EXAMINING THE EFFECTS OF THE WATER POLICY, LEGAL AND

INSTITUTIONAL FRAMEWORKS

Supervisor

A RESEARCH PROJECT PROPOSAL SUBMITTED IN PARTIAL

FULFILLMENT OF THE AWARD OF XXXXX, DEPARTMENT OF POLITICAL

SCIENCE & PUBLIC ADMINISTRATION, UNIVERSITY OF NAIROBI

JANUARY 2014

DECLARATION
This research study is my original work and has not been presented for the award of a
degree in this University or any other Institution of higher learning for examination.

Signature... Date...

Supervisors Approval

This research project has been submitted for examination with my approval as the

University supervisor.

Signature Date.

DEPARTMENT OF POLITICAL SCIENCE & PUBLIC ADMINISTRATION

SCHOOL OF

UNIVERSITY OF NAIROBI

ii
 DEDICATION

This thesis is dedicated to my amazing husband, whose optimism, support,

understanding, and love made this journey possible. This thesis is also dedicated to my

son, who serves as a constant inspiration in my life and reminder of just how blessed my

husband and I are.

iii
 ACKNOWLEDGEMENTS

I would like to thank my supervisor, for her guidance and support. It was such an honour

working with you and tapping from your wealth of experience. I would like to express

my gratitude to all the respondents who took their time to contribute to my research, it

was not an easy topic to discuss but you did your best. To all academic and support staff

at the University of Nairobi, your dedication humbles me. To my family and friends, you

were amazing, thank you for your unwavering support.

iv
 TABLE OF CONTENTS

DECLARATION...............................................................................................................ii

DEDICATION..................................................................................................................iii

ACKNOWLEDGEMENTS.............................................................................................iv

LIST OF FIGURES.........................................................................................................vii

LIST OF TABLES..........................................................................................................viii

ACRONYMS.....................................................................................................................ix

ABSTRACT........................................................................................................................x

CHAPTER ONE: INTRODUCTION..............................................................................1

1.1 Background of the Study.........................................................................................1

1.2 Statement of the Problem........................................................................................4

1.3 Research Question....................................................................................................5

1.3.1 Hypotheses..........................................................................................................5

1.4 Rationale/ Justification............................................................................................5

1.5 Scope of the Study..................................................................................................11

1.6 Limitations of the Study........................................................................................13

1.7 Key Definitions.......................................................................................................14

CHAPTER TWO: LITERATURE REVIEW...............................................................19

2.1 Introduction............................................................................................................19

2.2 The Evolution of Water Policy..............................................................................20

2.2.1 Revisiting Water Management Paradigms in History.......................................20

v
 2.2.2 Water Policy Reforms in the Early 1990s and After.........................................26

2.3 Financing the Water Sector with Donor Aid........................................................39

2.3.1 The History of Donor Aid in Kenya..................................................................42

2.3.2 Donor Aid for Water in Kenya..........................................................................44

2.3.3 The Problems of Donor Aid..............................................................................46

2.3.4 Politico-Economic Dimensions Determining Donor Aid..................................48

2.4 Theoretical Framework.........................................................................................51

CHAPTER THREE: RESEARCH METHODOLOGY..............................................56

3.1 Introduction............................................................................................................56

3.2 Research Design.....................................................................................................56

3.3 Sample Selection.....................................................................................................58

CHAPTER FOUR: RESULTS AND DISCUSSION....................................................59

4.1 Introduction............................................................................................................59

4.2 Descriptive Analysis...............................................................................................60

4.3 Independent T-Test Results...................................................................................64

4.4 Regression Analysis Results..................................................................................66

CHAPTER 5: SUMMARY, CONCLUSION AND RECOMMENDATIONS...........67

5.1 Summary of Findings.............................................................................................67

5.2 Conclusions.............................................................................................................67

5.3 Recommendations....................................................................................................68

vi
 LIST OF FIGURES

Figure 1: Trend of Funding of the Water Sector in Kenya by France................................60

Figure 2: Trend of Funding of the Water Sector in Kenya by DANIDA...........................60

Figure 3: Trend of Funding of the Water Sector in Kenya by DANIDA...........................61

Figure 4: Trend of Funding of the Water Sector in Kenya by Netherlands.......................61

Figure 5: Trend of Funding of the Water Sector in Kenya by SIDA.................................62

Figure 6: Trend of Funding of the Water Sector in Kenya by DANIDA...........................62

vii
 LIST OF TABLES

Table 4.1: The Levels of Participation of Donors in Funding Water Projects in Kenya. . .63

Table 4.2: Contribution of Donors to Water Sector in Kenya............................................63

Table 4.3: Donor Funding of Water Sector Before and After Water Reforms...................64

Table 4.4: The Effect of Water Reforms on Donor Funding to the Water Sector..............66

viii
 ACRONYMS

AMCOW African Ministerial Conference on Water

DAC Development Assistance Committee

GBS General Budget Support

IBRD International Bank for Reconstruction and Development

IDA International Development Association

IFC International Finance Corporation

ICSID International Center for Settlement of Investment Disputes.

IRM Integrated Water Resource Management

JMP Joint Monitoring Programme for Water Supply and Sanitation,

MDGs Millennium Development Goals

MIGA Multilateral Investment Guarantee Agency

ODA Official Development Assistance

OECD Organization for Economic Cooperation and Development

PRSP Poverty Reduction Strategy Paper

SAL Structural Adjustment Loan

SBS Sector Budget Support

UNCED United Nations Conference on Environment and Development

WHO World Health Organization

WSSCC Water Supply and Sanitation Collaborative Council

ix
 ABSTRACT

Despite the fact that over 70 percent of the Earths surface is covered by water, 99% of
the freshwater available is locked in polar icecaps, glaciers or far too deep underground.
This leaves humanity with access to only 0.3%1 of the 3% freshwater available on earth.
According to estimations by the UN, more people die presently due to insufficient access
to safe water and basic sanitation than in military conflicts. Countries in Sub-Saharan
Africa loose 5% of their national product annually more than the total amount of
development aid and debt relief due to insufficient access to safe water and basic
sanitation2.

While different studies have documented increasing competition between water users
(these include farmers, cities, energy suppliers, industries etc)in accessing water
resources they need; limited finance for water resource management remains a primary
concern, both for all users in developed and developing countries. In 1992, Kenyas
National Water Master Plan Study pointed out that the widely acknowledged major
constraint in the development of the water sector - was inadequate financial resources
exacerbated by lack of a financing mechanism of the water sector. In 2012, the lack of
finance for water resources management in the current fiscal environment of tight
budgets and strong fiscal consolidation still remains a major concern 3 not only in the
global south, but among the OECD countries as well. This problem has been attributed to
underlying compounded problems such as lack of comprehensive policy, institutional and
legal frameworks.

1
The Second UN World Water Development Report: Water, a Shared Responsibility.
March 2006. http://www.unesco.org/water/wwap/wwdr2/table_contents.shtml retrieved on 30th
November 2011

2
Government of Kenya (2007) The National Waer Services Strategy (NWSS 2007 - 2015)

3
OECD Studies on Water, (2012) A Framework for Financing Water Resources Management

x
And while sustainable financing remains at the heart of many of the solutions to
improved water management in Africa, it indeed came as a surprise that the MDG
drinking-water target was met in 2010 - five years ahead of schedule. Progress on
Drinking Water and Sanitation: 2012 Update4 stated that an estimated 89 per cent of the
global population now uses improved drinking water sources. While this exceptional
increase in access to safe water seems to be the documented case; 780 million people
still remain un-served, with 4 out of 10 people without access to improved drinking water
living in sub-Saharan Africa.5

This study tracked water policy developments that have taken place, their implementation
and how this relates to external donor budgets to water in Kenya from 1997 2007. The
study followed funding trends of selected European donors to Kenya, over a 10year
period and wishes to establish the drivers of aid allocations to water, five years before
and five years after Kenyas Water Act 2002. This study sought to better understand
funding and governance arrangements that are inextricably linked and that underpin
financial sustainability of the sector. It was hoped that a better understanding these trends
would lead us to better secure sustainable financing to support water development if the
needs of this proportion without access are to be reached.

4
UNICEF and World Health Organization 2012 Progress on Drinking Water and Sanitation: 2012 Update
5

Ref to reference in 3 above.

xi
 CHAPTER ONE: INTRODUCTION

1.1 Background of the Study

The earth is largely a water planet. Water may be everywhere, but its availability has

always been limited in terms of quantity and quality. Without water, life, as we know it,

will simply cease to exist. It is the only resource that is found in the 3 states of matter and

remains one of the most precious resources on earth. Water on earth is said to be 1,700

km3 in rivers and canals, 3,600km3 in moors, 120,000 km3 in lakes, 5000 km3 in

reservoirs and 65,000 km3 in groundwater. Despite this, a combination of both naturally

occurring conditions and humanitys actions continues to create pressure on existing

water resources. Globally, around 2.4 million deaths6 could be prevented annually if

everyone practiced appropriate hygiene and had good, reliable sanitation and drinking

water. Water resources of the earth continue to be characterized by gross inequality in

terms of distribution and developing effective water sector policies is troublesome for a

number of reasons.

First, water has unique physical properties, complex economic characteristics and

important cultural features that distinguish it from all other resources7. Second, water

resource management is administratively complicated because it involves legal,

environmental, technological, economic and political considerations 8. In most societies,

political considerations dominate decisions on water resource use. Nonetheless, most

6
Prss-stn A, Bos R, Gore F, Bartram J (2008) Safer water, better health: costs, benefits and sustainability
of interventions to protect and promote health. Geneva: World Health Organization.

7
R.A. Young and R.H. Haveman. 1985. Economics of water resources: a survey. In A.V. Kneese and J.L.
Sweeney, eds. Handbook of natural resources and energy economics, Vol. II. Amsterdam, Elsevier Science
Publishers.

1
policy options are framed and discussed in economic terms. Moreover, water problems of

the world are neither homogeneous, nor consistent. Some of the main driving forces

affecting water resources include: population growth, particularly in water-short regions;

major demographic changes as people move from rural to urban environments; higher

demands for food security and socio-economic well-being; increased competition

between users and usages; and pollution from industrial, municipal and agricultural

sources. Evidently, solutions to the water problems depend not only on water availability,

but also on policy and financing.

Literature implies that the architects of Kenyas water policy in 1990s set out to address

the bottlenecks in the Water Act Cap 372, in force then; with regard to policy

formulation, regulation and service provision. Functions which were not separated

included: inadequate funds for development, operation and maintenance of water supplies

and management of water resources; institutional weaknesses especially the scarcity of

qualified manpower and lack of skills of the users to properly operate and maintain water

supplies; unavailability of water resources due to its uneven distribution in space and

time; poor choice of technology in water supply and sewerage development, and

inconsistent project selection criteria which has resulted in adoption of technologies and

delivery mechanisms which are not well suited to sector development; lack of proper

coordination of various actors and sectors, and lack of proper inter-linkages with other

related sectors. All these reasons seemed to have driven policy change away from Cap

8
For example, water resource management depends on the government's ability to establish an
appropriate legal, regulatory and administrative framework. In fact, markets are based on a system of
enforceable private property rights. Private water markets require secure and transferable property rights,
including the right to exclude other users

2
372 to the National Water Policy of 1999. This study takes interest in following up the

effects that this policy change may have had on donor funding.

This study also appreciates that over the last century, rapid population growth and

expanding global economies have exacerbated fresh water demand. In 2005, 18 percent

of the worlds population, or 1.1 billion people, lacked access to safe drinking water 9. The

number of people without clean water in urban areas in Africa grew to 14 million in the

last decade10 and this number is expected to increase to 16 million by 2015 and 19 million

by 2025, for an addition of 395 million inhabitants over 25 years 11. Detailed projections,

in the 2012 report by the WHO/UNICEF Joint Monitoring Programme for Water Supply

and Sanitation, between 1990 and 2010, indicates that over the years under review, two

billion people gained access to improved drinking water sources, such as piped supplies

and protected wells. By 2015, it is further estimated that 92 per cent of the global

population will have access to improved drinking water. My study wonders how the

Progress on Drinking Water and Sanitation 2012 Update says a lot about global,

regional and in-country coverage levels, but little or nothing is mentioned on what may

have been the policy and financing drivers of success towards this increased drinking

water coverage at country levels. In fact, the WHO/UNICEF is yet to launch the

published the UN-Water Country Briefs under a pilot project in September 2013

during the world water week. It is expected that these will provide a strategic outlook on
9
Water for Life: Making it Happen. 2005. World Health Organization and UNICEF, Joint Monitoring
Programme for Water Supply and Sanitation.
http://www.who.int/water_sanitation_health/waterforlife.pdf (Retrieved 10thMarch 2012)

10
www.wsscc.org/source/weekly/01017.html(Retrieved 10th March 2012)

11
African Water Development Report, 2006. UN-Water/Africa.

3
the critical importance of investments in water for human and economic development at

country level; implying that studies on the drivers and impact of water financing are

indeed few, far between and ongoing. This therefore makes my study both nouvelle,

relevant and timely as it takes interest in investigating the possible link between public

policy developments in water and donor budgets at country level. It contributes to

political discourse and provides insights that can help to pinpoint external factors that

have advanced/ hindered implementation of water reform and to devise strategic entry

points to address identified barriers or scale up identified successful practices.

1.2 Statement of the Problem

Ongoing debate over the foreign aid regime remains trapped in something of an

intellectual vacuum given the lack of scholarly understanding of the determinants of

foreign aid programs12. While normative critiques of aid are numerous, critical analysis

based on comprehensive empirical evidence is rare. According to S.M.K. Donkor and

Yilma E. Wolde13, several factors have been known to hinder coordination and impede

attempts to integrate water aid, resource use and resource management activities and

according to Louka, (2008)14,a combination of poor policies, deficient and fragmented

implementation activities can have catastrophic results for the management of national

water resources.

12
Peter J. SchraederSteven W. Hook and Bruce Taylor(1998) Clarifying the Foreign Aid Puzzle: A
Comparison of American, Japanese, French, and Swedish Aid Flows in World Politics50.2 (1998) 294-323

13
S.M.K. Donkor and Yilma E. Wolde of the United Nations Economic Commission for Africa on
Integrated Water Resources Management in Africa: Issues and
Optionswww.gdrc.org/uem/water/iwrm/iwrm-africa.pdf(retrieved 12th March 2012)

14
Louka Eli (2008) Water Law and Policy, Oxford ; New York : Oxford University Press,

4
This study examined the extent to which policy, institutional and legislative changes in

the water sector have (if at all) impacted on donor aid and political coordination (or

fragmentation) among selected European donors both before and after Water Act

2002.There was specific interest by this study to compare financial allocations and

investigate the drivers behind specific European donor political decisions in regard to aid

allocations for water before and after the Water Act 2002.

1.3 Research Question

What influenced donor aid to water resource management 1997-2007?

1.3.1 Hypotheses

i. Kenyas Water Act (2002)increased donor aid to the water

ii. Kenyas Water Act (2002)improved political coordination of donors in water
iii. Kenyas Water Act (2002) had no impact on aid or political coordination of

donors

1.4 Rationale/ Justification

Water is a resource that is of direct interest to the entire population, as well as to most

ministries or departments at central and state levels, municipalities and private sector and

non-governmental organizations (NGOs).This study was justified as it feeds political

discourse both at the International and national levels on drivers of financing water

resource management. One can argue that the time has come when all major water issues,

including the interplay of public policies and donor funding, need to be analyzed, and

reviewed within an overall development context.

5
This study was concerned that on the basis of an analysis of past and present

experiences, it is evident that the water profession has basically failed to formulate,

implement and update national or sub national water policies on a regular basis in most

countries of the world. (Biswas 2002).Biswas is quite critical of policy developments

that have taken place across the world and says that the impacts of such general water

policies to improve water management processes and practices, and to alleviate poverty,

have been marginal at best. My study took these remarks as a challenge and wished to

demonstrate the extent to which policy has actually impacted on key donor resources that

were needed to advance water development.

The World Bank policy research report, Assessing Aid [World Bank, 1998], provides a

careful, and rather self-critical, evaluation of the Banks recent experience with foreign

aid. A large part of the report can be read as advocating policy dialogue, beneficiary

involvement, and local ownership instead of policy conditionality and enforced

additionally of aid financed projects. In the discussions following the report most of the

attention has focused on the first chapter in which the Bank seems to opt for policy based

selectivity in future aid allocations. Specifically, the Overview states: Financial aid

works in a good policy environment [World Bank, 1998: 2, 4] thus suggesting that aid

has no impact, or is even harmful, when policies are wrong. The unambiguous policy

message has provoked quite a few development economists and resulted in a wave of

studies of the link between aid and growth. It was therefore justified for my study to

investigate this financial aid vis-a-vis policy matters through political lenses and

contribute to hearty and responsive political discourse. The study appreciated that an

6
analysis of policy and budget variables and how they relate would contribute to an

expanded understanding of how we can better find solutions to complex and

interconnected water problems in world that continues to be characterized by gross

inequality in terms of distribution.

Several writings on aid effectiveness and aid allocation have frequently highlighted the

role of politics among donors in explaining aid allocation (Alesina& Dollar, 2000;

Boone, 1996; Burnside & Dollar, 2000; Maizels & Nissanke, 1984; McKinlay & Little,

1977). Traditionally, political variables employed in these literatures typically focus on

15
the donor side interests and determinants. Watanabe (2006) confirms the place of

politics in aid allocation and states that many studies in international development

demonstrate that foreign aid is not simply distributed according to the needs of

developing countries; an issue that Joshua M. Hill and Christopher C. Klein (2009) 16,

conform to and state that if aid is distributed based on countries needs; the most needy

would end up receiving the most amount of aid and this could present a problem if every

aid donor used the same system. Watanabe (2006) further asserts that Bilateral Official

Development Assistance allocation is often dictated by donor interests that are not

directly connected to development; a matter that this study takes keen interest in

investigating. This study employed political economic theories to read into the

exceedingly complex relationships between Kenya and selected European bilateral

donors 1997 2007; and to see whether Kenyas Water Policy and subsequent Water Act

15
Yuko Watanabe (2006) What Determines Bilateral Aid Distribution? Evidence from Major Donors

16
Journal for Economic Educators 9(1), SUMMER 2009

7
2002 has in any way determined the amount of aid to water during the period under

review.

Frieden and Rogowski argue that internationalization of issues affects the policy

preferences of actors and institutions within countries in predictable ways based on the

economic interests of the actors. In other words, this idea suggests that the north core sets

the pace for the south periphery. This study however explored the total converse by

assessing the motivating factors in Kenya that may have steered internationalization of

our local interests as expressed in the Water Policy and Water Act 2002 and influenced

trends in financial budgets to water by select European donors during the period under

review.

This study took specific interest in the policy gaps that were documented in the 1992

National Water Master Plana memorable point in time when many scholars deployed

balance of power logics to argue that the end of cold war bipolarity would result in a new

multipolar distribution of power17. 1992 is also the year when widely recognized

challenges facing the water sector were summarized innumerous international reports,

such as the World Banks 1992 Buky Report18 and the United Nations World Water

17
For examples of predictions of postcold war multipolarity, see Layne 1993; Mearsheimer 1990; Waltz
1993.

18
World Bank, 1992a: Water Supply and Sanitation Projects: The Banks Experience: 1967 - 1989.
Washington, D.C.: World Bank Operations and Evaluation Department. The Buky report analyzed 129
urban water supply and sanitation projects over the period 1967 through 1989. The Report noted that the
water sector stood out as one of the least satisfactory of any of the Banks portfolios, with the lowest
sustainability ratings of any sector. Some of these issues were not unique to the water sector, as evidenced
by the Wapenhans Report (released in the same year), which was critical of the Banks approach to project
lending, noting particularly poor performance in the water sector. See World Bank 1992b: Effective
Implementation: Key to Development Impact. Report of the Portfolio Management Task Force.

8
Assessment Programme Reports19.This familiar litany of documented water sector

challenges later formed the justification for water reforms. Some of the water challenges

brought to light in early 1990s included low coverage rates, indiscriminately low tariffs

(which were said to have been encouraging wasteful water use, and/or render difficult the

recovery of costs from tariff revenues), under-investment, deteriorating infrastructure,

over-staffing, inefficient management, and unresponsiveness to the needs of the poor.

This study also noted that the 1992 National Water Master Plan came to be in the year of

the 1st multiparty elections in Kenya and will be interested to narrate and relate

happenings between Kenya and specific European donors with 1992 as the baseline time

that is decorated with vibrant political happenings in Kenya.

Malaquen Milgo (2012) suggests in the publication water sector reform in Kenya is

bearing fruit20 that since the reforms started in 2003, the sector has realized improved

service levels and increased access to water for consumers and the formerly underserved.

He goes on to boldly suggest that more resources have been made available to the water

sector by governments and development partners as a result of the reforms yet he does

not back up this statement with empirical data. Infact, he only refers to recent survey

carried out between the 18th and 23rd December, 2011, and discusses four broad

objectives21: and none of these touches on water sector reforms and external aid. This
Washington, D.C.: World Bank, 1992b.

19
United Nations World Water Assessment Program: Water for People, Water for Life (2003) and Water: A
Shared Responsibility (2006). Rome: United Nations World Water Assessment Program.
20
DDD #03 Development Cooperation Worldwide

21
To establish and gain insight into the services delivered by the key institutions under the Ministry of
Water and Irrigation; to gauge public perception on services delivered by the water companies and the

9
clearly pointed to a gap in knowledge in this area and my study wished to contribute

towards the generation of scientific information as regards water sector policy changes

and external aid.

And finally, this study was motivated by facts documented in a regional study that

assessed 16 African countries (including Kenya) in 2006. The study indicated that even if

MDG targets were met, an additional 8.5 million people in Kenya will remain without

access to safe water, and 12.2 million will lack sanitation. In achieving the water and

sanitation goals therefore, there are financial constraints and it is unclear whether flows

are allocated and spent efficiently. Financing data is weak and investment planning new,

which may affect projections of need22.My study sought to contribute into filling the

identified need of financing data by analyzing donor flows and allocations and the

driving factors behind these allocations to water over a period of 10 years and through

this it is envisaged that the research findings will be used for improved planning and

projections.

1.5 Scope of the Study

The scope of this study was carefully considered after surveying what other worthy

academics have written on related water issues in the recent past. This study highly

appreciated and took cognizance of the so called Drawers of Water II study by Nyangeri

and Ombongi (2007) and East Africa Water Regimes by Ombongi and Nillson

WSBs; to assess the publics level of knowledge and awareness of the various interventions and services;
and to identify the achievements and challenges of the water sector reforms.

22
African Ministers Council on Water (AMCOW), EU Water Initiative and UNDP(2006) Getting Africa
on Track to Meet the MDGs on water and Sanitation: A Status Overview of Sixteen Africa Countries,
WSP- Africa, Nairobi Regional Office, World Bank.

10
(2009)both that offer an account of key historical events and policies in the Kenyan water

sector. My study also recognized several other studies that have been done on

Privatization including Wambua, (2004) Water Privatisation in Kenya, Global Issue

Papers No. 8 KAkumu (2004) on Privatization of the Urban Water Supply in Kenya:

Policy Options for the Poor; KAkumu and Appida(2006) on Privatization of Urban

Water Service Provision: The Kenyan Experiment; Asingo (2006) Eldoret Water

Company and Sanitation; Kenneth Nyangena (2008) on Privatization of Water and

Sanitation Services in Kenya: Challenges and Prospects; Owuor and Foeken (2009) on

Water Reforms and Interventions in Urban Kenya, Institutional set-up, emerging impact

and challenges; Okeyo Joseph Obosi () Public Private Partnerships in the Privatization of

Water Service Delivery in Kenya; Mutunga, (2011) Challenges facing the

Implementation of Water Sector reforms in Kenya, A Case of Tana Water Services Board.

I noted that most of the studies sought to highlight general knowledge, attitudes and

practices of privatization of the service providers in the water and sanitation sector and

the underlying challenges in the management of privatization of water and sanitation

services in Kenya, on both service providers and consumers. During the course of my

study, I only found a handful of critiques who posit that privatization has actually not

happened in Kenya but rather what we have is a sort of commercialization of the water

sector and a unique case of increased bureaucracy in the management of water issues.

The scope of my study was beyond assessing privatization and whether it has worked or

not, rather it was about analysis of the political relationships between Kenya and

European donors and how Kenyas Water policy, legal and institutional frameworks have

interplayed and influenced these relations.

11
The geographical scope of this study was limited to Kenya and its relations with select

European Donors in the area of water. A 2006 World Bank study Getting Africa on

Track to Meet the MDGs on water and Sanitation: A Status Overview of Sixteen Africa

Countries; indicated that data from the last five years preceding the study showed 62

percent of funding for Water Supply and Sanitation (WSS) had originated from donors,

while 38 percent had come from the Government of Kenya. This study was interested to

better understand local driving forces that may have influenced trends in foreign aid

budgets during the period under review 1997 -2007 and hopefully help us in further

interpretation of Kenyas foreign relations and whether public policy has a place in

influencing budget trends in the area of water.

Areas of further study in future may include a further analysis of the motivations for

sustaining aid as suggested by Hopkins (2000) that represent desiderata shaping, aid size,

packaging and effectiveness in the case of Kenya; These are (i) the pursuit of global

public goods, that will draw on collective benefits from reduced violence, disease and

pollution (ii) economic development benefits for donors, that will build on national self

interest in gains from trade (iii) domestic special interests that rests on interest group

pressures and bureaucracies that organize and serve these and (iv) increased willingness

of recipients to accept conditionality, that rests on what recipient countries are willing to

do to get aid.23

23
Raymond F Hopkins (2000) Political Economy of Foreign Aid in Foreign Aid and Development:
Lessons Learnt and Directions for the Future by Finn Tarp, Peter Hjertholm (eds) Routledge

12
1.6 Limitations of the Study
A key limitation to this study was the old view central planning model that dominated

development thinking between the 1950s and the 1980s that assumes that government has

the primary responsibility for financing, managing, and operating services

(Serageldin,1994). It is government's task to define the services to be provided, to

subsidize these services (especially for the poor), and to develop public organizations for

service delivery. The interplay of foreign donors and government within this model is

rather simple as external support agencies are only seen to assist government effort by

providing the resource transfers necessary for service provision 24. In this view therefore,

an extensive analysis of the factors that determine aid to water may not be seen as

important since aid is seen just as assistance or help to an otherwise independent

government system.

Another limitation of this study was view emanating from a critical analysis of the

growth regressions in Burnside and Dollar [2000] conducted by Dalgaard and Hansen

(2001) that analyzes the relationship between aid and government expenditure in a

modified neo-classical growth model. Their results suggest that while good policies spur

growths they may at the same time reduce the effectiveness of foreign aid. Secondly, this

analysis shows that the econometric results in Burnside and Dollar emphasizing the

crucial role of interaction between aid and good policies in the growth process are fragile,

as they are extremely data dependent. This finding conforms well to regression results in

24
Serageldin, Ismail (1994)- Water supply, sanitation, and environmental sustainability: the financing
challenge, The Intenational Bank for Reconstruction and Development/-n World Bank, Washington DC

13
other recent studies25 and they limited this study as the link between policies and aid was

downplayed.

1.7 Key Definitions

Water Resource Management (WRM): According to the World Bank, Water Resources

Management aims at optimizing the available natural water flows, including surface

water and groundwater, to satisfy these competing needs. It could therefore be defined the

activity of planning, developing, distributing and managing the optimum use of water

resources. In an ideal world, water resource management planning seeks to allocate water

on an equitable basis to satisfy all uses and demands, which is rarely possible in practice.

Integrated Water Resources Management (IWRM) on the other hand has been defined

by the Technical Committee of the Global Water Partnership (GWP) as "a process which

promotes the coordinated development and management of water, land and related

resources, in order to maximize the resultant economic and social welfare in an equitable

manner without compromising the sustainability of vital ecosystems."IWRM is based on

the three principles: social equity, economic efficiency and environmental sustainability.

This study will utilize both terms inter-changeably in discussions.

Water Policy: According to Schad (1991), the concept of national water policy is hard to

define in part because of the difficulty in defining the word policy. He defines national

water policy as the total of all actions taken by individuals and entities in managing the

25
Carl-Johan Dalgaard and Henrik Hansen (2001) On Aid Growth and Good Policies in Journal of
Development Studies, 37(6): 17-41, 2001

14
nations water resources26. At one time or another, the actions of legislative bodies in

dealing with water have seen the exercise of political wisdom or expediency, craftiness

and once in a while diplomacy or even prudence. According to this study, water policy

will be defined as the instrument through which broad goals and objectives of

government are translated to carry out legislative responsibilities. Water policies referred

to in this study included and reflected the strategic direction for water resources

management and the water industry in Kenya and included specific documents utilized in

Kenya that outline how water legislation is administered, that inform the water planning

process and that support equity and consistency in decision making.

Foreign Aid: Foreign aid takes many forms. The most important in terms of its size and

influence is official aid. The definition of official development assistance (ODA) is

provided by the Development Assistance Committee (DAC) of the Organization for

Economic Cooperation and Development (OECD). ODA is calculated as the sum of

grants and loans to aid recipients that: (a) are undertaken by the official sector of the

donor country; (b) have as the main objective the promotion of economic development

and welfare in recipient countries; and (c) are on concessional financial terms (i.e., with a

grant element equal to at least 25 per cent of the total). McGillivray (2003) finds that past

colonial links and political alliances are major determinants of foreign aid and that such

strategic factors are at least as important as variables which reflect recipient needs

(Alsina and Dollar, 2000). Very different motives have driven aid relationships over time,

particularly as global conditions and dominant ideas have changed. This study considered
26
Schad M Theodore (1991), Do We Have a National water Policy in Journal of Soil and Water
Conservation January/February 1991 vol. 46 no. 1 pp14-16
th
http://www.jswconline.org/content/46/1/14.extract# (accessed 10 Dec 2012)

15
the possibility that Kenyas Water Policy and its subsequent reforms have played a key

role in shaping and influencing foreign aid relations to water, by analyzing official flows

from select European donors over a ten year period.

Water Aid: The Development Assistance Committee (DAC) Defines aid to water supply

and sanitation as including water resources policy, planning and programmes, water

legislation and management, water resources development, water resources protection,

water supply and use, sanitation (including solid waste management) and education and

training in water supply and sanitation. This definition was a major limitation of this

study as the classification to distinguish between aid for water and aid for sanitation was

revised starting with 2010 flows27. This means that all the donor budgets captured from

OECD sources prior to 2010 have aid for water and aid for sanitation in one bag.

Budgetary Allocation: A budget allocation is the amount of funding designated to each

expenditure line. Budgetary allocations are integral components to an annual financial

plan, or budget. In this study, reference to budgetary allocation designated the maximum

amount of funding a specific donor is willing to spend on a given item or program, and it

is a limit that is not to be exceeded by the government authorized to charge expenses to

that particular budget line.

Budget Support: is a term used for aid funds that are managed by the partner

government using its own financial system and procedures; either for general funding of

the budget or for specific sectors. Two forms of budget support can be defined as a subset
27
"Guidance for use of water supply and sanitation purpose codes".

16
of budget support: General budget support is budget support where the purpose is to

contribute to the implementation of generic goals as set in the national development or

poverty reduction strategy. Sector budget support is budget support where the purpose is

to accelerate progress towards the partner governments sectoral goals28. As regards the

official definitions of (direct) budget support, there is a relatively clear consensus around

the OECD/DAC definition of budget support as: ...a method of financing a partner

countrys budget through a transfer of resources from an external financing agency to the

partner governments national treasury. The funds thus transferred are managed in

accordance with the recipients budgetary procedures. Funds transferred to the national

treasury for financing programmes or projects managed according to different budgetary

procedures from those of the partner country, with the intention of earmarking the

resources for specific uses, are therefore excluded from this definition of budget support

(OECD/DAC, 2006).However, as noted by DFID (2008) there are no internationally

agreed definitions of General Budget Support and Sectoral Budget Support and donors

differ slightly in practice - how they define the boundary. The closest thing to an official

definition is provided by OECD/DAC guidance, which states that: An additional

distinction might be made between general budget support and sector budget support. In

the case of general budget support, the dialogue between donors and partner governments

focuses on overall policy and budget priorities, whereas for sector budget support the

focus is on sector-specific concerns (OECD/DAC, 2006). In the context of this study,

specific attention and data will be drawn from Sectoral Budgetary Allocations made to

water by selected European donors. The limitations however of analyzing the sectoral
28
Ingrid Marie Mikelsen (2006) (This is the definition suggested by the SPA Dublin Workshop 2005.)
Donor Definitions of and practices in providing budget support with particular reference to sector budget
support, NORAD

17
budgetary allocation was that off budget and other programmatic support that is managed

by other budget procedures outside the government ones shall not be eligible for.

Sector Budget Support: Sector Budget Support covers financial aid earmarked to a

discrete sector or sectors, with any conditionality relating to these sectors. Additional

sector reporting may augment normal government accounting, although the means of

disbursement is also based upon government procedures (Booth and Lawson, 2004).

CHAPTER TWO: LITERATURE REVIEW

2.1 Introduction
Universal ambitions to attain universal coverage of water can be traced back to 1977;

when the first intergovernmental conference - Mar del Plata United Nations Conference

on Water was held. Representatives from most of the worlds governments committed to

ensuring that everyone would have adequate water and improved sanitation by 1990 29.

This UN target was not achieved and what followed in 1990 was a target to achieve

universal access to safe drinking water by 2000. Once more, progress fell so far short of

the goal resulting in the re-adjustment of time frame and recalibration of this through the

MDGs target of reducing by half the proportion of people without sustainable access to

safe drinking water and basic sanitation by 2015 30. This time, a part of the MDG 7c has

been achieved 5 years ahead of schedule.

29
UN- Habitat (2003) Water and Sanitation in the World Cities. London, Earth scan

30
Vandemoortele J. (2003) Are MDGs Feasible? New York, UNDP

18
Following this reported success, it is time that academic studies clearly articulate and add

to the body of knowledge factors that may have led to the said MDG 7c success and

among this could be the interplay between public policy and donor budgets. This paper

takes interest in establishing the relationship between public policy and donor budgets for

water in Kenya. It is hoped that future studies will undertake to follow up and document

whether improved policies development, implementation and increased budgets indeed

contributed to the success of a part of MDG 7c in the recent past.

2.2 The Evolution of Water Policy

2.2.1 Revisiting Water Management Paradigms in History

While Water governance can be traced back for 6000 years; mans obsession with

controlling the natural hydrological cycle can be traced back to 560 BC when the first

enclosed and covered spring was recorded in Athens (Morton, 1966). Water was among

the first resources that humans used and tried to manage, and hence one of the first areas

in which social rules and customs were developed. Several scholars have documented the

layers of paradigm shift in water management. Gupta 2007; cf. Cech 2003) argue that

through the 6000 years of history of water governance a number of different converging

forces are visible. These include, forces of the development of civilizations (e.g.

Mesopotamia), the spread of religion (e.g. Islam), conquests of other territories (e.g. The

rise of the Roman Empire and colonialism); the diffusion of ideological discourse (e.g.

Communism); codification (e.g. the spread of ideas about norms, rules and principles);

the role of epistemic communities (e.g. the rise of cross-border scientific communities

and their impact on policymaking); environmentalism (e.g. the spread of environmental

19
norms and rules through global policymaking and civil society); and globalization (i.e.

the spread of neo-liberal and consumerist norms through banks, the electronic media and

internet).

Allan (2000) talks of five water management paradigms are identified as follows; first,

the paradigm associated with of pre-modern communities with limited technical or

organizational capacity. The second paradigm is that of industrial modernity. In the water

sector the ideas of the enlightenment; engineering capacity, science and investment

initiatives of the state and the private sector characterized industrial modernity. Industrial

modernity was manifest as the hydraulic mission of the mid-twentieth century. According

to social theory the ideas underpinning industrial modernity were challenged during the

1960s and the 1970s. The questioning led to reflexive responses and a phase, which has

come to be known as 'reflexive modernity'. In the North in the water sector the reflexive

response is evident in a three water management paradigms. (Beck 1990) This phase

witnessed a reduction of water use in agriculture in a number of semi-arid industrialized

economies like Australia, California, Arizona and Israel. This reflexive phase can be

shown to have three sub-phases. The third paradigm is the change of water allocation and

management priorities inspired by the environmental awareness of the green movement.

Their campaigns started in the 1960s but it was not until the 1980s that evidence of the

influence on policy became evident in water use figures. The fourth paradigm was

inspired by economists who began to draw the attention of water users in the North to the

economic value of water and its importance as a scarce economic input. These ideas

gained currency in the early 1990s. There has been an attempt to export them to the South

20
via such agencies as the World Bank and through the energies of such institutions as

UNCED, the World Water Council and the Global Water Partnership and the associated

Global Water Forum in The Hague in March 2000. The environmental and economic

phases are still in train and it is argued here that they are being supplemented by a new

fifth paradigm which is based on the notion that water allocation and management are

political processes. Environmental fundamentals such as the hydrological logic of the

river basin and economic fundamentals relating to the value of water are central to the

concept of integrated water resource management - IWRM. But IWRM demands much

more than the mere recognition of the environmental and economic value of water and

planning engineering and economic interventions. IWRM is an intensely political process

because water users have interests and they do not want them to be diminished by such

interventions. Christian Schleyer et al 31(2012) also suggest that there have been several

paradigm shifts in water management since the nineteenth century to date. He submits in

detail that the Hydraulic mission which covers the late 19th century to the 1970s

(coincides to industrial modernity) had policy that appreciated water as a resource for

progress of human society. Other scholars identify this era as one that had policy

recognizing water as a human right. , J.A. Allan 32 (2004) posits that in the early 19th

century water users, the hydraulic engineers who solved many of their problems, and the

policy-makers engaged in the allocative politics of managing water resources, achieved a

31
Christian Schleyer, Andreas Thiel &InsaTheesfeld (2012) Scientists' views meet practitioner's
experiences - the advantage and challenge of re-scaling in the water sector. The challenge of comparing
water sector reforms on a cross-regional scale Planet under Pressure New Knowledge towards Solutions
March 26-29, 2012 London (Great Britain)

32
J. A. Allan (2004) Water resource development and the environment in the 20th century: first the taking,
then the putting back in The Basis of Civilization - Water Science? (Proceedings of the
UNESCO/IAHS/IWI1A symposium held in Rome. December 2003). IAHS Publ. 286. 2004

21
consensus on how water resources should be managed. Characteristically, policy in the

hydraulic era (also referred to as hydraulic infrastructure platform) focused on

technological subjugation of nature e.g. extensive irrigation infrastructure, large dams and

river regulations and the mid-19th century, engineering "solutions", diverting and storing

water to overcome seasonal variability.

1 Water Management Paradigms in Kenyas History

Earliest attempts to Water policy in Kenya can be traced back to the Water Ordinance of

1929. The Water Ordinance was repealed by the Water Act Cap 372 in May 1952, and

revised in 1962 and in 1972 in an attempt to redress colonial era misallocation of

resources. Nillson (2011) has it that in the case Kenya, responsibility for water supply

was originally entrusted to the Department of Water Development (DWD) which was

housed in various ministries; first in Public Works Department then transferred to the

Ministry of Natural Resources in 1964 and to the Ministry of Agriculture in 1968. The

hydraulic mission could be said to have been typically marked in 1974, when the

Government placed the water portfolio in a new ministry and this came with the first

National Water Master Plan Initiative launch. The primary aim of this initiative was to

ensure availability of portable water within reasonable distance to all households by

2000. The initiative bore the slogan, Water for all by the year 2000 which was to be

achieved through the development of water supply schemes. In line with the 1974

Initiative, the Government upgraded the Ministry of Agricultures Department of Water

Development into a Ministry of Water. This new Ministry embarked on an ambitious

water supply development program.

22
The World Commission on Dams (2000) has also shown that, globally, the largest

numbers of dams were constructed in the 1970s and consequently, this is said to have

caused risks to economies and livelihoods due to overexploitation and emergence of other

environmental problems. According to Briscoe and Malik (2007), Arthur Cotton of India

and other pioneering engineers were worshipped as saints, and dams became the temples

of modern India. The very success of the hydraulic mission enterprise, as in other

societies and for other issues, carried the seeds of its own downfall. As the policies

provided for the infrastructure platform was built, there were no policies focused on

dealing with challenges of maintenance, operation, and management. The uni-functional

(build) and uni-disciplinary (engineering) bureaucracy adopted the command-and-

control philosophy of the early decades of independence, seeing users as subjects (and the

state the provider) rather than partners or clients.

Water policy in Kenya in the 1970s is said to have promoted and supported the

construction of Turkwel Gorge Dam in Northern Kenya and Masinga Dam in the Tana

River Basin. This is said to have stripped off the water table from the surrounding forests

threatening the survival of the trees and affected the large floods that were essential for

the forests regeneration thus limiting the capacity of the forest in replacing itself

(Adams, 1992). While this account above clearly demonstrates the effects of policy on

the water sector priorities, much more remains to be said on how public policy may have

effected donor budget allocations towards these large dam constructions during the same

23
time. My study is about how policy may have influenced donor budgets, but at a later

point in time.

After the 1970s into the 1980s during the Reflexive modernity era (Beck 1990;

Giddens 1990) that is said to have had policy focusing on the software and not just the

hardware aspect of water delivery. This age acknowledged the social-ecological impacts

and the global as well as cross-sectoral and multi-level dimensions of water management.

Policy in this era also recognized decentralization, devolution, participation to foster

locally differentiated approaches to water management and equity in access. In Kenya,

the reflexive modernity era will be remembered as a time when the Government of Kenya

realized that the ambitious water supply policy of the 1970s was not sustainable as it put

too much strain on the government budget and left many utilities performing below

expectation. During the reflexive modernity era, Water Act Cap 372 had Ministry of

Water Resources Management and Development (MWRMD), National Water

Conservation and Pipeline Corporation, Ministry of Agriculture (MoA), Ministry of

Local Government (MoLG) and Ministry of Livestock and Fisheries (MoLF) were

all responsible for policy formulation, regulation and service provision. This

scenario made several Government organs the policy formulators, regulators and service

providers, causing confusion and overlapping of roles33. My study compares the volume

of donor aid from selected European donors and the nature of political coordination at a

time when Kenya still experienced multiplicity and duplication of roles among the

relevant ministries and after the implementation of the Water Act 2002.

33
GoK(2004) Water Sector Reforms Secretariat/Draft National Water Services Strategy, 2004

24
2.2.2 Water Policy Reforms in the Early 1990s and After

The 1990s ushered in a decade dubbed the International Water Decade by the United

Nations which could be seen as a fore-runner to the UN Millennium Declaration, a the

period when water services and foreign aid seems to have been undergoing a steady

decline. Serageldin (1994) in his keynote address to the Ministerial Conference 34

suggested that 2 main elements were essential if the world was to deal with the challenge

of financing water issues. One was Institutions. The promising institutional

arrangements are ones in which the people who are affected are put in charge of decisions

regarding both environmental services and the resources to be spent on them. At the

lowest level this meant letting households choose the services they want and are willing

to pay for. At the highest level it meant that the stakeholders in a river basin decide what

level of environmental quality they want and are willing to pay for. The second element

recommended was Instruments, which involved making more extensive use of market-

like instruments at all levels. At the household level this meant much greater reliance on

user charges for raising revenues and enhancing accountability and efficiency. At the

service level it meant greater reliance on the private sector for provision. And at the river

basin level it meant greater use of abstraction charges, pollution charges, and water

markets for water resource management. Implementation of water sector reform therefore

could be said to have been set on the basis of transaction cost reduction on the side of the

government. This political environment coincided with the end of the reflexive modernity

era and the entry of Integrated Water Resource Management (IWRM) as an approach for

progressive and environmentally sound management of water. This paper wonders

34
"Drinking Water and Environmental Sanitation: Implementing Agenda 21," held in Noordwijk, The
Netherlands, on March22, 1994.

25
whether or not this predominant political environment was a key influencing factor on

donor allocations to water.

2 What Drove the Spurt in Water 1990s Policy Reforms

The spurt in the 1990s water policy reforms was driven by several factors at international

and national levels. The end of the 1990s saw many developing countries carrying out

institutional reforms of the water sector, generally with an emphasis on privatization and

commercialization (see e.g. Bayliss 2003; Budds and McGranahan 2003; Kjelln 2006;

Dellapenna 2009).This World Bank-led push for reforms with a neo-liberal agenda was

also supported by most donor countries such as Germany, France, UK and Sweden.

However, the importance of public financing came back into fashion, against the

backdrop of the poor outcome of privatization of water services and the failure to attract

private capital (World Bank 2003, Swyngedouw 2009). This happened simultaneously

with a more general trend towards a revival of the take-off theory, where it was argued

that solving the development problems including water and sanitation required a mass-

transfer of capital from the developed world (Winpenny 2003; Sachs 2005).

The main strand to the water reform at international level was rooted in the global

discourse of integrated water resources management (IWRM) which was being actively

promoted by the Global Water Partnership. In essence, IWRM sought to promote the

coordinated development and management of water, land and related resources, in order

to maximize the resultant economic and social welfare in an equitable manner without

compromising the sustainability of vital ecosystems (GWP 2000).Arguments for

adopting the concept of IWRM were founded upon an awareness of an emerging water

26
crisis attributed to declines in water supply in a context of increased water demand due

to population growth, increased urbanization and intensification of agriculture (Nilsson

and Hammer,1998). As such, IWRM was viewed as providing an effective and

decentralized institutional framework for the management of competing water uses and

interests, especially within a context of perceived water crisis.

At the national level in Kenya, water sub-sector issues were seen as compartmentalized

between urban water supply, rural water supply, water resources management and

sanitation and respective policies and not always coherent. The responsibility for

sanitation in particular was divided between as many as five different sectors (Health,

Education, Water, Housing and Environment) and does not have a specific budget line

(Slaymaker and Newborne, 2004). Service provision prior to policy reform was not

coordinated and was carried out by a number of different providers ranging from

community-based organizations, private operators, public utilities to the government.

This fragmentation was seemed as a main barrier in the planning and implementation of

overall strategies. These challenges in a attempt towards more coherent policy

frameworks led to the adoption of Sector-Wide Approaches (SWAps)or countrywide sub-

sector programmes(see also:Mehta and Fugelsnes, 2003). It must however be noted that

the Lack of clear sector financing plans: Compared to Health and Education, has

remained a challenge for the Water Sectors. Therefore, Ministries of Water have lower

incentives but also a weaker position to lobby with the Ministry of Finance for budget

allocations compared to the health and education line ministries which, ex ante, tend to

have larger budgets and greater donor support (ODI, 2004).

27
3 The Integrated Water Resource Management (IWRM) Approach
At international level, policy work in the water sector grew tremendously from 1992.

Both the International Conference on Environment and Development (popularly known

as the Dublin conference) and the UN Conference on Environment and Development,

held at Rio de Janeiro, were held during the first half of 1992, and they had perceptible

impacts on the global water agenda thereafter in positive as well as negative ways. In the

early 1990sa suite of environmental issues had become global concerns; global warming,

species diversity and water. Biswas35 (2001) posits that one of the many negative impacts

of these two conferences was that the importance and relevance of formulating

operational national water policies basically disappeared from the global discussions on

water in the subsequent years.

The early 1990s evidently brought about increased dialogue on Integrated Water

Resource Management (IWRM), the interdisciplinary nature of the water sector. Several

issues emerged covering physical, economic, institutional, legal, environmental, social

and political aspects. There emerged a recognition that the diversified nature of the water

sector led in many cases to partial treatment of the water issues, or incomplete analysis of

the various issues at stake. Adaptive water management emerged as a systematic process

and response for continually improving management policies and practices by learning

from the outcomes of implemented management strategies (Pahl-Wostl 2007: 51)

explicitly including dynamics and uncertainty. The role of stakeholder participation and

35
AsitBis was (2001) Water Policies in the Developing World in Water Resources Development, Vol. 17, No.
4, 489499, 2001

28
social learning also increased. IWRM called for 13 areas of change requiring an

enabling environment with good policies, a legislative framework, and financial and

incentive structure, an organizational structure and capacity building. It called for a

number of instruments water resource assessment, plans, demand management, social

change instruments, conflict resolution, regulatory instruments, economic instruments

and information management and exchange (UNWWDR 2006: 14). The principles of

IWRM forced governance agencies to coordinate and cooperate to ensure synergetic

policies UNWWDR (2006). Integrated Water Resources Management, promoted initially

by academics (Koudstaal et al 1992), was adopted and further elaborated in a number of

policy documents such as the UN Conference on Environment and Development, 36 and

the World Bank 1992 Buky report. Characteristically, the policy in this era brought in

varying degrees of inter-sectoral integration and integration of administrative levels in an

attempt to de-politicize water management. It is in this era that water policy

acknowledged trade-offs between the economic, the social / development, and the

environmental rationale of water use as balancing objectives. Water was acknowledged as

an economic good characterized by the adaptation of economic principles of allocative

efficiency (water price efficiency). This era was challenged by the fact that most water

resource systems had public good features / and were seen as un-substitutable. Closer

36
IWRM is seen as including four principles: the promotion of a dynamic, interactive, iterative and multi-
sectoral approach that integrates technological, socio-economic, environmental and human health
considerations; to plan for the sustainable and rational utilization, protection, conservation and management
of water resources based on community needs and priorities within the framework of national economic
development policy; to design, implement and evaluation projects and programmes that are both
economically efficient and socially appropriate within clearly defined strategies based on an approach of
full public participation, including that of women, youth, indigenous people, local communities, in water
management policymaking and decision-making; to identify and strengthen or develop, as required, in
particular in developing countries, the appropriate institutional, legal and financial mechanisms to ensure
that water policy and its implementation are a catalyst for sustainable social progress and economic growth.

29
home, major policy reforms were gaining ground in the water sector backed by the

National Water Master Plan (1992) and hereafter, this paper closely follows the

developments that took place and that may have significantly affected key decisions to be

made among selected European donors.

However, critiques have argued that IWRM was seen as too complicated and utopian and

efforts to achieve it were doomed to fail because of the number of social actors and

situations involved. The UN World Water Development Report (2003) showed that while

the IWRM approach was accepted, the implementation was partial in both developed and

developing countries. The frustration arose from the quantum leap that IWRM called for

in improving bureaucratic structure and scientific collaboration, (Rahman et al 2003) and

the World Bank (2003) called for a sequential approach prioritizing some elements over

others as the way forward. Biswas (2002) enlists a critical review of the existing IWRM

based water management policies, strategies or plans indicating that the approaches

identified and/or pursued still continue: to be too traditional; to be too conservative; to be

too uni-sectoral; to be too engineering-oriented; to be too focused on water quantity; to be

too hierarchical and top-down; to be too politically-correct; to place too much emphasis

on past experiences; to have too little consideration of future trends and developments; to

have too inadequate linkages with energy, health and industrial policies. While my study

is not mainly about evaluating the IWRM approach, it is interested to assess how

provisions in IWRM based policy and legislative frameworks, as expressed in the Water

policy and Water Act 2002 have guided political interrelations with select European

donors and provided incentives for increasing donor aid (if at all) in Kenya.

30
4 Beginnings of Water Resource Management (WRM) Reforms in Kenya
Integrated Water Resource Management and subsequent Water Sector reform in Kenya

has had a much longer history than what is generally believed in the sector. While

popular belief has it that the Reforms were steered after the adoption of the Water

Policy of 1999, this paper strongly asserts that the so called Water Sector Reforms and

its related components of privatization did not happen in isolation of the international

political space and therefore deserve to be analyzed within the context of widespread

neoliberal reforms that swept across Africa under the Structural Adjustment Programmes,

led by the International Monetary Fund and the World Bank. Many countries in Africa,

including Kenya, actually started reforms of their water before 1990s, often with strong

backing of donor organizations such as the World Bank, German GTZ or the French AFD

(Bayliss2003; Ballance and Tremolet 2005).Kenya had participated in programmes for

structural adjustment and in 1986 the Kenya Government adopted a policy for Economic

Management for Renewed Growth (Sessional paper no 1, 1986) which underscored

commercial principles of public service. In line with this policy, some of the states

undertakings for water supply were transferred from the Ministry of Water Development

to a new state corporation, the National Water Conservation and Pipeline Corporation

(NWCPC) in 1988. This research recognizes that even the National Water Master Plan

and Delianation studies undertaken in the early 1990s were probably done to prepare the

ground for a reform of the entire water sector. It is the combination of these events and

processes that finally culminated into Kenyas first Water Policy and three years later, the

enactment of a new water law the Water Act 2002.

31
Historically, water resource management in Kenya was in the purview of the public

sector. The governmental ministries (usually at the central level) formulated water

policies unilaterally in one form or another, without any consultation with the

beneficiaries and/or stakeholders or much discussion with the state- or municipal-level

institutions37. The private sector and non-governmental institutions had virtually no

discernible role to play in the policy formulation. Accordingly, the policy formulation

process, irrespective of the sector considered, was some what similar.The bureaucrats at

the central water ministry generally decided on the targets. Appropriate resources were

then requested from the finance ministry. The water ministry was then responsible for

achieving the targets it had itself established, using the funds that were released to it by

the finance ministry. Water users, the private sector and NGOs had no significant role in

the process. And if Kenya wished to borrow funds from the World Bank or any of the

regional development banks or bilateral aid agencies for the construction, operation or

rehabilitation of water projects, it naturally had to comply with the policies and

requirements of the donors concerned. The overall process thus was comparatively

simple and straightforward.

It was not until 1999 that the definitive policy for the sector was promulgated in April

1999 as Sessional Paper No. 1 of 1999. This is the National Policy on Water Resources

Management and Development which called for de-centralization of operational activities

from the central government to other actors, including local authorities, the private sector

37
Asit K Biswas (2001) Water Policies in the developing world in Water Resources Development, Vol. 17,
No. 4, 489499, 2001

32
and increased involvement of communities in order to improve efficiency in service

delivery. Sessional Paper No. 1 of 1999 also tackled issues pertaining to water supply and

sanitation facilities development, institutional framework and financing of the sector. H.

Tropp (2007) affirms that the water sector had traditionally been and still is to a great

extentdriven by investments in technological innovations and development of

infrastructure to increase water supply. It is therefore interesting for this study to take into

consideration external financing may have been motivated by policy (and not

technological innovations as has been the tradition); and that there is a possibility that

Kenyas Policy Change in 1999 and subsequent legislation in 2002 could have affected

levels and trends of donor aid to the sector and by extension augmented or compromised

water resource management and related development initiatives.

Sessional Paper Number 1 of 1999 on National Water Policy on Water Resources

Management and Development can be said to have provided the policy direction for

Kenya to overcome the challenges in financing water development. The policy directions

provided in the Sessional paper include: Preservation, conservation and protection of

available water resources Sustainable, rational and economical allocation and

apportionment of water resources supplying adequate amounts of quality water meeting

acceptable standards for the various needs. It is on the basis of this Sessional paper that

the establishment of an efficient and effective institutional, policy and legal framework to

achieve systematic development, management and sustainable financial system for

effective water resources management, water supply was formed. In a nutshell, the

Sessional Paper No. 1 of 1999 provided a framework that would enable Government to

33
move away from direct service provision and restrict itself to regulatory functions. Thus

this study posits that this shift in functions could have created an enabling environment to

further influence sector specific inflows from specific European donors during the period

under review.

In line with the above principles of the National Water Policy, the Water Act 2002 overall

policy objective provided the foundation for a rational and efficient framework for

meeting the water needs for national economic development, poverty alleviation,

environmental protection and social well being of the people through sustainable water

resource management. This research is interested to know the extent to which the Water

Act 2002, borne of the National Water Policy provided the foundation for increasing

donor aid to water.

5 Water Reforms - Privatization, Commercialization or Enhanced

Bureaucracy?
In Kenya, privatization first became a major policy tool in the 1980s. The privatization

venture began with the IMF/World Bank imposition of structural adjustment programs

(SAPS) in the 1980s, which forced governments to free markets and pull of out of loss-

making state enterprises whose lifeline was government subventions. The IMF- World

Bank driven Privatization tag was typically represented by state withdrawal from the

water utilities and implementation of cost recovery policies in poor countries like Angola,

Benin, Guinea-Bissau, Kenya, Mozambique, Niger, Rwanda, Sao Tome and Principe,

Senegal and Tanzania. A random review of IMF loan policies in forty countries in 2000

revealed that IMF loan agreements with 12 borrowing countries included conditions

34
imposing water privatization or cost recovery requirements. Scholars and development

experts have defined privatization as a generic term used to describe a range of policy

initiatives meant to alter ownership or management away from the government in favor

of the private sector. Moreau-Le Golvan and Brant (2007) suggest that the Water

Privatization era was characterized by 3 main existing privatization models - the so-

called English, French and the German models. These three models corresponded

respectively to three basic types of privatization: "full privatization, privatization

through delegation" and "privatization with regulation by the supervisory bodies". The

three privatization models were designed to lead to three distinguishable forms of

competition: i) yardstick-competition between private providers, ii) competition between

private operators for the right to temporary operation, and iii) competition in the goods

and services markets38. They Identified trends and changes in the water sector and argued

that these were dependent on each countrys particularities regarding liberalization and

private sector involvement and that these varied following the different local situations

regarding technical complexity, financial pressure, regionalization and the emergence of

new stakeholders.

Ideally, those who support private initiative as a sustainable approach to service provision

would rather see water as an economic good that can be exchanged in the market at a

price. In practice this would mean that the market price is determined by demand and

supply and that the market price would allocate water according to competing uses,

taking into account the opportunity cost. Privatization is often confused with

liberalization. With the latter, the government can retain ownership of public enterprises
38
Yann Moreau-Le Golvan (KWB Berling), Philippe Brant (Veolia) 2007, Techneau Report on Trends in
Central Europe (Germany / Switzerland) Steffen Zuleeg TECHNEAU

35
but commercialize them in pursuit of efficiency. This could be done through improved

management and a pricing to reflect market trends. The bottom line in such cases is that

neither public ownership nor public management shifts. This appears to be Kenya's

chosen path with the provision of water services as opposed to outright privatization

through ceding control to private enterprises. In their writings, Moreau-Le Golvan and

Brant (2007) mention the unpopularity of higher tariffs as the main reason that

discouraged the Kenyan government from pursuing the privatization option39. Water

reforms in Kenya as entrenched in the Water Act 2002 constitute two main aspects; the

management of water resources and the management of water services. The latter is

considered under Part IV of the Act covering water supply and sewerage (KAkumu,

2005). The Private component as per the Act includes a private company but also a

group of citizens united in a Community-based organization (CBO) and either or not

supported by one or more NGOs (O.A. KAkumu, 2007). The act also recognizes Private

water vendors also known as the other private sector (Solo 1999) are informal

and/or small-scale operators who provide water (and sanitation) services in mostly low-

and middle-income neighborhoods. A critical evaluation of Kenya's institutional

framework indicates that no real privatization may have ever taken place in the water

sector in Kenya as all the institutions legalized to operate are public, and there are no

39
Moreau-Le Golvan and Brant (2007) The Ministry of Finance seemed eager to contract out water
services during the first half of 2001 but local politicians were not so keen. In June, Nairobi city council
awarded a contract to examine the future of the city's water and sewerage systems to a consortium led by
the British Halcrow Group. The study concluded that any private operator would need to introduce a 40%lo
tariff price hike in order to make any progress. The government's investment secretary, Esther Koimett,
announced the results of the report, adding that such rises would not be politically advisable.

36
structures and systems for ensuring that they operate in a way that may bring commercial

benefits40.

In Kenya studies point out to a shift towards market logic (with a larger private

participation), a process of regionalization (grouping of municipalities and increasing

scale of water supply services), and the creation of new regulatory systems. The move

towards privatization in Kenya and redefining the role of government in provision of

water can therefore be seen as recognition of governments own limitations and

shortcomings. Wambua41 (2004) argues that even though the government indicates that

privatization did not constitute a policy component on the sector, it was a discernible

feature of its shift on water provision. Wambua is also concerned that government at the

time was has at pains to distinguish between privatization and commercialization and that

Government of Kenya was keen on the formation of autonomous and competent water

service providers under which Local Authorities still maintain leverage and control.

Evidently, there seemed to have been some confusion of terms and the definition of

privatization, commercialization and water reforms seems and these may have been used

interchangeably yet different people used it to mean different things at every instance.

Through commercialization, the Water Act requires local authorities to form autonomous

water and sewerage companies with independent boards of directors to provide water

services and re-invest (ring fence) water revenues in service delivery improvement.

However, the companies will not own the water resources but their licensors currently
40
PhylisTemet is a Chemical Engineering graduate and alumnus of AfricanLiberty.org's summer seminar,
2010http://www.modernghana.com/news/350271/1/is-the-kenyan-government-embracing-privatisation-
o.html accessed 19th Oct 2012
41
Wambua, S., 2004, Water Privatisation in Kenya, Global Issue Papers No. 8, Berlin: Heinrich Bll
Foundation.

37
constituted as Regional Water Service Boards. The boards are also vested with powers to

license private water companies which are considered to be a potential source of conflict

with Local Authorities. Now whether it is commercialization or privatization that took

place in Kenya, one thing is clear, that the water sector reforms may have steered some

significant change in donor aid, an issue this research wishes to investigate.

2.3 Financing the Water Sector with Donor Aid

The rubric of foreign aid is vast and sophisticated. Giving of international donor aid has

a history of about 200 years; but most modern donor aid is a post world war-II

phenomenon. Different theories have influenced the way donor aid or development

cooperation has evolved over time and has led to newer insights on how best to frame

development cooperation. David Sogge (2002) describes aid as a token of concern, power

and expertise and goes on to say that in as much as it is given with a glow of satisfaction

and received with gratitude; where foreign dominates, pride and ambition have given way

to dependence and deference.

According to Organization of Economic Cooperation and Development (OECD),

Overseas Development Aid (ODA) it is defined as the transfer of resources on

concessional terms from one country to another country so as to promote the

development of the latter. During the early post World War II decades donor or foreign

aid was originally used to cover activities such as defense support, market expansion,

foreign investment, missionary enterprise, general post war rehabilitation and cultural

extension. It was seen as a tool for raising investment levels and regarded as appropriate

for expanding infrastructure and promoting social development. Come the 1970s, aid was

38
used for basic human needs and to fund investments by governments directly benefiting

their poor. Scholars have argued that Aid shifted in the 1980s to supporting growth with

emphasis on the funding of essential economic reforms of private investment to foster

national economic growth. In the 1990s, the aggregate level of development aid dropped

substantially. The sizeable reduction in aggregate aid levels in the 1990s has been

attributed to the end of the Cold War 42 by some scholars. Aid in the nineties is said to

have made a fundamental shift and embraced the humane notion which refers to aid

provided directly to disadvantaged communities through non-governmental

organizations. It was and still is administered from state to state either through bilateral or

multilateral arrangements.

A 2008 OECD analysis demonstrated that aid to the water sector accounted for about 9%

of donor aid with much of aid flowing to countries that already developing well, while

the share of aid in sub-Saharan Africa declined from 22% to 17% over 2001-2006. This

study begs the question, what are the factors that determine donor aid to the water sector;

and beyond stated health benefits, what other factors influence donor aid to continue

flowing even to countries that are considered to be doing well? Schraeder, Taylor et al.

(1998) suggest that there is something of an intellectual vacuum given the lack of

scholarly understanding of the determinants of foreign aid programs. The study, in this

section attempts to unravel what other scholars say generally on donor aid and

specifically on determinants or drivers of foreign aid to sector budgets in water resource

management.
42
Anne Boschini and Anders Olofsgrd (2007) Foreign aid: An instrument for fighting
communism? Published in: Journal of Development Studies, Volume 43, Issue 4 May 2007 , pages 622 -
648

39
Both the allocation pattern and the amount of bilateral ODA differ greatly across donor

countries since each donor has different aid philosophy, policies, management systems,

and allocation priorities. Although the primary goal of development assistance is to

promote development and welfare of the developing nations, most bilateral donors

consider their ODA a powerful diplomatic tool to shape political and often economic ties

between countries. Despite its good intentions, Sogge (2002) posits that in some aid

targeted places public management and services have decayed or collapsed, poverty and

inequality have worsened and insecurity prevails.43Scholars assert that no statistical co-

relation has been found between aid flows and growth per capita GDP (or other indicators

of development) although some argue that a small correlation is visible. They (Boone

1994, 1996; Burnside and Dollar 1997; Dollar and Easterley 1999; Rajan and

Subramanian 2005 ;); argue that aid has not helped countries develop. Burnside and

Dollar (1997) however suggest that when aid flows into good policy environments, it

helps growth, yet they also find that aid does not induce good policy environments to

emerge at all!44 The latter statement by these worthy scholars therefore inspires this study

to investigate whether at all good policy environments in water induce certain trends in

donor aid flows.

In the context of this study, foreign aid and donor aid will be used interchangeably to

mean the same thing.

43
David Sogge (2002) Give And Take: What's the Matter with Foreign Aid? Zed books

44
Finn Tarp and Peter Hjertholm (eds) (2000) Foreign Aid and Development: Lessons and Directions for the
Future

40
2.3.1 The History of Donor Aid in Kenya

During the first two decades after independence in Kenya, both bilateral and multilateral

aid sources were large and increasing. Gross ODA inflows increased from an annual

average of US$205 million in the 1970s to US$630 million in the 1980s and slightly over

US$1 billion in the 1990s (OBrien and Ryan, 1999). Aid to Kenya increased steadily

since the 1960s, with bilateral donors being the key sources of funding (mainly project

aid and technical assistance) in the 1960s and 1970s. In the first decade of independence,

Kenya experienced a growth rate of about 6.5% annually, attributed to both high in-flows

of foreign investment and technical assistance. The UK is said to have been the major

source of foreign aid to Kenya until the 1980s, when Germany, the Netherlands, Sweden,

Denmark, Japan and others significantly increased their contribution. Though aid flow to

Kenya significantly increased over time the flow has not been smooth 45. Contributions

by multilateral organizations such as the IMF and the World Bank have been

controversial for their focus on economic development and the severe austerity measures

they impose upon recipients. Because aid in both contexts is often tied to terms and

conditions of loans, critics have argued that aid has merely led to the dependence of

developing countries on the developed world. Moreover, the results of these massive aid

investments may also not have been visible due to the fragmented nature of aid flows.

This study plots the trends of donor funding to the water sector and compares the

amounts before and after the Water Act and wishes to establish the policy factors that

may have influenced the volume of aid flows to water.

45
By the end of the 1980s, Kenya had succeeded in attracting aid from most members of the donor
community. In 1990 constant prices, the aid flow increased from US$452.2 million in 1970 to US$1,234
million in 1980 and US$1,615 million in 1990. Unfortunately, the trend hit an all time low during the 1991
aid freeze, with the flow falling to a mere US$370.2 million in 1994, which was less than the flow in 1970.

41
Kenya experienced wide fluctuation and declining economic growth in the 1990s. Poor

performance of the economy coupled with high population growth among other factors is

said to have pushed the GDP per capita to decline from US$327 in 1990 to US$ 272 in

1997. In 1996-1997, the GoK was expecting to receive financing of US$183 million from

the International Monetary Fund and US$ 125 million from the WB to implement

reforms and strengthen economic growth. However donor concern about corruption and

slow implementation of the reforms led to funds being withheld in July 1997 and this led

to a weakening of the Kenya shilling resulting in increased interest rates and widening

budget deficit.

2.3.2 Donor Aid for Water in Kenya

According to the OECD Horizontal Programme on Water there are three sources of

finance for the water sector tariffs, taxes and transfers (the 3Ts) ODA falls under

transfers. In addition to the role it plays as a source of finance, ODA also supports

capacity development for the provision of water services. DAC defines aid to water

supply and sanitation as including water resources policy, planning and programmes,

water legislation and management, water resources development, water resources

protection, water supply and use, sanitation (including solid waste management) and

education and training in water supply and sanitation. Africa has continued to receive

donor aid for water development for over half a century now. This notwithstanding, a

critical view of the volumes of aid disbursed to Africa through the years seems to

illustrate that this help may have done much more to expand the industry and

commercial enterprise in other continents other than the African continent itself. Almost

42
all of sub-Saharan Africa experiences a high degree of indebtedness, high unemployment,

absolute poverty and poor economic performance. The average per capita income in the

region has fallen since 1970 despite the high aid in-flows.

Porvali (2009) states that in the 1960s and 70s the programmes. Projects were mostly

sector oriented with a sizeable technical assistance component. But the 1980s the

interventions were more holistic predominantly broad based programmes addressing

several linked sectors. They were mainly locally oriented with few links to the national

level and still had relatively large although diminishing technical assistance components.

An OECD report Financing Water and Sanitation in Developing Countries: The

Contribution of External Aid46; shows that Aid for water and sanitation has risen since

2001 after a temporary decline in the second part of the 1990s. In 2007-08, DAC

countries bilateral annual aid commitments to the water and sanitation sector rose to

USD 5.3 billion. Taking into account multilateral agencies concessional outflows

(assimilated to ODA), the total was USD 7.2 billion. Over the period 2003-08 bilateral

aid to water increased at an average annual rate of 15%. Multilateral aid also rose over

the period 2003-08 (4% annually). Loans represented almost half of aid to the water

sector.

The donors that extend the highest proportions of their aid to the water sector are the

AfDB (19%), Japan (17%), Italy (13%), Spain and the IDB Special Fund (12% each),

Netherlands and IDA (11% each), and Germany (10%). It is also important at this point to

take note of donor behavior. The picture of targeting of resources is mixed. Sub-Saharan
46
June 2010, OECD-DAC, www.oecd.org/dac/stats/water

43
Africa, the region most in need of improved access to water and sanitation, received 29%

of total aid to this sector in 2003-08. The next neediest region, South and Central Asia,

received 18%. Poorest countries received 43% of total aid to the sector: 29% for Least

Developed Countries (LDCs), and 14% for Other Low Income Countries (OLICs). This

picture makes this study ever relevant because the motivation behind aid allocation for

water seems not merely/ entirely based on need. Internationally, Japan is the largest

donor in the water sector, accounting for 27% of total aid in this sector for the period

2007-08. It is followed by IDA (15%), Germany (11%) and the United States (9%).

Countries that have significantly increased their aid to the water sector in recent years

include France, the Netherlands and Spain (through contributions to the IADB Fund for

Water). They each represented 5 % of total aid to water in 2007-08, similar level as for

the European Union institutions.

2.3.3 The Problems of Donor Aid

The number of organizations and countries involved in providing foreign aid is large. In

1970, the worlds rich countries agreed to give 0.7% of their GNI (Gross National

Income) as official international development aid, annually. Several critiques have it that

since 1970, despite billions given each year, rich nations have rarely met their actual

promised targets. For example, the US is often the largest donor in dollar terms, but ranks

amongst the lowest in terms of meeting the stated 0.7% target. Furthermore, aid has often

come with a price of its own for the developing nations: for example, some conditions

have ensured recipients use overpriced goods and services from donor countries, the

amounts are often dwarfed by rich country protectionism that denies market access for

44
poor country products, while rich nations use aid as a lever to open poor country markets

to their products, and large projects or massive grand strategies have notably failed to

help the vulnerable.

Several dozen international organizations, like the World Bank, the Asian, African, and

Inter-American Development Banks, and the United Nations Development Program

(UNDP), plus approximately thirty governments have significant programs of foreign aid,

including all the rich countries of North America, Western Europe, and Japan as well as

oil-producing countries in the Middle East and "middle-income developing countries,

like Korea, Thailand, and Turkey. Foreign aid, though large and commonplace, is not

without controversy, especially in major countries providing aid. This controversy centers

on the volume of aid that donor governments should provide and the related issue of the

impact of aid on development. Aid's critics complain that development aid aims to help

countries overcome poverty, but it has arguably done little to improve the economic well-

being of a billion of the world's poorest people, mostly in Africa where aid spending has

been highest, measured per head of population.

Easterly, argues that the main problems with foreign aid have been: 1) an inappropriate

development model based on the financing gap,47and 2) maladministration, caused by a

lack of accountability for aid agencies to the people whom they are supposed to serve 48.

He proposes to reform the way foreign aid is administered so that it actually benefits the

people whom it is supposed to help.

47
William Easterly (2001), The Elusive Quest for Growth: Economists Adventures and Misadventures in the
Tropics (Cambridge, Mass.: MIT Press).

48
Why Doesnt Aid Work?

45
According to Manning (2012), the factors diminishing aid effectiveness today include:

Inefficiency, as different channels of cooperation, bilateral, multilateral, the EU, are

fragmented; Dependency, as this allows donors to inappropriately leverage over national

policy and diminish national governments efforts to raise revenue independently;

Crowding out the private sector through government-to-government aid as this leads to

the state taking more responsibilities than it can effectively manage; Lack of clarity on

whether the current proportion of aid that goes to the state rather than NGOs is optimal;

Weakening of local accountability through strengthening the executive at the expense of

other political forces; Weak institutions whose accountability to donors tends to trump

accountability to stakeholders; Mixed motivations for providing aid including political

influence, cultural promotion and commercial self-interest; and the fact that Aid can be

used by donors as an excuse not to take action in other policy areas where reforms may

be politically costly in domestic terms but more effective than aid in terms of spurring the

development of recipient countries.

2.3.4 Politico-Economic Dimensions Determining Donor Aid

All industrialized countries without exception provide ODA to a wide variety of

countries, but there are distinctly different characteristics in the aid distribution patterns

of each donor country. The choice of recipient countries as well as the amount distributed

to them differs greatly across donor countries, often reflecting economic, cultural,

historical, and geo-political strategies of the respective donor country. The determinants

of foreign aid allocation have received much attention in the development literature from

the 1970s to the present with the majority of work in this area claiming that donor self-

interest plays a large role in determining how much aid a country receives, potentially

46
undermining the efficiency of development aid. Since the late 1990s a selection on policy

approach to aid was advocated such that more aid should be allocated to countries with

good policies, but there is little evidence that this has occurred. Clist (2011) in 25 Years

of Aid Allocation Practice: Whither Selectivity 49, used a two part model to examine

donor aid in 1982-2007. He introduces that 4P framework (Poverty, Population, Policy,

and Proximity) as a way of understanding a donors aid allocation. His results indicate

that recent conclusions of increasing selectivity are misplaced for the seven major donors

analyzed, who together represent the majority of development aid. Indeed, the effect of

each of the commonly mentioned time-trends (selectivity, the end of the Cold War, and

the commencement of the Global War on Terror) is much smaller than the role of donor

heterogeneity, which appears sizeable and entrenched. In other studies, Clist, et al (2012)

argues that donors may exercise selectivity over the aid modality and will cede more

recipient control over aid by granting more budget support to those recipients with better

expenditure systems and spending preferences (towards the poor) aligned with the donor.

He tested this for European Commission and World Bank (multilateral donors) budget

support over 19972009 and found that both donors had given budget support to almost

half of the countries they give aid, and the principal determinant of receiving budget

support was having a poverty reduction strategy in place. This however, did not influence

the amount of budget support given.

Benjamin F. Nelson, International Affairs Budget: Framework for Assessing Relevance,

Priority and Efficiency, (Washington, DC: General Accounting Office, October 30, 1997),

49
Paul Clist (2011) 25 Years of Aid Allocation Practice: Whither Selectivity? in World

47
once said, Aid appears to have established as a priority the importance of influencing

domestic policy in the recipient countries. However, according to Alesina and Dollar

(2000) the pattern of allocation of foreign aid from various donors to receiving countries

provide considerable evidence that the direction of foreign aid is dictated as much by

political and strategic considerations, as by the economic needs and policy performance

of the recipients50. Essentially, this papers proposition is that public policy in the

developing country could as well influence patterns of allocation.

Rainer Thiele (2006) analyzes the aid portfolio of various bilateral and multilateral

donors employing Tobit models that combine sectorally disaggregated aid data with

various indicators reflecting the situation of recipient countries regarding the MDGs.

Rainer demonstrates that donors differ in the extent to which their sectoral aid allocation

is conducive to achieving major MDGs and finds that there is a considerable gap between

donor rhetoric and actual aid allocation51. This invites the conclusion that the current

focus on substantially increasing aid is unlikely to have the desired effects unless the

targeting of aid is improved

50
Alberto Alesina and David Dollar (2000) Who Gives Foreign Aid to Whom and Why? Journal

51
Rainer Thiele, Peter Nunnenkamp, Axel Dreher (2006) Sectoral Aid Priorities:
Are Donors Really Doing their Best to Achieve the Millennium Development Goals? Proceedings of the
German Development Economics Conference, Berlin 2006 / VereinfrSocialpolitik, Research Committee
Development Economics, No.
21http://www.econstor.eu/bitstream/10419/3881/1/nunnenkamp.pdf(Retrieved 24th Nov 2012)

48
Hoeffler and Outram (2008)52 however in their empirical analysis indicate that roughly

half of the predicted value of aid is determined by donor specific effects. Of the

remaining variation, recipient need accounts for 36 percent and donor self- interest for

about 16 percent. This suggests that the previous literature has overstated the importance

of donor self-interest. However, they also highlight that bilateral donors seem to place

little importance on recipient merit. In the context of this study therefore, it is interesting

to investigate and document the interplay of factors that have determined aid distribution

by donor within the water sector in Kenya; and whether these have had an effect on levels

of resource allocation to key issues within the water sector.

Infact, Winters using an original dataset of all World Bank projects from 1996 to 2002,

distinguishes programmatic projects from investment projects and national from sub-

national investment projects. He asserts that well-governed countries are more likely to

make use of foreign aid for the purposes of economic development and poverty

alleviation. He says If the World Bank allows for more discretion in well-governed

countries, then it will choose to provide programmatic and national aid for these

recipients. From his evidence, Winters is convincing as he confirms the existing result

in the literature that the World Bank provides larger overall amounts of aid to better-

governed countries53.

52
AnkeHoeffler and Verity Outram (July 2008) Centre for the Study of African Economies Department of
Economics University of Oxford
53
Mathew S. Winters (2010) Choosing to Target: What Types of Countries Get Different Types of World
Bank ProjectsWorld Politics 62 (03): 422-458, 2010

49
2.4 Theoretical Framework
Foreign aid has always been political. It follows therefore from the every political

orientation of foreign aid that its effect upon the prestige of a giving nation is always in

the minds of formulators and executors of foreign aid policies. Marxist scholars and their

"dependency;' regard aid as a tool of dominant states at the center of world capitalism to

help them to control and exploit developing countries; while rationalists (Bueno de

Mesquita and Smith, 2007, 2009) have in a series of articles and books explored the

implications of their selectorate54 theory for relations between developed and

developing countries. In this framework, politicians in rich, democratic countries seek to

retain elected office by providing their selectorate with enough returns, generally in the

form of public goods. One of the public goods that leaders would like to provide is policy

concessions by foreign countries on key issues, so these leaders use foreign aid as a

means of buying policy concessions from the leaders of developing countries. Elites in

developing countries have incentives to agree to this quid pro quo deal because they are

also seeking to retain office. In this case, aid becomes fungible in the hands these leaders,

allowing them to pay off the important portions of their selectorate and retain office

with higher probability.

Liberal Internationalists see foreign aid as an instrument or reflection of the tendency of

states to cooperate in addressing problems of interdependence and globalization; through

the lenses of constructivism, Lumdaine () argues that "economic foreign aid cannot be

explained on the basis of donor states' political and economic interests, and that

humanitarian concern in the donor countries formed the main basis of support for aid.

54
Bruce Bueno deMesquita and Alastair Smith (2007) The group of individuals that have the ability to
affect elite political survival

50
Scholars who interpret relations between states through "realist" lenses have it that states

operate in an anarchic environment in which power, security, and survival are their

predominant preoccupations-answer that aid is, indeed, primarily a tool of hard-headed

diplomacy. (Aid's impact on the poor is incidental or instrumental-as a means of

increasing the security of the donor nation, for example, through reducing the temptations

of communism or terrorism.)

Early "realist" scholars and practitioners of statecraft argued that aid was a tool for

enhancing national power and security. In his writings, Morgenthau (1962:302) describes

aid as the transfer of money and services from one government to another that performs

here the function of a price paid for political services rendered or to be rendered 55. He

goes on to emphasize that the effect of subsistence aid is bound to strengthen the very

factors which stand in its way. In other words, it is only by accident favorable to

economic development (and may actually impede it). For Morgenthau much of foreign

aid is in the nature of bribes. Morgenthau considers this a highly inefficient form of

buying political influence. George Liska (like Hans Morgenthau, 1962), articulated the

view that "Foreign aid is today and will remain for some time an instrument of political

power."Both seem to agree that aid is a potent political weapon that simply seeks quick

political results and not necessarily long term growth.

While my study respects realist views, there seems to be a shortcoming in explaining the

effect of recipient side politics and policy on donor aid, much less in water development,

a matter this paper is investigating. It is key to note that the idealist paradigm and its neo-
55
Hans Morgenthau (June 1962) A Political Theory of Foreign Aid The American Political Science
Review Vol. 56, No. 2 (Jun., 1962), pp. 301-309 Published by: American Article Stable URL:
http://www.jstor.org/stable/1952366

51
idealist offshoots challenge realist assumptions, advancing a vision that is more positive

regarding the motivations of individual and state actors and more optimistic about their

potential for cooperative relations.56In a pure realist perspective, there is no possibility of

people in power striving for the ideal of economic development of underdeveloped states.

This view is however inefficient is explaining the recipient dynamics and this therefore

leads my study to utilize Liberalism that is based on a fundamental belief in free-market

principles (Martinussen, 1997) and the three mainstays of the Washington Consensus

which are fiscal austerity, market liberalization and privatization (ibid.). In fact, since the

1980s, the basic policy positions of the IMF and the World Bank the foremost

institutions of international development have been formulated through a neo-liberal

orientation, giving the market primacy.

According to Schlosser and Morlino (2011) the ideal version of liberalism is marked by a

shared commitment to four essential institutions. (i) First, citizens possess juridical

equality; (ii) Second, the effective sovereigns of the state are representative legislatures

deriving their authority from the consent of the electorate and exercising their

representative authority freely and that the state is subject to neither the external authority

of other states nor the internal authority of special prerogatives held, for example, by

monarchs or military bureaucracies over foreign policy. (iii) Third, the economy rests on

recognition of the rights of private property, justified by individual acquisition. (iv)

Fourth economic decisions are predominantly shaped by the forces of supply and

56
Charles W. Kegley, Jr., ed., Controversies in International Relations Theory: Realism and the Neoliberal
Challenge (New York: St. Martin's Press, 1995); and idem, "The Neo-idealist Moment in International
Studies? Realist Myths and the New International Realities, International Studies Quarterly 37 (June
1993).

52
demand, domestically and internationally, and are free from strict control by

bureaucracies.

Opponents however argue that in the neo-realist framework, neo-liberal policies, when

played out on the ground, are fundamentally harmful to poor people, diminishing human

development and ultimately exacerbating poverty. This in fact is summarized in literature

which indicates that by the early 1990s, reforms involving commercialization of water

servicesthe application of principles of cost recovery and profit maximizationand

private sector participation were proposed as a way to increase investment in water

delivery networks, improve access for all sectors of the population and reduce the burden

of public services on government finances. However, large segments of society still

question the treatment of water purely as a commodity, rather than as a human right and

moreover, increases in water fees have tended to be regressive, hurting the poor more

than other segments of society57.

The foreign-policy behavior of weak states, conventional wisdom holds, is largely

determined by a process of bargaining with a dominant state. Compliance with the

dominant state's preferences is viewed as necessary to the maintenance of economic

exchange relations that benefit the weak state. Evidence for such a theory has been found

in cross-sectional correlations of aid and trade with UN voting. However, such empirical

studies have ignored alternative explanations, overlooked elements of the statistical

record, and failed to examine the logic of the bargaining model. The assumptions of the

bargaining model are vulnerable to criticism; an alternative model emphasizes multiple

57
http://www.unrisd.org/80256B3C005BB128/
(httpProjects)/E8A27BFBD688C0A0C1256E6D0049D1BA#sthash.08FWznnF.dpuf(retrieved July 31st 2013)

53
constraints on the behavior of both the strong and the weak nation in an asymmetrical

dyad. Reanalysis of the data uncovers strong evidence of an explanation for foreign-

policy continuity rooted in dependency. Dependency permeates and transforms the

political system of dependent nations, thus bringing about constrained consensus rather

than compliance. Furthermore, the data provide strong evidence for an explanation of

foreign-policy change in both nations that centers on regime change, not on bargaining

with an external actor.

CHAPTER THREE: RESEARCH METHODOLOGY

3.1 Introduction
This study examined the trends in donor aid before and after the Water Act 2002 by

studying the history of aid and country case studies of aid giving, referring to government

documents, statements by public officials, DAC publications books, journal articles, news

reports, and commentaries. The study was supplemented by extensive interviews with aid

officials and experts in the three European bilateral foreign missions. The study examined

funding trends of four bilateral donors over a ten year period (five years before and after

the enactment of the Water Act), as reflected in the official government development

budget estimate books. This study took on a combined quantitative and qualitative

research approach; seeking an explanation on whether donor behavior towards water

funding trends has been influenced by Kenyas Water Policy and subsequent Water Act

2002.

54
3.2 Research Design
This study adopted a Quantitative & Qualitative Approach. This involved collection of

quantitative data showing the trends in donor funding in Kenya before the Water Act of

2002 and after the Water Act. The aim was to compare the statistics and thus determine

whether the introduction of the Act and policy changes accompanying the Act have

impacted the behavior of donors, leading to changes in funding patterns. It was

interesting to establish the levels of funding before and after the Water Act and try to

interpret changes through a neoliberal political lens. The data was obtained from

secondary sources, comprising of government reports and books obtained from the

government library in the Ministry of Finance. The data collected included the total

government expenditure on water against the total donor funding for water

(appropriations in aid); total development aid in Kenya against aid given for water; and

total yearly funding to all sectors per donor against the total yearly donor funding for

water in the country. These helped in drawing conclusions as to whether donors have

changed their patterns of funding by comparing the trends witnessed before and after the

Water Act. Water aid includes development of potable water infrastructure, sanitation

systems, and waste management, as well as water conservation and river protection. We

used percentage of the population with water access as an indicator of need for potable

water.

The qualitative approach to the research emanated from the quantitative research and was

aimed at deducing conclusions from patterns observed in the data collected above. It

sought explanation for the changing trends through the study of possible influencing

factors and thus promote an understanding of the effects of public policy on donor

behavior. In order to assist this objective, a survey was included, whereby a sample from

55
government officials and key donor country representatives in the country were included.

The survey was conducted in the form of questionnaires sent out to selected European

bilateral donors to water.

3.3 Sample Selection

This study undertook to select the top 4 European Bilateral donors to water who have

been funding Kenya from between 1997-2007. The funding trends to water from the

donors are analyzed and compared with the overall government commitments to the same

sector. Further to this, the share of aid to water in total bilateral sector-allocable is

graphically presented and a summary of the nominal changes over the 10 years noted and

compared to the 1991 baseline. From this data, the study inferred to recipient side policy

changes and analyze extent which these may have influenced the funding trends. To

compliment this investigation, a further review of official budget donor profiles on aid to

water supply and sanitation (2008) 58was undertaken covering donor side aspects of DAC

membersvaid to the water supply and sanitation sector; as prepared by the Secretariat of

the Development Assistance Committee (DAC) in collaboration with the DAC Working

Party on Statistics and the World Water Council (WWC).

HEIDE-IRENE SCHMIDT Contemporary European History / Volume12 / Issue04 /

November 2003, pp 473 507,DOI: http://dx.doi.org/10.1017/S0960777303001383

(About DOI), Published online: 04 February 2004. The article argues that although the

Federal Republic of Germany had a genuine interest in the development of the Third

World, it was the pressure of the United States that urged West Germany to become a

major donor country during the first development decade. Its economic and financial

58
An extract from the publication CRS Aid Activities in Support of Water Supply and Sanitation, 2001-
2006 (OECD/WWC 2008).www.oecd.org/dac/stats/crs/water(retrieved 4th Dec 2011)

56
strength made West Germany the primary target of burden-sharing claims. Having

accepted the position as a major contributor of foreign aid to underdeveloped countries,

West Germany at first tried to pursue a development policy based on its own postwar

experiences and economic concepts in reconstructing its economy. It operated within the

framework developed by Western donor countries in the Development Assistance

Committee and agreed to soften the terms of its foreign aid-giving during the second part

of the 1960s. Its substantial and effective foreign economic assistance policy gave West

Germany some leverage in pursuing its own political interests in other fields and in

gaining political status in the international community.

CHAPTER FOUR: RESULTS AND DISCUSSION

4.1 Introduction
This section presents the amount of development aid that Kenya has received from the

top 4 European donors and tracks the bilateral contribution over a period of 10 years

while comparing it to the total sum of development expenditure. In order to effectively

analyze the data, various tools were used including graphs and tables aimed at making

data comparison. Secondary data was sought from the various Government publications

on funding of the water sector from 1990 to 2013. The funding figures were sought from

various donors and entered into an MS Excel Spreadsheet. This therefore formed a panel

data (unbalanced due to the fact that some of the years were missing). The results are

presented as follows. First, the descriptive analysis is shown where graphical trends of

the donor funding are shown followed by tabular descriptive presentations. The second

section of the analysis presents the t-test results on the differences in funding of the water

sector before and after the enactment of reforms in the sector. The third section presents

57
the results on the regression analysis for the impact of reforms on donor funding of the

water sector in Kenya. This research sought to determine whether the changes in policy

in the water sector has influenced donor patterns and the use of graphs would therefore

show a clear trend on funding to the water development.

Table 4.1 shows data for Sweden, Germany, and France. The data captured the period

1995-2006. Water reforms in Kenya took place from the year 1999 to 2002 (Ndungu,

1997). The period was divided into four-years-period before water reforms, the four-year-

period during water reforms and the four-year-period after water reforms in Kenya.

Table 4.1 Data for Sweden, Germany, and France

Period of water reforms Year Sweden Germany France

Period before water 1995 9314185 4535939 701290
1996 1195294.118 1410588.24 1270574
reforms 1997 52066 24736966 0
1998 478162 1574873 215530
Period during water 1999 2179431 2319162 9921961
2000 6877279 1031899 34786
reforms 2001 729411.7647 14682482 92244
2002 802387 668174 871647
Period after water 2003 1600000 284714 112218
2004 1600000 18801639 25000174
reforms 2005 26263316 13789983 0

2006 12458080 15253270 58993347

Source: Ministry of water (2014)

4.2 Impact of Funding of the Water Sector in Kenya by France

Tables 4.2 and 4.3 present the findings of the study on influence of water reforms and the

funding by France.

58
Table 4.2: Paired Samples T-Test for Funding of the Water Sector in Kenya by

France before water reforms

Paired Samples Test

Paired Differences t df Sig. (2-

Mean Std. Deviation Std. Error Mean 95% Confidence Interval of the tailed)

Difference

Lower Upper

Pair Before- - - -.91

4758135.36495 2379067.68247 5387944.15611 3 .426
1 During 2183311.00000 9754566.15611 8

The study findings in Table 4.2 show that the t-calculated of 3.182 at 3 degrees of

freedom and 95% confidence interval of the difference for the first pair (periods before

reforms and during reforms in water sector). The critical t value is 2.37 at 95%

confidence interval of the difference. The t-calculated (-1.918) is less that t-critical

(3.182) and significance value (p=0.426) is greater than 0.05 hence the conclusion that

there is no significant relationship between aid and water funding before France water

funding.

Table 4.3: Paired Samples T-Test for Funding of the Water Sector in Kenya by

France after water reforms

Paired Samples Test

Paired Differences t df Sig.

Mean Std. Deviation Std. Error Mean 95% Confidence Interval of the (2-

Difference tailed)

Lower Upper

59
Pair during - -
30323958.75358 15161979.37679 29955909.99846 3.185 3 .042
1 - after 18296275.25000 66548460.49846

The study findings in Table 4.3 show that the t-calculated of 3.185 at 3 degrees of

freedom and 95% confidence interval of the difference for the second pair (periods during

and after France funding). The critical t value is 3.182 at 95% confidence interval of the

difference. The t-calculated (3.185) is more than t-critical (3.182) and significance value

(p=0.042) is less than 0.05 hence the conclusion that there is impact on aid funding by

France after reforms on water sector in Kenya.

4.3 Impact of Funding of the Water Sector in Kenya by Germany

Tables 4.4 and 4.5 present the findings of the study on influence of water reforms and the

funding by Germany.

Table 4.4: Paired Samples T-Test for Funding of the Water Sector in Kenya by

Germany before water reforms

Paired Samples Test

Paired Differences t df Sig. (2-

Mean Std. Deviation Std. Error Mean 95% Confidence Interval of the tailed)

Difference

Lower Upper

before
Pair -
- 3389162.30875 4510231.80362 2255115.90181 10565947.57845 1.503 3 .230
1 3787622.96095
during

60
The study findings in Table 4.3 show that the t-calculated of 1.503 at 3 degrees of

freedom and 95% confidence interval of the difference for the first pair (periods before

and during Germany funding). The critical t value is 3.182 at 95% confidence interval of

the difference. The t-calculated (1.503) is less that t-critical (3.182) and significance

value (p=0.230) is greater than 0.05 hence the conclusion that there is no significant

relationship between aid and water funding before Germany water funding.

Table 4.5: Paired Samples T-Test for Funding of the Water Sector in Kenya by

Germany after water reforms

Paired Samples Test

Paired Differences t df Sig.

Mean Std. Deviation Std. Error Mean 95% Confidence Interval of the (2-

Difference tailed)

Lower Upper

Pair During - -
10278197.88642 5139098.94321 8997934.19431 3.253 3 .031
1 - After 7356972.25000 23711878.69431

The study findings in Table 4.3 show that the t-calculated of 3.253 at 3 degrees of

freedom and 95% confidence interval of the difference for the first pair (periods during

and after Germany funding). The critical t value is 3.182 at 95% confidence interval of

the difference The t-calculated (3.253) is more than t-critical (3.182) and significance

value (p=0.031) is less than 0.05 hence the conclusion that there is an impact on aid

funding by Germany after reforms on water sector in Kenya

4.4 Impact of Funding of the Water Sector in Kenya by Sweden

Tables 4.6 and 4.7 present the findings of the study on influence of water reforms and the

funding by Sweden.

61
Table 4.6: Paired Samples T-Test for Funding of the Water Sector in Kenya by

Sweden before water reforms

Paired Samples Test

Paired Differences t df Sig. (2-

Mean Std. Deviation Std. Error Mean 95% Confidence Interval of the tailed)

Difference

Lower Upper

Before
Pair -
- 112799.58833 5282129.96770 2641064.98385 8517847.08818 .043 3 .969
1 8292247.91153
During

The study findings in Table 4.3 show that the t-calculated of 0.043 at 3 degrees of

freedom and 95% confidence interval of the difference for the first pair (periods before

and during Sweden funding). The critical t value is 3.182 at 95% confidence interval of

the difference. The t-calculated (0.043) is less that t-critical (3.182) and significance

value (p=969) is greater than 0.05 hence the conclusion that there is no impact on aid

funding by Sweden before reforms on water sector in Kenya

Table 4.7: Paired Samples T-Test for Funding of the Water Sector in Kenya by

Sweden after water reform

Paired Samples Test

Paired Differences t df Sig.

Mean Std. Deviation Std. Error Mean 95% Confidence Interval of the (2-

Difference tailed)

Lower Upper

Pair During- - -
13791101.03304 6895550.51652 14111497.45537 4.132 3 . 012
1 After 7833221.80883 29777941.07302

62
The study findings in Table 4.3 show that the t-calculated of 4.132 at 3 degrees of

freedom and 95% confidence interval of the difference for the first pair (periods before

and during Sweden funding). The critical t value is 3.182 at 95% confidence interval of

the difference The t-calculated (4.132) is more than t-critical (3.182) and significance

value (p=0.012) is less than 0.05 hence the conclusion that there is impact on aid funding

by Sweden after reforms on water sector in Kenya

4.5 Descriptive Analysis

The results in Figure 1 show that France has been increasing its funding since 1995 with

the largest funding coming in the period 2011/2012. DANIDA in Figure 2 has had a

fluctuating funding of the water sector in Kenya and so has been Germany (Figure 3) and

SIDA (Figure 5). Netherlands (Figure 4) had an upward trend in the funding of the water

sector and has been fluctuating since 2007. Figure 5 shows a summary of all the trends in

the funding of water sector in Kenya.

Figure 1: Trend of Funding of the Water Sector in Kenya by France

63
 1 .0 0 0 e +20.09 0 0 e +30.09 0 0 e +40.09 0 0 e + 0 9
FRANCE

a id
0

0 5 10 15
year
Graphs by donor

Figure 2: Trend of Funding of the Water Sector in Kenya by DANIDA

5 .0 0 0 e + 0 8

Danida
a id
0

0 5 10 15
year
Graphs by donor

Figure 3: Trend of Funding of the Water Sector in Kenya by DANIDA

64
 1 .0 0 0 e + 0 92 .0 0 0 e + 0 9 3 .0 0 0 e + 0 9
GERMANY

a id
0

0 5 10 15
year
Graphs by donor

Figure 4: Trend of Funding of the Water Sector in Kenya by Netherlands

8 00e+08

Netherlands
8 0 0 e + 40 .0
8 0 0 e + 30 .0
a id
1 .0 0 0 e + 20 .0
0

0 2 4 6 8
year
Graphs by donor

Figure 5: Trend of Funding of the Water Sector in Kenya by SIDA

65
 1 .0 0 0 e + 0 9
SIDA

5 .0 0 0 e + 0 8
a id
0

0 5 10 15
year
Graphs by donor

Figure 6: Trend of Funding of the Water Sector in Kenya by DANIDA

01 . 0 020. 0e 0+30. 0e9 0+40. 0e9 0+ 00 e9 + 0 9 01 . 0 020. 0e 0+30. 0e9 0+40. 0e9 0+ 00 e9 + 0 9

Danida FRANCE GERMANY

0 5 10 15
a id

Netherlands SIDA

0 5 10 15 0 5 10 15
year
Graphs by donor

Table 4.8: The Levels of Participation of Donors in Funding Water Projects in Kenya

Donor Frequency Percent

Danida 9 15
France 14 23.33
Germany 15 25
Netherlands 7 11.67

66
SIDA 15 25
Total 60 100
Table 4.1 shows that there were five (5) donors for the entire period under study

that funded the water sector through various projects across the country. In the sixty (60)

observations made, Germany and SIDA each appeared 25% of the time while France

appeared 23.3% of the time. This suggests the frequency with which these three donors

were involved in funding the water sector in Kenya.

Table 4.9: Contribution of Donors to Water Sector in Kenya

Donor Mean Aid Total Aid

France 875,000,000 12,300,000,000
Germany 812,000,000 12,200,000,000
SIDA 251,000,000 3,770,000,000
Danida 220,000,000 1,980,000,000
Netherlands 117,000,000 821,000,000
Total 517,000,000 31,000,000,000

Table 4.2 shows that France was the largest donor in water projects in Kenya with an

average funding of Sh. 875 million and a total funding of Sh. 12.3 billion followed

closely by Germany with mean aid of Sh. 812 million and a total aid of Sh. 12.2 billion.

The mean aid for the water sector was Sh. 517 million with a total aid of Sh. 31 billion

between 1995 and 2013.

4.6 Independent T-Test Results

This section shows the results of independent t-test performed on the data. In order to

perform this, the donor funding (aid) was grouped into two: funding before the

introduction of reforms and funding after the introduction of reforms. This created a

dummy variable reform which denoted a period before and after the introduction of

reforms in the water sector. The results are shown in Table 3 and Box 1.

67
Table 4.10: Donor Funding of Water Sector Before and After Water Reforms

Obs Mean Aid Std. Dev.

Before reforms 27 109,000,000 120,000,000
After reforms 33 850,000,000 1,010,000,000
Combined 60 517,000,000 835,000,000
Difference 741,000,000

Table 4.3 shows that the mean donor funding before the enactment of reforms was Sh.

109 million while after the enactment of the law the mean was Sh. 850 million, an

increase of Sh. 741 million in water sector funding by donors. Thus from the descriptive

analysis in Table 1, it is clear that donor funding improved after the introduction of water

reforms through the Water Act of 2002.

The analysis of the donor funding for the period before and after the introduction of

reforms using independent sample t-tests (see Box 1) reveal that the mean differences for

the two periods were statistically significant from zero at 99% confidence level, p-value <

.001. This means that the period before reforms were introduced and that after differed in

terms of donor funding. Further, the results show a statistically significant improvement

on donor funding as the mean was statistically significantly greater than zero at 99% level

of confidence. This suggests that the donor funding improved after the introduction of

reforms and policies in the water sector in Kenya.

Box 1: Independent Sample T-Test Results

diff = mean(0) mean(1) t = 3.7848

Ho: diff = 0 degrees of freedom = 58

Ha: diff < 0 Ha: diff != 0 Ha: diff > 0

Pr(T < t) = 0.9998 Pr(|T| > |t|) = 0.0004 Pr(T > t) = 0.0002

68
4.4 Regression Analysis Results
In order to ascertain the impact of policy reforms on donor funding, a regression analysis

was run. The dependent variable was aid and the independent variable was reforms.

Table 4.11: The Effect of Water Reforms on Donor Funding to the Water Sector

Aid
Variables coef SE
Reforms 7.406e+08*** (1.957e+08)
Constant 8.499e+08*** (1.313e+08)
Observations 60
R-squared 0.198
Standard errors in parentheses
*** p<0.01, ** p<0.05, * p<0.1

Table 4.4 shows the results of a regression analysis with reforms as a dummy variable

separating the period before and after the Water Act 2002 as the independent variable and

donor aid as the dependent variable. The results show a significantly positive correlation

between reforms and the donor funding in the water sector, p-value < .01. The R-squared

value of .198 suggests that reforms influenced 19.8% of the variance in donor funding.

From these results, it is clearly shown that reforms are very instrumental role in the

funding of the water sector by the donors.

69
 CHAPTER 5: SUMMARY, CONCLUSION AND
RECOMMENDATIONS

5.1 Summary of Findings

The study has indeed revealed a number of issues regarding the impact of reforms in the

water sector on donor funding in the sector. The results show that the biggest donors in

the water sector have been France with a total funding to the water sector of Sh. 12.3

billion followed by Germany at Sh. 12.2 billion. Overall, there has been a total donor

funding of Sh. 31 billion.

The period before reforms and that after reforms showed a remarkable difference in

donor funding of Sh. 741 million. The mean funding after the introduction of reforms in

the water sector was higher than that before the introduction of reforms. The independent

t-tests showed that the differences in the mean donor funding were statistically significant

at 99% level of confidence suggesting that reforms had an impact on the level of donor

funding.

The regression analysis also showed that reforms had a positive and significant impact on

the level of donor funding (p-value < .01) with reforms influencing 19.8% of the funding

(R-squared = 0.198). This shows that reforms had a positive impact on donor funding in

the water sector.

5.2 Conclusions
The level of donor funding has been improving since 1991 and remarkable rose after the

introduction of a number of reforms in the water sector. The study reveals that donor

70
funding after the introduction of reforms was higher than the period before reforms were

introduced. The tests show that this difference was statistically significant. These results

lead to the conclusion that reforms had a positive impact on the level of donor funding in

the water sector in Kenya between 1991 and 2013.

5.3 Recommendations
The study recommends that more reforms that will enhance accountability in the water

sector be introduced to cut bureaucracies and let more funding be channeled by donors to

the water sector in Kenya. There is also need to comply with the laid down procedures as

well as the Water Act 2002 to enable a smooth management of water resources and

funding by the donors. Future research should focus on other factors that may have

influenced donor funding increase in the water sector other than the policy reforms that

were the focus of this study.

TOTAL ESTIMATED DEVELOPMENT EXPENDITURE

YEAR TOTAL GOVT EXPENDITURE APPROPRIATIONS IN AID
Kshs Kshs
1990/1991 8,839,170,600 10,573,524,080
1991/1992 9,935,110,800 11,870,792,140
1994/1995 18,986,721,000 21,636,396,620
1996/1997 18,591,153,800 24,814,127,680
1999/2000 15,474,388,640 38,646,598,280
2000/2001 15,305,210,540 23,115,605,127
2001/2002 13,268,820,480 28,368,475,967
2002/2003 19,803,123,770 26,666,334,538
2003/2004
2004/2005 54,770,196,860 31,981,506,478
2005/2006 69,307,989,741 34,912,502,492
2006/2007 91,543,949,511 46,097,809,979
2007/2008 149,438,530,040 52,212,285,862
2008/2009
2009/2010 190,282,945,287 68,621,265,447
2010/2011 222,637,997,232 98,593,878,947
2011/2012
2012/2013 274,757,662,986 178,467,360,595

71
 Total GovernmentExpenditurevsTotal Appropria onsin
Aid
300,000,000,000

250,000,000,000
Expenditure(Ksh)

200,000,000,000

150,000,000,000

100,000,000,000 Total Government Expenditure

Appropria ons in Aid
50,000,000,000

0
1990/1991
1991/1992
1994/1995
1996/1997
1999/2000
2000/2001
2001/2002
2002/2003
2004/2005
2005/2006
2006/2007
2007/2008
2009/2010
2010/2011
2012/2013
Year

TOTAL ESTIMATED DEVELOPMENT EXPENDITURE

YEAR TOTAL GOVT EXPENDITURE APPROPRIATIONS IN AID
Kshs Kshs
1990/1991 8,839,170,600 10,573,524,080
1991/1992 9,935,110,800 11,870,792,140
1994/1995 18,986,721,000 21,636,396,620
1996/1997 18,591,153,800 24,814,127,680
1999/2000 15,474,388,640 38,646,598,280
2000/2001 15,305,210,540 23,115,605,127
2001/2002 13,268,820,480 28,368,475,967
2002/2003 19,803,123,770 26,666,334,538
2004/2005 54,770,196,860 31,981,506,478
2005/2006 69,307,989,741 34,912,502,492
2006/2007 91,543,949,511 46,097,809,979
2007/2008 149,438,530,040 52,212,285,862
2009/2010 190,282,945,287 68,621,265,447
2010/2011 222,637,997,232 98,593,878,947
2012/2013 274,757,662,986 178,467,360,595

72
TOTAL ESTIMATED EXPENDITURE FOR WATER
YEAR GOVERNMENT EXPENDITURE APPROPRIATIONS IN AID
Kshs Kshs
1990/1991 461,460,000 809,287,500
1991/1992 417,187,400 509,533,760
1994/1995 1,347,782,200 2,940,444,000
1996/1997 1,708,220,400 2,206,376,980
1999/2000 462,916,600 1,173,600,000
2000/2001 1,349,654,950 1,549,235,742
2001/2002 1,201,324,420 1,887,700,200
2002/2003 1,641,039,130 1,950,957,480
2003/2004
2004/2005 1,952,604,070 3,371,995,240
2005/2006 4,734,093,100 3,021,102,000
2006/2007 5,000,190,850 2,791,806,000
2007/2008 5,925,854,200 5,492,284,834
2008/2009
2009/2010 13,724,122,865 10,971,366,194
2010/2011 20,102,793,800 12,426,873,277
2011/2012
2012/2013 16,323,466,520 19,440,386,606

73
 GovernmentExpenditureonWatervsDonorAidtoWaterSector
25,000,000,000

20,000,000,000
Expenditure(Ksh)

15,000,000,000

10,000,000,000 Govt Expenditure on Water

Total Aid to Water
5,000,000,000

0
19 991

19 995

19 997

20 001

20 005

20 007

20 008

20 011
19 992

20 000

20 002

20 003

20 006

20 010

3
01
/1

/1

/1

/2

/2

/2

/2

/2
/1

/2

/2

/2

/2

/2

/2
90

94

96

00

04

06

07

10
91

99

01

02

05

09

12
19

Year

Rhetoric versus reality William easterly

74
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