Kenya power: 4GW target in sight but challenges persist
1 October 2019
Kenya is often seen as a relatively attractive market for investors, with a functioning democratic polity, a stable economy and a strong track record of private sector investment. However, challenges persist in Kenyan domestic politics and governance, and in the investment environment for the electricity supply industry (ESI) and other investable sectors.
African Energy’s latest in-depth country survey, Kenya Power Report 2019/20,outlines the market’s attractions and downsides for power developers, financiers and other stakeholders.
Calm before the storm
There is an air of relative calm before a looming storm in the often dramatic soap opera that is Kenyan politics. At several years of separation from the 2022 presidential contest, the familiar winds of a Kenyan leadership race are already buffeting the political landscape – even though a surprise détente between President Uhuru Kenyatta and his perennial rival Raila Odinga has helped plug the greatest source of political volatility. While the ‘handshake agreement’ removed an unwelcome distraction to the Jubilee Party-led government’s ambitious ‘Big Four’ development policy agenda, it has also created swells of disturbance across the political divide. To complicate matters, the fractured Jubilee Party is facing existential threats from within, reflected in the increasingly palpable discontent of Vice President William Ruto and his supporters, whose eyes are firmly fixed on the top job.
Positive macro indicators despite concerns
In contrast, upbeat macroeconomic indicators suggest clear sailing for Kenya’s macroeconomy – a forecast that is expected to continue, despite a few worrying clouds on the horizon. Kenya has earned rightful praise for a generally positive investment environment and a resurgence in economic activity. However, a mounting debt profile – which has been aggravated by the loosening of government purse strings on a number of flashy (often Chinese-financed) infrastructure projects – is making markets increasingly anxious, despite resolute assurances from policymakers.
IPP ‘frenzy’ in the power sector
Favourable economic conditions have been felt in the ESI, helping spur a frenzy of independent power project (IPP) activity in recent years. This has been facilitated by several phases of power sector reform spanning multiple decades; and the reforms continue as detailed in Kenya Power Report 2019/20.