KENYA

	FY 1998 Actual	FY 1999 Estimate	FY 2000 Request
Development Assistance	$21,500,000	$12,600,000	---
Development Fund for Africa	---	---	$20,900,000
Child Survival and Disease	$5,500,000	$6,700,000	$6,000,000
Economic Support Funds	$275,000	$37,000,000	---
P.L. 480 Title II	$24,368,000	$8,474,000	$7,281,000

Introduction.

A stable country in a volatile region, Kenya is a reliable ally that remains critical to U.S. interests. Kenya is the principal point of access for U.S. military and relief operations in the Horn of Africa and in central Africa. Kenya is also the economic linchpin of East Africa. Kenya receives 71% of the foreign direct investment compared to the other eight countries comprising the east Africa region. There are more than 75 American companies, representing investments of almost $300 million doing business in Kenya and pursuing opportunities in East and Central Africa. USAID development assistance to Kenya serves U.S. foreign policy interests of promoting peace, stability and economic growth in the region. USAID’s democracy and governance program focuses on conflict resolution and contributes to the achievement of democratic reform. Efforts in agriculture affect the major economic actor of the country, the small-scale farmer. The population and health program focuses on decreasing population growth, the HIV/AIDS epidemic and preventable diseases which affect child survival.

Development Challenge.

The past year was a difficult one for the U.S. mission in Kenya. On August 7, 1998 a bomb exploded outside the American Embassy in Nairobi, ending 213 lives, injuring thousands of people, and destroying buildings, businesses and infrastructure. The challenge is to help persons injured in the bombing to receive adequate medical care and to assist Kenyans to strengthen disaster response and preparedness programs.

In the last few years, the Kenyan economy has grown more slowly than any other economy in the region. Gross Domestic Product (GDP) grew by 2.3% in 1997 and is estimated to have grown by less than 2% in 1998. As growth slackened, employment opportunities diminished, per capita incomes declined, and standards of living for ordinary Kenyans fell. The lack of employment opportunities and declining incomes have adversely affected rural agricultural development, which draws more than half of its investible income from off-farm sources. According to the latest poverty survey, 47% and 29% of the Kenyans in the rural and urban areas, respectively, are absolutely poor. USAID is targeting the more vulnerable groups of the poor population through its efforts to transform subsistence agriculture to market-oriented production, while simultaneously stimulating small and microenterprise development. This should help increase income for farmers, while creating jobs off the farms.

In 1998, Kenya experienced the worst floods in its history, which caused widespread hunger, illness, loss of livestock and damage to major roads. USAID humanitarian assistance program helped to alleviate the suffering of more than half a million people in Eastern and North Eastern provinces of Kenya through medicine and food distribution.

Seroprevalence of HIV is still increasing. Among adults in urban areas, about 12% to 13% are HIV positive, while in rural areas it is about 8% to 9%. Out of the 29 million people, about 9% of adults and some 91,000 children are HIV-positive. It is estimated that there will be more than 1.8 million HIV infections in Kenya by the year 2000. Infant and under-five mortality still remain a challenge. Declining immunization rates are contributing to under-five mortality. Improvement of child survival is further hampered by high rates of chronic malnutrition, high fertility and HIV/AIDS. USAID support has contributed to a rapid decrease in the total fertility rate (8.1 children per woman in 1978 to 4.7 children per woman in 1998). USAID continues to emphasize the need to space and limit births, as the major contribution to improving child survival.

The immediate challenge for the United States is engaging the Government of Kenya (GOK) in a constructive economic and health policy dialogue while maintaining effective donor coordination in pushing for constructive reforms in democracy and governance. USAID is working toward improving the political environment in Kenya. Currently, there is increased public awareness and heightened debate of the constitutional and legal reforms that need to take place before the 2002 presidential elections. The GOK estimates the country to achieve its development/industrial strategy by the year 2020. However, given the development challenges facing Kenya, Mission estimates that this timeframe is too optimistic.

Kenya's external debt burden stands at about $5.5 billion, which is 46.6% of the GDP. In 1994, the United States rescheduled Kenya's debt.

Other Donors.

Donors that complement the USAID program include Japan, the World Bank, African Development Bank, the United Kingdom, Germany, Sweden, and the European Union. USAID closely collaborates with these donors. The United States is the sixth largest bilateral donor.

FY 2000 Program.

The focus of the FY 2000 program concentrates on three strategic objectives and one special objective. Resources will be used to strengthen the capacity of civil society groups to enable them to continue their efforts of demanding necessary political, constitutional and legal reform, thereby contributing to the Agency’s goal of strengthening democracy.

Funds will be used to continue commercializing smallholder agriculture and natural resource management. This program is linked to two Agency goals, encouraging broad-based economic growth and protecting the environment for long-term sustainability. USAID will strengthen the private sector and the competitiveness of agricultural markets and also focus on improving incomes through increasing employment. The program will continue to emphasize microenterprise growth as the major strategy for reducing poverty and thereby improving food security. The program will also assist about 300,000 food-insecure communities to make the transition from relief to development. Finally, USAID will assist income-generating programs that support the sustainable development of the natural environment by communities living adjacent to national parks.

The population and health program will continue to focus on reducing fertility rates and the risk of HIV/AIDS transmission through sustainable, integrated family planning and health services while supporting the Agency's goal of stabilizing world population and protecting human health. Funding will support health care financing reforms and child survival and emerging diseases activities.

Following the August 7, 1998 bomb explosion USAID developed a new special objective in order to assist Kenya's recovery from this disaster. FY 1999 funds will continue to implement programs aimed at reducing the economic impact of the bombing, help all persons injured in the bombing to receive adequate medical care and strengthen disaster response and preparedness programs.

KENYA

FY 2000 PROGRAM SUMMARY
(in thousands of dollars)

USAID Mission Director, Jonathan M. Conly

USAID Strategic and Special Objectives	Economic Growth & Agriculture	Population & Health	Environment	Democracy	Human Capacity Development	Humanitarian Assistance	TOTALS
SO 1. Effective Demand for Sustainable Political, Constitutional and Legal Reform Created. - DFA	---	---	---	3,000	---	---	3,000
SO 2. Increase Commercial Smallholder Agriculture and NRM. - DFA - P.L. 480/II	8,600 ---	--- ---	2,900 ---	--- ---	--- ---	--- 7,281	11,500 7,281
SO 3. Reduce Fertility and the Risk of HIV/AIDS Transmission through Family Planning and Health Services - DFA - CS	--- ---	6,400 6,000	--- ---	--- ---	--- ---	--- ---	6,400 6,000
Totals: - DFA - CS - ESF - P.L. 480/II	8,600 --- --- ---	6,400 6,000 --- ---	2,900 --- --- ---	3,000 --- --- ---	--- --- --- ---	--- --- --- 7,281	20,900 6,000 --- 7,281

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ACTIVITY DATA SHEET

PROGRAM: KENYA
TITLE AND NUMBER: Effective Demand for Sustainable Political, Constitutional and Legal Reform Created, 615-SO01
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCES: FY 2000: $3,000,000 DFA
INITIAL OBLIGATION: FY 1995 ESTIMATED COMPLETION DATE: FY 2001

Summary: USAID's democracy and governance (DG) program has two primary concerns: strengthening civil society, with an emphasis on women's participation, and developing a more transparent and fair electoral process while promoting conflict management. Between FY 1999 and FY 2000, activities will be tightly focused on strengthening civil society especially in regard to its contribution to the upcoming legal and constitutional reform process, and in building indigenous capacity for policy analysis and information generation. Throughout the period, special emphasis will be given to women because they represent about 52% of the population and have proven to be key actors in building a vibrant civil society. Additionally, USAID will enhance the capacity of Kenyan civil society and government to avert, contain, manage, and resolve violent ethnic, racial or religious conflicts. The direct beneficiaries are the people of Kenya, through USAID's work with the politically active non-governmental organization (NGO) community.

Key Results: Four intermediate results are necessary to achieve this objective: (1) effective demand: The capacity of civil society groups to effectively demand political, constitutional, and legal reform must be improved. This effectiveness will be demonstrated by the quality of information marshaled by civil society and by its persistence and ability to pressure the government toward desired reforms; (2) civic education: 75% of USAID-funded organizations offer civic education programs; (3) women political aspirants trained: about 700 women political candidates must be assisted to network and train in leadership skills before the general elections scheduled for the year 2002; and (4) conflict resolution trainers: 250 trainers trained and deployed in target areas hit by previous ethic or religious conflict.

Performance and Prospects: Although 1998 was a relatively calm year compared to 1997, when confrontations between the government and civil society escalated and national elections were held, significant strides were made by USAID's partners in achieving sustainable democratic governance. For example, due to civil society pressure the Constitution of Kenya Review Bill was enacted. The passage of this bill which lays the ground-rules for the constitutional reform process is important in three ways. First, it demonstrates the effectiveness of civil society in articulating its preferences, and in providing competent, reliable and insightful critiques of government actions, especially in a situation where the opposition politicians do not have the means to subject executive decisions or parliamentary bills to the scrutiny that the NGOs are able to. Second, it shows how the ability of civil society to mobilize the politicians and the public in peaceful street demonstrations forced the government to concede to its demands. Third, the results of negotiations over the process of constitutional review constitute an important lesson for competing groups to seek compromises rather than winner-take-all positions.

USAID is placing special emphasis on women because they represent over half of the population and have proven to be key actors in building a vibrant civil society. Last year, the number of USAID-funded organizations offering civic education focusing on women's involvement rose by 54%, exceeding the target of 40%. A USAID-sponsored study on the effectiveness of civic education in Kenya found that about 60% of USAID-funded organizations carry out activities at the grassroots where women are more likely to have access than men; and over 50% have an explicit gender focus.

For democracy to thrive in Kenya, civil society must increase its rural outreach capabilities and targetmore people of varied social backgrounds. USAID, therefore, is encouraging NGOs to enlarge their organizational and outreach capacities in order to promote more effective civic education programs in rural communities. USAID demonstrated this commitment by supporting three main umbrella church groups with strong rural outreach activities - the National Council of Churches in Kenya, the Church of Province of Kenya, and the Catholic Justice and Peace Commission. The impact of these church bodies in civic education has been substantial, owing to their long-established institutional presence on the ground and their work in the area of poverty alleviation. The performance of this SO is on track. USAID is confident that this SO will be able to achieve all the planned targets for FY 2000. USAID assistance has supported a civil society that is stronger than two years ago and is forcing the government to respond to its demands for reforms.

Possible Adjustments to Plans: Since 1995, USAID has focused its assistance on strengthening civil society to effectively demand political, constitutional, and legal reform. This decision was based largely on the fact that government institutions were not sufficiently independent of the ruling political party and that strengthening them might only serve to further concentrate power and authority. That premise, however, may no longer be valid, particularly across the spectrum of governmental institutions and functions. A deepening civil society has increased demand for reform, dissenting viewpoints are much more widely heard, and the 1997 elections have reduced the executive branch's party majority to the point where parliamentary processes are becoming meaningful. The time appears right to assess the extent to which the United States can help Kenyans improve governance both inside and outside government. USAID, will therefore, assess the extent to which the parliament, the judiciary, and local government have changed and are independent. Based on recommendations from this assessment, revisions to the democracy and governance strategy include key government institutions such as the Parliament, the Judiciary, and local government to make them more responsive to the civil society's demands.

Other Donor Programs: In terms of funds channeled through civil society NGOs, the United States is the leading donor. Other donors that compliment the DG program in rank order are, Netherlands, Sweden, United Nations Development Program, Finland, and the World Bank.

Principal Contractors, Grantees or Agencies: The major grantees are: National Democratic Institute, Marquette University, the Kenya Human Rights Commission, Institute of Policy Analysis and Research, International Commission of Jurists, International Federation of Women Lawyers-Kenya Chapter, National Commission of Status of Women, Public Law Institute, National Council of Churches and the Catholic Church.

Selected Performance Measures:

^*This index is calculated by summing up the weighted values assigned to the following factors, on a scale of one to five, one being the lowest and five the highest possible score: interest groups initiate debate; local groups respond quickly to adverse actions/condition; and, relevant interest groups form coalitions.

	Baseline (1997)	FY 2000	Target (FY 2001)
Weighted Effective Demand Index Increases*	3.0	3.5	4.0
Percent of USAID-supported organizations offering civic education programs	52%	75%	85%
Number of women candidates contesting local and national elections	500	650	800
Number of conflict resolution trainers trained and deployed in target areas	128	250	300

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ACTIVITY DATA SHEET

PROGRAM: KENYA
TITLE AND NUMBER: Increase Commercialization of Smallholder Agriculture and Natural Resource Management, 615-SO02
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 2000: $11,500,000 DFA; $7,281,000 P.L. 480, Title II
INITIAL OBLIGATION: FY 1995; ESTIMATED COMPLETION DATE: FY 2001

Summary: To address the twin problems of economic growth and unemployment, USAID developed a private sector-led strategy in 1996 to pursue commercialization of smallholder agriculture and natural resource management. This approach was adopted after USAID found that there is synergy between agriculture and micro/small enterprises (MSE) in Kenya that is exemplified by the predominance of agriculture-related firms in the economy. For example, 78% of all micro and small enterprises are located in rural areas, and approximately one-half of these enterprises are directly related to agriculture, inexorably link the agricultural sector and micro-enterprises in Kenya. This Strategic Objective (SO) therefore, aims to increase agriculture production, employment creation, income generation, and foreign exchange earnings through: 1) strengthening and making agricultural markets more competitive; 2) promoting MSE and natural resource management (NRM) related businesses; 3) increasing non-traditional agricultural exports (NTAE); and 4) promoting sustainable on-farm and other income-generating activities within communities in marginal agricultural areas to enhance their ability to move from relief dependence to development status. The SO also supports disaster response programs that cater to victims of calamities such as the recent floods and drought.

The main beneficiaries will be three million smallholder farmer households, who constitute 80% of Kenyan households and account for 75% of total agriculture production. This includes communities living in areas adjacent to Kenya's parks and reserves and in the arid and semi-arid lands (ASAL). These households, which are predominantly subsistence-based, constitute the majority of Kenya's poor. About 33% of Kenya's smallholdings are owned by women. The people in the ASAL areas, who are victims of chronic food shortages and natural disasters such as droughts and floods, will benefit from the humanitarian assistance and P.L. 480 programs.

Key Results: The following key results are necessary to achieve this objective: 1) Maize sales: Percentage of smallholder maize production marketed increases to 50% and percentage of maize sales to state corporations falls to 15%; 2) Growth in MSE employment: a 10% annual employment growth in MSEs, including NRM-related businesses; 3) Growth in NTAE: a 7% annual percentage growth in NTAE; and 4) NRM investments: a 25% annual increase in NRM related investments.

Performance and Prospects: Performance over the past year exceeded targets. USAID's investments in agricultural research, policy reform, grain storage, NTAEs and MSE sector continued to play a significant role in Kenya's economic growth. Agricultural markets have become more competitive and farmers are getting better prices as evidenced by improvement in the farmgate-to-market price ratio for maize from 80% in 1995 to 82% in 1997. Horticulture exports, which have been growing annually by more than 10% in recent years, are now a major foreign exchange earner. MSE employment grew by more than 10%, employing 1.5 million people by 1997. USAID investments in non-governmental organizations (NGOs) that provide services to MSEs include assistance to the first African MSE-lending NGO, Kenya Rural Enterprise Program (K-REP), which has been formally licensed to become a microfinance bank. There was a significant reduction in human-wildlife conflict and increase in wildlife numbers in USAID focal areas, as a result of increased benefits from NRM-related investments. The programs contributed significantly to key Agency initiatives such as the Greater Horn of Africa and microenterprise development; supported Kenya's role as a regional model for research and source of improved seed varieties; and facilitated regional trade. A simple and inexpensive small-scale drip irrigation system developed by an U.S. company has resulted in great improvement in vegetable production by small horticultural farmers. Milk yields have doubled as a result of USAID support to American Breeders Service, an U.S. company that has been involved in dairy sector improvement.

The P.L. 480 Title II program has helped communities in marginal areas to engage in sustainable on-farm economic activities that enhance their ability to cope with the effects of the drought. Additionally, P.L. 480 assistance has led to a fall in relief dependency by 20% in one community in 1998. In 1998, Kenya experienced the worst floods in its history, causing widespread hunger, illness, loss of livestock and damage to physical infrastructure. Under the humanitarian assistance program, the mission accessed $6.2 million worth of food and medical supplies, as well as U.S. military C-130 aircraft to airlift food and medical supplies. The USAID humanitarian program successfully met the emergency needs and helped to alleviate suffering of more than half a million people in Eastern and North Eastern provinces of Kenya through medicine and food distribution. An additional $1.7 million was used under the rehabilitation program to repair damaged water/sanitation structures, and to provide veterinary services and restock livestock.

The El Nino phenomenon had a greater impact on the economy than initially expected. The damage to infrastructure, especially roads, disrupted past gains in agricultural markets as evidenced by the extremely low returns to smallholder farmers following an unexpected bumper maize and beans harvest occasioned by the El Nino induced rains. While the Government of Kenya (GOK) is still grappling with the task of infrastructure rehabilitation, a drought has ensued which has caused extensive crop failures all over the country. Performance of the largely rural-based MSE sector and the horticultural exports, which are dependent on agricultural productivity, is expected to be negatively affected and the main challenges facing the country of poverty and unemployment worsened. This is expected to have a negative impact on performance in the coming years.

Possible adjustments to Plans: USAID has made a determination to split this SO into two separate SOs, one for agriculture and another for the environment. This will enable the mission to build more comprehensively on its past experiences and to address emerging challenges in these sectors.

Other Donors Programs: The World Bank and the European Union are the major donors for agriculture. The other donors include the United Kingdom, Germany, the Netherlands, and the Government of Kenya support various activities including applied agricultural research, agricultural policy analysis, infrastructure development, macroeconomic stabilization, and biodiversity conservation.

Principal Contractors, Grantees or Agencies: The major grantees and contractors are Food for the Hungry, Catholic Relief Services, World Vision, CARE, Adventist Development and Relief Agency, Development Alternative, Inc., Technoserve, Fresh Produce Exporters Association of Kenya, K-REP, Kenya Management Assistance Program, American Breeders Service, Appropriate Technologies for Enterprise Creation, the International Center for Economic Growth and Cooperative Bank of Kenya.

Selected Performance Measures:

	Baseline (1997)	FY 2000	Target (FY 2001)
Percentage of smallholder maize production marketed	38%	50%	52%
Percentage of maize sales to state corporations	45% (1995)	15%	13%
Employment in MSE (millions)	1.5	1.7	1.9
Annual increase in NTAE (horticulture)	24%	7%	7%
Annual Growth in selected NRM investments in USAID target areas	38% (1996)	38%	38%

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ACTIVITY DATA SHEET

PROGRAM: KENYA
TITLE AND NUMBER: Reduce Fertility and the Risk of HIV/AIDS Transmission through Sustainable, Integrated Family Planning and Health Services, 615-SO03.
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 2000: 6,400,000 DFA; $ 6,000,000 CS
INITIAL OBLIGATION: FY 1995; ESTIMATED COMPLETION DATE: FY 2001

Summary: In the late 1970s, Kenya's fertility rate was estimated at eight children per woman, among the highest in the world. This contributed to an almost 4% annual population growth rate (PGR) which had serious implications for Kenya's economic and social development. As the lead bilateral donor, USAID’s on-going financial, technical and commodity assistance contributed substantially to the precipitous fertility decline to 4.7 children per woman, reported in the 1998 Kenya Demographic and Health Survey (KDHS). While much progress has been made in the last 10 years, the current PGR of 2.6% annually is still high.

By 1995, when USAID began its current bilateral program, several health challenges had emerged: HIV/AIDS infections had reached epidemic proportions; earlier gains in decreasing infant and child mortality were stagnating; public health services were experiencing financial and managerial crisis; and the quality of public health care was deteriorating rapidly. Because of the need to address a broad range of reproductive health problems, USAID’s program in Kenya has focused on improving access to family planning, HIV/AIDS prevention, child survival services and strengthening service delivery systems.

The purpose of this SO is to reduce fertility and the risk of HIV/AIDS transmission through sustainable, integrated family planning and health services. The strategy entails encouraging the use of safe, voluntary contraception, reducing HIV transmission, and strengthening the health delivery systems and services upon which the target population depends. The beneficiaries of this program are an estimated 14.6 million men and women of reproductive age and an estimated 4.7 million children under five years of age.

Key Results: Three linked intermediate results work to achieve this SO: (1) increased sector resources: improved government and donor planning and coordination will lead to a rational use of financial inputs; (2) improved financial and management capacity of service providing institutions: increasingly market-oriented and self-reliant service providers are necessary to assure the availability of quality health care; and (3) increased customer use of integrated family planning, HIV/AIDS, and child survival services: effective supply and demand for services must be guaranteed and sustained.

Performance and Prospects: SO progress in 1998 was marked by numerous outstanding achievements. USAID's leadership led to the completion of the third KDHS. USAID’s coordination ensured that three key Government of Kenya (GOK) ministries and three donor partners were integrally involved in financing and/or implementation. KDHS results show a total fertility rate (TFR) of 4.7 children per woman, down from 5.4 in 1993, and 8.1 in 1976, possibly the steepest decline ever recorded. The modern contraceptive prevalence rate (CPR) among married women of reproductive age increased from 27% in 1993 to 31% in 1998. However, there are still significant regional disparities in CPR that need to be addressed. In addition, the numbers of young people who require reproductive health education and services are increasing rapidly.

The HIV/AIDS epidemic continues to be of deep concern. HIV prevalence has reached 9% within the adult Kenyan population. Recent policy changes have been encouraging, with NGOs and religious networks playing an increasingly active role in advocacy and promotion of positive behavior change. Sales of socially-marketed condoms increased by 72% from 1996 to 1997. There is a greater media role in providing information and education on HIV/AIDS.

USAID continues to work with key donors to assist the Ministry of Health to adopt a sector-wide approach (SWAP) to program donor and government resources for health and has facilitated development of multi-year plans in support of Kenya's health sector reform process. Policy formulation and strategic planning have helped to foster better, more effective donor collaboration and multi-sectoral action plans. Further, support of the GOK's cost-sharing program has resulted in a steady increase in cost-sharing revenues ($32 million to date). Encouragement of hospital autonomy and better management practices has resulted in better run, more effective hospitals. However, there is still room for improvement. Improved cost control measures such as those instituted in FY 1998 at Kenya's second-largest hospital must be replicated at least to the district hospital level.

Possible Adjustments to plans: USAID's health sector program has had to respond to emerging needs in several areas including family planning counseling, adolescent reproductive health, and infectious diseases. In FY 1999, a collaborative mid-term review of project activities will be conducted with partners, stakeholders and clients.

Other Donor Programs: In the population sector, the GOK, the United Nations Population Fund and the United Kingdom’s Department for International Development (DFID) program provide the widest range of technical and commodity assistance. Other donors include Sweden, Germany and the World Bank. Under the United States/Japan Common Agenda, the Japan International Cooperation Agency (JICA) and USAID are jointly assisting Kenya's second largest public hospital to develop infrastructure and management systems in preparation for its privatization in the next several years. In HIV/AIDS and control of sexually transmitted infections, major donors include DFID, Belgium, Canadian International Development Assistance, UNAIDS, and the World Bank. The United States, DFID and the World Bank provide the most overall support for the HIV/AIDS program in Kenya.

Principal Contractors, Grantees and Agencies: USAID implements activities through the GOK, 13 international private voluntary organizations/universities, and several dozen Kenyan NGOs. The local NGOs include the Family Planning Association of Kenya, Marie Stopes/Kenya, Maendeleo ya Wanawake, Kenya AIDS NGOs’ Consortium and the Anglican Church of Kenya.

Selected Performance Measures:

	Baseline (1996)	FY 2000	Target (FY 2001)
Cost-sharing revenue in the public sector	$6.7 million/year	$10.0 million/year	$11.0 million/year
Contraceptive supplies maintained at service delivery points	80% of required supplies on hand at service delivery points	90% of required supplies on hand at service delivery points	92% of required supplies on hand at service delivery points
Private sector condom sales	500,000/month	2 million/month	2.1 million/month
External grant and loan resources for FP and HIV/AIDS activities (other donor assistance)	35% of total grants/ loans from non-USAID sources	50% of total grants/ loans from non-USAID	55% of total grant/ loans from non-USAID sources
Modern contraceptive prevalence rate (married women)	27%	35%	36%

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