Executive Summary

WS Atkins International Limited was commissioned to develop the Urban Economic Plan for Kathwana as part of the UK’s Department for International Development Sustainable Urban Economic Development Programme (SUED). The aim of the programme is to support market driven growth in emerging towns and cities in Kenya. Supporting these smaller centres provides an environment to create economic opportunities and job creation in a way that balances growth across the country, develops economic sectors that can contribute towards increasing the national output and provide an incentive for minimising uncontrolled migration. The Urban Economic Plan (UEP) is an advisory document that builds on existing work and priorities identified under the County Investment Development Plan, the Integrated Strategic Urban Development Plan, and the Urban Development Policy Framework, as well as aligning and complementing work done by other donors. In doing so, it will provide a focused economic strategy for the Municipal Board and Departments to deliver economic development for Kathwana.

The purpose of the plan is to: › provide an inclusive economic strategy that can guide future development towards increasing prosperity in Kathwana; › prioritise economic activities and climate resilient infrastructure that can maximise benefits and support the development of a sustainable economic future for Kathwana; bring together stakeholders on deciding the economic future of Kathwana and implementing it; and › identifies and prepares value chain projects that can be considered further in terms of their feasibility and bankability before SUED seed financing is committed.

Stakeholders’ interests and insights have been considered throughout the development of the UEP. Section 2 of this document sets out the Diagnostic Assessment of Kathwana, where the social, economic, infrastructure and environmental baseline has provided an understanding of the barriers and drivers to sustainable economic growth. Kathwana has a high reliance on agriculture, though this is a low productivity sector with limited value addition and sectoral linkages which is partly due to a challenging climate with less rainfall in the dryer eastern regions of the county. There is a general lack of skill availability and transfer of knowledge between people, businesses and sectors. It will be important to develop sectoral linkages and supply chains across the economic sectors and enable better market access, information and expertise. The Social Inclusion Study was a key part of the diagnostic, providing recommendations for meeting the aims of the SUED programme - to advance inclusion of PWDs, and Youth. The prioritised projects will embed recommendations for overcoming communication, physical, attitudinal and organisational barriers to inclusion. The diagnostic assessment identified three Key Sectors that Kathwana should prioritise for Value Chain opportunities: › Agriculture and Livestock; › Business, Trade and Commerce;

› Emerging Sectors (Agri-processing & Green Sector, Tourism, Education).

The Diagnostics assessment concludes that for Kathwana being a greenfield development, the three key challenges to be addressed through the UEP are: 1. Low population size; 2. Inadequate economic activities; 3. Infrastructure gaps. Thus, critical for the development of the economy, through these key sectors, will be the improvement of infrastructure particularly in areas affecting production such as irrigation for agriculture, energy for industry and transport access between suppliers and markets. There is unreliable water supply to support both population growth and production, whilst irrigated land is limited and not always used for high value crops. There is poor waste management and drainage around the town. The cost of electricity is high and unreliable, where the use of more sustainable and efficient energy sources, including solar and bio fuels, can drive industrial opportunities and support population growth. Environmental and climate change threats exist, which will increase pressure on ecosystems, potentially worsen water scarcity and raise environmental degradation risks for soil, rivers, water supply, air quality and forested land. Furthermore, increased drought and flooding frequency may greatly impact agricultural yields and town production processes. Addressing these challenges can enable the town to establish itself as an effective multi-functioning centre, and lay foundations for sustainable economic growth. Section 3 presents the Development Concept for Kathwana which is the broad framework that helps address development needs in Kathwana and integrates climate resilient infrastructure proposals and value chain projects (VCs) in order to structure, prioritise, and phase urban development in a coherent manner. It is driven by the

economic vision that has been developed for Kathwana:

Kathwana’s Development Concept is based on three key components responding to the towns key challenges: Component 1: VCs to deliver a critical mass in terms of economic activity to signal growth; Component 2: Inclusive, Climate resilient and sustainable infrastructure proposals to support sustainable growth; Component 3: Housing as a pull factor for migration. These three components are supported by an agricultural collection and aggregation system that integrates emerging economic activity and infrastructure developments with the existing local informal economy of small-scale farming. Section 4 sets out the economic development plan for Kathwana Municipality. Action Plans have been developed for each of the key sectors, across:

› Agriculture and Livestock; › Trade and Markets; › Eco-Industries and Manufacturing; › Services.

These Sector Action Plans will complement and provide an enabling environment for the prioritised Value Chain (VC) opportunities Opportunities. Six potential projects were identified in the assessment and in consultation with local stakeholders, by performing most strongly against the project’s evaluation criteria and Kathwana’s established priority criteria - sustainable economic growth, climate resilience, catalytic investment and social inclusion. All of these opportunities would be suitable for development in Kathwana, however, two priority VC opportunities have been selected to maximise benefits:

› A single hub for processing a range of fruit, vegetables and grains, combining common collection, processing, packaging, storage, finance and marketing to produce competitively priced food for consumers and industry; and

› Cow and goat milk processing focused on long life products, including UHT milk and cheese.

These VC opportunities are presented in Section 4 with detail on: their base assessment, sector supply chain, production potential, demand outlook, prices, location analysis, value chain facility, collection, processing and distribution activities as well as indicative costs, expected revenues and value added, potential partners and an infrastructure and climate change vulnerability assessment. In summary, the two VCs offer the following benefits for Kathwana:

Milk Processing

Estimated that the project will create 60 full-time employees in the first phase, with high potential for employing special interest groups (SIGs)

Environmental benefits include support to pastoral farmers, low levels of water usage and low levels of waste or pollutants produced

Supporting for expansion in milk production

Reducing spoilage and improving product quality

Raising the potential for stock improvements through the link with the Livestock Improvement Centre

Supporting investment in fodder production, abattoir and tannery Food Processing

Creating up to 200 full-time employees in the first phase, with high potential for employing special interest groups (SIGs) and people with disabilities (PWDs)

Reducing post-harvest losses

Establishing a food processing hub that could be expanded in line with produce supplies and markets

Supporting investment in irrigation and expansions in production in a wide range of crops, through stable offtake and prices

Providing a range of shelf-stable foods, enhancing food security

Enhancing Kathwana as a market centre

Section 5 presents the Development Framework, organised around two key focus areas: Eco-Industrial Park and the Development Core area around the market and government offices. A set of projects have been identified across energy, transport, waste and water management. The proposed projects have been assessed against social inclusion potentials and climate vulnerability and a number of adaptation measures have been identified to ensure resilience.

Section 6 sets out further considerations for implementation across: partners and institutional structures; funding; capacity building; social inclusion; and climate change resilience. Following the completion of the UEP, during the next phase of the SUED programme, the identified value chain and climate resilient infrastructure projects will be developed further by: › Capacity building specialists to enhance municipal and local capacity to implement the projects and ensure revenue generation; › Investment climate experts to address policy and regulatory constraints; and to develop feasibility studies, businesscases and investment promotion.