Coast Branch Response to CIDP Mombasa County 2018-2022

Organisation Institute of Certified Public Accountants of Kenya, Coast Branch

Item Public Participation Forum, Tononoka Hall

Date 19th December 2017

Document Response to Mombasa County Government

2nd County Integrated Development Plan for year 2018 to 2022

Addressed to The County Secretary,

County Government of Mombasa

Contact Address Institute of Certified Public Accountants of Kenya - Coast Branch Jubilee Insurance Arcade - Room 16 B, Moi Avenue Tel: 0732 352476

Coast Branch Response to CIDP Mombasa County 2018-2022

1.0 Preamble

The first County Integrated Development Plan (CIDP) for Mombasa County covered the period 2013

to 2017. We believe there we considerable successes but also certain gaps in attaining the desired

goals. We believe this second County Integrated Development Plan (CIDP), will fill in the gaps and

also move towards attaining the desired goal of making Mombasa County a “vibrant regional

commercial hub with a high standard of living for all residents of Mombasa County”.

We do believe that the CIDP, will be in line with Vision 2030 objective and be prioritised annually

in the Annual Development Plan, through the County Fiscal Strategy paper and annual development

budget.

We understand that achieving this shared vision is not going to be possible by the County

Government of Mombasa without the co-operation and support from the National Government, the

development finance institution’s, commercial, industrial and financial institutions, and last but not

the least the people of Mombasa. The Institute of Certified Public Accountants of Kenya, Coast

Branch as a stakeholder in the realisation of this share vision, would request the consideration of the

following in making the CIDP for 2018-2022.

Coast Branch Response to CIDP Mombasa County 2018-2022

2. About the Institute of Certified Public Accountants of Kenya

The Institute of Certified Public Accountants of Kenya (ICPAK) was established in 1978. The

Institute is a member of the Pan-African Federation of Accountants (PAFA) and the International

Federation of Accountants (IFAC), the global umbrella body for the accountancy profession. The

Vision of the Institute is ‘A world class professional accountancy institute‘, while the Mission

is ‘To develop and promote internationally recognised accountancy profession that upholds public

interest through effective regulation, research and innovation’.

The Institute is guided by the following core values: Credibility, Professionalism and

Accountability. The Institute draws its mandate from the Accountants Act (no 15 of 2008). The

Act prescribes the following as the functions of the Institute:

To promote standards of professional competence and practice amongst members of the Institute

To promote research into the subject of accountancy and finance and related matters, and the

publication of books, periodicals, journals and articles in connection therewith;

To promote the international recognition of the Institute.

To advise the Examination Board on matters relating to examinations standards and policies;

To advise the Minister on matters relating to financial accountability in all sectors of the

economy;

To carry out any other functions prescribed for it under any of the other provisions of this Act or

any other written law and

To do anything incidental or conducive to the performance of any of the preceding functions.

Coast Branch Response to CIDP Mombasa County 2018-2022

3. WATER, SEWERAGE AND SANITATION MOMBASA COUNTY

This is a very critical component of Mombasa County, realising its vison of having high standards of

living for all its residents. This is covered by the World Bank’s Sustainable Development Goal No.

6. Clean Water and Sanitation - Ensure Availability and Sustainable Management of Water

and Sanitation for all. Hence it is our belief that support for a well - developed fund raising

proposal from Institutional development partners would be there, plus could also be achieved

through Public Private Partnership.

TARGETS TO ACHIEVE SDC NO.6

6.1 By 2030, achieve universal and equitable access to safe and affordable drinking water for all

6.2 By 2030, achieve access to adequate and equitable sanitation and hygiene for all and end open

defecation, paying special attention to the needs of women and girls and those in vulnerable

situations

6.3 By 2030, improve water quality by reducing pollution, eliminating dumping and minimizing

release of hazardous chemicals and materials, halving the proportion of untreated wastewater and

substantially increasing recycling and safe reuse globally

6.4 By 2030, substantially increase water-use efficiency across all sectors and ensure sustainable

withdrawals and supply of freshwater to address water scarcity and substantially reduce the number

of people suffering from water scarcity

6.5 By 2030, implement integrated water resources management at all levels, including through

transboundary cooperation as appropriate

6.6 By 2020, protect and restore water-related ecosystems, including mountains, forests, wetlands,

rivers, aquifers and lakes

6.a By 2030, expand international cooperation and capacity-building support to developing countries

in water- and sanitation-related activities and programmes, including water harvesting, desalination,

water efficiency, wastewater treatment, recycling and reuse technologies

6.b Support and strengthen the participation of local communities in improving water and sanitation

management

Coast Branch Response to CIDP Mombasa County 2018-2022

This Goal is also indirectly linked to the following other Sustainable development Goals.

SDG 3 Ensure Healthy Lives and promote well-being for all at all ages.

SDG 7 Ensure access to affordable, reliable, sustainable and modern energy for all.

SDG 11 Make cities and Human settlements inclusive, safe, resilient and sustainable

SDG 14 Conserve and sustainably use the Oceans, Seas and Marine Resources for sustainable

development.

Current Situation

The present water demand for Mombasa County is estimated at182,000m³/day. Current production is

about 46,500m³/day. The available supply can therefore meet only about 30% of

demand. Consequently the available water in Mombasa is distributed on a rationing program.

The Key Sources are situated in other Counties hence dependent on the Goodwill of the

Governments of these County’s, which also have rapidly growing towns and urban settlements of

their own, which in future will receive priority. The Key ones being Sabaki dam (Kilifi County) and

Mzima Spring (Taita-Taveta County).

Proposed Solution As Mombasa County is on the Coastline, it has the opportunity to have a water desalination plant,

which would ease the chronic water problem facing the County and Mombasa City resident of clean

water for sanitation. It could also have a sewerage treatment plant within the same project, which

treats the sewerage before putting it into the ocean.

This would give Mombasa County an increased degree of Independence from the neighbouring

Counties and resolve the chronic and perennial water shortage in the County. Plus protect the marine

eco-environment, which supports the fishing industry.

International Example: The Barcelona desalination plant: http://www.water-

technology.net/projects/barcelonadesalinatio/

Brief Details

Capacity: Drinking water output of 200,000m³/day, it is the largest reverse osmosis-based

desalination plant in Europe. It was awarded the "Desalination Plant of the Year" award by the

Global Water Awards 2010. (Roughly Mombasa’s full requirement).

Coast Branch Response to CIDP Mombasa County 2018-2022

Builders: The plant was built by Aguas Ter Llobregat (ATLL), the public utility that is responsible

for the supply of water to the city of Barcelona and the surrounding eight districts. It was intended to

increase the water security and availability in the Barcelona metropolitan region. The contract was

awarded in 2007 and plant was officially inaugurated in July 2009. It is currently supplying drinking

water to about 1.3m inhabitants in the region.

Cost and Financing: The project was co-financed by the EU, which contributed €150m. The

Spanish Ministry of Environment contributed €52m, while €28m was contributed by ATLL. Total

Cost Euro 230 million

Financing Solution

There is goodwill from international development agencies for such projects, and it is likely to get

partial grant, partial funding possibly using Public Private Partnership, including World Bank,

Islamic Development Bank, African Development bank and balance which is not funded as grants be

borrowed, maybe as a Green Bond.

http://blogs.worldbank.org/ppps/art- laying-bricks-infrastructure-asset-class

As the County Government of Mombasa, is unlikely to have the revenue resources to undertake the

project, its most feasible course of action would be to finance the water desalination and waste water

and sewerage disposal projects using Public-Private Partnership with Official Development

Assistance as the catalyst to finance the project through Mombasa Water and Sewerage Company

Limited. The Private sector financing with would be repaid by the charges for the water services

provided to the County’s residents. This could be part grant, part loan.

Alternatively – Islamic Sharia Compliant funding

Due to the changes in the various acts Income Tax Act, Public Financial Management Act, which

have made possible issuance of a Sukuk by County Governments, Mombasa County Government

could pioneer with a Sukuk for the Water and Sewerage Project. A feasible plan would be for

Mombasa Water & Sewerage Co. to do the Sukuk issuance An infrastructure Sukuk has to be either

asset based or asset backed, Mombasa Water and Severage Company Limited., would provide the

land and equipment to back the Sukuk, and on completion of the payment of the Sukuk, would be the

owner of the project assets. The repayment would be from the cash flows generated from charging

Coast Branch Response to CIDP Mombasa County 2018-2022

the Mombasa residents for water, which is also currently happening. The Sukuk listing should be in

either the Dubai International Financial Centre, Qatar International Financial Centre, Bursa

Malaysia (formerly known as Kuala Lampur Stock Exchange) or London Stock exchange (my

preferred listing exchange). It could also be structured as a Green Sukuk.

An alternative Islamic Sharia Compliant mode is Istisna’a – It is works like an Islamic sharia

compliant version of Build Operate and Transfer method of Public Private Partnership.

PS: Sukuk (Islamic Sharia Compliant equivalent of a Bond)

Links to Sukuk use in Infrastructure funding http://www.irti.org/English/Research/Documents/Conferences/IDB-AM-

41/Sukuk%20for%20Infrastructure%20Development-Indonesia%20Experience.pdf

http://thatswhy.isdb.org/irj/go/km/docs/documents/IDBDevelopments/Internet/thatswhy/en/suku

k/what-is-sukuk.html

http://www.mifc.com/index.php?ch=28&pg=72&ac=53&bb=uploadpdf

https://www.brookings.edu/blog/africa-in-focus/2013/10/17/islamic-sukuk-finance-can-help-meet-

africas-infrastructure-gap/

http://siteresources.worldbank.org/FINANCIALSECTOR/Resources/GHIATH_Developing_SUKUK_markets.pdf

https://www.sukuk.com/

https://www.sukuk.com/whos-who/london-stock-exchange-921/

http://www.lseg.com/sukuk

http://www.londonstockexchange.com/specialist-issuers/islamic/20151030-sukuk-list-live.pdf

Coast Branch Response to CIDP Mombasa County 2018-2022

4. BUSINESS SUPPORT FOR YOUTH - ALTERNATIVE METHODS OF FUNDING

The majority of the people of Mombasa County are Youth and a significant portion are

unemployed or underemployed. Some might want to go into Business and become entrepreneur’s,

however they lack capital and skills in order to run a commercial enterprise. My premise is

support to small business is essential to create jobs. Traditional sources of funding are usually

limited due to need for collateral to be used as security.

Proposed Operational Solutions

A Small Business Support Program, under the County Trade Department, which assists in

entrepreneurial skills development, assists in developing a viable business plan, evaluates

opportunities for businesses, help’s in sourcing finance. In the City of Calgary there is a Program

called Momentum, see link http://www.momentum.org/

It would look at business opportunities in area’s like the Blue Ocean Economy, which got

significant taxation incentives including accelerated investment allowances, etc. We create a

proper value chain, which starts right from Ocean fishing and Prawn farming, to freezing plants,

to canning units, to packaged sea foods, including developing export oriented packaging both raw

fish and cooked canned fish products, possibly under the Special Economic Zone being set up in

Mombasa. Each link in the value chain could be owned and operated my youth owned businesses.

Same could be extended to other agricultural products grown in the Coast region, tamarind,

Mango, Line– process into pickles and sauces and pack, market and export. Also, construction

industry products like building blocks, clay block, using low cost concepts like Hydro –Foam

blocks for low cost housing units etc. could be encouraged.

Proposed Financing Solutions

Crowd Funding both Conventional and Islamic Sharia Compliant. The Small Business program, would direct and assist in sourcing from international and regional initiatives. See below:-

Kickstarter – See Link https://www.kickstarter.com/about?ref=nav – Normal

Shekra - http://www.shekra.com/en/howitworks.php -Islamic Sharia Compliant

Venture capital for Africa https://vc4a.com/ - Regional Normal

Angel Network for Funding https://www.funded.com/?utm_source=yb&utm_medium=cpc&utm_term=angel%2Binvestor&utm_campaign=ybangelinvestor&utm_content=Angel%20Investors%20-%20HV

An Article which explains Islamic Venture Capital

http://www.eurekahedge.com/NewsAndEvents/News/328/Islamic_Private_Equity_and_Venture_Capital

Coast Branch Response to CIDP Mombasa County 2018-2022

Set up Mombasa County Government promoted Financial Institutions

1) Mombasa County Micro Finance Bank Limited

This institution could be partly, County Government owned, where all County Government

accounts would held, County Government staff encouraged to open accounts there for receiving

salaries, all small businesses supported through County required to bank there, lending to viable

Business projects, through the bank etc. The County Government would own significant

shareholding say 40%, however strategic private sector development partners like International

Finance Corporation, Commonwealth Development Corporation, East African Development

Bank. Islamic Development Bank (3 partners with 10% each) and Mombasa County Individuals

30% distributed via a private share placement as this would be restricted to Mombasa County

Residents. The Development Partners would be required to provide Long term loans as

mezzanine finance. It could latter issue both bonds and Sukuk’s depending on funding needs of

Businesses. It could be hybrid Conventional Microfinance Bank with Islamic Window.

In the Canadian province of Alberta, there is a Provincial Government owned Bank, which plays

a similar role, see link. http://www.atb.com/about/Pages/default.aspx

2) Mombasa County asset Investment Management Services Company

The Mombasa County Government together with a CMA registered Fund management company

could set up a joint venture, where by it sets ups various investment funds to mobilise capital to

be able to offer funding to its residents – always offering a conventional alternative and an

Islamic Sharia Compliant alternative. Example,

1) Start-up Venture capital fund based in Mombasa, for new companies

2) SME Venture capital Fund, for companies which have existed for at least 3 years

3) Housing Fund – Islamic Home Financing and a Mortgage fund.

The small business support program, would recommend for funding businesses, however these

funds would operate independently, as the funds available depend on investors investing no

guarantee would be given for successful funding. Hence the small business program would also

refer for funding to programs like Women Enterprise Fund and Youth Enterprise fund.

Coast Branch Response to CIDP Mombasa County 2018-2022

5. ATTAINABLE HOUSING AND HOME OWNERSHIP PROGRAM

Affordable Housing is a major service that devolved governments especially which have Cities

within them have a responsibility to provide or facilitate its provision through private sector players.

However, a major challenge to resident home ownership is the inability of the common man to buy

it in cash or pay the down payment for a mortgage. In the Canadian city of Calgary they have an

attainable housing programme Link Below http://www.attainyourhome.com/ , where by the

homes in the program are developed jointly by the devolved government entity and private

developers, the devolved government provides the land on which the housing units are built, which

becomes the down-payment for the house and a mortgage obtained for the developers price of

putting up the units. So the county resident pays a small amount up-front and gets a mortgage on a

house jointly owned with the housing entity. Once the mortgage is paid off, the resident has the

option purchase the interest of the devolved government housing entity, to own the house fully. The

mortgages could also be provided by funds set up a Mortgage Fund set by the County set up

Investment management company (see point no. 4 above).

The County could also consider setting up a program with Mombasa County based private

developers and construction companies to either develop from scratch or re-develop existing

County estates. These could be done using Real Estate Investment Trust (REIT’s), the funding

would be raised from members of the Public, the County Government would be Strategic Partner,

which provides the land and receives units in the REIT. This would also be managed by the County

Government owned Investment Management Company. Another alternative to consider would be to

launch a Housing Sukuk, to fund these projects.

7. Intra-County Light Rail – Metro System.

In any major metropolis, rapid transit system, for the masses is provided using light rail systems.

This is fast saving manhours, environmentally friendlier compared to 14 seater matatu’s and Tuk-

Tuks, which dominate the transit, and reduce significantly the congestion on the roads. It would

reduce time wasted when commuting to and from work, furthermore distances to work are

increasing. The smaller vehicular modes of transport are also costly to run, as the trains are able to

realise economies of scale and size. This project could also be financed using an infrastructure

Sukuk.

Coast Branch Response to CIDP Mombasa County 2018-2022

8. SME Business Park

One of the Vision 2030 objectives is to have a SME Business Park in all 47 Counties. The Mombasa

County Government should consider having an SME Business part, which would be for mainly local

entrepreneur’s especially Youth to create services, trade and produce light industrial goods for local

and regional consumption. It would work well with the business support to youth agenda, as it will

give them a place to operate from.

The SME Business Park project has potential to attract activity primarily in the following areas:

Value added Agro-processing of commodities grown locally like coconut, tamarind, mangoes etc.

Traditional skills and artefacts making, marketing and export

Automotive assembly, parts manufacture, recycling and repair

Electrical & Electronics, trade, service and repair

Energy products, hardware (energy efficient jiko’s) and fuel’s from re-cycled material.

Livestock & Leather Industries,

Textiles & Apparels,

Services – Business Process Outsourcing & Information Technology Enabled Services, Medical

Services, Financial Services, Logistics Hub, Ship & Container Repairs, Maintenance & Overhaul,

Hospitality.

Aqua – Processed fish and fish products both fresh-water and sea water, frozen and canned.

6. Concluding remarks

We would like to thank the reader for taking the time to read this paper, we believe some if not all

idea’s shall be taken up by the respective departments of the County Government of Mombasa,

under the able leadership of the Governor His Excellency Hassan Ali Joho and the Deputy Governor

Dr. William Kingi, and be incorporated in the Mombasa County Integrated Development plan for the

years 2018-2022. We as ICPAK Coast Branch sincerely offer the County Government of the

expertise of our members to assist in planning, budgeting and implementing the idea’s presented in

this document and matters related to Public Financial Management. We wish to enable the

transformation of Mombasa County, to be a regional commercial hub, giving all its residents a good

living standard. It could be said these idea’s are Utopian, however Utopias should exist so that

realities can be constructed and engineered…

Coast Branch Response to CIDP Mombasa County 2018-2022

Appendix : ICPAK Coast Branch Leadership

CPA Juma Yusuf – Chairperson

CPA Jack Wesonga – Vice Chairperson

CPA Mohamed Ebrahim – Secretary and CPD Convener CPA Farheen Khandwalla – Gender Representative CPA Mariam Shikanda – Youth Representative CPA Dalton Mwagogho – Taita Taveta County Convener CPA Said Hero Bwanamaka – Lamu County Convener CPA Florence Birya – Kilif County Convener CPA Mwingo Mbito – Kwale County Convener CPA Derrick Majani - Mombasa County Convener.