Kenyan county paves way for FDI-led growth

Leaders have grand plans that they say will help foreign investors and Kenyans alike

While other counties in Kenya has raised their taxes to boost revenue, Machakos county, a new county located about an hour and half's drive east of downtown Nairobi, has not changed them. Instead, it has focused on a less conventional idea: attracting foreign direct investment to create a sustainable economy.

"We sought a bigger base," says Kim Musau, CEO of Machakos Investment Promotion Board. This is the local government's investment arm, created to be the first point of contact for investors.

The entity is the first of its kind in the country and perhaps the region considering it is not under the national government.

Officials of the Sino-Africa Future Corporation Ltd have praised the board, saying project approval and the process of setting up a business in the county have been made easy. Sino-Africa is a Chinese advisory firm based in Kenya that links Chinese investors to Africa.

"The promotion agency has made things simple," says Benny Zhou, the corporation's managing director.

Creation of the board was necessitated by the large amount of interest expressed by potential investors after two forums held not long after the county was established in March 2013, officials say.

The first forum was held in May last year, barely a month after county Governor Alfred Mutua was sworn in. It attracted investment worth more than 7 billion Kenyan shillings ($79.5 million).

Six months later, Kenyan President Uhuru Kenyatta presided over the second forum, at which land for the development of the planned new Machakos City was offered.

Machakos City's plan calls for a large mixed urban development with modern buildings, hospitals, school, a variety of housing and businesses adjacent to the existing Machakos town. It is part of an ambitious county government master plan that would transform the county.

Only 809 hectares were earmarked in the first phase, to be provided at no cost to serious investors who are vetted by the agency. There was demand, however, for 13,355 hectares, officials say.

"If this were stocks in the bourse, we could say there was oversubscription," jokes Musau, who previously worked in financial managerial positions in a local telecom company before taking the top job at the investment entity.

Other qualified investors may be allotted land in other urban developments at a later stage, officials say.

The board has 10 members - three county officials and seven from the private sector. The board, whose creation was announced in October 2013, was designed to promote the county as an investment hub, facilitate and support investments, provide after-care services such as expediting utility services, and policy advocacy. "We are an adviser to the government on investment matters and we speak for the investors," Musau says.

The board oversaw the successful signing by investors of memoranda of understanding. As of June of this year, the board had deals worth about 1.6 trillion shillings lined up, backed by signed memoranda representing commitments from investors who have set forth their development designs and the required land, officials say.

Musau says that it is an indication that they are on the right track. "As a county we boast of vast land and we only had to untie it and see how it can work for us."

The board has found the most interest in four types of enterprises: manufacturing, agriculture, real estate and tourism.

Musau attributes their success to the county's smart leadership. "Investors need to be confident that their investments will be protected," he says.

Secondly, he cites allocation of free land for unlocking investment. Because land ownership is a highly touchy issue in the country, investors often shy away from it. In the past, public land was illegally and irregularly allocated, and the issue remains murky at times because the present institutional and legal frameworks are not always clear on land tenure, land use, acquisition and disposition.

The county's land distribution met with stiff resistance from a local political leader. A case was lodged in court to stop Machakos from distributing it to investors but the court did not rule in his favor. Also, Kenyatta's presence at the forum conferred his blessing on the county's plans. According to the CEO, the land is safely under the county's control and it is in the process of zoning it.

Thirdly, Machakos is in a strategic location. It lies along the highway connecting Nairobi and the port city of Mombasa. The new Mombasa-Nairobi Standard Gauge Railway project that will be built by China Road and Bridge Corporation passes through the county, too.

There is also sufficient labor available. Land allocation is subject to the condition that investors start developing within six months of acquisition. "We want our people to start benefiting from these reforms soon," Musau says, noting that the memoranda conform to the country's labor laws and rules emphasizing technology transfer.

Machakos also has some industries, including cement producers, which officials say should reduce construction costs for investors.

Often cited as the county to watch in terms of investment, Machakos' landscape should soon start changing once national authorities approve the master plan. It has undergone several revisions to incorporate investors' interests, and the CEO says it will be wrapped up by year's end.

He says the master plan has taken longer than expected in order to ensure they get it right. Given the poor planning of other cities, the plan's concepts are expected to play a vital role in balancing land use. "We are undertaking comprehensive spatial urban planning that takes satellite cities under consideration. We want to develop all the county."

The Sino-Africa Future Corp is increasing its involvement with the investment board with a focus on real estate.

"The potential of the real estate business is high," Zhou says, noting that another mega project planned by the national government, Konza Technology City, touted as an African version of Silicon Valley, is in the county and that Jomo Kenyatta International Airport is nearer Machakos than downtown Nairobi.

The Sino-Africa company has been asked to help plan a trade forum in the county. "Besides giving them exposure, the event will sharpen the county's negotiation skills," Zhou says. "Investors will also meet relevant officials."

While finding workers with the proper skills is a challenge, the board plans to formulate strategies to encourage investors to pay for skill training programs before setting up. It was a concept successfully practiced in Asia, and Musau says he thinks it can work in Kenya, too.

The investment promotion board intends to be a one-stop shop. It has 10 staff members, but the need to grow is clear. "At the moment we assume responsibilities once an investor has been cleared with the national body, KenInvest. But in the future, we would like to assume many other responsibilities to speed up the process," says Musau, noting that those services have yet to be devolved to the local level.

But it is not sitting back. Through a partnership with the World Bank's International Finance Corporation, an online portal, machakosinvest.com, has been launched.

The young entity is also working to make sure the signed memoranda are implemented. "The agreements we made have given us a lot to chew on," says Musau, smiling.

lucymorangi@chinadaily.com.cn