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Making the Case for Integrating Value Chain Development into Urban Economic Planning

Updated: Jul 9


The Sustainable Urban Economic Development Programme (SUED) has worked closely with 12 municipalities in Kenya to better position them as emerging urban centers that will attract more investment for critical infrastructure and value chain projects. The programme’s work in advocating for balanced growth in small and medium sized urban centers that are located along high-economic potential growth corridors is aimed at providing responsive transformational economies.

SUED’s work endeavors to support growth and sustainable economic development by unlocking private and public investment in the urban sector. In this blog post, the SUED team shares how the programme has worked with six municipalities to help them prioritise value chain and climate resilient as well as inclusive infrastructure projects that can support the economic sectors with the greatest potential for inclusive economic growth.

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Kenya: towards an inclusive and resilient economy


With the promulgation of the 2010 constitution and the 2013 General Elections in Kenya, the country moved from a centralized government with one national government to a devolved one with one national government and 47 county governments. This new devolved system commenced implementation in March 2013. At the time, counties were at different levels of socio-economic development. These differences were further exacerbated by the varied amount of resources that they individually had such as arable land, skilled workers, and infrastructure. This meant that while the intent of devolution was noble the reality was that some counties were at an economic advantage over others.


Over the past years, there has been an appreciation of devolution in how it has brought forward economic priorities of previously marginalised areas. Counties have begun to seek responsive sustainable development that is inclusive. One of the keyways in which they’ve done this is by developing a County Integrated Development Plan (CIDP) that guides development over a five-year period. The CIDP details development priorities including transformative projects that will advance the county’s economic potential. Counties have additionally developed spatial plans that help them define how the county physical space including urban centers will be utilised. Further, counties have increased the access that they have to various stakeholders with unique expertise that they offer to the counties. These multi-faceted approaches all lacked one unifying factor, a plan that could build on existing work and priorities while identifying new ones and help the counties to have an inclusive economic strategy that would guide future economic development.


Our approach


To fill this gap, SUED combined local knowledge and international best practices to help supported municipalities to develop Urban Economic Plans (UEPs). The UEPs unique selling point is that they introduce an integrated multi-disciplinary approach to planning for economic growth and advocate for the maximisation of agglomeration economies.


SUED’s work in six municipalities (Kitui, Malindi, Isiolo, Kathwana, Kisii and Iten) is helping them determine how best to harness value chain development for maximum industrial development, job creation and resilient livelihood impact. This value-chain oriented approach to inclusive growth in emerging urban centers objective is to catalyse sustainable urban development while identifying critical climate resilient infrastructure.


The programme’s partnership with the municipalities enables the identification of climate-resilient value chain projects that have strong value-addition potential and harness links within their municipalities to leverage on existing structures that promote trade or advocate for the strengthening of value chain development. To do so, the programme employs a structured approach in the development of municipal UEPs by using a phased approach:

  • Inception Phase: To ensure alignment to the programmes support and the municipality’s asks, SUED hold kick-off meetings. The meetings are geared towards explaining the intricacies of the UEP development process, having the programme team better understand the economic priorities in the municipality as well as how they worked best. This phase is critical in ensuring that the development of the UEP is inclusive and is done in a way that fits within the municipal business and community culture. Further its helps ensure that all stakeholders of the process understand the purpose, scope and intended outcome of their municipal specific UEP. For example, in Kitui, Malindi and Isiolo, the boards had yet to learn about SUED’s work and did not understand the UEP process, this kick-off meeting(s) provided a platform for appreciation of the development process. While for Kisii, Iten and Kathwana, the board and municipal team had engaged with SUED in a consultative forum and gained familiarity with the programme’s processes however they needed information on how SUED would help them identify their priority economic sectors.

  • Diagnostic Phase: In this phase, the programme carries out a comprehensive and detailed assessment on the municipality’s demographics, economy, infrastructure, environment, and climatic conditions. This process is crucial in identifying emerging value chain and climate resilient infrastructure projects that have the highest economic growth potential. In municipalities such as Kitui and Iten that had clear economic advantages in some sectors, honey, and sports respectively, this phase helped demonstrate the link between the sectors and the barriers to their successful development.

  • Technical Briefing Phase: This phase provides an opportunity for both the municipality and SUED to think through the findings of the diagnostic phase and come up with a development framework that will help them prioritise value chain opportunities and their impact. In addition, the municipality and SUED determine which green infrastructure opportunities can be taken advantage of. In Kisii, there is little manufacturing activity in its banana value chain, the briefing phase enabled SUED outline how the municipality should utilise the existing facilities to take advantage of the readily available raw materials. Further, Kisii learned how they could co-locate facilities such as processing plants to increase product potential and efficiency.

  • UEP Phase: This is the final stage of the development process. The municipality and SUED set the vision and identify their priority key economic sectors. With the programme’s support, key anchor projects that outline value chain opportunities are determined. For some of the municipalities, there was need to diversify the anchor projects to shield them from sector specific economic stunting. For years, Malindi Municipality’s key signifier was the tourism industry, marine parks, world-renown beach resorts and national parks endeared it to tourists. However, with the pandemic and the tourism sector recording a significant decline in the most recent years, there was need to diversify its economic priorities. The programme worked with the municipality to identify a diversification plan. In it, it outlines how the municipality can prioritise its manufacturing and agricultural sectors. With SUED’s support, the municipality short-listed value chain projects such as fruit processing and fish processing to complement the tourism sector.

Within these phases, it is integral to maintain a good-working relationship with respective county and municipal stakeholders. It is critical to ensure that different members of the community drawn from varied areas of expertise feel that their inputs and opinions are incorporated into identification of the value chains. This continual engagement helps in safeguarding future resource mobilisation activities that will need their buy-in. The utilisation of a stakeholder engagement strategy that helps SUED map who to talk to on different topics, how to continue and appropriately engage with various stakeholders across the public and private sector as well as how to maintain a positive and responsive relationship helps strengthen the UEP development process.


By maintaining SUED’s accessibility to stakeholders throughout the UEP development process, the programme has harnessed local life experience that brings into focus the contexts of the identified value chain. This inclusion in the decision-making process through consultations has ensured that the programme generates and sustains interest in the programme and its future work.


Strong value chains: an investment in the future


This post aims to share how the programme identifies the value chain projects ensuring that they have been assessed against climate resilience and social inclusion. This process is critical as it helps the municipalities determine which of their economic sector is ready for investment. In doing so, it makes it easy to identify potential projects that can catalyse the municipalities economy by highlighting their competitive advantages.


The first step involves the municipality and the programme looking at an extensive list of economic opportunities using a policy and economic lens. This plays a key role in determining not only their economic potential but identifying any business environment barriers that have deterred investors or slowed down the economic growth within a particular economic sector. For instance, Kathwana is a green field with need for significant investment in social and physical infrastructure to draw in subsequent investors. The value chain projects that were under discussion needed to take into account their unique positioning and see how to take advantage of their physical location with regards to their economic offerings. In doing so, they could draw in populations to create a demand for social and physical infrastructure, as such there is a regulatory and policy role that the county needs to play such as zoning and land use demarcation to “open up” the municipality for investment.


The second step entails assessing the long list using a Strength, Weakness, Opportunities and Threats (SWOT) analysis. The SWOT helps the programme contextualise the key issues that arise from the municipality’s demographics, economic dynamics, development context as well as their prevailing environmental conditions. Further, the SWOT helps look at the existing infrastructure and how it will help advance the value chain projects or hinder it and if the latter what should be done to ensure that there is adequate social and physical infrastructure to complement the value chain projects. Iten, despite being Kenya’s second largest producer of potatoes lacks a capable processing plant to take advantage of the main cropping season. This second step helped the municipality team think through how they could go about establishing a local processing plant that would help farmers have a central location in the county for taking produce increasing their competitive cost base.


The third step comprises of an in-depth evaluation process where an evaluation framework is used to ; a) determine the level of resilience the value chain project has to any shifts in the economy b) assess how resource efficient it would be, i.e. will it be a circular economy that has zero waste c) share how socially inclusive it will be by ensuring the inclusion of vulnerable groups and d) demonstrate how sustainable the project will be i.e. how viable is it to utilise both green infrastructure and green energy on it. In Isiolo, in its industrial cluster, the programme worked with the municipality to see how to better align their abattoir to a circular economy.


The fourth and final step is geared towards shortlisting value chain projects through a more vigorous assessment process that helps the municipalities see the costs and revenues of the project as well as determine its competitiveness and land and infrastructure requirements. This wider in-depth analysis helps the municipalities identify where they play a key role. By detailing how the UEP can be actualised with an implementation plan that includes how they can strengthen their urban governance as well as what the implementations costs are, municipalities are able to prioritise which value chain and critical infrastructure projects can be integrated into their wider county planning processes.


Championing sustainable urban economic growth


These four step processes are crucial in helping municipalities see the merits of value addition across the value chain projects that have been identified. They are able to see the importance of a stable off take and pricing, the need for integration of waste management into the value chain, how to link the value chain with the national broader economic agenda as well as identify the employment potential for their locals.


Knowledge on their competitiveness, the value chains production potential, demand outlook and location of processing plants and source of produce, the value chain process flow and capacity as well as distribution and sales helps both SUED and the municipalities see what indicative costs would be needed to actualise the projects as well as determine the revenues it should generate to ensure that it would be sustainable beyond the programme’s support.


Conclusion


Due to SUED working across 12 municipalities, the programme is best placed to see the intersectionality of value chain projects across the country. This in-depth value chain project analysis plays a key role in how SUED works with municipalities to synergise economic opportunities. The support towards integrating value chain development into urban economic planning is highlighting the high-economic potential that these urban centers have. With the completed UEPs that demonstrate new ways of ensuring that municipalities lead in implementing circular economies that promote continual use of their resources across the value chain, SUED is making the case for value addition that strengthens the linkages between rural and urban areas.