It is estimated that by 2015, 30% of the total national population will be living in urban areas and of these 40% will be living in informal settlements.

Current population stands at 34.3 million (UN, 2005). The national population growth rate according to the national statistics is 2.5% annually and is expected to reach 45 million by the year 2030. The average rate of rural-urban migration is however higher than the natural population growth rate resulting in higher overall population growth rates for urban centres. The growth rate for Nairobi, for example is estimated at 4.4%.

The national poverty level is high. It is currently estimated that 49% of the population lives below the poverty line according to the World Bank standards.


Customers & Stakeholders Analysis

1. Government,
2. water services boards,
3. private sector- large industries,
4. foreign contractors

Economic Analysis

The Kenyan economy has been growing at a rate of 6% and this is projected to be sustainable in the long term. According to a recent survey by Central Bureau of Statistics, overall poverty has declined to 46% (49.1% rural, 33.7% urban).

According to this report overall poverty in Nairobi has declined from 52.6% in 2000 to 21.3% in 2006. This report concludes that although the trend shows declining poverty levels, poverty in Kenya is still a rural phenomenon and the economy has to grow at over 6% to sustain the current population growth rate of 2.5%.

The outlook for the domestic economy shows favorable prospects for vibrant growth in 2007. Inflation rate is expected to decline in 2007 as a result of lower food commodity prices and a stable macroeconomic environment.

Activities in the financial sector are likely to depict an upward trend supported by the huge earnings experienced in 2006 and good corporate management. Activities in the Nairobi Stock Exchange in 2007 are likely to go up following expected sales of Safaricom and Telkom shares to the public through the Initial Public Offer (IPO).

Growth in Agriculture, Manufacturing, Hotels and Restaurant, Transport and Communication, Wholesale and Retail trade, and Construction sectors are likely to improve in 2007. Gross Domestic Product (GDP) is expected to record a growth rate of between 5.8 to 6.5 per cent in 2007.

Real Gross Domestic Product (GDP) expanded by 6.1 per cent in 2006 compared to a revised growth of 5.7 per cent in 2005. Key sectors supporting this growth:-

- Hotels and Restaurants : 14.9 Per cent
- Wholesale & Retail Trade : 10.9 Per cent
- Transport and Communication : 10.8 Per cent
- Manufacturing : 6.9 Per cent
- Building & Construction : 6.3 Per cent
- Financial Intermediation : 5.5 Per cent
- Agriculture and Forestry : 5.4 Per cent

Total employment excluding rural small scale agriculture and pastoral activities stood at 8.7 million persons in 2006 up from 8.3 million recorded in 2005. The economy generated 469 thousand new jobs in 2006, an increase of 5.7 per cent from the 2005 levels.

The development expenditure on water supply and related services has been steadily rising from 3.2B in 2004/05 to 6.6B in 2005/06. The MWI budget for 2006/07 was 7.8B. Development expenditure on water supplies and related services increased by 15.1 per cent from KSh 6.6 billion in 2005/06 to KSh 7.6 billion in 2006/07. It is expected that with sustained economic growth and improved revenue collection by KRA the MWI budget will correspondingly go up resulting to higher capital budgets for water projects.

Cement consumption increased by 12.3 per cent from 1,572.5 thousand tonnes in 2005 to 1,765.8 thousand tonnes in 2006. Index of government expenditure on roads increased from 62.6 in 2005 to 209.0 in 2006, largely driven by sevenfold increase in government allocation on roads. Loans and advances from commercial banks to the sector increased by 41.1 per cent from KSh 21.4 billion in 2005 to KSh 30.2 billion in 2006.

Consumer Price Index: The government's policy on interest rates has expanded access to credit leading to an increase in private consumption of 7.1% in 2006. The CPI for April 2007 stands at 222.61 points compared to 208.6 points in November 2006. Over the last 12 months, Fuel and Power index had the highest increase of 10.5% while general prices of goods and services increased by 0.9%.

The overall economic outlook for the next 5 years looks geared for further growth. This is expected to push up the demand for safe water and sewerage services and exert pressure on existing infrastructure. It is therefore imperative that infrastructure development and exploitation of existing water resources be enhanced to support the anticipated demand. This growth is also expected to bring about opportunities for private sector participation in the water sector. The government's focus on the rehabilitation of the roads network and infrastructure will bring in more opportunities in the roads sector.


Environmental Analysis

• Climate: The Kenyan climate is tropical at the coast and arid in the interior according to NEMA.

• Rainfall: Country's annul mean rainfall is estimated at 621mm. (NEMA)

• Weather patterns: Rapid dissipation of El Niño conditions occurred during January and February of 2007. The metrological data show the likelihood of an emerging La Niña over the next several months. If such an event does become established, then given the timing in the year, it would be likely that the event would persist for much of the remainder of the year. (Kenya National Meteorological Department)

• Forestation: In Kenya the forest cover is less than 2%, while the UN recommends at least 10% (Green Belt Movement). This has great impact on the water sources. During the planning period, Spencon will collaborate with other stakeholders to conserve forests.

• Global warming: The burning of ever-greater quantities of oil, gasoline, and coal, the cutting of forests, and the practice of certain farming methods is said to be responsible for increasing the amount of "greenhouse gases" in the atmosphere, (carbon dioxide, methane, and nitrous oxide) resulting in increased global temperatures. 11 of the last 12 years are said to have been the warmest on record, and 1998 was the warmest year. The increase in global temperatures is altering the complex web of systems that allow life to thrive on earth, such as cloud cover, rainfall, wind patterns, ocean currents, and the distribution of plant and animal species. This is expected to cause plant and animal extinctions and "extreme weather events" e.g. storms, floods, and droughts. The Kyoto Protocol has powerful and legally binding measures for controlling emissions and Kenya is a signatory. Kenyan companies like Mumias Sugar have already started trading in carbon credits.

• Current environmental issues in Kenya: Water pollution from urban and industrial wastes; degradation of water quality from increased use of pesticides and fertilizers; water hyacinth infestation in Lake Victoria; deforestation; soil erosion; desertification; poaching (NEMA)

• Current Natural Hazards: Recurring drought and flooding.

• Conservation: Kenya hosts the UN agency on Environment (UNEP) and thus giving it the advantage of being the focal point for model conservation efforts. There are several government agencies and programs spearheading conservation often with overlapping responsibilities. It is expected that the operationalisation of NEMA will assist in regularising these efforts into a unified whole.

Political Analysis

The country suffers from Poor policies on development- poor urban planning and water and power supply. Corruption is still prevelant despite tough talk on corruption though reducing. There are also bilateral deals-strings attached donor funds negotiated by the government and donor countries thus limiting participation of other third country companies from participating in such projects. There is political interference/ activism whereby politicians demand companies operating in their area to employ locals yet they are unskilled.

Constitutional review: It is expected that the general consensus within the political class on the need for comprehensive constitutional reforms will yield a new political dispensation within the next 5 years. Considering the non-contentious provisions of the Bomas draft it is expected that if a new constitutions is enacted it will fundamentally change the management of public affairs and regional administration.

General elections: 2007 is an election year and from the poll results so far published it is expected that the incumbent will be re-elected to serve for a second term. There is rising Insecurity in parts of the country as the general elections draw near.

CDF – This has spawned opportunities for funding infrastructure developments in constituencies. Access to these funds is however a political process.

Industry Analysis

Kenya has experienced rapid growth in the transport industry since independence. This has proved to be essential not only for the domestic economy but also to serve the landlocked countries in Eastern Africa.

However, the transport infrastructure network has deteriorated significantly in the past decade owing in part to the suspension of donor funding to Kenya for this purpose. The network has also suffered from a long and cumbersome procurement process for construction, maintenance and rehabilitation of public infrastructure coupled with poor and compromised quality of work as a result of corruption.

The quality and efficiency of the transport network have fallen leading to less predictable service delivery. Lengthy delays, breakdown of transport equipment, and closure of sections of the transport networks along the major transport corridors occur on a daily basis.

In recognition of the importance it attaches to addressing these problems, the government has identified transport infrastructure as one of the key pillars in its ERS and has developed an Integrated National Transport Policy Programme that seeks to develop the transport sector's infrastructure in a coherent and integrated manner.

However, daunting challenges persist in the attempt to repair, modernise and expand the Kenyan transport infrastructure. Among the major challenges are how to turn around the poor economic performance of the public enterprises managing transport infrastructure facilities, and how to mobilize adequate resources for maintenance, rehabilitation, construction and expansion of the infrastructure itself.

The responsibility for road infrastructure is dispersed among different government ministries, departments and levels of government, with the Ministry of Roads and Public Works responsible for the classified roads, and the Ministry of Local Government, through various local authorities, responsible for urban and rural roads.

The existing institutional framework has many players who are not linked optimally. Kenya's road network has greatly deteriorated in the last decade. In addition to poor and deteriorating road conditions in the urban centres, there is a lack of other road infrastructure facilities such as footpaths for pedestrians to make walking safer, separate lanes for cyclists or non-motorised transport modes (NMTs), or flyovers and bypasses to ease traffic congestion.

Although local authorities are expected to be responsible for the provision and maintenance of urban infrastructure, including roads, nearly all of them have been experiencing critical financial constraints, poor resource management and lack of quality personnel in specialized areas.

The government is aiming to reduce the length of road network classified in bad condition by 23 per cent by 2007. The projected implementation activities include construction and rehabilitation of key road links and networks under the Roads 2000 Programme; rehabilitation of rural roads and reconstruction of 150 km of trunk roads per year, and concessioning of up to 1 200 km of trunk roads by 2007.

Current road infrastructure financing, which is a responsibility of the central government, is inadequate, arbitrarily allocated and does not allow for innovative ways for funding infrastructure development and maintenance.

Furthermore, financing is fragmented between different ministries, departments and levels of government, which results in spreading the resources too thinly. Significant external funding for most of the proposed activities is made available from various donors and development partners.

The government's contribution is made available through the Fuel Levy Fund that accounts for 24 per cent of the total budget and a share of the newly created Constituency Development Fund (CDF), with an estimated 16 per cent share of the total budget.

The infrastructure development industry faces challenges such as with mechanization, new and improved methods of construction methodology, erratic and expensive electricity. The key is to adapt to new technology and improve on machinery and equipments.