GBP 478K, with private investment of GBP ~1.5M committed by Milly Fruits.

For Equator Kenya Ltd. (EKL), SUED supported in structuring a project to expand their chili processing capacity and diversify into new products (flakes, powder, oil) to source more chilis from local smallholder farmers and reduce postharvest losses, while incorporating climate-smart technologies. SUED supported EKL to refine its growth strategy and articulate the structural and operational improvements to the existing facility to apply for catalytic funding.

SUED | Newsletter 2022/2023

27

SUED developed a project concept note and budget, investment application form, investment committee memo and climate impact assessment for grant funding under the SUED program and conducted risk-based due diligence to ascertain the operator’s credibility. This resulted in a grant commitment of ~GBP 250K from the British High Commission, accompanied by ~1M of an equity injection from the EKL shareholders.

Both investments are expected to have significant impact to the fruit processing sector in Malindi. The new Milly Fruits mango drying facility and EKL diversification into chili oil, flakes, and powder will reduce postharvest losses for farmers, which today reach up to 40% of harvest volumes in Kilifi County, due to lack of preservation technologies. Both projects will utilise solar power for parts of the production, further reducing greenhouse gas emissions. Overall, the two projects will reach ~15,000 local farmers, enhancing their livelihoods and climate resilience.

Case Study 3: Sustainable Urban Drainage Systems (SuDS) in Isiolo Projects highlights: Projects details Funding Expected jobs Expected impact

Construction of Storm Water Drainage System in Isiolo ~GBP 1 million from World Bank’s Horn of Africa Gateway Development Project (HoAGDP) 80,000+ Isiolo residents ~90 jobs during construction

Seasonal floods in Isiolo municipality contribute to the frequent destruction of property with recurrent floods destroying property worth over KES 800 million in 2015 alone, due to the municipality’s location in a basin which receives water runoff from the hills around Mount Kenya. For this reason, floodwater management was identified as a priority project by the municipality under the Isiolo Urban Economic Plan.

The SUED Programme conducted a detailed pre-feasibility study detailing the key issues contributing to flooding in Isiolo’s urban core. Thereafter, Isiolo Municipal Manager submitted this pre-feasibility study as one of the municipality’s priority projects to the World Bank’s Horn of Africa Gateway Development project, (HoAGDP), through its implementation agency, the Kenya National Highways Authority (KeNHA). Following this submission, the HoAGDP requested for further details, so SUED drafted a concept note, preliminary engineering designs, and a high-level environmental analysis.

After over a year of follow-up support and sensitisation within the implementing agency, the project was included in the HoAGDP budget, with a preliminary figure of ~GBP 1 million. Once construction is completed (in 2024-2025), the stormwater drainage improvements are expected to improve the climate resilience for the town’s 80,000+ residents by reducing the damage caused by floods to trade premises and residential properties.

Lessons learned From the three years supporting project structuring, investment attraction, and financial close for these transactions, some of the key learnings include: •

Engage the public sector early and closely, helping to them to understand how to attract private sector players through PPP frameworks. It is important to help municipal and county stakeholders to understand which projects may be able to generate a financial return and attract investment, and that a private investment attraction approach may not be viable for all of the county and municipal leadership’s priorities; for example, the county leadership pushed to prioritise a project to upgrade Malindi waterfront, but from an investment attraction perspective, it was unclear how it would generate a commercial return.

SUED | Newsletter 2022/2023

28

• •

•

A streamlined stakeholder process could be conducted to help the municipality identify their economic opportunities and priorities, which will form the basis for targeted projects.

Consider the investment-readiness of operators within a sector before prioritising projects. While a project may sound viable given a municipality’s natural resources, it is important to evaluate the local and regional players who could be potential operators before committing to attract investment. For example, through the SUED process, a blue economy project was prioritised in Malindi, given the high prevalence of artisanal fishing and the under-exploited sustainable catch off the Malindi coastline.

Cast a wide net for private operators including regional players and potential sectors of focus.

Considering the challenging circumstances of operating in smaller municipalities, it is important to consider a wider pool of potential projects to increase chances of attracting private sector operators with the necessary skills and expertise to operate effectively. Under the SUED programme, we had success with local and regional players (i.e., incentivising Milly Fruits to move from Mtwapa to Malindi).

SUED | Newsletter 2022/2023

29

SUED INVESTMENT LAUNCH Chilli Processing Plant

The UK Government through SUED in collaboration with Malindi Municipality and Kilifi County launched a chilli processing value chain project. The private investor for the project is Equator Kenya Limited (EKL). SUED’s partnership with EKL is aimed at working with the company to integrate more climate-smart technology at the facility to expand its network reach to farmers.

EKL is investing £893,026 (Kshs154 m) into the project with a third-party contribution of £105,036 (Ksh17m) totaling to almost £1m (Ksh170m) to optimise its operations. SUED has played a strategic role in unlocking this investment by providing £249,745k (Ksh417m) in seed fund support.

SUED’s support will enable EKL to double its annual dried chilli production from 70MT to 150 MT by 2025, diversifying its chili processing activities and upgrading its current facility to become more climate resilient in its energy utilisation. The support has also increased EKL’s farmer network from 1700 to 11,000.

SUED | Newsletter 2022/2023

30

HES IN KILIFI COUNTY Fruit Drying Processing Plant

The UK Government through SUED in collaboration with Malindi Municipality and Kilifi County launched a fruit drying value chain project The project is a partnership between the UK Government and Milly Fruits Processing Ltd(Milly Fruits) and entails the development of a 1,450 square metres climate-friendly fruit drying facility that will produce mangoes, pineapples and coconuts primarily for export to clients in Europe and the Middle- East.

Through SUED’s support, Milly Fruits has broken ground on its new site for its climate friendly fruit drying facility that will be powered primarily by renewable energy for production.

The new facility will be completed within the next 9-12 months. This facility is focused on climate benefits as it will utilize solar dryers for 30% of its production and power the remaining production through. Milly fruits is investing £1.48m (Ksh339m) into the project with the UK Government providing a seed fund contribution of £478k (Ksh82.9m). the local grid, which is predominantly hydro-generated. It will also reduce transport emissions and significantly reduce emissions from fruit wasted, currently a major challenge.

SUED’s support will enable Milly Fruits to work with more than 4,000 small holder farmers within the municipality to produce 760MT of dried fruits

SUED | Newsletter 2022/2023

31

LESSONS LEARNED IN Intermediary Cities Competitiveness: A Look into Kenya’s Investment Landscape

SUED | Newsletter 2022/2023

32

Introduction The UK Government through its Sustainable Urban Economic Development Programme (SUED)is working with selected municipalities in Kenya to attract investment for climate resilient infrastructure and value chain projects. The programme is working with county governments and the private sector to improve urban economic planning and raise investment for bankable, climate-resilient infrastructure and value chain projects to ensure that these emerging urban centres develop in an inclusive and sustainable way.

Kenya’s urban population is expected to increase by 50 percent by 2030, presenting both challenges and opportunities. With nearly 1 million young people entering the job market each year, it is critical to generate adequate jobs. Post devolution in Kenya, counties are at the forefront of promoting job creation and poverty reduction through a multisectoral approach towards investment attraction and a significant number of these investments are likely to be located in emerging cities and municipalities.

good and serviceable infrastructure and utilities; access to affordable financing; availability of developed human resources; and availability of technical support, in particular for SMEs. These activities require direction and coordination within the county government and with national government. However, counties face capacity limitations in investment promotion. KenInvest proposes the creation of a county level investment promotion unit to deliver investment promotion services to potential and existing investors.

The unit could initially have a simple but functional structure that aligns with the current needs of the County. Staff could be seconded on part-time basis from the department dealing with trade and investment to work in the unit.

As the number of investors increases, the unit can also evolve, employing more staff on a full-time basis to provide specialised investment promotion services.

Many counties are yet to set up or operationalise investment promotion units.

The following sections highlight aspects that can In addition, capacity building of investment promote sustainable investment in municipalities promotion officers in trade and investment in Kenya that are being supported by SUED, with examples from Kisii and Iten municipalities. SUED’s departments or county level investment promotion agencies, as well as other officials experience of successfully attracting investment that engage with investors is needed. in two projects in the municipalities is used as an SUED is supporting capacity building of the illustration. This includes investment by Avofresh municipalities and counties through customised Processors Limited in the avocado oil project in training workshops and collaboration in the Kisii Municipality, Kisii County; and investment by investment attraction process, helping to Select Fresh Produce Kenya Limited in the Irish build institutional memory, cumulative skills and sweet potatoes project in Iten Municipality, and knowledge development. Additionally, Elgeyo Marakwet County. the programme worked closely with Kisii Governance and Creation of an Municipality to develop by-laws that ensure a Enabling Business Environment for conducive environment for incoming investors.

Investors

In its third County Integrated Development Plan, Kisii County acknowledges the need The municipalities and county governments for a county investment unit to continuously have the responsibility of creating an enabling engage with investors and market available environment for investment. According to investment opportunities in the county.4 The KenInvest, some of the considerations to attract county will establish a county investment unit investors to counties include a clear investment to identify and market sustainable investment policy; secure and predictable investment opportunities, coordinate investment activities, environment; simplified procedures for investment and spearhead the development of a policy and and business operations; well-packaged information on investment opportunities; investment regulatory framework for investment promotion. incentives; comprehensive master plan and land/ SUED supported investment in the avocado property database; SUED | Newsletter 2022/2023

33

oil processing project in Kisii Municipality. The project was formally launched in June 2022 and the avocado oil extraction facility commissioned in April 2023. The Kisii County Government championed this project and facilitated its implementation, including providing 1.3 acres of land at the Agricultural Training Centre and a godown for leasing.

SUED is also supporting investment in the Irish and sweet potatoes project in Iten Municipality.

The project was launched in January 2023. The county government has supported the investor by facilitating connections with farmer groups and identification of suitable land for setting up the processing facility. The county is yet to establish an investment promotion unit.

The support provided by the county government leadership in Kisii and Iten demonstrates that while investment promotion structures are important and should be established to provide guidance and clarity to investors on the processes, ownership and buy-in of projects and political goodwill also play a vital role in facilitating investment in the municipalities.

Urbanisation and the Impact of Economic Planning in Attracting inward Investments Urbanisation is a driver of economic growth through expanded access to jobs, markets, services and infrastructure for the urban population and businesses. A study on African urbanisation shows that small and mid-sized

The British High Commissioner meets the CEO of Select Fresh SUED | Newsletter 2022/2023

cities can deliver many of the benefits of urbanisation that larger cities provide,5 implying that investing in intermediary cities and municipalities can deliver economic development for the urban populations as well as surrounding rural communities.

Kenya has yet to leverage urbanisation for economic transformation and no country has reached high-income status without urbanising.

In comparison, East Asia urbanised with economic transformation driven primarily through investment in infrastructure and industrialisation. The SUED business case also recognises that urbanisation in Kenya has not translated into high rates of economic growth that are sustainable due to lack of economic planning and an unfavourable business environment in municipalities and cities to sustain industrialisation.

To drive economic development, counties need to embrace better local economic planning. As investment projects must be located at countylevel, sound economic development plans can help to attract investors by demonstrating the county’s priorities and progress in supporting the growth of certain sectors and its commitments in creating an enabling business environment.

The third generation County Integrated Development Plans (CIDPs) covering the period 2023 to 2027 have been prepared and published by the counties. CIDPs combine economic, spatial and sector plans and inform county budgets over five years.

They define priorities and provide flagship investment projects. The CIDPs therefore offer an opportunity for counties to organise their economic development efforts.

Development and implementation of economic plans is constrained by resource limitations, both funding and institutional capacity. Counties facing resource challenges tend to deprioritise economic development initiatives that would enhance competitiveness to cover recurrent expenditure and basic service-delivery. Different models for financing urban investments are needed, alongside the current funding from national government, own source revenue and development partners. Institutional development and capacity strengthening are also needed at municipality level to plan better for urbanisation.

34

SUED has supported the development of urban economic plans (UEPs) to promote wellplanned, market-driven economic growth in the municipalities.The plans serve as an advisory guide for the municipalities on developing in a planned and coordinated manner and provide a longer-term roadmap for building resilient economies. The UEPs offer an integrated multidisciplinary 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.

The aim is to support inclusive and sustainable economic growth in the municipalities.

In addition to the development of the UEP, Kisii Municipality utilised the recommendations from the UEP and directly engaged a private firm to develop the Integrated Strategic Urban Development Plan (ISUDP) to guide its growth and development in the next 20 years (2022 - 2042). The ISUDP will provide a basis for public and private investments, coordinate sector programmes and projects, and guide land development and management. The plan will position Kisii Municipality as a preferred investment destination, propelling it towards the achievement of city status.

In its current CIDP (2023-2027), Elgeyo Marakwet County provides the sub-sector programmes and flagship projects to be implemented by national and county government, and development partners. The SUED-supported value chain projects in Irish and sweet potato processing, and groundnuts processing (sports nutrition bars) are included as flagship projects. This provides a strong signal to potential investors that the county has prioritised these sectors and will facilitate investment in the value chains.

Value chains and their Role in Regional Economic Clusters Rural-urban linkages have been enhanced by the emergence of intermediary towns and cities. According to Africa’s Urbanisation Dynamics 2022 report, the closest city for 68% of the rural population in Africa has fewer than 50,000 inhabitants.10 Urbanisation benefits the surrounding rural population through facilitating access to services, infrastructure, and markets.

SUED | Newsletter 2022/2023

Agricultural value chains link rural and urban areas, with urban centres providing a market for rural producers, as well as access to relevant services; and rural areas providing raw material for agro-industries. Counties should identify their competitive advantage and focus on developing those value chains, including increasing productive capacity and market promotion.

Intermediary cities and towns that may be unable to attract multiple sizeable industries in different sectors can benefit from specialisation to generate economies of scale and increase productivity, for example, through encouraging innovation and enhancing value addition in a sector or value chain.11 This also encourages the development of clusters – geographic concentration of businesses in related activities that creates synergies among them and maximises agglomeration economies, which are the benefits that result from the proximity.

Applying a regional outlook, for example, a cluster of counties collaborating based on their competitive advantage, can help to promote regional economic development through leveraging economies of scale and development of regional value chains. Counties in Kenya have organised themselves into 6 regional blocs; Frontier Counties Development Council; North Rift Economic Bloc; Lake Region Economic Bloc; Jumuia ya Kaunti za Pwani; South Eastern Kenya Economic Bloc; and Mt. Kenya and Aberdares Region Economic Bloc.

SUED is supporting investment in agricultural value chain projects in Kisii and Iten municipalities that have the potential to promote regional value chain development and expand economic growth across counties.

The Irish and sweet potato processing plant will be located in Iten Municipality and the operator will source raw materials from the local Irish and sweet potato farmers based in Elgeyo Marakwet County, as well as the wider North Rift Economic Bloc counties including Baringo, Nandi and Trans Nzoia, and counties in Western Kenya. Select Fresh Limited will initially contract approximately 2,000 Irish and sweet potato farmers. Additional farmers will be onboarded over time, with the number expected to grow to more than 5,000 farmers.

35

The avocado oil processing facility is in Kisii Municipality and is sourcing avocados from farmers in Kisii County and neighbouring counties in the Lake Region, Rift Valley and Western Kenya including Nakuru, Migori, Homa Bay, Siaya, Kisumu, Nandi, Kericho, Bomet, Vihiga and Kakamega. Avofresh Limited is also setting up aggregation centres around Kisii County and in the neighbouring locations.

Through this project, approximately 1,000 farmers will benefit from a ready market for their products, with this number expected to increase to 3,000 in the medium to long term.

catalysed the investment in the municipalities through persuading the investors to invest in Iten and Kisii by demonstrating the projects’ viability, accelerating the investment process, and contributing to de-risking the investments.

The sustainability of the projects beyond SUED’s technical support and seed funding is enhanced by the following factors: •

Sustainability beyond Technical Assistance and Initial Seed Funding SUED is providing technical assistance and seed funding to incentivise potential investors to invest in the selected value chain and infrastructure projects in the SUED supported municipalities. The investor outreach exercises have revealed that the provision of seed funding can help to attract investors and catalyse investment. SUED is also handholding and advising potential investors to help realise the investments, including providing transaction and fundraising support for the projects and this has made SUED supported Municipalities and attractive destination for Investors . The avocado oil and Irish and sweet potato projects both received seed funding from the programme through the British High Commission.

A seed funding grant of £469,805 was provided for the avocado oil project to assist in building the logistics framework to maximise fruit collection from Kisii and nearby surrounding counties. The funding was used to purchase a fleet of trucks for collection of avocados and to facilitate the setup of simple aggregation/ collection sites across the target counties.

•

•

The seed funding support is demand driven and the investors provided justification for the need and use of the funds. They presented a business case for the seed funding, for example, to enhance the supply chain and logistics or to increase farmers’ yields to provide more raw materials. The applications were reviewed and approved by the British High Commission Investment Committee and due diligence conducted to assess technical and financial capacity, legal and reputational risks.

Avofresh Processors Limited and Select Fresh Produce Kenya Limited are private investors that are already in operation in other locations in the country and, therefore, have the technical knowledge and experience on the value chains. The companies were looking to expand their operations and the seed funding and technical support helped to catalyse their investment in Kisii and Iten municipalities and support their growth.

The seed funding is provided for investments that are commercially robust and strategically targeted to incentivise the private sector to invest. To determine the viability of the projects, pre-feasibility studies are conducted to gain a deeper understanding of the operating models, business environment, social and environmental impact, and project risks and mitigations. In addition, the projects have received buy-in and political goodwill from the counties, suggesting they will facilitate the investments and support their sustainability.

For the Irish and sweet potato project, seed funding of £735,000 was approved. The seed funding is provided for procuring equipment for a tissue culture lab that seeks to increase farmer yields, as well as a curing facility which will increase the shelf life of farm produce by at least one year. In both cases, the seed fund grant and accompanying technical assistance SUED | Newsletter 2022/2023

36

SUED INVESTMENT LAUNCH IN KISII COUNTY

The 70-tonne avocado oil extraction project in Kisii is a partnership between the UK Government and AvoFresh Processors Limited and has been implemented by the UK’s Sustainable Urban Economic Development Programme (SUED) in collaboration with Kisii County. and Kisii Municipality. The newly commissioned factory will utilise avocado sourced locally from farmers to produce avocado oil mainly for the export market. The facility has a capacity to process up to 70 tonnes of avocados daily which have to ripen for a period of 7-10 days before the extraction of the oil.

The UK Government has played a key role in catalysing this investment by providing expert advice and £ 469,805 (Ksh79 million) in seed fund support. The seed fund was utilised in building the logistical framework to maximise fruit collection in Kisii through the purchase of nine (9) trucks, forklift and semi-trailer that are used for the transportation of avocado across the county to the facility. Avofresh has invested £ 2.10 million (Ksh355 million) into the extraction facility.

The UK Government has played a key role in catalysing this investment by providing expert advice and £ 469,805 (Ksh79 million) in seed fund support.

SUED | Newsletter 2022/2023

37

The Deputy British High Commissioner- Mr. Julius Court and the Kisii County leadership learn how

H.E Jonathan Bii addresses the media after a session with the SUED and BHC team

4.SUCCESS STORIES SUED | Newsletter 2022/2023

38

SUCCESS STORY 1

Broadening the Vision to Diversify the Economy

A local farmer assesses his mango crop on his farm

With support from the UK Government through the Sustainable Urban Economic Development Programme (SUED), Malindi Municipality is among the122 Municipalities in Kenya that now have an Urban Economic Plan (UEP). The UEP outlines within it a climate -resilient economic vision for the Municipality. The vision is two-pronged, 1- a tourism action plan that is aimed at developing a series of interventions that can advance the tourism offer within Malindi and 2- a diversification plan that considers opportunities within other key sectors such as agriculture.

the fruit processing sector in the Municipality.

There was need to see how the Municipality could work with the private sector to promote value addition and support the diversification of agricultural processing through this value chain. Historically, Malindi has had a large tourism sector that has driven its economic advancement. However, with COVID-19 increasing the challenges that the sector faced,

As a way to advance the vision, SUED worked closely with the Municipality to identify a viable sector by prioritising and refining the projects identified in the UEP. One of the most promising sectors identified was SUED | Newsletter 2022/2023

39

there was need to diversify the local economy through agriculture to increase resilience.

Fruit processing not only in Malindi but Kenya and the wider East Africa region presents an attractive opportunity due to the large local and regional demand for fruit pulp and other processing products. With a demand in Kenya and Africa for processed fruit estimated to be about 425,000 tonnes and 2.2 million tonnes respectively.

Despite the significant market size, the fruit processing value chain has faced numerous challenges such as limited access to inputs and technical assistance to improve production as well as limited access to market leading to reliance on brokers. This in turn has led to processor facilities to experience underutilization due to the seasonality and perishability of fruits. To address the challenges in the sector to drive success for fruit processing, SUED identified two key challenges: a) low -production yields due to small and medium sale farmers who do not have adequate inputs to increase the crop yield and b) high-post harvest loss due to the lack of proper storing facilities.

private sector player to set up a processing plant in Malindi which will accelerate job creation and climate resilience. The private investor is set to ground break at the proposed facility site early 2023 with anticipated completion in 9-12 months.

Once the facility is completed the private investor will be able to directly impact more than 4,000 farmers and work with them to tailor-make agro-environmental programmes on land and crop management to enable them to become more climate resilient in their farming.

In addition, the various challenges across the key stages of the value chain starting at fruit production will be collaboratively addressed ensuring the optimal utilisation of the facility by farmers. With SUED support, Malindi will have strengthened its economic diversification approach and economically empower farmers.

To assist in addressing these challenges, SUED engaged a private sector player in Malindi to help them set up and operate a new climate-friendly fruit drying facility. SUED is working with the fruit processor to reach more than 4,000 small holder farmers to link them with high-value markets and improve their productivity. With the programme’s support the private sector player will develop a 1,450 square metres climate friendly fruit drying facility in Malindi to produce dried mangoes, pineapples, and coconut primarily for export to Europe and Middle East. The facility will utilise solar dryers for 30% of its production and power. Once fully operated the plant will produce 760MT per year and will source 10,000 MT of fruit from farmers within Malindi. SUED’s work in the Municipality has demonstrated that while fruit processing is attractive, local investors need support to make the opportunity viable. As a result of the detailed outreach process and engagement with various private sector players, SUED is providing a seed fund investment of close to £500,000 to help the SUED | Newsletter 2022/2023

40

SUCCESS STORY 2

Working with Municipalities to Attract Investments into Climate Resilient Value Chain Projects

H.E. Wisley Rotich, Governor Elgeyo Marakwet, British High Commissioner, H.E. Jane Marriott and CEO of Select Fresh Eunice Mutua visit a potato farm in Iten Municipality

In Sub-Saharan Africa, potato farming is gaining traction as an important food crop. Its high yields, relatively shorter growth cycle (90120 days) compared to other food crops and nutritional value makes it a major staple food in developing countries such as Kenya. In Kenya, the potato crop is the second most important food crop after maize and is majorly grown by small holder farmers across the country.

When compared to maize, it is less affected by climate change which is a high factor in mitigating against food loss to combat hunger in the country and provides a way in which

SUED | Newsletter 2022/2023

households can raise income. In majority of the homesteads that it is grown, it plays a dual role both as a cash and food crop.

Despite its huge economic potential on the famers, the potato marketing value chain has been largely ineffective with farmers getting fewer returns when compared to other agricultural value chains. Such as maize Potato famers face a number of challenges that deter them from increasing their income such as: a) the extension of potato bags by middlemen which they use to fleece farmers

41

when purchasing potatoes, b) a lack of storage facilities making them sell the potatoes at low prices at harvest while consumers pay double or triple at market during low season. With the potato yielding four times as much on the same land as other grains, farmers to enable them to reach their earning potential.

To mitigate the aforementioned challenges, the UK Government through its Sustainable Urban Economic Development Programme (SUED) together with Elgeyo Marakwet County and Iten Municipality, and in partnership with Select Fresh Produce Kenya Limited (Select Fresh) is establishing an Irish and sweet potato processing plant in Iten Municipality that will serve thousands of small holder farmers in the Rift Valley region. The plant will process ready cut fresh and frozen Irish potato and sweet potato fries (chips) for local and export markets.

The plant will enable the small holder farmers to meet the increasing demand for potatoes in urban centers and to contribute to greater food security in the county due to potatoes not being susceptible to international commodity market fluctuations. The programme together with the County, Municipality and Select fresh is addressing the key drivers of potato production i.e., climate change, potato production systems, productivity and postharvest handling and storage losses.

To make the economic diversification of the municipality climate resilient, the programme together with the municipality are promoting the need to look into food crops with short growth cycles such as the potato to enable farmers to take advantage of the changing rainfall patterns. By having a private investor located within the municipality to provide a ready market, farmers will be encouraged to integrate potato farming into their grain farming. By encouraging production systems that promote small scale mixed farming, the farmers will build their adaptability to a wide variety of climate change trends.

To support the farmers to ensure that they have a favourable variety that can be exported, the municipality and the operator will be providing agricultural extension services that provide educational information on the varieties that match international standards as well as provide seedlings. The adoption of these varieties will enable them to replace old lines based on yields4, reduce the susceptibility to disease as well as align with the market preferences.

To mitigate against the widespread inconsistencies in the County, the Municipality and agricultural department will work with farmers to increase their potato growth yield by helping them assess the quality of the seed utilised to ensure the quality of the harvest is assured. In doing so, the potato processing plant will have sustainable operations all year round by processing both Irish and sweet potatoes which have different harvest times.

Working with the farmers, the County and Municipality will be integrating best practices in postharvest handling practices at the farm level that include sorting grading, weighting, and packaging. By prioritising the sorting activity at farm level, farmers will be able to fetch better (farm gate) prices when they bring it to the SUED supported potato processing plant. This will help the farmers quickly sell the potatoes to Select Fresh who will put in place storage facilities that will avoid spoilage. By selling to Select Fresh during harvest season, farmers will be able to sell at a standard rate without running a loss.

SUED | Newsletter 2022/2023

42

first year of operation with the projection to reach 10,000 within five years. Economic vision can be implemented to ensure that critical infrastructure and value chain projects are prioritised in a way that strengthens subnational capacity to contribute to the national economy.

The launch of the project was done by the British High Commissioner to Kenya Jane Marriott and Elgeyo Marakwet County Governor H.E. Wisley Rotich in January 2023. The 60,000-tonne processing plant for Irish and sweet potatoes will see the improvement of the farm produce for local and export markets.

By having in place, the various interventions, the plant will help in reducing post-harvest losses and provide a ready market to off take the potatoes, guaranteeing steady farm prices for over 10,000 small holder potato farmers in Elgeyo Marakwet and the North Rift Valley region. In addition, to increasing farm yields, the project will also enhance the existing farmer cooperative societies by providing the necessary training and capacity building to farmers on better farming methods.

Speaking at the launch of the project in Iten, the Chief Executive Officer (CEO) for Select Fresh Ms. Eunice Mutua said “We are happy to bring to Iten a Potato Processing Plant that has been a result of the collaboration between the UK Government and the Elgeyo Marakwet County Government. At Select Fresh our intent is work closely with small holder farmers to ensure that what they produce meets international standards for export. When we complete the potato processing plant and start exporting to Europe, we will put Kenya on the map as the third country in Africa that exports potatoes. We are keen to ensure that the methods that we use are environmentally friendly and promote climate resilience.

The UK Government played a key role in catalysing this investment by providing expert advice and £735,000(100 million Kes) in seed fund support. This complements Select Fresh’s £15.4 million (~2.4 billion Kes) investment into the project. In the first year of operation the plant will produce 30,000 tonnes of Irish potatoes and 30,000 tonnes of sweet potatoes into fresh and frozen fries in the first year with production increasing to 50,000 tonnes each in five years. By having the facility in Elgeyo Marakwet, 5,000 jobs will be created in the SUED | Newsletter 2022/2023

43

SUCCESS STORY 3

Creating Climate Smart Economic Opportunities

Ground breaking at the Milly Fruits Facility in Malindi Municipality

The UK Government through the Sustainable Urban Economic Development Programme in collaboration with Malindi Municipality and Kilifi County launched a climate friendly fruit drying value chain project. The facility. The facility by Milly Fruits Processing Ltd (Milly Fruits) will provide reliable incomes to smallholder farmers as well direct and indirect economic opportunities in Kilifi County and wider region. SUED’s partnership with EKL is aimed at working with the company to integrate more climate-smart technology at the facility to expand its network reach to farmers. Through SUED’s support, Milly Fruits has broken ground on its new site for its climate friendly fruit drying facility that will be powered primarily by renewable

SUED | Newsletter 2022/2023

energy for production. The new facility will be completed within the next 9-12 months. Milly fruits is investing 251 million Kenya shillings with the UK Government providing a seed fund

The Kilifi County Government Team,the British High Commission Team, the SUED Team and Kenyan National Government representatives at the groundbreaking ceremony 44

The Kilifi Governor and the British High Commissioner discuss the site plans for the fruit drying facility

of 81.2 million Kenya shillings.

SUED’s support will enable Milly Fruits to work with more than 4,000 small holder farmers within the municipality to produce 760MT of dried fruits that will be exported to Middle East and Europe. Further, Milly fruits will now have the capability to tailor agro-environmental programmes on land and crop management to equip farmers with coping capabilities due to SUED | Newsletter 2022/2023

increased climate variability such as changes in rainfall patterns, flooding, and drought.

By having the expansion of the in Malindi, the UK Government is providing stability for farmers by reducing middlemen who would exploit them. The UK Government’s support through SUED is ensuring that post-harvest losses will be reduced due to improved handling and traceability of the produce. This will in turn 45

improve farmer income and efficiency of production and incentivise farmers to invest more in climate resilient agro produce. In three years, the facility will have purchased 10,000 MT of fruits resulting in the disbursement of £3.65 million to farmers for their produce and in wages for workers.

Speaking about creating a climate smart economic opportunity in Malindi, the British High Commissioner said “Our strategic partnership with Kenya entails partnerships around climate resilient urban development, jobs creation, trade facilitation, education, health and environment and climate change. The use of renewable energy by the two investments and the economic opportunities it will create is a fact that the threat of climate change, economic hurdles and a rapidly urbanising society are everyday realities.”

The Kilifi Governor addressed the public during the launch ceremony for the drying facility in Malindi

SUED | Newsletter 2022/2023

46

The Elgeyo Marakwet Governor and the British High Commissioner Plough a potato field in preparation for planting season in Iten Municipality.

SUED | Newsletter 2022/2023

47

SUED | Newsletter 2022/2023

48