Africa Yearbook

Although officially united as part of NARC, the National Alliance of Kenya (NAK) and Liberal Democratic Party (LDP), NARC's main constituent elements, continued their clashes throughout the year. The first encounter concerned the NARC elections, set for 11 March. The aim, primarily of politicians allied with the Democratic Party (DP) such as Justice and Constitutional Affairs Minister Kiraitu Murungi and of a number of smaller parties united in NAK, was to dissolve all the separate parties in the NARC coalition and to create a single party by 31 March at the latest. In October 2004, Murungi had warned that parties which did not legalise their existence by March 2005 by holding elections and submitting audited accounts would be expunged from the official records of the registrar of societies.

LDP (Raila Odinga), Forum for the Restoration of Democracy-Kenya (FORD-Kenya/Musikara Kombo) and National Party of Kenya (NPK/Charity Ngilu) opposed the idea of individual membership in a single party, arguing that NARC was a coalition of parties. The trio threatened to go to court if forced to participate in the NARC polls. Individual membership was seen as an attempt to strengthen President Kibaki's position and to sideline Health Minister Charity Ngilu, who had been the official chairperson of NARC. Although the high court issued an injunction on 8 February to stop the election, the wrangle continued, including the issuing of two types of party cards by two different groups within NARC. By mid-April, even the DP had given up the idea of individual membership.

The bickering over NARC membership was linked to another, even more important issue, namely the long awaited announcement of a new constitution. In 2004, the constitution of Kenya review commission had been obliged to hand over the process to the parliamentary select committee on the review of the constitution. Parliament could make recommendations to Attorney-General Amos Wako for any amendment of the so-called Bomas draft, prepared by a people-driven constitutional conference in 2003–04. MP Charles Keter (KANU) had moved the Constitution of Kenya (Amendment Bill) No. 2 2004. This bill primarily proposed wresting powers to prorogue and open parliament from the president, and to allow parliament to send the government home after a simple majority vote of no-confidence. Staunch Kibaki supporters opposed the move, resulting in an amendment that changed the majority requirement to two-thirds of all MPs. In April, it was watered down even further, as MPs would lose their seats once a no-confidence vote was passed. By the end of 2005, the bill had still not been approved in parliament.

In early May, the political crisis within the cabinet climaxed. There were open calls for the sacking of Raila Odinga. These came in the wake of LDP's threats to leave government if Nicholas Biwott (KANU), the notorious strongman under the former President Daniel arap Moi, was offered a cabinet position. On 31 January, Biwott had lost the race for the national chairmanship of KANU to Uhuru Kenyatta in controversial elections during a party congress. The Biwott group, mainly MPs from Rift Valley Province, did not accept this defeat. Uhuru warned Biwott not to split the party but to retire from politics like former President Moi, who officially resigned the KANU chairmanship on 9 February, after a 50–year career in politics, of which more than 24 years had been as president. Unresolved cases from the past, such as the Goldenberg saga and the 1990 murder of Foreign Minister Robert Ouko, continued to haunt Biwott during February and March. On 23 February, new accusations were made that a bodyguard of Biwott had smuggled a loaded firearm into the UK in an elaborate plot to assassinate retired Scotland Yard detective John Troon, who had investigated the murder case. The parliamentary select committee on the Ouko murder, led by Gor Sunguh, confiscated Biwott's diplomatic passport and established that Biwott had travelled two days ahead of the Kenyan delegation: this conflicted with Biwott's claim that he had travelled together with Ouko. On 12 May, the committee recommended that Biwott and several other people be investigated for their possible role in circumstances that led to Ouko's death. Notwithstanding this unfolding situation, on 16 April Kibaki met Biwott and the latter announced that his group was heading back into the government. On 1 May, Otieno Kajwang stated that LDP would quit the government if Biwott was appointed. On 2 May, however, Odinga was quick to give the assurance that LDP ministers would not walk out.

NARC's wrangles now reverted to the fight between NAK and LDP over the set-up of the powerful Parliamentary Select Committee on Constitutional Review (PSCR). NAK tried to reduce Odinga's influence in the committee by kicking out his allies, notably the ministers Kalonzo Musyoka and Najib Balala. Conciliatory moves by Vice-President Moodi Awori (LDP) were unsuccessful and LDP did not await the debate in parliament and decided to pull out of the PSCR altogether. Odinga, though, remained. KANU made a similar move when its candidate, Marsden Madoka, was denied the chairmanship, leaving the committee with a pro-Kibaki majority and Simon Nyachae (FORD-People) in the chair.

On 30 May, LDP called for dialogue and reconciliation to put the constitutional reform process back on track. The fact that both Charity Ngilu and Home Affairs Minister Musikara Kombo had been lured back to the Kibaki camp may explain the move. LDP's rudest shock was that both the Biwott and Kenyatta groups voted with the government. Stories about Biwott obtaining a position in the NARC cabinet ceased once LDP crossed back to the government benches. The threat of isolation and removal apparently caused Odinga to end his feud with Kibaki. LDP's secretary for legal affairs, Otieno Kajwang, even said Odinga was ready to support a new constitution without the position of a prime minister, if this was the wish of Kenyans. All along, LDP had supported a constitution as proposed in the Bomas draft that would allow for an executive prime minister and a largely ceremonial president, in contrast to the presidential system favoured by the NAK group. On 21 July, the government won a parliamentary vote (102 against 61) that allowed it to alter the Bomas draft. Justice Minister Murungi devised a road-map that started with the Bomas draft to arrive, via amendments in parliament, at a national referendum that would represent a verdict on the new draft devised by Attorney-General Wako. As KANU and FORD-People politicians had joined the government of national unity in 2004, and as neither LDP nor NAK were consistent in their support for either side in the constitutional debate, it was time for a new re-alignment. This happened as soon as the electoral commission of Kenya announced that the symbol for a ‘yes’ vote on the draft constitution proposal would be a banana and a ‘no’ vote would be symbolised by an orange. Politicians and the country alike were split among bananas and oranges. Six cabinet ministers (Anyang' Nyong'o, Ayako, Musyoka, Balala, Ntimama, Kilimo) supported Odinga and Uhuru Kenyatta in the so-called Orange Team to convince the people to vote against the Wako draft.

The final verdict was in the hands of Kenyans, who were requested to reject or embrace the proposal in a referendum scheduled for 21 November. However, on 11 August, MPs from KANU and LDP and members of Katiba Watch went to court in a bid to block the publication of the proposed new constitution. They also wanted to stop the referendum, arguing that the Wako draft was illegal because it had not been put before parliament. The case was delayed several times and finally withdrawn. The Wako draft, released on 22 August, differed significantly from the Bomas draft. Although the former did include the creation of the post of prime minister, the authority to hire and fire him was vested in the presidency. During the campaign both sides frequently and deliberately twisted the contents of the draft constitution, and appeals were made by churches and human rights groups to politicians and the media to provide quality information. Even worse, violence erupted during the campaign.

Some six out of eleven million registered voters turned out for the referendum. Of these, 57% rejected the proposal, leaving only 43% in favour. President Kibaki, who had urged Kenyans to approve the proposed new constitution, said he accepted the verdict of the majority of the voters. Following the defeat, Kibaki dissolved his entire cabinet. The orange campaigners, who were quick to register the Orange Democratic Movement (ODM), called for new national elections. These did not occur. On 8 December, Kibaki experienced more problems when three ministers and 17 assistant ministers turned down their appointments to a new cabinet. Wangari Maathai was among those who declined, while others, notably Musikara Kombo, accepted the offer only after being promised more ministerial jobs for FORD-Kenya. All seven LDP rebel ministers were left out. Murungi was transferred from justice to energy, while Transport Minister Chris Murungaru, who for officially undisclosed reasons (but obviously for being implicated in corruption) had been banned from obtaining visas for the UK and US, was not reappointed. Murungaru, though, went to court to challenge the ban. He blamed his difficulties on his role in strengthening competition through tender procedures to the disadvantage of British companies. Kibaki tried to divide the ODM by reaching out to KANU through former President Moi, but failed to get support from the Kalenjin group led by William Ruto.

In January, Amnesty International (AI) released a report stating that rape was one of the leading human rights abuses in Kenya. It lamented the lack of trained police officers and lawyers. Fingers were also pointed at the police for killing five innocent people in suspicious circumstances in May. In July, British ministers questioned the UK's arms trade with Kenya, the UK's fourth largest arms trade partner, arguing that the arms were used for internal repression. In October, police fired live bullets at demonstrators in Kisumu, killing four people, bringing the death toll to eight killings in referendum rallies. AI also criticised the Kenyan authorities for violating the rights of suspects detained on charges related to the bombing of an Israeli-owned hotel in Kikambala on 28 November 2002. Some 100 suspects held after that bombing had been subjected to inhuman treatment by foreign security agents. Seven men were brought to trial, only to be acquitted by the high court in June. One of them was re-arrested for illegal possession of firearms.

In May, the outlawed Mungiki sect hit the news again, albeit in a more peaceful manner, when its former national coordinator, Ndura Waruinge, was reported to be ‘born again’. He had started it as an anti-Christian traditionalist sect, had converted to Islam, become a political operative and a fugitive, and his aim now was to carry forward the legacy of Mother Teresa by serving the poor as pastor of the Everlasting Love of Jesus Church. In October, police arrested 18 Mungiki members in Kitengela town, where they had settled in the house of Chairman Maina Njenga. The latter claimed they were harassed because of support for the Orange Team. In December, hundreds of matatu (commuter vehicles) workers protested over demands by Mungiki members for a daily KSh 100 protection fee from every vehicle, refusal resulting in physical assault or worse.

Conflicts over natural resources resulted in the loss of many lives. In January, at least 14 people were killed and another 2,000 displaced from their homes in the Mai Mahiu area of Nakuru district, following violent clashes between Maasai pastoralists and Kikuyu agriculturalists over water. More than 20 people were killed during inter-clan violence between Kenyan Somali of the Murule and Garre communities in the north-eastern district of Mandera. Again, rivalry over pasture and water points triggered the violence. In March, a total of 22 people were killed in El Golicha village, near El Wak town in Mandera. Police pursued the attackers and killed eight. UNICEF estimated that over 20,000 people were displaced as a result of the violence. In July, at least 75 people, mostly women and children, were killed in two remote villages of Dida-Galgalo and Turbi in Marsabit district following clashes between Gabra and Borana over pasture and water. Later that month, Turkana warriors counter-attacked and killed 40 members of a group of 200 marauding Ugandans. In June, an estimated 3,000 families, mostly Kipsigis and Kisii, were left homeless in Narok district after the government evicted small-scale farmers from the Mau forest. A notice to quit had been issued two months earlier. The forest is a catchment area for seven rivers and streams running across the semi-arid plains into the famous Maasai Mara reserve. Most of the people had settled in the area between 1998 and 2000. The government claimed that 1,962 parcels of land had been illegally carved out of the forest and the title deeds fraudulently issued. Most of the homes, schools, health clinics and shops were demolished or burned. In October, state authorities unveiled a plan to resettle some of the victims in neighbouring Nakuru district.

Narok district was also the scene of protests against Attorney-General Wako when he decided to invoke a nolle prosequi rule in a case against Tom Cholmondeley Delamere, grandson of Lord Delamere, one of Kenya's first white settlers. On 19 April, Delamere shot to death a Kenya Wildlife Service warden in unclear circumstances while investigating illegal game meat trade at the Delamere ranch. By late May, Director of Public Prosecutions Philip Murgor was sacked, apparently over this case, and replaced by Keriako Tobiko. Murgor, however, believed his fate was the result of investigations into a KSh 6.4 bn cocaine case involving prominent people, including a cabinet minister. Other quarrels erupted throughout the first half of the year over other issues, all to be fully understood only in relation to the power struggle within NARC. By the end of February, Raila Odinga asked President Kibaki to take action against ministers implicated in graft.

All this came in the wake of the resignation of John Githongo, the permanent secretary for government and ethics, on 7 February while in Europe. No clear statement was given by Githongo, except that his action was linked to frustrations encountered while discharging his duties. The re-opening of the Goldenberg scandal, reforms to the judiciary and public procurement regulations, the establishment of the Kenya Anti-Corruption Commission (KACC) under the Anti-Corruption and Economic Crimes Act 2003, the enactment of the Public Officers Ethics Act 2003 and the appointment of Githongo, formerly head of Transparency International-Kenya, to his government position had all been hopeful signs that Kibaki's promise to fight corruption once he was in power would be honoured. This now seemed to have come to an end. To make matters worse, in April 2004 a scandal involving a tender for a KSh 2.7 bn tamper-proof passport contract was exposed, linked to a company called Anglo Leasing and Finance Ltd., represented by an American consultant, Merlyn Kettering, who had resided in Kenya since 1987. Githongo's attempts to expose those in government circles behind the contract were frustrated. Top officials argued that no investigation was needed, since all the money had been repaid. Following Githongo's resignation, the US and Germany suspended aid for anti-corruption programmes. Other countries, like Japan, threatened to freeze aid as well, while France, Sweden, Belgium and the Netherlands called for patience and dialogue.

This plea fell on deaf ears. Only five days before Githongo's resignation, the UK high commissioner had launched an attack on the Kibaki government over corruption and bad governance. He had handed over a list of 20 new corruption cases that would cost Kenyans millions of euros. Some ministers (Ngilu, Odinga, Anyang' Nyong'o) and Kenyan society-at-large also spoke out about their frustration at the foot-dragging in anti-corruption efforts. Kibaki renewed his assurance that action would be taken against corrupt officials and ordered the KACC to conduct immediate investigations into suspect government contracts. In addition, parliament's public accounts committee moved to appraise these classified procurements. One of the ministers thought to have been involved in the Anglo Leasing contract, Chris Murungaru, was demoted from the ministry of national security to the ministry of transport.

In January, Murungaru was at the centre of a media incident. A ‘Standard’ journalist had been taken to court over an article that traced relations between leading politicians and the business community and that had upset the then national security minister. Worldwide protests led the state to drop the case. The media subsequently pushed for the long overdue Press Freedom Bill, while calling upon journalists to refuse bribery. In April, another ‘Standard’ reporter was acquitted. He had been charged with stealing a police tape and publishing a story on the mysterious death of university lecturer Crispin Mbai. These were hopeful signs, although US-based Freedom House released a report on 3 May that claimed that only Pakistan and Kenya had registered a negative shift in press freedom from ‘Partly Free’ to ‘Not Free’. Reporters Without Borders also stated that press freedom had shrunk more in Kenya than elsewhere and the country's annual ranking dropped from 82 to 109 out of 167. In May, President Kibaki, speaking at the International Press Institute world congress in Nairobi, announced a new law to ensure press freedom in Kenya. However, during the heat of the referendum campaign, Family TV and KASS radio came under attack from the government for allowing the Orange Team to air their views. KASS was even closed down for a week, allegedly for inciting people to violence. Finally, in November media practitioners started discussing a bill seeking to establish an independent media council of Kenya.

The corruption charges mentioned above played a central role in Kenya's relations with foreign donors. In particular, relations with the UK, US and Denmark soured. In June, a row erupted with a Danish NGO, MS Kenya, that threatened Kenya's $ 52 m land law reform programme. Danish officials were accused of sponsoring land-related violence and were refused renewal of work permits. Among the cases mentioned was a land rights NGO, Osiligi, accused of inciting the invasion of commercial ranches. Denmark stated it would withhold $ 19.5 m in aid unless the row was resolved. In October, the government accused the EU ambassador of “rude behaviour” for having issued an ultimatum to Kibaki through the media to sign the Public Procurement Bill by 31 December or lose KSh 2.5 bn in aid.

In spite of these troubled relations, the government received considerable sums in budget support and technical assistance. In December, the EU announced € 125 m in support of the Poverty Reduction Budget Support II Programme. In addition, the IMF and the World Bank made several significant contributions, in part to help bridge the gap left by the US and Germany in the anti-corruption programme. Other major donors were Japan, UK, Norway and South Korea, which provided assistance in water development, education, roads, energy and industrial development.

Relations with the US were also troubled due to the controversial anti-terror law. Although Kenya had redrafted the Suppression of Terrorism Bill, it had not yet been tabled in parliament. The US continued its negative travel advisory for Kenya and pressured the government to sign a bilateral non-repatriation accord in respect of the International Criminal Court. Failure to sign would result in suspension of KSh 760 m in military aid. The suspension took effect in May, but Kenya decided not to give in. Animal welfare organisations and public opinion reacted negatively to a plan by the Kibaki administration to donate 300 wild animals to a zoo in Thailand, said to be the biggest single translocation of wildlife in the history of Kenya. On 9 November, a deal was finally signed between the two countries for the transfer of 135 animals, including some on the endangered list, in exchange of some KSh 80 m. However, in late December the high court stopped the deal until two wildlife conservation groups had been heard.

At the regional level, an important development occurred on 1 January when the East African Community launched its customs union. This allowed goods from Uganda and Tanzania to enter Kenya duty-free, while Kenyan exports to these countries would be subject to customs duties until 2010. At the end of March, a rise of 10% was announced in East African trade volume. In Tanzania, there was some resistance to issuing work permits to Kenyans, an issue that was not resolved before the deadline (July). In June, six Kenyan journalists were expelled from Tanzania. A major concern in the integration was the relatively advanced state of the Kenyan economy and the dominance of its products in the region. The trade volume from Kenya to both Uganda and Tanzania stood at about KSh 45 bn annually, compared to only approximately KSh 2.2 bn from both countries to Kenya. Consequently, Uganda and Tanzania felt that their industries needed protection. In particular Uganda, with the smallest economy, feared that it would suffer from trade diversion by having to switch from cheaper overseas products to more expensive products from Kenya.

In 2004, the economy had somewhat picked up from its previous slump, to reach a growth rate of 2.6%. This trend continued in 2005, resulting in an estimated growth of 5%. Agriculture and tourism were the key drivers of the economy. On Madaraka day (1 June), President Kibaki addressed the nation and claimed that 474,000 new jobs had been created, an expansion in employment of 6.5%. These successes also translated into improved revenue earnings for the government. A total of KSh 7.2 bn was set aside in 2005 for the Constituency Development Fund (CDF), up from KSh 4.5 bn in 2004.

By December, overall inflation stood at 7.6%, thus reducing the average inflation for the year to 10.3%, down from 11.6% in 2004. The Kenyan shilling appreciated against foreign currencies. It traded at the beginning of the year at 78.5 and 106.5 to the dollar and euro respectively, while at year's end these figures had dropped to 72.4 and 85.7. On the regional front, the shilling gained against the Ugandan and Tanzanian currencies to trade at the end of the year at USh 25.2 and TSh 16.1 respectively, compared with USh 22 and TSh 13.5 in January.

The government's fiscal operations during the year resulted in a budget surplus of 0.3% of GDP in fiscal year 2004–05, compared with a deficit of 0.4% of GDP during the previous period. This was mainly due to the strong growth in GDP and an improved tax administration, as well as an increased inflow of external grants from development partners. However, in the second half of 2005 the budget deficit stood at KSh 13.8 bn or 1% of GDP. This deficit mainly resulted from an increase in government expenditures to KSh 160.8 bn during the period.

The public debt registered $ 9.4 bn at the beginning of 2005. This was equivalent to almost 60% of GDP. At year's end, total public debt had increased to $ 10.4 bn, but was down to 55.3% of GDP. The absolute increase was mainly due to a growth in domestic debt to $ 4.6 bn. Generally, short-term interest rates had been stable for over a year, ranging between 7.8% and 8.7%.

Kenya's overall balance of payments improved to a surplus of $ 275 m in 2005, as compared to $ 117 m in 2004. This was due to an improvement in the capital and financial account surplus of $ 1,359 m, which offset the $ 1,201 m deterioration in the current account balance. The latter account widened mainly as a result of a worsening trade deficit, from $ 1,592 up to $ 2,924 m. This was primarily due to a sharp increase of 42.3% in merchandise imports (mainly machinery and transport equipment, petroleum, chemicals, manufactured goods).

Export earnings accelerated in 2005 following higher volumes in some sectors (tea and horticulture) and higher prices in others (coffee). The value of domestic exports grew by 25.5%, while re-exports declined by 3.5%. Coffee and tea exports increased by 43.8% and 23% and stood at $ 128 m and $ 561 m respectively. The value of horticultural exports increased by only 4.1%, to reach to $ 433 m. Compared to 2004 (+22.1%), this rise was modest. African countries took 49.2% of Kenya's total exports. Uganda (17.4%) remained the main destination for merchandise exports, followed by the UK (9.6%), Tanzania (8.2%) and the Netherlands (7.5%).

Agriculture, forestry and fishing remained the most important economic sectors (over 24% of GDP). Except for coffee (-4.6%), all sectors increased their output. Growth figures for tea, sugar cane and horticulture were 1.2%, 22.1% and 12% respectively. The increase in the horticultural sector was in cut flowers and vegetables, whose volumes increased by 14.9% and 22.1% respectively. Fruit deliveries, however, declined by 19.6%. Profitability in the sector continued to be hampered by the high cost of implementing stringent phyto-sanitary conditions, the high cost of inputs and increased competition from low-cost producers in North Africa. Moreover, disgruntled workers set up the Horticulture Workers Union (HWU), which the government refused to recognise, to secure better living and working conditions. In October, Kenya and the EU started negotiations for a new trade pact amid fears that the country could lose KSh 9.5 bn once the Cotonou agreement ends by January 2008. Deliveries in the coffee sub-sector declined by 4.6% in 2005. Average prices of coffee, however, improved to $ 2,329 per tonne from $ 1,802 per tonne in 2004. Milk deliveries in the formal dairy sector increased by 25%. The rise was attributed to the new Kenya Co-operative Creameries (KCC), which had been revived in 2004.

Significant improvements were recorded in the manufacturing sector. Cigarette and beer production increased by 22.1% and 11.3% respectively, while soda ash and cement production increased by 2.5% and 18.4%. Sugar production, however, declined by 5%. The improvement in most sectors was supported by tax exemptions for most of the inputs, enforcement of anti-dumping measures and the existence of market opportunities for light manufactured products in African markets. In June, the Kenya Association of Manufacturers stated that the textile industry might collapse following the abolition of the global quota system by the WTO in January. At least six textile companies closed their doors and 2,000 people lost their jobs because of fierce Asian competition in the European market.

On 3 February, Tiomin Kenya signed a fiscal agreement with the government and announced its intention to start mining titanium in Kwale in 2006. The company had obtained permission for imports of duty-free machinery and capital goods, as well as other exemptions and tax reductions. Tiomin held a licence to mine the mineral for 21 years. In April, the district compensation and resettlement committee was launched. It will oversee a compensation scheme of KSh 80,000 per acre and the resettlement of some 1,500 farmers. Kenya was expected to gain in taxes, new job opportunities and royalties, but critics feared environmental problems and claimed that Tiomin had undervalued the mine. In August, a Chinese company showed an interest in buying Kenyan titanium. In November, Kenya reduced the requirements on foreign investors willing to start businesses.

Electricity generation increased by 9.7% in 2005 to 5,519 m kWh, of which 54.5% was generated from hydro sources. Low water levels due to the severe drought threatened production. Thermal and geothermal sources accounted for 27.3% and 18.3% respectively of total power generation. With higher economic growth, consumption of electricity grew by 6.8% in 2005. In May, the government announced plans to increase electricity supply by 225 MW. The second phase of the Sondu Mirui hydro-power project was one of the five power plants mentioned. The government agreed to add an extra KSh 2 bn to the KSh 9.4 bn provided by Japan in 2004. On 20 December, the European Investment Bank released KSh 3.7 bn to help improve the electricity distribution network. Kenya started producing its own unleaded fuel ahead of the 31 December deadline, when the country was expected to switch from leaded petrol.

Robust growth was achieved in the telecommunications sector. The number of mobile telephone subscribers increased to 5,263,916 in December, while the potential was estimated to be about 11 m. Fixed lines increased to 286,729. In March, Kuwait's Mobile Telecommunications agreed to buy Celtel for $ 3.3 bn. Telkom Kenya decided to modernise its network and install a fibre optic cable between Nairobi and Mombasa. A new investigation into Telkom Kenya revealed that the state-owned company had been overstaffed during Moi's presidency with low-ranking jobs (messengers, watchmen, porters) to the tune of 12,000 workers. It called for a reduction of the workforce from 17,480 to 7,154 to make the company competitive. Econet Wireless became the third mobile phone operator in Kenya in November 2004, but sued Minister Tuju for KSh 97 bn in May for alleged defamation. Tuju was accused of making damaging remarks in parliament by suggesting that Econet was engaged in sleazy dealings. At the end of 2005, Econet was still not in operation.

Cargo handled by the Kenya Ports Authority declined by 13.1% to 12.1 m tonnes during 2005. The decline was in imports, exports and transhipments, which fell by 2.5%, 15.8% and 270.1% respectively. In February, plans were announced to upgrade Mombasa port because its turn-around times were below standard. New technology would be needed to automate the processing of cargo and paperwork. Rwanda, Burundi, DR Congo and Uganda had complained about unreasonable delays in clearing imports. In December, a Ugandan company, Mukwano, announced it would open a KSh 395 m bulk liquid handling terminal.

The volume of petroleum products transported by the Kenya Pipeline Company grew by 8.2% to 3.5 m cubic units in 2005. Cargo handled by Kenya Railways (KRC), therefore, declined by 4.8% to just 2.8 m tonnes. In October, the Rift Valley Railways Consortium led by Sheltam Rail Co., a South African firm, won the competition to operate KRC and Uganda Railways for the next 25 years. Other minority shareholders were from Kenya (Primefuels Kenya, 15%), South Africa (Comazar, 10%; CDIO, 4%) and Tanzania (Mirambo, 10%). In March, it was announced that 7,000 of the 9,000 workers would be dismissed once KRC's management was handed over to a private firm. The concessionaire was set to take over KRC and Uganda Railways from 1 April 2006. A possible conflict could arise between the new concessionaires and a proposed new railway line between Juba (southern Sudan) and Mombasa. Kenya approached NEPAD to finance a pre-feasibility study to look into this issue.

Improved linkage with Mombasa was also the intention of plans to upgrade the Kitale-Lodwar-Lokichoggio road to all-weather standard to ease transport to and from the Sudan. Kenyan businessmen were eyeing southern Sudan, with its new semi-autonomous regional government, as a potential region for expansion. In August, parliament rejected budget allocations for the roads ministry because these mainly favoured the constituencies of President Kibaki and Roads Minister Raila Odinga.

In the air transport segment, passengers passing through Nairobi increased by 12.9% in the first ten months of 2005. Plans for a new airport in Isiolo, mainly aimed at the export of miraa (khat) to Somalia, announced in February, met with criticism. In October, Kenya Airways reported a 48% increase in its after-tax profit of KSh 2.2 bn for the first half of its financial year. In 2005, Kenya Airways boosted its fleet and opened new routes both in Africa (Mali, Mozambique, Senegal, Sierra Leone) and to Asia (China). It now served over two million passengers annually and had the largest network in Africa. The strong performance of Kenya Airways contributed to financial problems for Regional Air, its competitor in the African and domestic market. British Airways subsequently terminated its collaboration with Regional Air.

Tourism was the most vibrant sector of the economy in 2005. Visitors through Nairobi and Mombasa airports and from cruise ships increased by 24.5% to 832,000, compared with 668,000 in the same period of 2004. The good performance in tourism reflected stepped-up marketing campaigns in both traditional and new markets. Moreover, Kenya benefited from the change of plans by tourists intending to visit Asian destinations as a result of the Tsunami and bird flu catastrophes.

Throughout most of the year, Kenya witnessed a major drought that especially hit northern regions, populated by several pastoral groups. The worst affected districts were Mandera, Wajir, Turkana, Isiolo and, in southern Kenya, Kajiado. Already in May the WFP had announced that two million Kenyans would need food aid at least until August. Calls for assistance were repeated throughout the year. Finally, in the health sector some positive news was recorded in the fight against HIV/AIDS, with the national prevalence rate dropping further to 6.7% from 13% two years ago. Efforts to combat malaria were also intensified.