Lake Turkana: A land of opportunity?

Lake Turkana: A land of opportunity?

Lake Turkana region in north-west Kenya is attracting significant foreign investment. However, political and security dynamics are sensitive, fragile and complex.

Turkana County, an underdeveloped, remote and impoverished part of Kenya has now become the centre of interest for multinational investors.

East of Lake Turkana, the largest wind farm in Africa is under construction. On 20th October 2015, Google announced it will buy a 12.5% share of the Lake Turkana Wind Power Project, confident in the projects commercial viability.

Costing over $700 million and sporting a capacity exceeding 310 megawatts, the project, once complete will comprise 15% of Kenya’s energy mix.

On the other side of Lake Turkana, in the west, the area has attracted international oil companies, such as Tullow Oil. Exploration activities uncovered 600,000 recoverable barrels of oil in 2012.

The area is already being transformed with the arrival of a large number of individuals seeking to profit on the back of oil discoveries, with some town’s populations having increased 500%.

In addition, vast water aquifers have been discovered underneath the bone dry region. This could provide a solution the area’s water shortages, potentially transforming livelihoods.

Unfortunately, all these lavish blessings extending across the poverty stricken area, are accompanied by a consortium of high profile political, security and operational risks.

Kenyan Politics

In the run up to the elections, President Uhuru Kenyatta may be lured into corrupt practices, repressive conduct, and interference in the private sector as he tries to maintain a grip on power, threatened by his waning popularity and the ICC.

Kenyatta is keen to produce oil before the 2017 elections, which puts political pressure on the sector. This aim is in-part driven by a need to boost his popularity. Kenyatta’s approval ratings are wavering owing to his refusal to increase teacher salaries, a poor response to Al-Shabaab and a degree of economic upheaval as growth slows and banks collapse.

Furthermore, Deputy President William Ruto is facing increased pressure from the ICC following charges ensuing from the 2007 post-election violence: he could soon be imprisoned.

In turn, the Jubilee Coalition could collapse. If it is unable to maintain cohesion given the obstacles its leaders face, then the risk of violence in the 2017 elections is heightened as political opposition leaders will aim to obtain office in what is likely to be a politically divided context.

A downward spiral in Kenya’s political fortunes could spell disaster for investors as they face increased risks of corruption in the run up to the elections, as well as risks to their reputations, if election violence occurs and a reversal in policy development.

This uncertainty is reflected by the fact that in Transparency International’s Corruption Perception Index, Kenya’s position has already declined from 139th (2012) to 145th (2014).

The Cradle of Mankind

More specifically, investors face a multitude of political and security risks in the Turkana region itself.

Firstly, inter-communal violence has spiked in the region. The Turkana ethnic group who inhabit the region, aim to reap the benefits of oil production through controlling land where oil is or is believed to be. Ethnic Pokots compete for the land and resources in the region. In May, one attack led to 54 deaths. The prospect of profiting from oil and the presence of over 200,000 illegal fire arms increases the severity of such risks.

Secondly, given the region’s newly assigned political and economic significance, it has undoubtedly become an attractive target for Al-Shabaab. The terrorist group are at ‘war’ with Kenya and have performed high profile attacks, most recently killing 147 people at Garissa University in April 2015. An attack on Turkana could destabilise the political and economic future of Kenya.

Thirdly, Turkana County neighbours South Sudan, which has repeatedly relapsed into widespread deadly conflict. As a result, tens of thousands of refugees have flooded into Lake Turkana to escape the violence. This has strained the economic livelihoods of people already living in poverty, and contributed to tensions with heightened competition over resources.

Finally, North of Lake Turkana, in Ethiopia, a series of damns (most recently Gibe III) are reducing the lake’s water levels by around 30 ft. This increases pressure over scarce water resources and is further compounded by refugees moving from Ethiopia, where they have been displaced by dams and infrastructure projects.

The combination of these issues also results in increased pressure for multinationals to ensure their operations benefit surrounding communities through successful development projects and revenue sharing. In the absence of such measures in 2013, 400 angry locals broke into Tullow’s Twiga site demanding jobs.

What’s next for investors?

Wind farm or oil rig, investors must engage effectively with the affected population to mitigate risks posed to their operations, and ensure long-term profitability.

Regionally, nationally and locally, Lake Turkana is disproportionately exposed to complex pressures competing from different directions which could transform Turkana County from a land of opportunity into the eye of a political storm.

Investors in Lake Turkana will need to ensure strong local communication strategies and stakeholder relationship management. They must manage expectations and coordinate with political figures, if they stand a chance of dealing with the widespread political and security risks to their operations.

About Author

Elliot Kratt

Elliot is a Freelance Analyst with The Economist Intelligence Unit. Prior to this, he held positions in a number of risk consultancies and has worked in East and West Africa. He has been quoted by journalists with the Financial Times and Wall Street Journal. Elliot holds a first class BA (Hons) in International Relations from the University of Leeds. All views expressed are his own.