JBICI Research Paper No. 36-3

July 2008

ISSN 1347-5703

4-1, Ohtemachi 1-chome, Chiyoda-ku, Tokyo 100-8144, Japan

Tel: 03-5218-9720 （JBIC Institute）Internet: http://www.jbic.go.jp/ Recycled paper

JBICI R

esearch Paper No. 36-3

JBIC InstituteJapan Bank for International Cooperation

July 2008

Aid Effectiveness to Infrastructure:A Comparative Study of East Asia and

Sub-Saharan Africa

Case Studies of Sub-Saharan Africa

Aid Effectiveness to Infrastructure: A

Com

parative Study of East Asia and Sub-Saharan A

frica, Case Studies of Sub-Saharan A

frica

Francis M. MwegaUniversity of Nairobi

Aid Effectiveness to Infrastructure:a Comparative Study of East Asia And

Sub-saharan Africa

Kenya Case Study

i

i

Table of CONTENTS

1. OVERVIEW OF THE STUDY …………………………………………………………… 11.1 Background …………………………………………………………………………… 11.2 Objectives of the overall study ……………………………………………………… 11.3 Evolution and composition of foreign aid to Kenya ……………………………… 21.4 Foreign aid and economic growth in Kenya ……………………………………… 31.5 Choice and justification of Kenya project cases ………………………………… 5

2. THE BURA IRRIGATION AND SETTLEMENT SCHEME (BISS) ……………… 82.1 Background …………………………………………………………………………… 82.2 Conceptual and economic problems ……………………………………………… 102.3 Technical problems …………………………………………………………………… 112.4 Institutional and management problems ………………………………………… 132.5 Efforts at rehabilitating BISS ……………………………………………………… 14

3. COMPARISON OF BISS WITH THE TANA RIVER DELTA IRRIGATION PROJECT (TDIP) ………………………………………………………………………… 183.1 Summary of the JBIC (2001) evaluation of TDIP ……………………………… 183.2 Lessons from TDIP …………………………………………………………………… 233.3 Some findings from the fieldwork on TDIP ……………………………………… 27

4. THE NAIROBI WATER SUPPLY PROJECT (NWSP) ……………………………… 294.1 Summary of the JBIC (2002) evaluation of NWSP ……………………………… 294.2 Situation analysis of the NWSP …………………………………………………… 324.3 Some findings from the fieldwork on NWSP ……………………………………… 38

5. COMPARISON OF NWSP WITH THE NYERI TOWN WATER SUPPLY SYSTEM …………………………………………………………………………………… 40

6. FINDINGS AND RECOMMENDATIONS …………………………………………… 456.1 Sustainability of the infrastructural services …………………………………… 456.2 Institutional spillovers and explanatory factors ………………………………… 496.3 The role of the aid relationship in generating sustainability and spillovers … 52

RREFERENCES ……………………………………………………………………………… 54APPENDIX …………………………………………………………………………………… 57

ii iii

List of Tables and Box

Tables

Table 4.1: Water tariff rates in Nairobi …………………………………………………… 34Table A1.1: Japanese supported projects in Kenya ……………………………………… 57Table A2.1: Performance of Kenya’s major irrigation schemes, 1985/86 - 2004/05* … 58

Box

Box 2.1: From uncertainty to great expectations in Bura scheme …………………… 16

ii iii

Acronyms and Abbreviations

AfDB African Development Bank

AWSP Athi Water Services Board

BADEA Arab Bank for Economic Development in Africa

BISS Bura Irrigation and Settlement Scheme

EDF European Development Fund

EIB European Investment Bank

EIRR Economic Internal Rate of Return

FINIDA Finnish International Development Agency

FIRR Financial Internal Rate of Return

GDP Gross Domestic Product

GTZ Germany Agency for Technical Cooperation/ Deutsche Gesellschaft für Technische Zusammenarbeit

JBIC Japanese Bank for International Cooperation

JICA Japan International Cooperation Agency

KfW German Bank / Kreditanstalt für Wiederaufbau

NCC Nairobi City Council

NIB National Irrigation Board

NWSC Nairobi Water and Sewerage Company

NWSP Nairobi Water Supply Project

NYEWASCO Nyeri Water and Sewerage Company

ODA Overseas Development Assistance

OECD-DAC Organization for Economic Cooperation and Development – Development Assistance Committee

OECF Overseas Economic Cooperation Fund

OFID The OPEC Fund for International Development

OPEC Organization of Petroleum Exporting Countries

SIDA Swedish International Development Agency

TARDA Tana and Athi Rivers Development Authority

TDIP Tana River Delta Irrigation Project

TDIPO Tana Delta Irrigation Project Office

UK United Kingdom

UFW Unaccounted-for-water

WSD Water and Sewerage Department

WSRB Water Services Regulatory Board

1

1

1. OVERVIEW OF THE STUDY1

1.1 Background

In 1975, the average Gross Domestic Product (GDP) per capita gap between Africa

and East Asia and Pacific was $3942. Almost thirty years later in 2004, the GDP

per capita gap had increased almost ten times to $3,889. Similarly, in 1977, the life

expectancy gap at birth between the two regions was 16 years; in 2004, the gap was

24 years. What contributed to the difference in development trajectories? There have

been many attempts to answer this puzzle. The conclusions that these literatures

draw, however, vary widely indicating lack of consensus. Some studies point to

geographical factors (Sachs and Warner 1997), demographic factors (Kremer 1993),

while others focus on the differences in governance and policies (Burnside and Dollar

1997; Sachs and Warner 1997; World Bank 1998), ethnic fractionalization (Easterly

and Levine 1997) and institutional factors (Sachs and Warner 1997).

In the period between 1975 and 2003, Africa received $394 billion of ODA while

Asia (Far East and Oceania) received $228 billion (OECD-DAC 2005)3. It is natural for

us to ask, what happened in between those years? What has been the role of aid and

aid effectiveness in explaining the differences between Africa and East Asia in terms

of economic growth and poverty reduction? To borrow the words of the very people

who have contributed much to this debate, “while producing interesting results and

raising fascinating questions, cross-sectional macroeconomic studies cannot be the

last word on the topic of aid effectiveness” (Dollar and Levine 2005). In other words,

we know a whole lot about correlations and possible causalities between patterns

of aid allocations and changes in development indicators, based on macroeconomic

analyses. What is missing in these studies, however, is a careful and detailed analysis

of the differences in the transformation mechanism of foreign aid into growth in Asia

and in Africa. Without this careful analysis, the way out of “Africa’s Growth Tragedy”

(Easterly and Levine 1997) will remain unimaginable.

1.2 Objectives of the overall study

The wider study undertakes a comparative analysis of aid projects focusing on

ways in which these projects may have contributed to transforming growth processes,

1 Sections 1.1 and 1.2 draw heavily on the study’s Terms of Reference (February 12, 2007, version).2 In this paper, unless otherwise noted, Africa refers to Sub-Saharan Africa and Asia refers to East

Asia.3 Kenya received about US$18.7 billion during this period.

2 3

beyond the economic impacts of planned physical outputs. The study is interested in

impacts related to ideas influencing policy, transfer of knowledge and lessons learned,

organizational capacity to plan, implement and operate, and human resources

development in general. The main hypothesis is that the Asia-Africa contrast, outlined

above, and the role of foreign aid, to a large extent can be explained by differences

in the institutional linkages between aid projects and wider systems at the national

level.

It has been argued that infrastructure aid projects in Asia have contributed to

institutional reform, capacity building and human capital development of the recipient

countries. For example, reflecting on the infrastructure development projects of Japan

in Asia, Arakawa and Wakabayashi (2006) states that “The experiences at the project

level have led to capacity building and the establishment of comprehensive country

systems at the national level.” Because this said contribution of infrastructure aid to

institutions building - which may be one of the factors for realizing project impact - is

often not recognized and therefore less documented, it is the main focus of the study.

Thus, in the wider study, processes of institutional changes associated with specific

infrastructure projects and relationships between those institutional changes to

the overall impact of the infrastructure projects are examined in both East Asian

countries and African countries. Then comparing the differences and similarities of

the above processes draws out policy implications for aid in Africa.

1.3 Evolution and composition of foreign aid to Kenya

Various studies have analyzed the pattern and evolution of foreign aid in Kenya

(Mwega 2003). The country experienced a dramatic build-up in nominal aid flows

during the 1970s and 1980s, with a slackening of donor support in the 1990s. Gross

ODA inflows increased from an annual average of $582 million in the 1970s to $673

million in the 1980s and to $857 million in the 1990s. During this period, foreign

aid averaged about 9% of GDP, accounting for about 20% of the annual government

budget and financing slightly over 80% of development expenditures (Njeru 2004).

Donor support however reached a peak of $1.6 billion in 1990, generally declining

thereafter as the government reneged on its commitment to donors, leading to aid

freezes in 1992, 1997 and 2000. At its peak, net ODA inflows were equivalent to about

45% of the government budget, with Kenya’s share of total development aid in Sub-

Saharan Africa remaining remarkably stable at 5.2%4. Kenya also benefited from the

4 Following the December 2002 elections, government revenues have increased dramatically so that ODA currently (2007) accounts for less that 5% of the total government budget.

2 3

fact that the terms of its ODA softened over the period. The share of grants increased,

rising from 47% in the 1970s to 51% in the 1980s and to more than 69% in the 1990s.

ODA takes many forms. Kenya, for example, received approximately three-quarters

of its total aid from bilateral donors, with no distinct trend toward greater reliance on

either multilateral or bilateral aid. The share of multilateral aid increased moderately

in the 1980s, primarily due to the disbursement of the World Bank adjustment loans,

but the bilateral share rose again in the 1990s with the decline in new adjustment

lending after 1991. Bilateral aid has been mainly in the form of grants (72% of the

total), with the share of grants increasing in recent years, whereas multilateral aid

has mainly been in the form of loans (86%). The principal source of multilateral loans

has been the World Bank group, accounting for almost 80 percent of total loans in the

study period.

A large proportion of bilateral grant aid (58 percent over the 1970s) was given for

technical assistance. During the 1980s, the share of technical assistance in total grant

assistance began to decline, to 39% in the 1980s and 36% in the 1990s, as bilateral

donors shifted an increasing proportion of their project assistance to grant terms.

However, the absolute amounts expended for technical assistance have remained high,

averaging $140 million per year in the 1980s and $225 million per year in the 1990s.

Much of this is money that the country does not receive, since it is paid directly to the

resident advisors, or to education and training institutions outside of Kenya, by the

aid-giving country or international agency.

Bilateral donors have also provided debt forgiveness of prior ODA debt of $700

million between 1986 and 1992 and $26 million in 1997. The principal sources of ODA

debt relief were the United States, Germany, Canada, the Netherlands and the United

Kingdom (UK). The Japanese government has not provided debt forgiveness, but has

offset debt repayments with supplemental grant aid.

1.4 Foreign aid and economic growth in Kenya

There are various ways to analyze the linkage between foreign aid and economic

growth. The most common approach is through cross-country regressions. A major

but controversial finding of this literature is that foreign aid can only raise economic

growth in a good policy environment (Burnside and Dollar 1997, 2000; World Bank

1998). A related finding is that foreign aid cannot ‘buy’ good policies through ex

ante conditionality. This is because economic reforms induced by foreign aid are

‘time-inconsistent’ and therefore lack credibility. This is not changed by repeated

donor-recipient interactions, since the threat to punish those who reverse policies by

4 5

denying them future lending is itself not credible, due to the pressure on donor staff to

continue lending.

These empirical findings have had a major influence on the debate on foreign aid,

for if ex ante conditionality does not work, donors then have two options: (i) redesign

foreign aid contracts to improve the policies pursued by recipients; or (ii) switch to ex

post conditionality or selectivity. Donors are increasingly moving towards the second

option, while aid recipients are wary about this shift in the foreign aid policy.

Another way of analyzing the relationship between foreign aid and economic growth

is to utilize the two-gap model. This model is derived from the national accounts

identity:

I-S= M-X,

where I is investment, S savings, M imports and X exports. While these two gaps

are equal ex post, they may differ ex ante, as the expected savings gap (I-S) deviates

from the expected foreign exchange gap (M-X). In the absence of private financing,

donors fill the binding gap with foreign aid, to achieve a target growth rate, with a

transmission mechanism from aid to investment to growth. The role of foreign aid is

therefore to fill the smaller of these gaps, hence supplementing domestic savings or

foreign exchange earnings from exports depending on whether investment or imports

are the binding constraints to economic growth, respectively.

One simple way to assess whether it is the foreign exchange or savings gap which is

the binding constraint to economic growth in Kenya since the 1980s is to analyze the

relationship between (i) foreign aid and imports; and (ii) foreign aid and investment

(see Easterly 2001). The foreign exchange (savings) gap is binding on growth if the

first (second) relationship is positive and statistically stronger. Ideally, a 1% of AID/

GDP should be reflected in a 1% increase in imports (investment) GDP ratio if the

foreign exchange (savings) gap is the binding constraint. These variables could also

be expected to rise by even more than one for one because of increased savings (export

earnings) by aid recipients. The trade gap is expected to be less influential following

the economic liberalization of the 1990s with foreign exchange shortages in the

country becoming less likely. Kenya has witnessed a substantial liberalization of its

foreign exchange market since the early 1990s.

An analysis by Mwega (2004) found the relationship between ODA and investment

to be positive and much stronger than that between ODA and imports, although the

coefficient was much smaller than one (0.374). From these results, it was quite clear

4 5

that it is the savings gap that has been the binding constraint to growth in Kenya

since the 1980s.

The study also found the relationship between foreign aid and public gross fixed

capital formation highly significant since the 1980s (t-value=3.313), with the decline

in ODA accompanied by a drastic decline in public investment during the study

period. Njeru (2004) also found a strong statistical relationship between ODA and

government development expenditures, with a shilling increase in ODA leading to 57

cents increase in government development spending over 1970-99. ODA was therefore

almost equally shared between recurrent and development expenditures, even though

all ODA in Kenya is recorded on the development expenditure vote. This is consistent

with the results above that only a fraction of ODA is spent on investment. The study

by Mwega (2004) also showed a positive but non-significant relationship between

foreign aid and private gross fixed capital formation since the 1980s as both also

generally declined during the study period.

1.5 Choice and justification of Kenya project cases

We have selected two projects for detailed study. These major projects are:

1. The Bura Irrigation and Settlement Scheme (BISS); and

2. The Nairobi Water Supply Project (NWSP).

The two projects satisfy the following criteria set out in the study’s Terms of

Reference.

Each country study will include one case with funding from Japan. Other donors •

should preferably fund the other case, although for some countries there can be

valid reasons for selecting two Japanese-funded projects.

The World Bank and the European Development Bank (EDF) mainly funded BISS.

Bilateral finance in the form of grants and soft loans was also provided by Britain,

Finland, Holland and Japan (Howells 1985). The main actor was however the World

Bank, with the other donors taking little part in the monitoring of the project. On the

other hand, NWSP was co-financed by Overseas Economic Cooperation Fund (OECF)

(former name of the present Japan Bank for International Cooperation (JBIC)), the

World Bank, the African Development Bank (AfDB) and the European Investment

Bank (EIB). While the project was commissioned in 1994, the tunnels started to be

used in 1992.

6 7

The selected projects should be large infrastructure projects, considered as having •

national significance at the time of planning or even in retrospect. Large projects

means “challenging” and “pioneering” projects (i.e., projects that were beyond

the capacity of the recipient countries at the time of implementation). Integrated

programmes consisting of many smaller investments may be selected.

BISS was a large project, projected to cost about KSh 766 million (about US$ 98.4

million) in 1977, equivalent to Ksh 148,700 (about US$ 18,000) per each family settled

(Ruigu 1988). There were however major delays from the onset of the implementation

of the scheme in practically all administrative areas as well as major revisions on

scheme design. As a result, costs soared, rising to about US$ 121.7 million at 2000

prices (Inocencio et al. 2005)5. According to Ruigu, the World Bank pumping and

gravitational projects cost US$ 145 and US$ 31, respectively, compared to over

US$1,500 in Bura, making it one of the most capital-intensive schemes in the world.

As seen in Table A1.1 in the appendix, NWSP is one of Japan’s largest projects in

Kenya’s social sector (Japanese Yen 5.342 billion, about US$ 38.321 million)6.

The selected projects should be economic infrastructures such as transport (road, •

ports, etc), energy/power, urban water and sewerage, telecommunications, or

irrigation.

The two selected projects cover irrigation, floods control and settlement; as well as

urban water supply, respectively.

Each country study will have to cover 2 sectors, and as a minimum select one project •

for in-depth study in each sector. This will be complemented with background

information on the sectors selected, allowing a comparison of the project case with a

general pattern of the sector possibly with examples of reference projects.

Our reference projects are the Tana River Delta Irrigation Project (TDIP); and the

Nyeri Town Water Supply System, respectively.

The Japanese Government has devoted one of the large amounts of foreign aid

resources in Kenya to the TDIP and related investment (Japanese Yen 6,619 billion,).

5 According to the World Bank Statement of Loans for February 2007, its component (approved in 1977) was US$ 34.00 million, of which US$ 28.85 million was disbursed and US$ 5.05 million was cancelled. The loan has been fully repaid by the government.

6 Based on an average exchange rate of Yen 137.96 per US dollar in 1989. Earlier TOR (e.g. the November 1, 2006, draft) explicitly required analysis of one economic infrastructure project and another project on basic service delivery such as water and education.

6 7

The Nyeri Town Water Supply System, mainly supported and funded by German

development agencies (Germany Agency for Technical Cooperation / Deutsche

Gesellschaft für Technische Zusammenarbeit(GTZ) - capacity building and German

Bank/ Kreditanstalt für Wiederaufbau (KfW) - investment), is considered an example

of successful water commercialization in the country. Commercialization has mainly

involved formation of water companies with private-sector-like management, allowing

them sufficient autonomy in decision making while ensuring that asset ownership

remains within the public domain. Water supply and sanitation has substantially

improved in Nyeri town, with mainly local funding arising from a systematic

expansion of the revenue base. The approach has been used as a model for the country

as a whole. The Nyeri case illustrates how successful and national institutions are

created to include greater private sector participation and to ensure their financial

involvement in urban service provision (RTI International, 2005)

To ensure that institutional effects can be identified, only projects completed a •

minimum of 5 years back will be selected.

The two main selected projects were completed in the late 1970s and the late

1990s, respectively.

8 9

2. THE BURA IRRIGATION AND SETTLEMENT SCHEME (BISS)

2.1 Background7

Many irrigation schemes have been initiated along the Tana River (the longest and

biggest river in Kenya). Beside the TDIP (which is discussed below), Tana River had

two major irrigation projects (Hola and Bura) all of which failed. As seen in Table A2.1

in the Appendix, both irrigation schemes were non-operational by the mid-1980s and

late-1990s, respectively8. The schemes were badly mismanaged, eventually resulting

in collapse. The BISS, at the insistence of the World Bank, had relied on pumping

water down large irrigation trenches. According to a former employee, a wrong choice

of the pumps was made whereby components and spare parts came from different

continents. Siltation (mainly sand) either clogged or destroyed these pumps and the

dredgers were rendered useless. Hence, when the pumps broke down, the waterways

silted up; while prices for the main crop planted in the area (cotton) fell drastically

on the open international market9. By the late 1980s, BISS was an open wasteland

of invader bushes, unpalatable by animals10. The failure of the project to meet

expectations caused the Kenya Government to shy away from similar schemes. TDIP

(discussed below) was once considered for settlement possibilities, but now proceeded

on the basis of commercial estates with a few outgrowers. This type of development is

unlikely to have the same impact on unemployment and landlessness as settlement,

although it is more likely to produce an economic return. There were also plans to

run the semi-completed part of the BISS as an estate in an attempt to reduce the

operating subsidy.

7 Some information in this sub-section is based on Howells (1985) and Adams (1990). 8 In the 1980s, irrigation activities were mainly concentrated in seven major schemes. These are

(i) Mwea, (ii) Ahero, (iii) West Kano, (iv) Bunyala, (v) Tana, (vi) Bura, and (vii) Perkerra. Mwea is the biggest scheme, which produces more than three-quarters of the rice consumed in the country.

9 According to the former employee, other acts of mismanagement included undue influence of politicians in the award of contracts; dubious criteria in the selection of tenants; hiring of consultants who did not hand over reports, were there for too long and had nothing to show for it; uncontrolled and irregular recruitment of workers, some ghost; conflict of interest in the supply of inputs; the insurance arrangements were irregularly procured with the result that the expensive guest house was not properly covered and burnt without compensation; main canals without lining were filled with sand and soil after rains; and so on.

10 Former President Moi once described the Scheme as “a failure, a disgrace and the height of mismanagement” (Kenya Times, January 22, 1986). Horta (1994) called it an “an unmitigated disaster, the result of remarkably poor planning”. According to Horta, the project owners spent $55,000 for every settler on the project site, in a country where the per capita income is only $350, and yet “these settlers and their families suffer abject poverty and drought and famine…. Malnutrition and disease are rampant. The Bura Project initially planned to build 20 village health units and various health centres, but these were cancelled”.

8 9

The main objectives of the BISS were seen as settling landless people, providing

them with worthwhile employment and increasing agricultural output. Settlers were

to be selected from each of Kenya’s Provinces on a quota basis. The aim was to settle

5,200 families in 23 villages and the population was expected to ultimately reach

65,000. Infrastructure in the form of roads, treated water supplies, sewerage, schools

and clinics were to be provided to accommodate this population.

Each settler family was to be provided with a house, a 0.5 hectares vegetable plot

and 1.25 hectares of land on which they were required to grow cotton and maize.

Cotton was to be the major cash crop, with maize grown for subsistence and local

resale. Services such as land preparation, crop protection, and provision of water, seed

and fertilizer were to be provided by the scheme authorities and charges deducted

from the proceeds from the sale of cotton. Cotton was to be ginned on site and sold for

export, despite Kenya being a net importer, since its superior quality was expected to

attract a price premium. Irrigated fuel-wood plantations were included in the plan to

provide fuel for the settled population and to prevent the destruction of the riverine

forest strip (which is considered to be biologically unique).

The executing agency was the National Irrigation Board (NIB), a parastatal body

that was established in 1966 through an Act of Parliament (Cap 347). Construction

started in 1979 and the first settlers moved in 1981. However, about that time the

project began to run into financial difficulties. Inflation, devaluation, underestimations

and unforeseen expenditures led to rapidly rising costs. With a fixed aid package,

Kenya’s share of the costs rose from KSh160 million (20%) in 1977 to KSh l billion

(45%) by 1982. The government was unable to meet its obligations on many contracts

that led to substantial delays and costly claims for damages.

In 1983, a decision was made to curtail the scope of the project by about half,

reducing the number of settler families to 2,500 and the cost to KSh 1.50 billion. This

was despite the fact that irrigation and water treatment works had already been

substantially completed for the full population, the main outstanding works being

houses, schools and the fuel-wood plantations. The aid agencies were asked and

agreed to provide 100% financing for the remaining construction to ease the cash flow

problems.

As well as the severe financial problems, the project suffered from conceptual,

technical and institutional deficiencies.

10 11

2.2 Conceptual and economic problems11

i. Settlement issues

The concept of settling people from all over Kenya on a quota basis is dubious.

This is because settlers from the Kenya highlands, where the pressure on land is the

greatest, are unused to the inhospitable climate and lack resistance to the endemic

diseases such as malaria and bilharzia. Desertion and death rates amongst settlers

was therefore high and many household heads chose to leave their families at home.

The result was that the settlement objectives and the relief of pressure on the land

were not met. In addition, the settlers were unable to manage the holdings single-

handedly and production consequently suffered.

Many of the settlers consequently saw the project as providing only temporary

employment, and intended to return home if they could save enough to buy land there.

In contrast, ‘settlers’ from the local Coast Province who were more used to the climate

and had more resistance to the endemic diseases adapted well to the Scheme, and

farmed reasonably successfully.

Thus the project as a solution to landlessness and urban drift may have been

misconceived from the outset.

ii. Incentives for production

Ownership of land is an important issue in Kenya, yet settlers were given land

on one-year renewable leases. This led to a sense of insecurity and destroyed any

incentive for the tenants to develop the land or settle permanently, unlike settlers in

rain-fed settlement schemes who got freehold titles as a matter of policy. The provision

of all inputs (seed, fertilizer, and so on) by the authorities and the authoritarian

management style also led the settlers to view themselves as labourers, rather than

self-sustaining farmers. The result was that the settlers came to expect to be spoon-

fed and showed few signs of initiative.

The management position was that provision of these inputs, like the tenancy

arrangements, is necessary to retain control and to ensure that the crop calendar is

fulfilled. It is also argued that these inputs had to be provided since the settlers had no

resources of their own. In practice, inputs were not being provided on time and yields

were depressed. Yet the tenants had no recourse, since charges were automatically

11 This sub-section is mainly based on Howells (1985) and Adams (1990).

10 11

deducted from the proceeds of the sale of their cotton, which was managed by the

authorities. Co-operative arrangements might have provided a better approach to

managing inputs and sales and would have encouraged the settlers to become more

involved with the scheme.

One further major disincentive was the producer price of cotton, which was

controlled by the Cotton Board and estimated to be about 60% of a realistic price that

might exist in a free market. Low returns hardly provided much incentive for far

mers to put effort into growing cotton, and the more enterprising farmers were able

to make more money (and get a better cash flow) by selling tomatoes grown on their

vegetable plots, to the detriment of cotton production.

iii. Economies of scale

Early studies advocated a minimum project of 15,000 hectares to achieve economies

of scale in the provision of infrastructure and abstraction of water from the river by

gravity. However, the surveys failed to find more than 4,000 hectares of suitable soils

(despite a lowering of the criteria). After a World Bank appraisal, a decision was made

to proceed with a project comprising 4,000 hectares of suitable soils and 3,000 hectares

of marginal soils. This decision was taken in the expectation that soils would prove

suitable and that additional areas of marginal soils could be developed later to give

scale economies.

At the time of appraisal, returns on investment were projected at 13%. However,

these were based on allocation of certain costs over a wider (future) project base.

Realistically, returns were probably well below 10% before the rapid cost escalations

started and static world cotton price quickly led to the project becoming uneconomic.

The Bank raised the possibility of abandonment in 1979, but construction was already

underway. By then, the loan and credit agreements had been signed.

2.3 Technical problems12

The project also faced many technical problems, the most detrimental of which are

discussed briefly below.

i. Crop yields

These proved to be well below expectations with cotton yielding 70% and maize

12 Ibid.

12 13

below 50% of the lowest projections, resulting in low settler incomes (Howell 1985,

Adams 1990). Reasons included poor soils, poor crop varieties, labour shortages,

inexperienced farmers, poor reliability of water supplies and late inputs.

One concession to the economies of scale problem was that gravity abstraction of

water was postponed and a diesel pump station built instead. The remote location,

pump availability (below 50%) and poor road access resulted in erratic fuel supplies.

Procurement of spares from overseas was difficult and slow because of foreign

exchange problems.

Given the location and the poor wages paid by the sector, it was not possible to

obtain the highly skilled mechanics needed to maintain the station. The station was

the lynchpin of the project and success depended on its proper functioning, yet it was

inoperable for much of the time. Problems of maintenance, spare parts, fuel supply

and lack of trained operators and mechanics led to repeated breakdowns in 1983 and

1984, with water available for only 25% of the time.

ii. Housing

Settler housing also proved a particular problem in that it was extremely difficult

to find low cost housing solutions in an area devoid of most natural materials. The

construction of tenant houses fell behind schedule. The solution finally adopted, at

a cost of KSh 20,000 per house, was a mud and mangrove pole affair with rendered

walls and a corrugated iron roof, with many houses collapsing within two to three

years of construction. Toilets were also a challenge as they easily collapsed due to poor

soils. Tenants were expected to buy these houses over 20 years through deductions

made from their cotton sales. Not surprisingly, this created a great deal of resentment.

iii. Choice of technology

In many cases, the choice of technology was over-sophisticated in design and

concept, and this resulted in subsequent operating problems. These included problems

with an expensive (KSh 120 million) and complex water treatment and distribution

system (never operated); the river pump station; a dredger to remove silt from the

main canal (never operated); and an over-sophisticated irrigation system with many

controls (most of which were never used).

12 13

2.4 Institutional and management problems13

i. Co-ordination with other organizations

One of the major problems was obtaining support from other government bodies,

particularly in getting them to take over completed infrastructure. The Ministry of

Water Development refused to accept the new treatment works on the grounds that it

did not have a budget line or the staff to run it.

Another was increased health risk to settlers. Disease incidence was high among

settlers and their children, particularly because of malaria. Most settlers used canal

water for supplies with a commensurate increase in the incidence of water-borne

diseases, decreasing community productivity. Similarly, the Ministry of Health was

three years late in taking over a clinic. In the interim period, the Catholic Sisters

provided healthcare but this proved inadequate given the number and condition of the

settlers. Delay of donated medical equipment at the port on grounds of taxation, also

delayed the opening of the health clinic.

ii. Staff development

The World Bank appraisal report recognized the weakness of the NIB as an

implementing agency and recommended that it should be strengthened. Competent

staffing levels were not met due to poor government scales and regulations. The report

also recommended the appointment of a team of expatriate managers for the first five

years of operation. These recommendations were included as covenants in the loan

agreement, but were ignored until the project got out of hand.

By that time, the EDF had decided to withdraw their support. The project staff were

poorly trained, poorly motivated and in deficient numbers. Qualified and experienced

staff were difficult to obtain, given the project’s location and the salaries offered.

iii. Over-centralization of decisions

Staff on site had little authority, with all major and procurements being made in

Nairobi (Howell 1985). Given the location and the poor communications, this resulted

in unnecessary delays and lowered the morale of the site staff to the detriment of the

project and the settlers, besides the high costs of transport for inputs and Nairobi- site

visits

13 Ibid.

14 15

In 1985, the World Bank conducted a review of the project that was highly critical

of the way in which it was conceived, designed and implemented. As a result of this

review, the project was taken from the NIB and set up as a separate parastatal under

the Ministry of Agriculture, the intention being to decentralize decision-making and

give more autonomy to the site staff.

2.5 Efforts at rehabilitating BISS

The discussion above shows that besides mismanagement, BISS was not well

designed (irrigation water for example should not be used for maize cultivation) and

was therefore not sustained. Our analysis therefore mainly focuses on the lessons

learned from the project for the Kenyan policy-makers, and to a lesser extent, the

World Bank. The most interesting “institutional spillovers” in this case is probably the

lessons drawn from the problems encountered by the project.

As seen in Box 2.1 below, there are recent efforts to revive the scheme and policy-

makers seem to have learned some lessons from past mistakes. According to a

government official, the key problem was that BISS was scaled back, leading to

limited exploitation of scale economies, increasing the operations and maintenance

costs of the project. According to the NIB, which came back to manage BISS in 2005,

the challenges facing BISS included:

Farmers have not planted a cash crop for 15 years (from 1990-2005). Similarly, •

they have not planted subsistence crops for 9 years (1994-2002). This has resulted

in famine, increased poverty levels and unemployment for the scheme farmers and

community.

Frequent breakdown of the pumping station.•

Silted canals are ringed by • Prosopis Juliflora (Mathenge) bush.

Weak cooperative and other farmers’ organizations.•

Change of approach to management in public irrigation projects in line with the new •

Government and NIB policy of Participatory Irrigation Management.

Proliferation of • Prosopis Juliflora bush in farming areas and in water conveyance

and storage.

When NIB took over, it started the rehabilitation process, especially of existing

14 15

pumps, with financing from the Kenya government14. The objective was the immediate

resumption of irrigated agricultural activities in the area, with only 500 hectares

under irrigation at that time. It was anticipated that the water irrigation supply

system would be stabilized, with 2,500 hectares put under irrigation; this increasing

to 5,500 hectares once the pump-gravity system was fully operational.

According to a NIB official, the beneficiaries paying for the operations and

maintenance costs of the scheme will secure the future sustainability of the project.

NIB was in early 2008 in the process of hiring consultants to determine how much

farmers should pay, estimated to be about KSh 5-10,000 per hectare per annum.

Farmers would be advised on what crops to grow, based on their relative returns, with

NIB facilitating farmers’ connection to markets. Commercial farmers would also be

encouraged to lease land as part of the efforts to make the scheme self-sustaining. The

enhanced use of the gravity system would also lower the operation and maintenance

costs15. According to the official, the loans from the Arab Funding Institutions do

not have policy conditionality, although they have guidelines on how to manage the

funds16.

According to the official, NIB has accumulated a lot of experience in managing

irrigation schemes and BISS is not different from the other schemes that it manages

such as Ahero, Bunyala and Hola, which are all currently under rehabilitation.

The performance of schemes declined with the general decline of the agricultural

sector and the economy in general in the 1980s and 90s due to poor governance in

the country. There have also been attempts to streamline the irrigation policy in

the country, to bring about harmony in the sector. A cabinet paper has already been

prepared for discussion.

14 The management of the scheme changed hands from NIB to the Ministry of Agriculture in 1985; to the Ministry of Regional Development in 1988; to the Ministry of Reclamation, Regional and Water Development in 1993; to the Ministry of Agriculture in 2001; and to the Ministry of Water and Irrigation in 2003. A NIB official claimed that the taking away of the management of BISS to the Ministry of Agriculture in 1985 was driven by politics rather than lack of capacity at NIB.

15 Some stakeholders pointed out that use of the gravity system limits the area that can be irrigated, so that this may not be a panacea to the problems facing the scheme.

16 Government officials have however complained that the negotiations take too long to conclude. The negotiations for BISS for example that started in mid-1990 were concluded in early 2007 when the Kuwait Fund carried out a successful appraisal of the project.

16 17

Box 2.1:

From uncertainty to great expectations in Bura scheme

Daily Nation, November 27, 2007

For decades, farmers in Bura irrigation scheme have lived each day at a time, their agriculture lifeline severely threatened. The back and forth shift in the scheme’s management over the years had left them disillusioned and bitter with the Government. The scheme has been under seven different management teams since its inception in 1978, with the Ministry of Agriculture moving in on three occasions. However, a new lease of life has been unleashed in the area following the successful negotiation for a KSh 4 billion funding from Gulf financiers to improve the water supply in the area through gravity.

When the National Irrigation Board took over the management of the scheme mid-2005, the farmers resented. This was the second time the board was returning to the scheme. The farmers, with knowledge of hindsight, were apprehensive since the board did not prove its worth between 1979 and 1985 when it was managing the scheme. Currently, 2,500 hectares are under irrigation, with 2,200 resident farmers. Each household has been allocated 1.25 hectares for main crop farming and 0.05 hectares for vegetables. Cotton farming is the dominant activity while maize, cowpeas and groundnuts are planted between October and December.

On taking over, the NIB put a raft of measures to ensure that the scheme realized its potential. Among them were repairs to enable efficient irrigation water supply and expansion of the water supply to cover 5,500 hectares in three years time. Changing of the irrigation water supply system from pumping to gravity also featured prominently in the programme. In the gravity system, water is held in a reservoir then released into the field systematically. With soaring cost of fuel, extensive use of pumps to drive water through irrigation channels is uneconomical. Bura is not connected to the national power grid. Operations at the scheme solely rely on diesel.

The KSh 4 billion funding component was signed in Vienna, Austria, and will go towards the implementation of the gravity programme as well as other expansion programmes.

The loan has been secured from three groups namely; Kuwait Fund for International Development, Arab Bank for Economic Development in Africa (BADEA) and OPEC (Organization of Petroleum Exporting Countries) Fund for International Development (OFID). Last year, a socio-economic study was carried out in the scheme. The study proposed new cropping patterns while laying emphasis on commercial farming. High value crops such as soya beans, maize, groundnuts, passion fruit and sunflower were recommended.

The 500 acres research farm serves as a demonstration field to the farmers. Contract farming has also been successfully negotiated with Kenya Seed Company. Faida Seeds

16 17

and Bidco Oil companies are other firms that have expressed interest in dealing with scheme farmers. This kind of farming helps in assuring the farmers of a ready market once they harvest the produce.

Information from the board indicates that the scheme will resume production in two phases. In the first phase, 2,500 hectares will be put under cultivation before the lapse of the 2007/2008 financial year. The next phase, to incorporate the intended expansion of the area under cultivation to 5,500 hectares, will go on up to 2012. The pumps were handed over to the farmers last week at the NIB headquarters in Nairobi. The farmers’ representative was optimistic that their production would improve and help in sustaining their households. Purchased at KSh 96 million, the pumps are to be installed in the next three weeks. The operation of the new pumps will begin before the end of the year.

According to permanent secretary Mahboub Maalim, this is part of an ongoing rehabilitation process for irrigation schemes. Already, the Government has committed Sh300 million towards the rehabilitation. This will include both private and public schemes across the country. The Ministry of Water and Irrigation has also finalised the irrigation and drainage policy, to support the processes.

18 19

3. COMPARISON OF THE BISS WITH THE TANA RIVER DELTA IRRIGATION PROJECT (TDIP)

3.1 Summary of the JBIC (2001) evaluation of TDIP

3.1.1 Objective of TDIP

The objective of the project was to utilize the land and water resources of the lower

Tana delta for irrigation to increase rice production to meet the growth in consumption

and to contribute to greater import substitution and self-sufficiency (JBIC 2001).

Unlike BISS, TDIP utilized the “estate system“, under which all agricultural

development activities, including agricultural infrastructure, production, quality

control, marketing and sales, administration, operations and maintenance were

to be managed and administered in a unified manner. The execution agency of the

project was the Tana and Athi Rivers Development Authority (TARDA), a parastatal.

One of the postulated advantages of the estate system is that it enables efficient

and profitable agricultural operations with a small investment when compared to a

settlement scheme.

3.1.2 Project scope

The ODA loan covered 85% of the total project cost. Specifically, it was allocated

to procure materials and equipment as well as services required for the construction

of irrigated farmland, in addition to irrigation and farming facilities (such as staff

members’ accommodations and rice-processing mills). The loan was also allocated to

procure most of the consulting services.

The amounts, terms and the timing of the ODA disbursements were to be as follows:

Loan amount/Loan disbursed amount

¥6.031 billion/¥6.025 billion

Exchange of notes/Loan agreement

March 1990/March 1990

Terms and conditions repayment period

(grace period):

Interest rate:; 2.5%, 30 years (10

years), generally untied

Final disbursement date December 1997

3.1.3 Project innovations

The project had four major innovations, which were pilots for the agricultural

18 19

sector in Kenya (JBIC 2001)17. The first innovation was the introduction of the large-

scale state management system. The Kenyan government already had experience

in implementing large-scale irrigation projects, but the previous irrigation projects

employed the settlement (tenant) system in which land rights were granted to

individual farmers (see Table A2.1 in the appendix). The estate management system

was introduced in the Tana delta project wherein the management and execution of

all processes from production to harvesting to sales were to be conducted by the Tana

Delta Irrigation Project Office (TDIPO). Irrigated rice production under this system

was the first attempt of its kind to be made in Kenya.

The second innovation was the introduction of large-scale mechanization technology

to the project. Major agricultural works, including land cultivation, rice planting

and harvesting, were to be executed through the introduction of large agricultural

machines rather than the previously utilized labor-intensive systems. Similarly, as

part of the rice planting techniques, a less labor-intensive system of directly sowing

seed in irrigated rice fields was to be used for the first time.

The third innovation was the development of high-yield rice varieties suitable for

the coastal region. The project aimed to develop unique high-yield rice varieties that

suit the geographical and climatic conditions of the Kenyan coastal region where the

Tana delta is located. The final innovation was double-cropping of rice, another first in

Kenya.

3.1.4 Results and evaluation

a. Relevance and efficiency

The project aimed to increase rice production and reduce rice imports, thereby

raising the ratio of self-sufficiency. A look at the changes in domestic rice production

during the period from 1990 to 1998 shows that annual production remained equal

or less than 40,000 tons with no marked fluctuations. Immediately after the project

was completed, however, the site sustained enormous damage from floods caused by

El Nino rains in 1997, and the initially intended effects failed to be delivered. The site

was still under recovery at the time of the JBIC (2001) evaluation.

Initial plans called for the project to be completed by October 1996, but it was

actually completed in December 1997, approximately 14 months behind schedule. The

17 Some respondents commented that these were too many innovations to be undertaken at the same time, undermining the feasibility of the project.

20 21

major reasons for the delay were (i) the need to partially reassess the design of the

intake ports and other facilities, and (ii) the undeveloped state of the access road from

Malindi.

b. Effectiveness

i. Effects on irrigation area and rice production

According to JBIC (2001), the project was completed in December 1997. However,

because the site sustained enormous damage in the same month from floods caused

by the El Nino phenomenon, it was not possible to attain the planned levels of

effectiveness in terms of irrigation area (1,840 hectares) and rice yield (18,400 tons on

an unhulled-rice basis and 12,000 tons on a polished-rice basis). In terms of irrigation

area, however, targets had effectively been met in 1997, when work was completed.

The El Nino phenomenon caused extraordinarily heavy rains, and the resulting

flooding in the lower Tana caused flood protection banks that had been constructed by

the Kenyan government and TARDA in 1989 to the east and west of the project site

to collapse at various locations. In addition, the irrigation channels, drainage, control

roads and farmland facilities were heavily damaged, rendering most of the irrigation

facilities that had just been completed virtually unusable. This flood was of a scale

comparable to those of a once-in-50-year probability and exceeded the design scope for

the protection banks. Therefore TARDA was forced to suspend all project activities.

Under these circumstances, OECF/JBIC undertook a survey on “Special Assistance

for Project Sustainability of the Tana Delta Irrigation Project (I)” in July 1998 and

proposed recovery plans and temporary measures to the Kenyan government and

TARDA. In 1999, based on these proposals, TARDA began temporary construction,

allowing production to be restarted in certain areas that had sustained relatively less

damage.

The Kenyan government meanwhile made a request to the Japanese government

for an ODA loan to fund the Tana River Flood Damage Recovery Plan, which included

the rehabilitation of major structures and other full-scale recovery construction. Such

ODA loan had not yet been granted by the time of the JBIC (2001) report. The Kenya

government continued to promote recovery work and allocated KSh 155 million to

TARDA for recovery plans from its budget in 2000/2001. Lack of finances and possible

20 21

financiers has limited the pace of the rehabilitation.18 19

ii. Effects of the project innovations

With respect to the introduction of the large-scale estate management method,

the TDIPO confirmed that the estate administration and management system was

established during and after the project. Fully-fledged large-scale mechanization

technology was also introduced. In order to develop high-yield rice varieties suitable

for the coastal geographical and climatic conditions, the number of varieties was

narrowed down from 300 to five varieties that were selected for their (a) resistance to

insects, (b) fast growth, (c) ability to meet the tastes and preferences of Kenyans, and

(d) abundant yield. Furthermore, double-cropping and direct-sowing technologies were

firmly established. Moreover, the project was promoting activities to disseminate new

rice production technologies to local communities. One example was to provide free

seeds of new rice varieties to farmers living in the project site, though this was limited

to certain areas.

iii. Employment creation effects

In order to cope with the sharp reduction in operating income due to flood damage,

TARDA reduced the number of personnel at the TDIPO from 233 in December 1997

to 68. Although the number of personnel directly hired by the executing agency to

work on the project was expected to return to former levels and to increase in the

future as recovery work progressed, it would take some time to return to the level

planned at appraisal. TARDA was also implementing organization-wide plans to

reduce employees from 405 (in 2000) to 208 in 2002. Thus the executing agency was

working hard to achieve greater organizational efficiency. Overall, new employment

opportunities were created in an area in which there were no such opportunities

before.

18 According to the 2006/07 Medium Term Expenditure Framework, the Tana Delta Rice Project was 30% complete, with financial support expected from donors to complete the rehabilitation of the project, with other estimates indicating this would require about KSh 2 billion (Coastal Express, Jan 14, 2003). Central government grants to TARDA amounted to KSh 132.6 million in 2006/07 for recurrent expenditures; and KSh 91 million for development expenditures.

19 According to JBIC officials, the rehabilitation of TDIP following its destruction by the 1997 El Nino rains was not done because of a shortage of funds. JBIC was in that period involved in the Tana Delta Road Construction Project as well as the Sondu Miriu Project. There were also concerns about Kenya’s external debt sustainability as well as its worsened governance and policy environment. Consequently, JBIC did not even give an envisaged second loan to Kenya for the Sondu Miriu Project during this period.

22 23

iv. Calculation of the economic and financial internal rates of return

At appraisal, the Economic Internal Rate of Return (EIRR) for the project based on

international rice prices and the Financial Internal Rate of Return (FIRR) based on

domestic rice prices were predicted at 8.4% and 11.9%, respectively. The assumptions

underlying the calculations were: (a) a project life of 30 years after project completion;

(b) the benefits were from income from the sale of polished rice, rice bran and crushed

rice; and (c) the costs were civil engineering and construction works (including

equipment procurement), consulting, operations and management.

Due to the flood damage, an accurate comparison of EIRR and FIRR was not

possible at the time of the JBIC (2001) evaluation.

3.1.5 The environmental impact

Forests in the Tana delta host the red colobus, a rare primate. The primate (Colobus

badius rufomitratus) is registered with the Washington Convention and the African

Convention on the Conservation of Nature and Natural Resources. The red colobus are

indigenous to Kenya and are legally protected because of their rarity and importance

as a national heritage. Measures were therefore adopted to prevent decreases in its

population and to protect the species during the project implementation. Measures

undertaken included minimizing deforestation for the development of farmland and

planting trees. At completion, trees had been planted in a 323-hectares area.

In addition, an office was established within the TDIPO to monitor changes in

the red colobus population in the project area and its vicinity. The environmental

monitoring office was established to focus on environmental conservation in the Tana

delta and its sustainable development. It was to monitor vegetation, wild animals and

birds, livestock breeding and grazing lands, agricultural production and population,

health and sanitation, water quality and fish, hydrological and climatic conditions,

and other environmental elements according to environmental monitoring indicators.

Based on the project’s monitoring records, there was no marked environmental

degradation during the period from 1991 to 1997, the project completion year. No

particular negative effects on rare animals had been reported by the time of the JBIC

(2001) review.

3.1.6 Sustainability

As described above, TARDA initiated emergency recovery work for destroyed

irrigation channels, banks and other major structures on the project site. In addition,

22 23

repairs were made to damaged construction equipment, agricultural machinery, rice-

polishing mills and other facilities to prepare for full-scale resumption of the project.

These self-help efforts for recovery deserve to be evaluated. The major prerequisite

for effective and sustainable development of the project, however, was to advance the

recovery work in earnest20.

3.2 Lessons from TDIP

As in the case of BISS, our analysis mainly focuses on the lessons learned from

TDIP for the Kenyan policy-makers, and to a lesser extent, the project, according to

JBIC, was completed successfully and its subsequent destruction by the 1997 El Nino

floods was an Act of God. Hence the most interesting “institutional spillovers” in this

case are probably the lessons drawn from the problems encountered by the project.

In a review article, Oosterbaan (1988) concludes that many new irrigation projects

have disappointing results. The disappointing results stem from overestimates of the

benefits and underestimates of the costs, losses, and damages, in the light of the ever-

decreasing availability of good quality land and water resources. The benefits are often

less than expected because many projects are initiated, implemented and operated

“top-down” without regard for farmers needs and motivations; the discrepancy

between national (urban) and rural development targets; and the scarcity of well

qualified and motivated managerial technical staff. The costs are often higher than

expected because not all direct costs are recognised or foreseen; while the prevention

of negative secondary effects requires unforeseen additional measures, which increase

the direct costs. The secondary (environmental) costs, losses, and the damages are

higher than expected because they are not foreseen or taken into account.

Many of these issues were discussed in the feasibility study of TDIP (Ecosystems

1983). The decision to undertake the project was for example made top-down, starting

from the national economy and government policies from which it was concluded that

rice production in Kenya had to be increased, that the Tana delta offered possibilities

for this national target, and that the project should be of the state-enterprise type

with only one proprietor of both land and the water under hierarchical management

and with contracted labour. While the top-down approach does not explain the

failure of TDIP, with this approach shared by many successful projects in Africa and

elsewhere, the top-down approach undermines the “ownership” of the project by the

20 According to one official, TARDA did manage to salvage 200 hectares from its own saving, to bring the total area in use to 380 hectares. There was however another mild flooding in 2004 and another one in 2007, which reduced the area under use to only 60 hectares. It requires at least 600 hectares to breakeven, with a crop every season (2 seasons per year).

24 25

local communities, and hence its sustainability in the context of a country where good

land is in short supply and the land question is a very sensitive political issue. These

TDIP communities are some of the poorest in the country.

Following extensive damage resulting from the 1997 El Nino rains, it has been

proposed that TDIP be rehabilitated21. This provides an opportunity to improve on the

design and implementation of the earlier collapsed project. We therefore draw on an

impact assessment of such a rehabilitation done by Luke et al. (2005).

According to the study by Luke et al. (2005), significant levels of poverty and

vulnerability characterize the TDIP-communities, with the greatest constraint

being lack of rainfall. The irrigated rice scheme – if targeted correctly - therefore

holds the potential to contribute significantly to livelihood improvements and, by

extension, sustained use of the environment. The proposed rehabilitation should

attempt to redress the TDIP communities’ livelihoods vulnerability and lack of

development options, which will also serve to reduce pressure on the surrounding

natural habitats. In order for sustainable outcomes to be achieved, appropriate design

and implementation must necessarily engage the communities as partners, and be

characterized by information sharing, consultation and collaboration. This requires a

through understanding of the stakeholders involved in the project.

3.2.1 The TDIP communities

According to the study, the Polder 1 TDIP is commonly associated with six villages,

therefore considered to be the legitimate stakeholders of the project. Land falling

within the traditionally-demarcated boundaries of three of these – Kulesa, Wema

and Hewani – were incorporated into the project, while the other three villages

– Bfumbwe, Sailoni and Baandi – border the project, and have traditionally used

common property resources within the project, and continue to do so – typically the

floodplain forests and available grazing areas.

The traditional Pokomo cultivators, with the exception of Baandi, which is inhabited

by traditional Orma pastoralists, inhabit all the six villages. The Orma residents of

Baandi distinguish themselves amongst pastoralist as being “permanent” within the

Tana River delta, rather than “nomadic”22.

21 See the statement by the Kenya Minster for Regional Development in the Daily Nation, November 1, 2006

22 The utilization of the waters of the Tana River has been in the middle of a conflict pitting the two communities against each other. The Pokomo claim the land along the river and the Orma claim the waters of the river.

24 25

Assessment by the Luke et al. study of key informants approximated that about 61%

of the population in the TDIP villages were poor, 30% middle-class and 9% rich23. In

an index of vulnerability that ranged from 1 to 4, they were vulnerable with respect to

housing (2.1), food supply (2.4), access to incomes (2.6); and access to education (2.5).

On average, households live in non-permanent houses, struggle to produce sufficient

food, are either reliant on the land for income, or on selling labour in the absence

of a viable land base; and either have enrolled some of their children in secondary

schools or not at all. From village focus groups, the principal constraint to livelihoods

and development was (i) poverty, caused by lack of cultivatable land; (ii) low-per-acre

productivity; (iii) lack of infrastructure to access markets; and (iv) insecurity of land

tenure and property.

Overall, the study concludes that subsistence farming results in a lack of community

capacity to accumulate needed capital, in order to precipitate investment into

strategies that break the poverty cycles. These underlying challenges are exacerbated

by insecurity of land tenure, banditry and loss of a primary resource to TDIP. If village

farmers were allowed to cultivate rice on their traditional land within the (improved)

TDIP and selling to TDIP (as has been suggested in the past, and indeed expected at

the project’s inception), the rehabilitation of the TDIP directly and indirectly has the

potential to contribute positively towards diminishing all four basic causes of local

poverty, as identified above by the communities.

3.2.2 Institutional linkages with TARDA

From the focal group perceptions of existing linkages between their villages and

both internal and external institutions, the dominating institutional relationship for

the six villages is the proximal and negative impact of TARDA (Luke et al. 2005). The

negative impacts of TARDA fall into three general categories. First is loss of resources

to the TDIP. The effects include loss of both use and ownership of prime agricultural

land; loss of prime dry-season grazing land (for Orma); and increased illness and

diseases, especially malaria due to TDIP rice paddy flooding

The second is non-delivery of promised benefits by TARDA, in return for Hewani

and Kulesa villages agreeing to transfer traditional ownership of prime village land

to the TDIP. The non-delivered benefits are principally (i) rice cultivation by the

communities on the portion of lands annexed by the project, accompanied by the

sale of rice to TARDA at a fair price; (ii) building of schools and clinics; (iii) building

23 Tana River is one of the districts with the highest levels of food poverty (70.6%) and overall poverty (71.8%) based on the 1994 Kenya Welfare Monitoring Survey.

26 27

of a bridge over Tana River connecting upper TDIP (Sailoni) with Garsen town, to

assist with transport and market access; and (iv) construction of an all weather road

connecting the villages to main Malindi-Lamu highway, to assist with transport and

market access.

The third is that TARDA neither consults with villages before taking action, nor

informs villages when/ after taking action. TARDA also does not pay casual workers in

a timely manner, or always in cash as agreed. TARDA only engages the villages when

problems are encountered on TARDA’s part and does not take the subsequent views

expressed by the community seriously24.

A benevolent attitude by TARDA towards communities would be expected, given

that TDIP represented a development-focused project in a poverty-stricken area.

The only aspect in which TARDA has been seen to deliver benefits during the more

than 15-year course of the project was the pre-1997 El Nino period, when the TDIP

provided significant casual employment to villages, paid in a timely manner. One

of the problems contributing to continued disaffection is the (apparent) lack of a

“written” contract or memorandum of understanding between TARDA and the

communities outlining the nature and details of the relationship surrounding TDIP.

The communities have not been aware of the existence of such a document.

Luke et al. (2005) conclude the TDIP holds significant potential to contribute to

resolving a significant number of the underlying conditions that maintain villages

in a cycle of poverty. Potential interventions include engagement of the communities

as development partners, through shared consultation, information, planning and

implementation; TARDA to consider delivering on the original expectations that

communities would be able to cultivate rice within those traditional lands that fall

within the TDIP, and sell to the rice to TARDA at fair prices; continue providing

employment opportunities, with payment executed at a timely manners; and consider

the feasibility of assisting communities with periodic water supplies for crops.

3.3 Some findings from the fieldwork on TDIP

The stakeholders talked to agree on the need for TARDA to enhance the ownership

24 Some respondents pointed out that this behaviour is not unique to TARDA in estate-type irrigation projects. In some cases, even though the staff of the executing agency do not consult and communicate closely with the local people, the projects have been successful. Therefore, it cannot be concluded that lack of consultation always brings out failure. Institutions should be evaluated in the context of the relationships between the government and the local people, and government and donor agencies.

26 27

of the project by the local communities. There was also a major problem of marketing.

Tomatoes, watermelons and other products are grown in the area, but they go to waste

due to poor marketing so that there were high post-harvest losses. There was thus

need to develop marketing linkages and to enhance the capacity of TARDA in this

area.

Some stakeholders suggested that instead of looking for funding to rehabilitate

TDIP, mechanisms should be found to mitigate against the impact of events such as

the 1997 El Nino floods. The country could get external resources, but a similar thing

could happen again, hence the need to look for other ways for intervention, including

project re-design. One suggested possibility was to look for a strategic investor to work

with TARDA, to alleviate management problems at the institution. They suggested it

was not the business of government to farm; this should be left to the private sector.

A private company such as Dominion (farming in Yala) was interested in TDIP. An

Investment Conference on Rice had also been suggested. It was also possible to form a

cooperative society to take over the project, including sub-division of the land among

members. They therefore argued that the institutional arrangement for the project

was not appropriate, with its focus on a commercial enterprise. TARDA did not have a

comparative advantage in this situation, and was unlikely to efficiently operate such a

commercial venture. Hence there was need to improve the institutional arrangements

for undertaking such projects

In terms of sustainability, stakeholders also recommended the building of dams

upstream (e.g. at Mutonga and Grand falls) to reduce the probability of flooding

downstream for both BISS and TDIP, given that the flow pattern of the river and

the precipitation seems to have changed due to climate change. Thus the whole river

basin management and strategy is a crucial issue for the Kenya government. Another

possible solution was moving from rice to sugar cane farming, as the latter is less

prone to floods, consistent with TARDA’s proposed sugar project in the Tana delta25 26.

In terms of policy reforms, stakeholders suggested that an irrigation policy paper

had been proposed with irrigation stranded across various ministries: Agriculture;

Regional Development; Water and Irrigation. TDIP for example is under TARDA in

25 According to the TARDA website, subsequent phases of the planning and development will investigate other commercial crops such as cotton, palm oil, bananas, and so on or a settlement programme under a small-holders model of commercial farming.

26 TARDA has proposed to convert 12,400 hectares of land in the Tana Delta to sugar cane growing and production, generating a large controversy (see The Kenya Wetlands Forum 2005). According to TARDA, the Mumias Sugar Company was being offered mainly land, while the output of the project is clear. To mitigate the top-down nature of the TDIP, active participation of all stakeholders is being facilitated, with sensitization workshops held across the country.

28 29

the Ministry of Regional Development; the Bura Scheme on the other hand is under

the NIB in the Ministry of Water and Irrigation. The policy would separate production

from marketing and the provision of infrastructure.

On the issue of spillovers, stakeholders were agreed it is difficult to get lessons

from TDIP as the project collapsed before it could generate any experiences. It would

be difficult to tell a priori whether the project could have been a failure or a success.

Moreover, TARDA is involved in many other projects, not just TDIP, so that the

performance of the institution should be assessed in a more holistic manner27.

It was suggested that TARDA staff were now very well trained and are adequate

for the implementation of the project if and when it is rehabilitated even though the

Kenya government has increasingly become unwilling to guarantee and to provide

financial security to state corporations, especially non-strategic ones like TARDA.

There has also been a discernible shift by donors from financing large projects to small

projects, although this cannot be attributed to TDIP alone.

27 Since its inception over 30 years ago, TARDA has planned and implemented many projects, including the Masinga and the Kiambere Reservoir and Irrigation Projects. Proposed projects by TARDA include rehabilitation of TDIP; promotion of eco-tourism in the Tana Delta as well as undertaking diverse environment conservation and water management activities.

28 29

4. THE NAIROBI WATER SUPPLY PROJECT (NWSP)

4.1 Summary of the JBIC (2002) evaluation of NWSP

4.1.1 Objectives of NWSP

The main objective of the project was to expand the water supply system in the

project area (Thika River), from 194,000m3 per day at the time of appraisal, to

492,000m3 per day as of 2002, in order to meet the growing demand for water in

Nairobi. The specific objectives of the whole project included improvement of water

supply and sewage treatment capacity, expansion of water supply to low-income

communities, and institutional development of the Water and Sewerage Department

(WSD) of the Nairobi City Council (NCC).

The NWSP was co-financed by the World Bank, the AfDB, the EIB and OECF/JBIC.

The three funding agencies were represented by, and their funding channeled through

the World Bank (Syagga 1999). It is therefore difficult to delineate the influence and

contribution of OECF/JBIC alone.

4.1.2 Project scope

The total scope of the project consisted of (1) construction of transmission pipelines;

(2) construction of a dam; (3) construction of a water intake system; (4) construction

of a water treatment system; (5) construction of a water distribution system; (6)

construction of a sewage water treatment system; (7) consultant services; and

(8) technical assistance (JBIC 2002). The OECF/JBIC ODA loan portion covered

construction of transmission pipelines (Item 1 above). The Government of Kenya and

the NCC (formally called Nairobi City Commission) were the borrowing and executing

agencies.

4.1.3 Results and evaluation

i. Relevance

In government policy documents, the importance of water as both a basic need and

an input in the economic and social development process is emphasized. In addition,

providing a sufficient quantity of good quality water is listed as an overall goal of the

national water development policy. In this light, it can be concluded that this project

is still relevant.

30 31

ii. Efficiency

The OECF/JBIC ODA loan portion was implemented with no substantive change

in scope, despite nine months’ delay in project completion mainly due to delays in the

tender evaluation process (JBIC 2002). Of the total loan amount of 5,342 million yen,

92.9% was disbursed. This decrease is largely attributable to the depreciation of the

Kenya shilling against the Japanese yen during the construction period. It can be

concluded that the Japanese ODA loan portion was efficiently implemented.

iii. Effectiveness

a. Physical effectiveness

With the completion of the project, water production capacity was expanded from

194,000 m3 per day to 455,000m3 per day, slightly lower than the target of 492,000 m3

per day (JBIC 2002). At the time of appraisal, it was expected that water production

through this project would meet the water demand until 2000. In spite of the increase

in water production, however, the total water sale was apparently almost unchanged

from 1985, before the project. This may be attributed to the high rate of unaccounted-

for-water (UFW). In fact, the rate of UFW was getting worse. According to the NCC,

(1) the number of unmetered estates and illegal connections was quite high; (2) even

if metered, the quality of meter readings was inadequate, and (3) water pipelines

that are not repaired leaked and burst frequently. It can be concluded that while this

project helped cope with growing water demand in Nairobi, UFW rates would require

to be improved in the future.

b. Interview survey

In order to assess the effectiveness and impact of the project from the stakeholders’

perspective, an interview survey of a sample of the population (size=100 people)

was conducted in high, medium and low-income areas in Nairobi (sample sizes of

30, 30, and 40, respectively, representing the population ratio). On average, 91% of

respondents were connected to the Nairobi water supply source, although a correlation

between income and the connection ratio was apparent (JBIC 2002). However a

significant proportion of those connected did not pay their water bills at all.

c. Financial effectiveness

According to JBIC (2002), 52% of water was unaccounted for as of 2000. This figure

represents a sharp increase from the estimate made at the time of appraisal in 1989,

30 31

and is much higher than the target figure of 20%. In order to re-calculate the FIRR,

UFW was assumed to be 50% after 1997. The re-calculated FIRR was 5%. The original

FIRR at the time of appraisal was 7%. This discrepancy is due to the high rate of UFW

(about 50%) compared with the original plan (20%).

4.1.4 Impacts

i. Decrease in water-borne diseases

Half of the sample population interviewed for the survey responded favorably when

questioned about the impact of the project on the incidence of water-borne diseases;

63% of the higher income group, 50% of the middle-income group, and 43% of the

lower income group replied positively, respectively (JBIC 2002).

ii. Environmental and social impacts

The Kenya government undertook a study on the environmental impact of the

project28. Although the Japanese portion of the project (i.e., transmission pipes) did not

involve any resettlement or environmental externalities, other co-financed portions,

especially the dam construction, involved an inundation of land and the resettlement

of 335 families. They received a compensation package for relocation.

4.1.5 Sustainability

i. Operation and maintenance

The NCC’s WSD, with a total staff of 506 as of 2001, was directly responsible

for the operation and maintenance of the project. The division responsible for

water transmission was then under the authority of the Deputy General Manager,

Operations and Maintenance (Water).

There was a severe lack of financial and managerial sustainability at the WSD.

With more than 50% UFW rate, the financial situation of the WSD deteriorated. The

extent of the financial distress was not totally clear, as no financial audit of the WSD

had been conducted in the previous several years. According to the investigation,

payment of WDS staff salaries had been delayed for months. This made it difficult to

offer much-needed services such as meter reading to the Nairobi population.

28 Nairobi City Council (1998), Third Nairobi Water Project: Environmental Appraisal Report.

32 33

In order to arrest the deteriorating situation, with the guidance of the World Bank,

the WSD was at the time studying the possibility of privatization in the form of

divestiture, concession, leasing or management contracting.

ii. Conditions of facilities and materials

All Japanese financed pipelines remained functional and operational, and WSD

inspectors were routinely inspecting them for cracks, leakage and any other technical

problems (JBIC 2002). However, according to the WSD, no major maintenance work

had been carried out since the completion of the project. Maintenance works such as

protection works on sections damaged by erosion and general maintenance of access

roads were needed. To keep the whole project sustainable, it was essential to conduct

this maintenance work.

4.1.6 Overall recommendations for enhancing the sustainability of NWSP

To keep the whole project sustainable, it was essential to conduct the maintenance

work mentioned above and examine countermeasures to reduce UFW29.

4.2 Situation analysis of the NWSP

4.2.1 Nairobi’s water supply situation

Since Nairobi became the administrative capital of Kenya, a number of water-supply

projects have been undertaken. Nairobi’s first water supply project was commissioned

in 1899 based on the Nairobi River in the Athi River catchment area (Wambua 2004).

By 1986, Kikuyu Springs, Ruiru Dam, Sasumua Dam and Chania Dam provided

Nairobi with a total of 192,000m3 per day. The supply was insufficient, as the city’s

population had increased tremendously, placing severe pressure on the water supply

and the sewerage system.

NWSP helped provide relief to the situation. According to Syagga (1999), when

completed, the project was expected to displace 500 households and flood 350 hectares

of land used for small-scale tea farming. In addition, the water was to be pumped to

29 As noted in the Japanese Ministry of Finance Evaluation of the project (FY 1996), even though the Japanese portion of the project was completed without problems, it was essential for the donors to cooperate with one another in monitoring the NCC fiscal management. The Evaluation noted that while the project did achieve the goal of alleviating water shortages and improving sanitary standards, the sustainability of the project would depend on whether water fees are charged and adequate revenues raised. There was a concern whether there would be enough effort on the Kenyan side to improve collection rates and reduce leakage.

32 33

Nairobi in 4-metre-diameter pipes, constructed on 24-metre-wide wayleaves acquired

through private parcels of land, over a distance of some 60 kilometers. Although

the project site was in a rural district, and hence the affected people were in a rural

settlement, the ultimate beneficiaries were to be the residents of Nairobi.

Among the positive spillovers from the project, it created direct employment at the

construction site and in small-scale businesses that served the construction workers

(Syagga 1999). Labour for future dam maintenance would also be required. The project

also created a number of facilities for the benefit of the surrounding community,

notably a primary school, a health clinic, an improved road network, and a power-

supply station. Above all, the project would supply enough water to sustain Nairobi’s

growing needs to 2005.

However, the project caused considerable amount of suffering for displaced

households (Syagga 1999, Ndung’u 2003). Extended families were split up,

compensation money was inequitably distributed within households, the total

compensation was insufficient, and families suffered a loss of earning capacity. The

dam altered the microclimate in the vicinity, and more mosquitoes were breeding and

causing sickness in the surrounding areas. Farmers also had to deal with soil erosion

arising from the unprotected high embankments.

Many studies have subsequently been done on the water situation in Nairobi.

According to the World Bank (2005), water supply in Nairobi has been plagued for

many years with inefficiency and complex management and logistical problems. This

has led to inadequate water services, with the poor suffering the most. The study for

example estimates that, of those that were served by the utility, 40 percent did not

receive a 24-hour supply; some 30 percent received water once in two days; while 10

percent received water only once a week. A household survey by Gulyani et al. (2005)

revealed that poor households in Nairobi spent 45 minutes on average collecting

water every day; the non-poor spent only 18 minutes while households with private

connections spent about 5 minutes. Nairobi utility’s water revenue collection efficiency

was below 30%, so that out of every 100 metered water users in Nairobi, less than 30

users paid their bills. The utility billed KSh 3 billion per year but collected only 30%

or KSh 900 million (Wambua 2004).

As noted above, UFW was over 50 percent of the total volume of treated water

produced. Much of the UFW resulted from physical leakage, and the rest was due to

water theft and failure to bill, essentially as a result of mismanagement. According to

the World Bank (2005) study, only about 187,000 or 42 percent of the total households

in Nairobi had legal water connections. Nearly all others, largely poor households,

34 35

obtained water from kiosks, water delivery services and illegal connections, with

the water purchased from vendors usually originally sourced from the network. The

new Nairobi Water and Sewerage Company (NWSC) formed in 2004 was tasked with

improving this situation.

In the household survey conducted by Gulyani et al. (2005), the utility coverage,

or the proportion of households with access to piped water supply, appears to be

relatively high in Nairobi compared to many other capital cities in Africa. Specifically,

the survey found that 71 percent of the households in Nairobi in the sample had access

to piped water supply, either through a private in-house connection or a yard tap. By

comparison, a study of water supply and independent providers in 10 African capital

cities (including Nairobi) estimates that in six of these cities, only 27–49 percent of the

households have access to piped supplies, with the rest of the households relying on

independent providers or traditional sources (Collignon and Vézina 2000).

Although a relatively high proportion of households in Nairobi have access to

piped supplies, water usage levels is low (about 42 litres consumption per day)

when compared with that of other countries as well as when compared with earlier

consumption and use levels in Kenya itself. Thomson et al. (2000) argue that there has

been a dramatic decline in domestic water use in urban Kenya: it has fallen from 105

lcd in 1967 to 45 lcd in 1997 (and to 40 lcd in 2000). The explanation for the low levels

of consumption and decline over time is that piped households have been forced to cut

back because of failing municipal supplies but also from a combination of price and

quantity factors.

The tariff structure in force in Nairobi is an increasing block tariff (see Table 4.1).

According to the World Bank (2001), the average tariff charged by Kenyan water

utilities, from all categories of customers combined, was about US$0.4/m3, sufficient

to cover capital plus operations and maintenance costs if the water utilities were run

efficiently.

Table 4.1: Water tariff rates in Nairobi

Block 1 Block 2 Block 3 Block 4

Consumption – m3 0-10 10-30 30-60 > 60

Tariff – KSh/ m3 12 18 28 35

Tariff – US$/ m3 0.16 0.24 0.37 0.47Source: World Bank (2005). 1 $ is equivalent to KSh 75.

The official water tariff provides little indication of what people were actually

paying. Despite low average water use, households pay remarkably high unit prices

34 35

for water. Gulyani et al. (2005) estimated the average cost to be KSh 260 per cubic

meter (US$3.50). The main reason behind the high unit cost of water reported by

households is that many of them, including those with private connections, buy

water from expensive sources such as kiosks and vendors. Households in the sampled

population were paying, on average, KSh 205/m3 (or US$2.7/m3) for water from kiosks,

and KSh 630/m3 (or US$8.4/m3) for water from vendors who deliver at home (including

tankers).

These prices for vended water are similar to those reported for Nairobi by Collignon

and Vézina (2000) in their study of African cities; their data also show that vended

water costs more in Nairobi than in most of the other capital cities included in their

10-country sample. Hence the average cost of water from kiosks is remarkably high,

given that utilities in Kenya usually supply water to kiosks at a “social” or bulk rate of

about KSh 11/m3 (US$0.15/m3).

Despite the Nairobi utility’s attempts to deliver a subsidy through the tariff, there

is evidence that the poor, who are more likely to rely on water sold by third parties,

pay more per unit of water. In an attempt to partially address the problem, the utility

established a flat rate of KSh 10 per cubic meter for bulk supply to water kiosks

serving informal settlements. However, this has not been effective in bringing down

costs to consumers as few kiosk operators are actually billed at this rate as they

often end up being charged the regular domestic tariff. These costs, as well as the

investment costs and overheads incurred by the kiosk operators, translate into very

high prices at kiosks.

In other words, the kiosk owners are charging 18 times the price that they pay for

the water. Even after taking into account that kiosk owners have to incur initial costs

for installation of kiosks, as well as some recurrent overhead costs (including illegal

payments), the difference between the price paid to the utility and the price charged

for water by kiosk owners is large. In fact, Collignon and Vézina (2000) calculated

the minimum gross profit margin of “standpipe operators” (kiosks) in Nairobi to be

80 percent and the maximum to be 90 percent, the highest profit margins in their

10-country sample. This suggests that much of the subsidy provided by the utility was

not accruing to the poor for whom it is intended; rather, these subsidies were negated

by the high costs of installing and running kiosks, or they accrued to kiosk owners,

those collecting illegal payments from them, or both.

It is estimated that 55% of the Nairobi’s population reside in informal settlements

that lack adequate network infrastructure. In order to access the services they need,

the less poor among them have taken their own initiative, extending pipe work for

36 37

several kilometers to a single dwelling, or combining efforts for mutual benefit.

However for the poorest households, the problem is more difficult to solve. It is

unlikely that they can afford the options currently open to them and it is likely that a

number of other constraints will stand in their way.

The first step in a strategy to improve access to private connections should be to

facilitate the extension of network infrastructure into those informal or unplanned

areas. A good example is Kibera, a settlement in Nairobi of up to 500,000 people. More

than 1,000 private connections have been installed (Lamba and Memon 2005). These

pipelines stretch up to 1 kilometer from the nearest utility main. Increasing security of

tenure is a key step that the government can take to avoid inefficiencies and improve

access to water supply to poor households.

Some of the measures that can be considered to increase the access of low-income

households to private connections include:

extending the piped water supply networks into informal and unplanned settlements;•

enabling low-income households to afford the upfront costs of a connection;•

removing administrative and legal barriers;•

setting the price of water at a level that is affordable to low-income households; and•

developing appropriate mechanisms for managing payment.•

The Nairobi water company is reported in January 2005 to have started

collaborating with small-scale water vendors in Kibera to improve water supply

service for low-income consumers. Maji Bora Kibera, an association of 500 small-scale

water vendors serving approximately 500,000 Kibera inhabitants, had entered into

a partnership with the NWSC. They agreed to form a task force that would address

concerns of UFW, revenue collection and rent-seeking behaviour.

4.2.2 Institutional reforms

A push for good governance in the last decade or so has also had an impact in the

water sector (World Bank 2005). A new water policy in Kenya came into effect in

1999, redefining the role of the government so as to focus on regulatory and enabling

functions rather than direct service provision. The government plans to emphasize

supporting private sector participation and community management of services,

rather than continue subsidizing inefficient utilities with public funds.

The Water Act of 2002 (enacted in March 2003) laid the legal framework for

implementing the policy and set up the institutions required (World Bank 2005). The

36 37

institutional framework for service delivery under the Water Act (2002) is supported

by all the donors active in Kenya’s water and sanitation sector. The influence of donors

– including the World Bank, Swedish International Development Agency (SIDA),

KfW, Finnish International Development Agency (FINIDA), the Netherlands, Belgian

Administration for Development, GTZ, Austria, AfDB, JICA, among others – has been

most profound throughout the reform process (Lamba and Memon 2005). Besides

providing financial support, the donors have played a key role in shaping the reform

agenda, refining policy objectives and the methods for pursuing them, and influencing

the pace of the reforms.

The World Bank in particular has played a key role in the global water sector

(Lamba and Memon 2005). It has crucially influenced the policies of the recipient

countries as well as those of the other multilateral and bilateral donors. It shapes

national and international water policy both via its linking the award of loans to strict

conditionalities and by its leading role in the formation of opinion in the water debate.

The central aspect of the World Bank’s water policy since the beginning of the 1990s

is the notion of water as an economic good. It is focused on a comprehensive reform of

the water infrastructure sector, which so far has been largely in public hands.

For a considerable period, the NCC’s WSD was regarded as ill equipped to deliver

quality service mainly due to corruption, with NCC ranked the fifth most corrupt

public sector organization in a recent survey by Transparency International (Lamba

and Memon 2005). The solution to this problem was the proposal that water service

functions of the NCC should be relocated elsewhere, preferably to an independent

entity. This was not possible until the enactment of the supporting legal framework in

the form of the 2002 Water Act.

The NWSC, recently weaned from the WSD of the City Council, is the principal

services provider to the city’s three million people. It was officially launched on August

19, 2004. It operates along the lines of a private enterprise, with an autonomous board

of directors. The company’s prime object is to provide water services within the City

of Nairobi pursuant to the provisions of the Water Act (2002). Pursuant to the said

Act, the company operates as an agent of the Nairobi Water Services Board. It is the

Board that holds the license for the provision of water within Nairobi. The benefits

of this license have been made available to NWSC by way of an agency agreement

that established a framework for delegation of the license. In consideration for the

benefits of the license, NWSC assumed a number of responsibilities, which include

its covenants to ensure adequate, and quality potable supply of water at affordable

tariffs and an obligation to improve water and sewerage infrastructure for the City of

Nairobi.

38 39

By May 2004, NWSC had taken over the functions of the Water and Sewerage

Services Department of NCC. It also inherited 2,200 staff and the operational

structures of the NCC Water Services Department. In August 2004, NWSC recruited

a team of 6 professionals whose overall responsibility was the reformation of water

service provision to improve its accessibility, availability and affordability. With the

said objectives, the professionals were mandated to run NWSC in an efficient and

profitable manner and to correct the shortcomings of the NCC Water and Sewerage

Services Department.

4.3 Some findings from the fieldwork on NWSP

4.3.1 Sustainability of the NWSP

Discussions with stakeholders pointed out that no major water project has been

implemented since 1994, with additional support by OECF/JBIC limited by a

shortage of resources. The NWSP (‘Chania 3’) was expected to be followed by another

project (‘Chania 4’) to bring more water into Ndaka-ini Dam. This however was not

implemented. The project was expected to cost $11 billion, with Phase I costing $5

billion. The donors were discouraged by poor governance in the country. The election

of a new government in December 2002 had not changed the situation30.

Officials of the NWSC say they have managed to reduce the UFW from about 52%

in 2001 to about 37-40% in 2007 by attending to physical water leaks, reducing illegal

connections, controlling carwash and improving the water metering-billing cycle. The

ultimate target is 20-25% (some countries have managed to reduce this to even less

than 10%). The challenge is that much of the water supply to informal settlements

in Nairobi is operated by illegal cartels that have proved difficult to dismantle. The

cartels also use cheap connection materials that have undermined the quality of the

water supplied to these areas. Kisumu had succeeded in getting rid of these cartels, so

there was hope that Nairobi could do the same.

The water company was currently collecting 60% of potential revenue, compared

to 30% when it started operations in 2004. The NWSC currently handled 230,000

accounts, out of a potential 400,000.

30 According to estimates by the Athi Water Services Board (AWSP) which manages water provision in Nairobi and surrounding areas, demand for water currently (2007) stands at 337,487 cubic metres, while only 248,000 cubic metres is reaching consumers. Demand is set to increase to 574,000 cubic metres by 2015, and over one million cubic metres by 2030.

38 39

4.3.2 Spillovers from the NWSP

According to the NWSC officials:

The company has trained people who had moved to other water projects. An •

example was given of the Managing Director of the Kisumu Water Supply Company,

who came from the NWSC.

The NWSC inherited 2,300 workers, of which only about 40 were university •

graduates. The number of workers had now reduced to 2,100, and the company

would like to reduce the number even further, to enable the hiring of more skilled

workers.

As noted above, the NWSP constructed a school and a health centre at the dam.•

There had been planting of trees around the dam (more than 40,000), by a Ndaka-•

ini conservation group (Ndaka-ini Environmental Association).

Ndaka-ini dam has become a recreation and tourism resort that is within the •

driving distance of Nairobi, with the annual Ndaka-ini Marathon held there.

Reforms in the sector were partially driven by the NWSP. In the 1980s, a large •

number of bilateral donors withdrew from the water sector complaining of poor

governance in the country, with NWSP being the only major water project during

that period. Much of the funding was going to NGOs. The World Bank then started

to put pressure for water reforms to be implemented if it was to increase funding

to the sector. These reforms included increasing the managerial autonomy of the

NCC’s WSD. The government then decided to look at reforms for entire water sector,

not just the NWSP.

The private sector has benefited from supplying the NWSC especially with •

chemicals, pipes, and so on.

There had also been transfer of technology from firms/ contractors that have worked •

with the NWSC transferring those skills to other water utilities. There are also

more that 160 companies (some unregistered) that provide bottled water, competing

with the water company. The formation of these bottled water companies was

driven by (a) the perception and propaganda that the NWSC water was not safe for

drinking (there were stories in the past that the NCC used chalk instead of chlorine

to treat the water); and (b) the portability of bottled water. Some of these companies

(5 out of the 16 large ones, including Coca Cola’s Dasani) used the company’s piped

water.

Another externality is the possibility of generating power from the Ndaka-ini Dam •

(about 2 megawatts). Discussions with Kenya Electricity Generating Company were

ongoing.

40 41

5. COMPARISON OF NWSP WITH THE NYERI TOWN WATER SUPPLY SYSTEM

The Nyeri Municipal Council took over the provision of water services from the

Central Government in 1982, and admittedly provided poor water and sewerage

services to this small central Kenya town until the water utility was commercialized

(Wambua 2004). The formation of WSD in the Council in 1995 did not make matters

any better because water revenues went to the Nyeri Municipal Council Treasury

and were often diverted to non-water areas. This meant that burst pipes could not be

repaired in time. It also meant that the water supply could not be expanded to match

population growth as the water revenues were not ploughed back to develop the

sub-sector. The desired result of service improvement and sustainability had failed

and adoption of commercialization as an alternative management approach became

inevitable. In June 1996, the Nyeri Municipal Council put a request to the GTZ to

support the privatization of Council’s WSD. GTZ came in handy and has been involved

in advising several other Kenyan local governments on the commercialization of their

water services.

According to a GTZ official, decision-makers in the 1970s and 1980s were not taking

into account operation and maintenance costs (the recurrent cost problem), which

is very crucial for sustainability of projects. By the early 1980s, most of the water

utilities were managed as departments in the local authorities. This made it quite

difficult to manage water utilities efficiently within such a structure. Repairing a

burst pipe for example could take a long time because of bureaucracy and regulations.

At that time, one could not for example spend more that KSh 5,000 without a council

resolution. A maintenance activity costing more than this amount would therefore be

unduly delayed.

In the mid-1990s, GTZ started promoting commercialization of water services with

pilot schemes in Nyeri, Eldoret and Kericho. Policymakers were initially skeptical

about the policy, saying this would not work. There were for example delays in

commercialization in Eldoret and Kericho as the local authorities attempted to

reverse the council decisions to commercialize. Due to these delays, Nyeri Water and

Sewerage Company (NYEWASCO) absorbed the bulk of the support provided by GTZ

for the three pilot commercial companies. The objective of commercialization was to

promote the sustainability of the water utilities, by shielding them from politics in the

local authorities. It has been a policy of GTZ since the 1980s to build local capacity

first before investment in water projects. The GTZ principles of capacity building for

sustained development have consisted of (i) transfer of knowledge by formal training

40 41

and training on the job (learning by doing); (ii) promotion of behaviour change; (iii)

introduction of incentive schemes; and (iv) improvement of work processes and

management tools (WSRB 2007).

Commercialization entailed making the water department autonomous, permitting

recruitment of management and other staff through a competitive process to work

alongside a board of directors. This was crucial as the main stakeholders in the

created water company (the management and the Board) do not directly contribute

their own resources to the company. One then requires to recruit individuals who are

likely to pursue the “public interest”. If the right people are not recruited, things could

go very wrong.

Commercialization of course should take into account equity issues by using block

tariffs adjusted for inflation, with cross-subsidization across water users such as

through providing cheaper water through water kiosks in informal settlements.

Unlike Nairobi, Nyeri town does not have cartels that control the supply in informal

settlements. One problem with cartels in Nairobi is that they can influence water

supply in their areas and hence the tariffs that they charge for the water.

The NYEWASCO was incorporated as an independent company owned by the Nyeri

Municipal Council in 1997, after the council realized it could not offer efficient water

services to the residents of Nyeri town (Wambua 2004). Through GTZ’s technical

inputs and the willingness of Nyeri Municipal Council to free its grip on the water

department, NYEWASCO started its operations in 1998.

The commercialization of the Nyeri Town water supply worked very well, after

the new water company got financial and managerial autonomy. In its board sat a

Chairman and a corporate management team comprising of a Managing Director,

Commercial Manager and Technical Manager. Legally, NYEWASCO is an agent of

the Nyeri Municipal Council. Under the agency agreement signed in 1999, to regulate

the relations between the Municipal Council and NYEWASCO, water infrastructure

valued at KSh 509.7 million was passed on to NYEWASCO. NYEWASCO also

absorbed all staff from the Municipal Council’s water department (Wambua 2004).

NYEWASCO is regarded as a success story on commercialization of water services

in Kenya and has become a “learning centre” for many local water utilities, including

the NWSC. The Nairobi City councilors went to Nyeri to study the modus operandi

of the water company, before the reforms were undertaken in Nairobi. The Nyeri

project therefore gave courage to the NCC to proceed with the water reforms. This was

however a two-way process, with Nyeri councilors for example also visiting the NWSC

42 43

to study its sewerage management. GTZ has also learned from the success of Nyeri.

Taking water as a business, it has promoted syndication of water supply in several

small towns in Western Kenya, whereby water to these towns are supplied by a single

company to exploit economies of scale.

The success of the Nyeri water company was due to various factors. According

to some stakeholders, one reason for the ease of the commercialization is that the

Nyeri Council kept good books of their accounts. The local authority could therefore

tell that it had been subsidizing the water department, and hence making losses.

Consequently, it was easy to persuade the authority to let go of the water department

in order to stop this subsidy. This happened even before the countrywide water sector

reforms were undertaken. Another factor is the quality of staff, management and

leaders involved in the water utility. Unlike the other pilots, these people were more

educated, with some councilors university graduates. The good performance is also

attributed to the fact that it is easier to manage the water supply of a small town

(50-60,000 people). Unlike NWSC, NYEWASCO was able to fund expansion of water

supplies even without donor support, increasing its water capacity from 6000 m3 to

9000m3 per day (see below).

NYEWASCO is run on strict corporate lines with water revenues being ploughed

back into improving water and sewerage provision. According to Wambua (2004):

Its Kamakwa water treatment works production capacity had increased by 50% •

from 6,000m3 / day to 9,000m3 per day.

Complaints of water turbidity have been eliminated.•

Reported water pipe bursts are attended to promptly 24 hours a day.•

It was continuously employing new workers to improve on service delivery.•

The number of new registered connections increased from 6,586 in 1999 to 8,318 in •

March 2003.

Over the same period, metered connections jumped from 6,721 to 9,271.•

It had established retail water kiosks for the poor sections of the municipality while •

slum residents paid KSh 12 for a cubic meter of water. On the other hand, rich

neighbourhoods and corporations e.g. Mt. Kenya Bottlers (a Coca-Cola subsidiary)

and tourist lodges using more than 100m3 of water daily paid KSh 75 per cubic

meter or 50 per cent above the domestic tariffs.

It had created employment without taxing the poor by selling water to kiosk •

operators who sell it to poor residents at affordable rates.

It had ensured lower rates for public institutions e.g. local schools and medical •

facilities.

It had pursued needs-driven commercial policies, for instance, interrupting supply •

42 43

to the local golf club in times of scarcity.

It changed its main source of water from Nairobi River that was drying because of •

farming activities upstream to Itooni River, hence saving the river that flows all the

way to the Kenya capital.

It had cut down water losses from 55% to 36-40%, one of the lowest UFW rates the •

country.

Because of these practices, NYEWASCO was boasting of a water surplus of 1000m• 3

per day and was negotiating for a loan from KfW for expansion31.

It was collecting over KSh 8 million per month and serving 50- 60,000 people.•

91.6% of its clients expressed satisfaction with its front desk attendance. More •

significantly, 81.1% were satisfied with the quality of water supplied. While 41.6%

were not happy with its prices, 76.8% got their monthly bills promptly.

In 1990, the Municipality could produce only 2,171,309 m• 3 of water, selling

1,388,687m3 meaning it was losing over 700,000m3 of water while earning KSh

8,864,109. In 2003, NYEWASCO produced 908,469m3 of water and sold 516,442m3

for KSh 24,692,305, indicating improved efficiency.

According to WSRB (2007), NYEWASCO has achieved all the major targets set in

1998. It doubled the annual revenue, expected to reach KSh 120 million in 2007. The

revenue collection efficiency is about 98% on average, with 10-25% of the revenues re-

invested to improve service provision, especially to the poor, through water kiosks in

densely populated low-income areas and informal settlements. Other achievements

include (WSRB 2007):

The use of alum powder instead of lumps reduced the alum usage by over 50%, •

leading to cost savings on chemicals.

The recirculation of wash water resulted in energy savings of more than 30%.•

UFW dropped from 46% in 1999 to 30% in 2006.•

Staff per thousand connections down to 7 in 2006 from 24 in 1998.•

Cost coverage increasing/ operation and maintenance cost coverage achieved.•

Water production capacity has increased to 27,000m• 3 per day, increasing service

hours from an average of 10 hours to 24 hours.

In a 2002 survey, 76-81% of the consumers expressed satisfaction with the service •

delivery; quality of the supplied water; receipt of (correct) bills; and consumer

31 In 2003, this German agency agreed to fund the US$10.5 million rehabilitation of the Nyeri town water system (Water & Water International, May 2003). The objective of the project was to expand water treatment plants and water intake, and rehabilitation of the sewerage treatment works. The project would also develop sewer infrastructure to homes and businesses. The project would increase water intake from 8,000m3 per day to 26,000m3 per day. In 2006, the interest rate on the loan was reduced from 6.5% to 2.5% to enable the financial sustainability of the project after completion. The grace period was also increased to 10 years.

44 45

service. However, only 53% expressed satisfaction with sewerage services, indicating

that more requires to be done in this area.

44 45

6. FINDINGS AND CONCLUSIONS

In this study, we selected two main projects: the BISS and the NWSP. These are

compared to the TDIP; and the Nyeri Town Water Supply System, respectively. The

study focused on the following issues:

Assessment of the individual project’s sustainability. •

Identification of important spillovers (or lack of) in terms of human resources •

development; capacity building; and institutional and policy reforms. The spillovers

may also be in the form of new technology spread to other projects; new forms of

revenue generation; stimulation of local private sector (e.g. construction); impacts of

donor policy and practice; impacts on government policy and regulation, and so on.

Factors explaining such institutional impacts.•

Assessment of the influence of donor policy and practice on such impacts (possibly •

related to policy development, ownership and capacity development).

Comparison of BISS with TDIP. What accounted for the poor record of irrigation •

projects in the Kenyan coastal region? Both settlement and estate irrigation schemes

on the Tana River are quite vulnerable to flooding. The interviewed stakeholders

also cited lack of infrastructure in the affected areas as a major problem.

Comparison of the NWSP with the Nyeri Town Water Supply System, with the •

latter often taken to be a success case of water services commercialization. What

lessons did the NWSP learn?

In these section, we pay particular attention to the two main hypotheses regarding

sustainability of aid-financed infrastructural services, namely (i) institutional effects

(spillovers) are important; and (ii) that the nature of the aid relationship matters,

which reflect the analytical framework as captured especially by the first four bullets

above.

6.1 Sustainability of the infrastructural services

6.1.1 Irrigation

The main objective of BISS was to alleviate landlessness in the overpopulated

agricultural areas of the country; provide employment; and increase the output of

cotton for export. The project failed to meet its objectives (as described in the paper).

BISS proved to be costly. The project’s settlement component has been described

as the most expensive scheme in the world, with families settled at a cost of about

$55,000 per household. The project suffered from conceptual and economic problems

46 47

including settlement issues; poor incentives for production; inability to exploit

economies of scale; poor crop yields; housing problems; inappropriate technology; and

institutional and management problems. A whole range of factors therefore explain

the project’s non-sustainability, As documented in the paper, these include poor

planning, design and administration of the project by the World Bank, the government

and NIB. The institutional framework was not geared to foster a pioneer spirit

amongst the settlers. The project faced and continued to face technical problems that

escalated costs, depressed returns and made operations difficult. Under pressure from

the World Bank, the government attempted to dismantle some of the deficiencies,

including making the scheme more autonomous and abolishing the Cotton Board

(Howells 1985).

According to Howells (1985), many of the problems that led BISS to under-

perform are unique to the project and it is perhaps an overreaction to dismiss

settlement schemes out of hand. However, the feasibility of moving people en masse

into inhospitable areas and expecting them to settle permanently and perform

economically remains in doubt. While the “estate” type developments are one method

of tackling the joint problems of unemployment and agricultural output, they do little

to satisfy the Kenyans’ hunger for land. Shortage fertile land is a big issue for Kenya’s

development, with about eighty seven percent of the country’s landmass arid or semi-

arid, not suitable for arable farming.

The main objective of TDIP, on the other hand, was to increase rice production to

enhance self-sufficiency in Kenya. The project had four major innovations, which were

pilots for the agricultural sector in Kenya: (i) the introduction of a large-scale estate

management system; (ii) the utilization of large-scale mechanization technology in the

project; (iii) the development of high-yield rice varieties suitable for the coastal region;

and (iv) double-cropping of rice, another first in Kenya. TARDA was the executing

agency.

The objective of the project was also not achieved. Immediately after the project was

completed, the site sustained enormous damage from floods caused by El Nino in 1997.

The site is still under rehabilitation efforts, with only 30% complete (in 2007).

What explains the non-sustainability of the project? The project, according to JBIC,

was completed successfully and its subsequent destruction by the 1997 El Nino floods

was an Act of God. TDIP was not fully rehabilitated due to an alleged lack of resources

both by donors and the government.

46 47

6.1.2 Urban water supply

The main objective of the NWSP was to expand the water supply system in the

project area from 194,000m3 per day at the time of appraisal, to 492,000m3 per day as

of 2002, in order to meet the growing demand for water in Nairobi. The total scope of

the project consisted of seven components. The Japanese ODA loan portion covered

one of these: the construction of transmission pipelines. The government and the NCC

were the borrowing and executing agencies.

As warned in the Japanese Ministry of Finance Evaluation of the project (Fiscal

Year 1996), even though the Japanese portion of the project was completed without

problems, it was essential for the donors to cooperate with one another in monitoring

the NCC’s fiscal management. The Evaluation noted that while the project did

achieve the goal of alleviating water shortages and improving sanitary standards,

the sustainability of the project would depend on whether water fees are charged and

adequate revenues raised. There was a concern whether there would be enough effort

on the Kenyan side to improve collection rates and reduce UFW.

A push for good governance in the last decade or so has also had an impact in the

water sector including NWSP. A new water policy in Kenya came into effect in 1999,

redefining the role of the government as to focus on regulatory and enabling functions

rather than direct service provision. The institutional framework for service delivery

under the Water Act (2002) is supported by all the donors active in Kenya’s water

and sanitation sector. The influence of donors has been most profound throughout

the reforms process. The World Bank in particular has played a key role in the global

water sector (Lamba and Memon 2005).

The NWSC, weaned from the WSD of the City Council, is the principal services

provider to the city’s more than three million people. It was officially launched

on August 19, 2004. It operates along the lines of a private enterprise, with an

autonomous board of directors. The company operates as an agent of the Nairobi

Water Services Board that holds the license for the provision of water within the City

of Nairobi.

Discussions with stakeholders pointed out that no major water project has been

implemented since 1994, with additional investments limited by a shortage of

resources, undermining the sustainability of the NWSP. The NWSP (‘Chania 3’) was

expected to be followed by another project (‘Chania 4’) to bring more water into Ndaka-

ini Dam. This however was not implemented. The donors were discouraged by poor

governance in the country during the regime of President Moi.

48 49

Officials of the NWSC say they have enhanced the sustainability of the project by

managing to reduce the UFW from about 52% in 2001 to about 37-40% in 2007 by

attending to physical water leaks, reducing illegal connections, controlling carwash

and improving the water metering-billing cycle. The ultimate target is 20-25%. The

main challenge is that much of the water supply to informal settlements in Nairobi is

operated by illegal cartels that have proved difficult to dismantle. The cartels also use

cheap connection materials that have undermined the quality of the water supplied

to these areas. The water company was currently collecting 60% of potential revenue,

compared to 30% when it started operations in 2004. The NWSC currently handled

230,000 accounts, out of a potential 400,000.

The Nyeri Municipal Council took over the provision of water services from the

Central Government in 1982 (Wambua 2004). The formation of WSD in the Council in

1995 did not improve water service delivery because water revenues went to the Nyeri

Municipal Council Treasury and were often diverted to non-water areas. In June 1996,

the Nyeri Municipal Council put a request to the GTZ to support the privatization of

Council’s WSD. GTZ has been involved in advising several Kenyan local governments

on the commercialization of their water services.

The NYEWASCO was incorporated as an independent company owned by the

Nyeri Municipal Council in 1997. Through GTZ’s technical inputs and the willingness

of Nyeri Municipal Council to free its grip on the water department, NYEWASCO

started its operations in 1998. The commercialization of the Nyeri Town water supply

worked very well and stakeholders are agreed that NYEWASCO is a success story on

commercialization of water services in Kenya.

The success of NYEWASCO was due to several factors. According to some

stakeholders, one reason for the ease of the commercialization is that the Nyeri

Council kept good books of their accounts. The local authority could therefore

tell that it had been subsidizing the water department, and hence making losses.

Consequently, it was easy to persuade the authority to let go of the water department

in order to stop this subsidy. This happened even before the countrywide water sector

reforms in early 2000s. Another factor is the quality of staff, management and leaders.

Unlike in the other pilots, these people were more educated, with some councilors

university graduates. The good performance is also due to the fact that it is easier to

manage the water supply of a small town, with NYEWASCO serving only 50-60,000

people, compared to the NWSC’s over 3 million people.

Unlike NWSC, NYEWASCO has been able to fund expansion of water supplies from

its own resources; increasing its water capacity from 6000 m3 to 9000m3 per day, even

48 49

though it has received financial support from a German development agency, KfW, to

expand its water supply capacity.

6.2 Institutional spillovers and explanatory factors

6.2.1 Irrigation

The most interesting “institutional spillover” in both the BISS and TDIP cases is

probably the lessons drawn from the problems encountered by the projects. According

to Howells (1985), BISS provides useful insights into the practical problems of

settlement and the lessons learned could be instrumental in determining a framework

for future development. In the case of TDIP, respondents are agreed that it is difficult

to determine the project’s spillovers as it collapsed before it could generate any

experiences and it would be difficult to tell a priori whether the project would have

been a failure or a success.

From early on, the failure of BISS to meet expectations caused the Kenya

Government to shy away from similar schemes (Howells 1985). It was from this lesson

that TDIP proceeded on the basis of commercial estates with a few outgrowers. There

were also plans to run the semi-completed part of the BISS as an estate in an attempt

to reduce the operating subsidy. However, such an estate-type irrigation project is

unlikely to have the same impact on unemployment and landlessness as settlement,

although it is more likely to produce an economic return. It would also do little to

satisfy the Kenyans’ hunger for land, given the shortage of good land in the country.

As discussed in the paper, there are recent efforts to revive the scheme and policy-

makers seem to have learned some lessons from past mistakes. According to an NIB

official, the key problem is that BISS was scaled back, leading to limited exploitation

of scale economies, hence increasing the operation and maintenance costs of the

project. NIB proposes to enhance the future sustainability of the project by asking the

beneficiaries to pay for the operations and maintenance costs of the scheme. Farmers

would be advised on what crops to grow, based on the crops’ relative returns, with NIB

facilitating access to markets. Commercial farmers would also be encouraged to lease

land as part of the efforts to make the scheme self-sustaining. The enhanced use of the

gravity system would also lower the operation and maintenance costs.

BISS was managed by NIB before 1984 and since 2005. According to its officials,

NIB has accumulated a lot of experience in managing irrigation schemes and BISS

is not different from the other schemes that NIB manages such as Ahero, Bunyala

and Hola, which were all undergoing rehabilitation. According to these officials, the

50 51

performance of the schemes declined with the general decline of the agricultural sector

and the economy in the 1980s and 90s due to poor governance in the country.

Stakeholders indicated that an irrigation policy paper had been proposed with

irrigation stranded across various ministries: Agriculture; Regional Development;

Water and Irrigation. The Bura Scheme for example is under the NIB in the Ministry

of Water and Irrigation; while TDIP is under TARDA in the Ministry of Regional

Development. The policy would separate production from marketing and the provision

of infrastructure. A cabinet paper had already been prepared on this. If implemented,

it would bring about institutional harmony in the sector.

As with BISS, there are plans to rehabilitate the TDIP. According to Luke et al.

(2005), the rehabilitation efforts of the project should attempt to be more bottom-up by

redressing the TDIP communities’ livelihoods vulnerability and lack of development

options. This should include addressing the negative effects of TARDA on these

communities that fall into three general categories. First is loss of both use and

ownership of prime agricultural land; loss of prime dry-season grazing (for Orma); and

increased illness and diseases, especially malaria due to TDIP rice paddy flooding.

The second is non-delivery of promised benefits from TARDA, in return for Hewani

and Kulesa villages agreeing to transfer traditional ownership of prime village land

to the TDIP. This is principally rice cultivation by the communities on the portion of

lands annexed by the project, accompanied by the sale of rice to TARDA at a fair price;

building of schools and clinics; and building of a bridge over Tana River connecting

upper TDIP (Sailoni) with Garsen town, to assist with transport and market access;

and the construction of an all weather road connecting villages to main Malindi-Lamu

highway, to assist with transport and market access. The third is that TARDA neither

consults with villages before taking action, nor informs villages when/ after taking

action.

Some stakeholders suggested that instead of looking for funding to rehabilitate

TDIP, mechanisms should be found to mitigate against the impact of events such as

the 1997 El Nino floods. The country could get external resources, but a similar thing

could happen again, hence the need to look for other ways for intervention, including

project re-design. One suggested possibility was to look for a strategic investor to work

with TARDA, to alleviate management problems at the institution. They suggested it

was not the business of government to farm; this should be left to the private sector.

A private company such as Dominion (farming in Yala) was interested in TDIP. An

Investment Conference on Rice had also been suggested. It was also possible to form a

cooperative society to take over the project, including sub-division of the land among

members. They therefore argued that the institutional arrangement for the project

50 51

was not appropriate, with its focus on a commercial enterprise. TARDA did not have a

comparative advantage in this situation, and was unlikely to efficiently operate such a

commercial venture. Hence there was need to improve the institutional arrangements

for undertaking such projects

Stakeholders also recommended the building of dams upstream (e.g. at Mutonga

and Grand falls) to reduce the probability of flooding downstream for both BISS and

TDIP, given that the flow pattern of the river and the precipitation seems to have

changed due to climate change. Another possible solution was moving from rice to

sugar cane farming, as the latter is less prone to floods, consistent with TARDA’s

proposed sugar project in the Tana delta.

6.2.2 Urban water supply

The paper has identified several institutional and other spillovers from the NWSP

of differing levels of importance. According to the NWSC officials:

Reforms in the water sector were at least partially driven by the NWSP. In •

the 1980s, a large number of bilateral donors withdrew from the water sector

complaining of poor governance in the country. Much of the funding was going

to NGOs. The World Bank then started to put pressure for water reforms to be

implemented if it was to increase funding to the sector. These reforms included

increasing the managerial autonomy of the NCC’s WSD. The government then

decided to look at reforms for the entire water sector, not just for Nairobi.

The company has trained people who had moved to other water projects.•

The NWSP constructed a school and a health centre at the dam and provided •

employment to the local community.

There has been planting of trees around the dam (more than 40,000) by a Ndaka-ini •

conservation group.

Ndaka-ini dam has become a recreation and tourism resort that is within the •

driving distance of Nairobi, with the annual Ndaka-ini Marathon held there.

The private sector has benefited from supplying the NWSC especially with •

chemicals, pipes, and so on.

There has also been transfer of technology with firms/ contractors that have worked •

with the Nairobi water company transferring those skills to other water utilities.

There are also more that 160 companies (some unregistered) that provide bottled

water, competing with the water company. Some of these companies (5 out of the 16

large ones, including Coca Cola’s Dasani) used the company’s piped water.

There is a possibility of generating power from the Ndaka-ini Dam (about 2 •

megawatts). Discussions with Kenya Electricity Generating Company were ongoing

52 53

(in 2008).

The main institutional spillover effect from the commercialization of the Nyeri

Water and Supply System (and the creation of NYEWASCO) is that it has become

a “learning centre” for many local water utilities, including the NWSC. The Nyeri-

GTZ water commercialization approach has been used as a model for the country

as a whole. The Nyeri case illustrates how successful and national institutions are

created to include greater private sector participation and to ensure their financial

involvement in urban service provision (RTI International, 2005)

The Nairobi City councilors for example went to Nyeri to study the modus operandi

of the water company, before the reforms were undertaken in Nairobi. The Nyeri

project therefore gave courage to the NCC to proceed with the water reforms. This was

however a two-way process, with Nyeri councilors for example also visiting the NWSC

to study its sewerage management. GTZ has also learned from the success of Nyeri.

Taking water as a business, it has promoted syndication of water supply in several

small towns in Western Kenya, whereby water to these towns is supplied by a single

company to exploit economies of scale.

6.3 The role of the aid relationship in generating sustainability and spillovers

6.3.1 Irrigation

BISS’s multilateral lenders were the World Bank and the EDF. Bilateral finance

in the form of grants and soft loans was provided by Britain, Finland, Holland and

Japan. BISS was therefore financed by a consortium of donors. The World Bank was

however the main actor, with the other donors taking little part in the monitoring of

the project. There is consensus that this is one example of the World Bank’s failed

projects. According to Horta (1994), the “World Bank’s 1990 Project Performance

Audit Report…indicates that project managers should have been aware of problems

and halted the project early on. Technical studies on the lack of suitable soils for

irrigation in the area existed but were not taken seriously. Project managers, rushing

to get the ill-prepared project approved by the Bank’s Board of Directors, downplayed

the risks and vastly underestimated costs”. In an analysis of 314 irrigation projects

implemented from 1967 to 2003 in 50 countries in six regions, Inocencio et al. (2005)

lists Bura among the relatively costly projects largely because of the reduction in

the actual irrigated area versus the planned area. At the World Bank, “aggressive

agricultural and irrigation expansion and establishing and attempting to meet lending

targets resulted in downgrading of technical and economic screening of projects”.

52 53

TDIP on the other hand was largely financed by OECF/JBIC,with TARDA, a

parastatal, the executing agency. TDIP utilized the “estate system“, under which all

agricultural development activities were to be managed and administered together

under one agency. One of the postulated advantages of the estate system is that it

enables efficient and profitable agricultural operations with a small investment when

compared to a settlement scheme. While this top-down approach in the design and

implementation of the project, of course, did not cause its collapse, some commentators

(e.g. Luke et al. 2005) call for a more bottoms-up approach in a future rehabilitation of

the project if it is to significantly improve the welfare of the stakeholder communities

in the Tana delta.

6.3.2 Urban water supply

NWSP was financed by a consortium of donor including OECF/JBIC, the World

Bank, the AfDB and EIB. The three funding agencies were represented by, and their

funding channeled through the World Bank (Syagga 1999). It is therefore difficult

to delineate the influence and contribution of OECF/JBIC alone, even though it

maintained its financial autonomy, by financing one component of the project. The

World Bank was a major influence on the water sector reforms adopted in the country

that saw the commercialization of water utilities, enhancing their sustainability.

The Nyeri Town Water Supply System has mainly been supported and funded

by German development agencies. According to an official, GTZ started promoting

commercialization of water services in mid-1990s with pilot schemes in Nyeri, Eldoret

and Kericho. The objective of commercialization was to promote the sustainability of

the water utilities, by shielding them from politics in the local authorities. It has been

a policy of GTZ since the 1980s to build local capacity first before seeking investment

in water projects. Investment support for example came much later in 2003, when the

German agency, KfW, agreed to fund the US$10.5 million rehabilitation of the Nyeri

town water system (Water & Water International, May 2003). The GTZ principles of

capacity building for sustained development have consisted of (i) transfer of knowledge

by formal training and training on the job (learning by doing); (ii) promotion of

behaviour change; (iii) introduction of incentive schemes; and (iv) improvement of

work processes and management tools (WSRB 2007). This approach seems to have

worked very well in Nyeri.

54 55

REFERENCES

Adams W. M. (1990), “How Beautiful is Small? Scale, Control and Success in Kenyan Irrigation”. World Development, Vol 18, No. 10, October.

Arakawa, Hiroto and Jin Wakabayashi (2006), “Budget Support and Aid Effectiveness: Experience in East Asia”. JBIC Review, No. 14.

Barro, Robert J. (1991), “Economic Growth in a Cross Section of Countries”. The Quarterly Journal of Economics, Vol. 106, No. 2, pp. 407-443.

Burnside, Craig and David Dollar (1997), “Aid, Policies, and Growth”. World Bank Policy Research Paper.

Burnside, Craig and David Dollar (2000), “Aid, Policies, and Growth”. The American Economic Review, Vol.90, No.4, pp 847-868.

Collignon, Bernard and M. Vézina (2000), “Independent Water and Sanitation Providers in African Cities: Full Report of a Ten-Country Study”. World Bank, Water and Sanitation Program.

Dollar, David and Victoria Levin (2005), “Sowing and Reaping: Institutional Quality and Project Outcomes in Developing Countries”. World Bank Policy Research Working Paper 3524.

Easterly, William (2001), The Elusive Quest for Economic Growth. MIT Press, Cambridge.

Easterly, William and Ross Levine (1997), “Africa’s Growth Tragedy: Policies and Ethnic Divisions”. The Quarterly Journal of Economics, Vol. 112, No. 4, pp. 1203-1250.

Ecosystems Ltd (1983), “Tana Delta Ecological Impact Study”. Nairobi, Kenya.

Gulyani S., D. Talukdar and R.K. Kariuki (2005). “Water for the Urban Poor: Water Markets, Household Demand and Service Preferences”. World Bank Water Supply and Sanitation Sector Board Discussion Paper No. 5.

Horta K. (1994), “Troubled Waters: World Bank Disaster along Kenya’s Tana River”. Multinational Monitor, July/ August.

Howells, Keith (1985), “Settlement Projects as a Solution to Landlessness and Urban Drift in Kenya”. http:/ dspace. lib. cranfield. ac. uk: 8080/ bitsream/ 1826/ 535/ 2/ SWP. 126. pdf.

Inocencio A., M. Kikuchi, D. Merry, M. Tonosaki, A. Maruyama, I. de Jong, H. Sally and F. Penning de Vries (2005), “Lessons from Irrigation Investment Experiences: Cost-reduction and Performance-enhancing Options for sub-Saharan Africa”. Paper submitted by the International Water Management Institute to the African Development Bank.

JBIC (2001), Tana River Delta Irrigation Project: An Evaluation.

54 55

JBIC (2002), Nairobi Water Supply Project: An Evaluation.

Kremer, Michael (1993), “Population Growth and Technological Change: One Million B.C. to 1990”. Quarterly Journal of Economics, Vol.108, No.3, pp.681-716.

Lamba, Davinder and Ali Memon (2005), “Water Sector Reforms in Urban Africa: A Road to Mercantilization?”. Paper Presented at a UCLA Conference on “Global Cities: Water, Infrastructure and Environment”, July.

Luke, Quentin, Richard Hartfield, Pamela Cunneyworth (2005), “Rehabilitation of the Tana Delta Irrigation Project Kenya: An Environmental Assessment”. Report Prepared for Critical Ecosystem Partnership Fund, July.

Mwega, Francis M. (2003), “Financing International Cooperation in a Globalizing World: A Case Study of Kenya”. Paper prepared for the UNDP Project on Public Finance in a Globalizing World: Innovations in Theory and Practice.

Mwega Francis. M (2004), “Foreign Aid, Monetary Policy and Economic Growth in Kenya”. Paper prepared for Kenya Institute for Public Policy Research and Analysis (KIPPRA).

Ndun’gu A.G. (2003), “Ndaka-ini Dam and Drainage Basin: Impact Within, Without and Beyond”. Mimeo.

Njeru, James (2004), “The Impact of Foreign Aid on Public Expenditure: The Case of Kenya”. AERC Research Paper No. 135, March.

OECD-DAC (2005), Promoting Pro-Poor Growth: Infrastructure.

Oosterban R. J.(1988), “Effectiveness and Social/ Environment Impacts of Irrigation Projects: A Critical Review”. International Institute for Land Reclamation and Improvement (ILRI) Annual Report, Wageningen, The Netherlands.

RTI International (2005), “Mobilization of Private Sector Resources for Urban Water Services in sub-Saharan Africa: Case Studies of Water Provision in the City of Dakar, Senegal and the Cities of Nyeri and Eldoret, Kenya”. Paper Submitted to the Municipal Finance Task Force.

Ruigu, George M. (1988), “Large Scale Irrigation Development in Kenya”. Report No. 23/1988 for the Food and Nutritional Planning Unit, Ministry of Planning and National Development, Nairobi, Kenya.

Sachs, J.D., Warner, A. (1997), “Sources of slow growth in African economies”. Journal of African Economies, Vol 6, pp 335– 376.

Syagga P. M.(1999), “The Third Nairobi Water Supply Project evaluation”. Paper Prepared for IDRC.

The Kenya Wetlands Forum (2005), “Development, Conservation and People’s Livelihoods at Cross-roads: The Proposed Sugar-cane Project in the Tana Delta, Tana River District, Coast Province, Kenya”. March.

56 57

Thomson J., I.T. Porros, E. Wood, J.K. Tumwine, M.R. Mujwahuzi, M. KatuiKatua and N. Johnson (2000b), “Waiting at the Top: Changes in Water Use in East Africa over Three Decades”. Environmental and Urbanization, Vol 12, No. 2.

Wambua, Sammy (2004), “Water Privatization in Kenya”. Paper Prepared for the Heinrich Böll Foundation.

World Bank (1984), World Bank Development Report.

World Bank (1998), Assessing Aid. Oxford University Press.

World Bank (2001), “Kenya: Review of the Water Supply and Sanitation Sector. Report 22182”. Washington D.C.

World Bank (2004), “Kenya: Nairobi Water and Sewerage Restructuring Project: Project Appraisal Document 28825-KE”. Washington D.C.

World Bank (2005) Water and Sanitation Program, “Rogues No More? Water Kiosk Operators Achieve Credibility In Kibera”. June.

WSRB (2007), “Socially Responsible Commercialization”. Nairobi, Kenya.

56 57

APPENDIX

Table A1.1: Japanese supported projects in Kenya

Name of the Project SectorDate of

approvalAmount JY

million

Kenya Broadcasting Corporation Modernization Project Telecommunications 28/06/1989 16,198

Mombasa Diesel Generating Power Plant Project Electric power and gas 31/03/1995 10,716

Mombasa Airport Improvement Project Transportation 30/03/1990 9,010

Telecommunication Expansion Project Telecommunications 03/03/1997 8,724

Telecommunications Modernization Project Telecommunications 07/02/1980 7,878

Kilifi Bridge Construction Project Transportation 20/01/1986 7,840

Cement Plant Rehabilitation Project mining and manufacturing 30/03/1990 7,674

Sondu Miriu HydropowerProject Electric power and gas 03/03/1997 6,933

Tana River Basin Road Construction Project (II) Roads 30/3/1990 6,523

Telecommunications Modernization Project (II) Telecommunications 27/07/1983 6,450

Tana River Basin Road Construction Project (I) Roads 2/4/1982 6,100

Tana River Delta Irrigation Project Irrigation and flood

control30/03/1990 6,031

Grain Silo Construction Project Agriculture, forestry and Fisheries 18/07/1985 5,521

Nairobi Water Supply Project Social services 17/03/1989 5,342

Greater Nakuru Water Supply Project Social services 30/03/1987 5,017

New Nyali Bridge Project Transportation 18/12/1975 4,900

Mombasa Airport Project Transportation 09/05/1973 4,086

Rural Road Project Transportation 15/08/1978 3,381

Horticultural Produce Handling Facilities Project Agriculture, forestry and Fisheries 28/10/1993 2,016

New Mtwapa Bridge Construction Project Transportation 15/07/1977 750

Engineering Services for Sondu Miriu Hydropower Project Electric power and gas 17/10/1989 668

Engineering Services for Tana River Delta Irrigation Project

Irrigation and Flood Control

30/3/1987 588

Engineering Services for Mwea Irrigation Project Project Irrigation and floor control 28/10/1993 572

Engineering Services for Grain Silo Construction Project

Agriculture, forestry and Fisheries 13/02/1984 391

Source: JBIC

58

Table A2.1: Performance of Kenya’s major irrigation schemes, 1985/86 - 2004/05*

1985/86 1990/91 1995/96 2000/1 2004/05*Mwea

Hectares cropped (ha) 8,271 5,802 5,901 10,590 10,000Number of plots-holders 3234 3240 3243 3,381 5,400Paddy yields (Million tons) 26407 25504 25887 45,810 59,520Gross value of crop (KSh millions) 84.24 113.36 352.8 1,238 1,786Payments to Plot-holders (KSh million) 29.16 61.98 230.8 - 1,066Ahero

Paddy yields (Million tons) 4378 2986 2054 1,222 741Perkerra

Onions yields (Million tons) 587 1630 889 102 -Chillies yields (Million tons) 234 368 0 32 -Water Melons (Million tons) - - - -Paw paw (Million tons) - - 220 - -Cotton - - 208 - -Bunyala

Paddy yields (Million tons) 1259 403 920 491 1,068West Kano

Paddy yields (Million tons) 2650 3890 1645 1,742 1,348Sugar cane - - - - -Tana

Cotton yields (Million tons) 1839 - - - -Bura

Cotton yields (Million tons) 5182 1678 - - -All (mainly 7) Schemes

Hectares cropped 13950 9365 9039 12,431 10,832Number of plots-holders 7376 7688 7243 5,348 6,660Gross value of crop (KSh millions) 149.06 165.12 444.94 1,291.3 1,880.6Payments to Plot-holders (KSh millions) 57.24 88.26 277.92 26.4 1,115.0

Source: Kenya, Economic Survey, Various Issues, * Provisional

JBICI Research Paper No. 36-1

July 2008

ISSN 1347-5703

4-1, Ohtemachi 1-chome, Chiyoda-ku, Tokyo 100-8144, Japan

Tel: 03-5218-9720 （JBIC Institute）Internet: http://www.jbic.go.jp/ Recycled paper

JBICI R

esearch Paper No. 36-1

JBIC InstituteJapan Bank for International Cooperation

July 2008

Aid Effectiveness to Infrastructure:A Comparative Study of East Asia and

Sub-Saharan Africa

Framework Paper

Aid Effectiveness to Infrastructure: A

Com

parative Study of East Asia and Sub-Saharan A

frica, Framew

ork Paper