AFD and Kenya by Agence Française de Développement

Nairobi Sky Line ÂŠ Yves Terracol

AFD AND KENYA

Promoting sustainable development

These commitments have mainly been in the form of soft loans, which account for over 84% of the total volume of sovereign and non-sovereign loans extended by AFD in the country over the past 10 years. Thanks to this financing, the residents of Kenya’s three main cities have benefited from improved water services (8.5 million people reached), 250,000 people are connected to the power Grid every year, 1.5 million people benefit from improved electricity services, and 1,500 km of rural roads have been upgraded, having an impact on 1.5 million people.

AFD GROUP’S COMMITMENTS IN KENYA Agence Française de Développement (French Development Agency - AFD) began its activities in East Africa in 1995 when PROPARCO, its private sector subsidiary arm, opened an office in Nairobi. AFD subsequently opened a regional agency in Nairobi in 1997 which covers the five countries that have now formed the East African Community (Burundi, Kenya, Rwanda, Tanzania and Uganda).

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In Kenya, AFD Group’s support primarily focuses on:

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S upporting urban development by financing integrated urban programs and key investments, with a focus on the water and sanitation sector; S upporting economic growth by promoting the private sector, which is an engine for growth and job creation. Over the past decade (2004 to 2013), the volume of AFD’s financing itself has reached over EUR 1.125bn and has mainly been in the energy sector (a total of EUR 559.7m, with ongoing projects worth EUR 487.5m), the drinking water and sanitation sector (EUR 220.9m), the transport infrastructure sector (EUR 176.7m) and the urban development sector (EUR 73.4m).

200 175 150 125 100 75 50 25 0

2004

2005

2006

Other Private sector

2007

2008

2009

Environment Infrastructure

2010

2011

2012

2013

Urban development

PROPARCO’s commitments over the same period stand at EUR 487.6m. PROPARCO’s operations have benefited 43 companies and banks.

eveloping infrastructure, particularly for energy and transport, D with a specific focus on environmental issues (biodiversity, natural resources management and climate change mitigation);

Commitments for 2004 - 2013

Olkaria 4 site

SUPPORT FOR INFRASTRUCTURE The energy sector accounts for over fifty percent of AFD’s commitments in Kenya. In the country, it supports:

r enewable energy development, particularly geothermal energy, with the aim of promoting a low-carbon energy mix, a ccess to electricity, particularly in rural areas, while keeping the country’s energy intensity under control, t he strengthening of power transmission and distribution networks, and the regional integration of the electricity market in East Africa. AFD has also contributed to the definition and planning of national renewable energy policies under its mandate as lead donor in the energy sector.

Rural electrification

With commercial banks and the Kenya Association of Manufacturers (KAM), it mobilizes the private sector with the aim of promoting sustainable growth via specialized credit lines, earmarked to finance renewable energy and energy efficiency projects.

ENVIRONMENTAL CREDIT LINES Over 70% of Kenya’s primary energy comes from biomass, the bulk of which is firewood. This resource is used by a significant number of Kenyan households and by certain industries in the agri-business sector, which leads to an alarming rate of deforestation. This situation is an incentive to actively assist Kenya in its transition towards renewable energies (RE), by supporting public policies and promoting various forms of private investment. Indeed, alongside large-scale geothermal projects, the development of small-scale hydropower other renewable energies, as well as support for energy efficiency projects in industry and services, all contribute to this objective.

AFD intends to continue its financing for geothermal energy and access to energy, alongside the tools recently implemented by the European Union for SE4All, as well as its operations in the renewable energy and energy efficiency sectors. It also takes part in the road upgrading program to improve access to markets by financing rural roads in six Counties in central Kenya. Finally, AFD finances regional transport infrastructure: the international airports of Nairobi – the regional airport hub – and Mombasa.

AFD finances small to medium-sized renewable energy generation units (from 0.5 to 8 MW) via two local partner banks, as well as the development of high energy efficiency (EE) industrial processes in the agri-businesses that consume the most energy. This gives them a comparative advantage, particularly on export markets.

The project also aims to gradually convince the commercial banking sector to finance this type of innovative project. Both local banks and potential investors do, however, consider that the technical risks of these projects are high and poorly controlled. To overcome this barrier, the credit line has been combined with a technical assistance mechanism, which is partly financed by the European Union. This assistance is based in Nairobi for an initial two-year period and comprises expertise in renewable energy and energy efficiency. Geothermal energy

WATER, SANITATION AND INTEGRATED URBAN DEVELOPMENT In the water and sanitation sector, AFD finances the upgrading and extension of drinking water supply and sanitation facilities in three of Kenya’s large cities, Nairobi, Mombasa and Kisumu. In Kisumu, it involves a regional approach (see box).

It builds the management and planning capacities of local public water distribution companies and thus supports the ongoing decentralization process. It is supporting a major urban development project in Kisumu City and is cofinancing a National Slum Upgrading Program for fifteen or so cities with the World Bank and SIDA. Finally, AFD is supporting social housing by refinancing Shelter Afrique. Cleaning of raw water pipe

REGIONAL APPROACH FOR LAKE VICTORIA AFD has defined a regional strategic approach on the shores of Lake Victoria, where it supports water operators in the main cities (Kisumu in Kenya, Kampala and Jinja in Uganda, Bukoba, Musoma and Mwanza in Tanzania). This regional approach is shared with the Lake Victoria Basin Commission and provides for experience-sharing and the implementation of common solutions approved for each project. The aim is to address water quality issues and optimize the selection of raw water or wastewater treatment methods.

For example, each of these cities faces a problem of pollution and Algae growth, which hampers the functioning of the traditional treatment systems in place. Innovative solutions need to be implemented in a coordinated manner between the projects. The support provided by AFD via these regional projects on common issues is highly appreciated by its partners. It also offers the opportunity to call on France’s internationally recognized expertise in the sector.

ENVIRONMENT AND BIODIVERSITY

SUPPORT FOR PRIVATE DYNAMICS

AFD previously financed technical assistance to the ex-Prime Minister’s and Minister for Environment’s departmental staff to help the Kenyan Government define a National Climate Change Plan. It has now contracted ADETEF to provide technical support in the field of climate change to three entities: the Ministry of Energy, for renewable energies, Kenya Wildlife Service, for a climate change adaptation plan for parks, and Kisumu City, for its sustainable urban development.

AFD supports Kenyan small and medium entreprises (SMEs) and banks, with its ARIZ guarantees and its specialized long-term credit lines. The main beneficiaries of PROPARCO’s financing have been the agro-industry (tea, sugar), tourist industry and energy sector. Over the past 10 years, PROPARCO has allocated EUR 154.1m to Kenyan SMEs.

In addition to its action to support climate change in the field of mitigation, AFD has also been providing assistance for adaptation projects for several years now, as well as for ecosystem and biodiversity protection. AFD initially forged a partnership with the NGO Green Belt Movement, founded by the Nobel Peace Prize Winner, the late Professor Wangari Maathai, for the partial reforestation of the Aberdares Forest (2,000 ha of forest). It is now financing a project that aims to protect the Marsabit Forest, which is located in the north of the country in the middle of a desert area.

Marsabit: Lake Paradise

Agence Française de Développement (French Development Agency – AFD) is a public development finance institution that has been working to fight poverty and foster economic growth in developing countries and the French Overseas Communities for seventy years. It executes the policy defined by the French Government. AFD is present on four continents where it has an international network of seventy agencies and representation offices, including nine in the French Overseas Provinces and one in Brussels. It finances and supports projects that improve people’s living conditions, promote economic growth and protect Earth, such as schooling for children, maternal health, support for farmers and small businesses, water supply, tropical forest preservation, and the fight against climate change. In 2012, AFD approved EUR 7 billion to finance activities in developing countries and the French Overseas Communities. Main outcomes of AFD’s funding are monitored every year. For instance, money delivered will help get 10 million children into primary school and 3 million into secondary school; they will also improve drinking water supply for 1.79 million people. Energy efficiency projects financed by AFD in 2012 will save nearly 3.6 million tons of carbon dioxide emissions annually.

NAIROBI REGIONAL AGENCY Top Plaza Building Kindaruma Road, off Ngong Road P.O. Box 45955 00100 Nairobi – Kenya Tel: (254.20) 259.29.07 / 259.29.09 Fax: (254.20) 259.29.08 kenya.afd.fr

www.proparco.fr

PROPARCO, AFD’s subsidiary dedicated to private investment, promotes private investment in emerging and developing countries in order to boost growth, promote sustainable development and reach the Millennium Development Goals. Its financing is tailored to the specific needs of investors in the productive sector, financial systems, infrastructure and private equity investment.

FFEM

5 rue Roland Barthes 75598 Paris Cedex 12 – France Tel. : +33 1 53 44 31 31 Fax : +33 1 44 87 99 39 www.afd.fr

www.ffem.fr

FFEM is a bilateral public facility set up by the French Government in 1994 following the Rio Summit. It aims at promoting global environmental protection via sustainable development projects in developing or transition countries. The French Global Environment Facility supports physical projects in recipient countries. Its operations are learning-based and support experimental, innovative or exemplary approaches.

This publication was printed in an environmentally responsible manner using vegetable-based ink and PEFC™ paper, chain of custody n° 10-31-945 (sustainable forest management).

Creation: Planet 7 – December 2013

AGENCE FRANÇAISE DE DÉVELOPPEMENT (AFD)