Identifier
Created
Classification
Origin
09NAIROBI178
2009-02-03 12:05:00
UNCLASSIFIED
Embassy Nairobi
Cable title:
KENYA ECONOMIC HIGHLIGHTS: FEBRUARY 2009
how-toVZCZCXYZ0000 RR RUEHWEB DE RUEHNR #0178/01 0341205 ZNR UUUUU ZZH R 031205Z FEB 09 FM AMEMBASSY NAIROBI TO RUEHC/SECSTATE WASHDC 8362 INFO RUCPDOC/USDOC WASHDC 3175 RUEATRS/DEPT OF TREASURY WASHDC RUEHC/DEPT OF LABOR WASHDC RUEHXR/RWANDA COLLECTIVE RUEHBS/USEU BRUSSELS
UNCLAS NAIROBI 000178
STATE ALSO FOR AF/E AND AF/EPS
STATE PASS USAID/EA
STATE PASS USITC FOR ALAN TREAT, RALPH WATKINS, AND ERLAND
HERFINDAHL
TREASURY FOR REBECCA KLEIN
COMMERCE FOR BECKY ERKUL
SIPDIS
E.O. 12958: N/A
TAGS: ECON ELAB ECPS EINV EFIN ETRD EAID BEXP PINR ASEC
PTER, KCOR, KE
SUBJECT: KENYA ECONOMIC HIGHLIGHTS: FEBRUARY 2009
REFS: A) Nairobi 119 B) 08 Nairobi 2897
This cable is not/not for internet distribution.
-----------------
TABLE OF CONTENTS
-----------------
UNCLAS NAIROBI 000178
STATE ALSO FOR AF/E AND AF/EPS
STATE PASS USAID/EA
STATE PASS USITC FOR ALAN TREAT, RALPH WATKINS, AND ERLAND
HERFINDAHL
TREASURY FOR REBECCA KLEIN
COMMERCE FOR BECKY ERKUL
SIPDIS
E.O. 12958: N/A
TAGS: ECON ELAB ECPS EINV EFIN ETRD EAID BEXP PINR ASEC
PTER, KCOR, KE
SUBJECT: KENYA ECONOMIC HIGHLIGHTS: FEBRUARY 2009
REFS: A) Nairobi 119 B) 08 Nairobi 2897
This cable is not/not for internet distribution.
--------------
TABLE OF CONTENTS
--------------
1. (SBU) KENYA STRUGGLES WITH GROWING DEFICIT
2. (SBU) TEACHERS CALL OFF STRIKE
3. (SBU) SEACOM CABLE SET TO LAND JUNE 27
1. (SBU) KENYA STRUGGLES WITH GROWING DEFICITS
Tax revenues fell $113m short of the GOK's mid-FY08/09 target. Due
to the global crisis, there is little prospect for more robust
collection during the remainder of the fiscal year. The
conventional wisdom here is that the GOK will almost certainly slash
much-needed infrastructure spending. To mitigate the degree of cuts
to capital expenditures, the new Finance Minister, Uhuru Kenyatta,
recently announced the sale of $234m in infrastructure bonds. Media
reports FinMin PermSec Joseph Kinyua assuring investors that
proceeds from the bonds will remain tied to designated projects.
However, a contact familiar with the bond floatation process told us
January 30 that Kenyatta's and Kinyua's comments are misleading. In
fact, the proceeds from the bond sale -- and interest payments to
buyers -- are not linked to specific projects. "This is not an
infrastructure bond, but rather a routine bond issuance; this may
not even be clear to Ministry of Finance officials," our contact
said. He believes the bond will actually be used to service the
government's KSh127 billion budget deficit. Comment: Kenya's
investment climate, already severely damaged by corruption (septel)
and poor infrastructure, can ill afford the perception of more
government foul play. End Comment.
2. (SBU) TEACHERS CALL OFF STRIKE
The Kenya National Union of Teachers backed off its demand for a
lump sum 26% pay increase and accepted a government plan to phase in
the raise in three stages over two years. The government promised
to adjust the phase in period to two stages over two years if the
Kenyan economy rebounds during the next 12 months. The government
further agreed to drop any charges against striking teachers. New
Finance Minister Uhuru Kenyatta negotiated the settlement which
ended the strike; he reportedly made clear Kenya's financial
problems to union bosses.
Comment: The 11-day strike had parallelized learning for millions of
Kenyan primary school children, distracted parliamentarians from
work on political reform, and contributed to a sense of unease in
the country. We score this as a victory for government, which
convinced the union to accept the key elements of its initial
proposal (i.e., a 26% raise over an extended phase in period). The
message to other unions may be that strikes don't pay real dividends
in this economic environment. Ref A provides background on the
strike. End comment.
3. (SBU) SEACOM CABLE SET TO LAND JUNE 27, 2009
In a January 28 meeting, Seacom CEO Brian Herlihy updated Ambassador
on the progress of the company's undersea fibre optic cable that is
now scheduled to land in Kenya on June 27 this year. The cable,
which links Kenya, Tanzania, Mozambique, Ethiopia, Madagascar, and
South Africa to Europe and India, is expected to bring broadband to
East Africa for the first time. Herlihy told the Ambassador that
the Kenya portion, including the cable station in Mombasa, is 95%
complete. Seacom is scheduling a simultaneous launch in all of the
countries involved in mid-July.
Comment: This is good news. Economic growth is severely hampered
by the lack of affordable, efficient internet service in Kenya.
According to Herlihy, parts of a national fibre optic backbone are
in place or about to be in place. In other words, when the cable
lands, Kenya should be poised for a relatively quick leap forward in
internet technology. End comment.
RANNEBERGER
STATE ALSO FOR AF/E AND AF/EPS
STATE PASS USAID/EA
STATE PASS USITC FOR ALAN TREAT, RALPH WATKINS, AND ERLAND
HERFINDAHL
TREASURY FOR REBECCA KLEIN
COMMERCE FOR BECKY ERKUL
SIPDIS
E.O. 12958: N/A
TAGS: ECON ELAB ECPS EINV EFIN ETRD EAID BEXP PINR ASEC
PTER, KCOR, KE
SUBJECT: KENYA ECONOMIC HIGHLIGHTS: FEBRUARY 2009
REFS: A) Nairobi 119 B) 08 Nairobi 2897
This cable is not/not for internet distribution.
--------------
TABLE OF CONTENTS
--------------
1. (SBU) KENYA STRUGGLES WITH GROWING DEFICIT
2. (SBU) TEACHERS CALL OFF STRIKE
3. (SBU) SEACOM CABLE SET TO LAND JUNE 27
1. (SBU) KENYA STRUGGLES WITH GROWING DEFICITS
Tax revenues fell $113m short of the GOK's mid-FY08/09 target. Due
to the global crisis, there is little prospect for more robust
collection during the remainder of the fiscal year. The
conventional wisdom here is that the GOK will almost certainly slash
much-needed infrastructure spending. To mitigate the degree of cuts
to capital expenditures, the new Finance Minister, Uhuru Kenyatta,
recently announced the sale of $234m in infrastructure bonds. Media
reports FinMin PermSec Joseph Kinyua assuring investors that
proceeds from the bonds will remain tied to designated projects.
However, a contact familiar with the bond floatation process told us
January 30 that Kenyatta's and Kinyua's comments are misleading. In
fact, the proceeds from the bond sale -- and interest payments to
buyers -- are not linked to specific projects. "This is not an
infrastructure bond, but rather a routine bond issuance; this may
not even be clear to Ministry of Finance officials," our contact
said. He believes the bond will actually be used to service the
government's KSh127 billion budget deficit. Comment: Kenya's
investment climate, already severely damaged by corruption (septel)
and poor infrastructure, can ill afford the perception of more
government foul play. End Comment.
2. (SBU) TEACHERS CALL OFF STRIKE
The Kenya National Union of Teachers backed off its demand for a
lump sum 26% pay increase and accepted a government plan to phase in
the raise in three stages over two years. The government promised
to adjust the phase in period to two stages over two years if the
Kenyan economy rebounds during the next 12 months. The government
further agreed to drop any charges against striking teachers. New
Finance Minister Uhuru Kenyatta negotiated the settlement which
ended the strike; he reportedly made clear Kenya's financial
problems to union bosses.
Comment: The 11-day strike had parallelized learning for millions of
Kenyan primary school children, distracted parliamentarians from
work on political reform, and contributed to a sense of unease in
the country. We score this as a victory for government, which
convinced the union to accept the key elements of its initial
proposal (i.e., a 26% raise over an extended phase in period). The
message to other unions may be that strikes don't pay real dividends
in this economic environment. Ref A provides background on the
strike. End comment.
3. (SBU) SEACOM CABLE SET TO LAND JUNE 27, 2009
In a January 28 meeting, Seacom CEO Brian Herlihy updated Ambassador
on the progress of the company's undersea fibre optic cable that is
now scheduled to land in Kenya on June 27 this year. The cable,
which links Kenya, Tanzania, Mozambique, Ethiopia, Madagascar, and
South Africa to Europe and India, is expected to bring broadband to
East Africa for the first time. Herlihy told the Ambassador that
the Kenya portion, including the cable station in Mombasa, is 95%
complete. Seacom is scheduling a simultaneous launch in all of the
countries involved in mid-July.
Comment: This is good news. Economic growth is severely hampered
by the lack of affordable, efficient internet service in Kenya.
According to Herlihy, parts of a national fibre optic backbone are
in place or about to be in place. In other words, when the cable
lands, Kenya should be poised for a relatively quick leap forward in
internet technology. End comment.
RANNEBERGER