How we can spark Nairobi's economic growth

A trader sells palm leaves to catholics in Nairobi on April 10,2022 when they celebrated Palm Sunday. [Denish Ochieng, Standard] Nairobi City County population makes up more than 30 per cent of Kenya's urban population with an estimated 4,397,073 people. This is three times more than that of the second city, Mombasa. The growing urban population is mainly attributed to rural to urban migration in search for economic opportunities. Like many African cities, Nairobi is yet to realise full potential and benefits that come with urbanisation. Urbanisation is a key feature of structural transformation that drives economic growth. To unlock economic opportunities of urbanisation, the Africa Growth Initiative (AGI) at the Brookings Institution in the US has developed an "Urban Economic Growth Framework for African cities". The framework focuses on three primary pillars that define ability of cities to benefit from agglomeration and generate productive jobs. This includes accessibility, business environment and public sector governance. The framework provides specific indicators and ways to identify these three critical constraints. The Kenya Institute for Public Policy Research and Analysis (KIPPRA) applied the AGI framework to analyse Nairobi potential for growth and employment. The findings bring out key priority areas for policy action. Creation of productive jobs: The labour force has been growing at an average annual rate of 3 per cent with youth accounting for over half of this population. Unemployment persists despite various initiatives. Overall, unemployment of the working age group in Nairobi is estimated at 40 per cent with youth accounting for 48 per cent. Evidence shows education and skills development enhance productivity and decent earnings. As such, a focus on tertiary institutions in providing training and skills consistent with emerging technologies is critical for the labour market. Although Kenya has registered good progress in creating jobs especially in the digital and gig economy, policy interventions to nurture the emerging sectors are key. For instance, fast tracking the coding syllabus for schools will produce workforce for future jobs. Accessibility within the city: Accessibility is key for connecting workers to firms and firms to markets. Nairobi has 298km of railway, 4 commuter train services, 2 airports and 4,730.68km of road network. Despite the good progress on infrastructure, there is a high concentration of poor unpaved roads in highly densely populated informal settlements. Furthermore, most jobs are inaccessible within 1 hour by foot or bus. Further, Kenya still relies on outdated building codes of 1960s that have not embedded the resilience concept in planning and development of infrastructure. This calls for review and updating of relevant infrastructure development policy guidelines to improve safety and reliability of infrastructure. The city also has a mismatch in zoning and land use. Therefore, planning that considers population growth, nature of infrastructure, land use and other emerging issues are essential. It is important to develop a land value index, update the land appraisal system and consider creating more public spaces. The business environment: Many businesses in the city experience delays in accessing licences and permits. Other key challenges include limited finance and land. They also face rigid labour regulations, inefficiency in tax administration, and crime and disorder. For example, a business takes about 87 days to secure electricity connection. A firm could lose about Sh2.3 million annually to power outages. It is also essential to coordinate the implementation of business policy reforms between the national and county governments. Public sector governance: Nairobi has 14 constitutional functions, which includes planning. The county leads with highest collection of own revenue among the 47 counties. Equitable share from national government has been rising from Sh 9.51 billion in FY 2013/14 to Sh15.79 billion in FY 2018/19, dipping to Sh11.45 billion in FY 2019/20 (due to Covid-19 effects) and recovering in FY 2020/21 to Sh19.42 billion. Thus, proper budget planning, bolstering the own source revenue and timely disbursement will support fiscal management of the city. The writer is a principal policy Analyst at the Kenya Institute for Public Policy Research and Analysis

How we can spark Nairobi's economic growth

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