EU auditors: Development aid to Kenya had no visible impact on the economy
Thursday, 10 September 2020
View of Kilimanjaro from Amboseli National Park, Kenya, credit: Unsplash/Sergey Pesterev
The European Commission and External Action Service (EEAS) have not demonstrated that European Development Fund (EDF) aid to Kenya between 2014 and 2020 addressed the country’s development obstacles, according to a new report by the European Court of Auditors (ECA).
In the audit report published this week (8 September), the auditors call on the EU to rethink its approach to allocating development aid.
“We did not see sufficient evidence that the aid is channelled to where it can do most to reduce poverty,” said Juhan Parts, the ECA Member responsible for the report and a former Estonian Auditor General and Prime Minister. “Job creation is the most effective and sustainable way to reduce poverty, so EU funds should primarily be focused on economic development.”
EU development aid is aimed at reducing and ultimately eradicating poverty in the supported countries by incentivising good governance and sustainable economic growth. The EDF is Kenya’s main source of EU funding. The aid received by the country under the EDF programme between 2014 and 2020, amounted to €435 million, around 0.6 % of its tax revenue.
The auditors examined whether the Commission and the EEAS had targeted it effectively towards where it could contribute most to reducing poverty.
To what extent could you rely on the Commission’s evaluations/internal audits of aid to Kenya and to what extent did the audit generate new knowledge not known to the Commission?
“We were not able to find a proper internal analysis on how exactly the Commission and EEAS intended to contribute to the Kenya’s development by its aid money,” Juhan Parts replied. “We would have expected to see a realistic assessment on the EU financial capacity, Kenya’s development needs and its government commitment in certain areas.”
He does not consider that the information provided by the audit was completely new for the Commission and other stakeholders. “However, we believe that we raised in a clear manner some issues which, so far, has not been discussed openly.”
Kenya’s population of about 52 million is projected to reach about 85 million by 2050. A third of the population is living below the poverty line, on less than $1.90 a day, and over 20 % suffers from undernourishment. Kenya’s GDP growth has been below the regional average. Transparency International’s Corruption Perception Index 2019 ranks it 137 out of 180 countries.
Why did you choose to audit development aid to Kenya (and not another country) and can the findings be generalised to other development countries receiving EU aid?
“Kenya has one of the largest economies in the East African region, known for its innovative mindset and wide use of digital services,” Juhan Parts replied to The Brussels Times. “It has also been relatively stable in recent decades and is therefore an important country for the development of whole region.”
He explained that ECA did not make any comparative analyses with other countries, but as the aid policy and allocation methodology is the same for all African, Caribbean and Pacific (ACP) countries, some generalizations can be made with confidence.
“The Kenyan example showed that the EU development assistance suffers from unrealistic plans and lack of meaningful prioritization. It also showed that the Commission and EEAS do not pay sufficient attention to the rule of law and job creation through competitive economy, which are crucial for the sustainable poverty reduction.”
The auditors found that the process of allocating EDF aid does not allow it to be linked to a country’s performance, its governance, or its commitment to structural reforms or fighting corruption.
The Commission and the EEAS allocated around 90 % of Kenya’s 2014-2020 funding from the EDF using a standard formula for the ACP countries, which does not address their specific development obstacles or the funding gap. The country allocations also did not take into account other donors’ grants or loans.
The aid covered only a small fraction of Kenya’s development needs and was spread across many areas, including agriculture, drought emergencies, energy and transport infrastructure, elections, public financial management and the justice system. Spreading funding over so many areas increases the risk of not reaching the necessary critical mass to achieve significant results in any single sector.
Furthermore, the reasoning behind the selection of sectors is not clear enough. The Commission and the EEAS did not carry out their own specific assessment of the country’s development obstacles and objectives, and did not explain how and why the supported sectors would assist most in reducing poverty. EU’s direct support for measures against corruption was limited.
Juhan Parts says that it is difficult to find a good explanation to why sector analyses were missing. Two problems seemed to be determining.
“First, the Commission and EEAS failed to carry out a comprehensive analysis on what realistically can be achieved by the EU money available for Kenya. This led to a poor prioritisation and scattering plans, which at the same time were very ambitious.”
“Second, it also seemed that the they wanted to continue with the same actions as in the previous period (2008 – 2013), leaving aside other sectors; including those necessary for improving country’s economic competitiveness (manufacturing, digitalisation, fighting corruption, etc.).”
He says that donor coordination was not missing per se. “What was missing, was the joint decision making, which is the most important. Coordination that has no impact on the decisions, makes little sense. Several reasons were mentioned why donor coordination lacked effectiveness, such as different planning horizons and budgetary cycles.”
Donor coordination is one of the indicators in the Paris declaration on aid effectiveness (2005) which is still in force. What were the main shortcomings?
“The Paris declaration was indeed one of the documents based on what we developed our audit criteria. We also used EU’s own documents, for example the Commission’s development strategy Agenda for Change (2011) and academic literature. In terms of the Paris declaration, we noted shortcomings with regard to the principles of ownership and alignment.”
“For example, the EU has paid little attention to manufacturing sector and digital economy although these areas are highlighted as the priority targets in the Kenya’s latest development master plan ‘Big 4 Agenda’. In a Kenyan context, we also cannot forget corruption and lack of transparency, against which the Paris declaration warns, but which have not been properly addressed by the EU funding.”
The audit report apparently had an impact on the European Commission and the EEAS judging from their lengthy replies to it. Overall, they did not agree with the findings and claimed that the EU aid to Kenya was based on the country’s specific needs and directed primarily toward the EU global objective to reduce poverty. But they accepted partially ECA’s recommendations.
“As resources are finite and in the context of development subject to volatility, choices need to be made in the programming phase and adapted during implementation…These choices were rational, based on sound analysis and the existing strengths of EU cooperation … based on a partnership approach with Kenya whose Government requested and strongly supported the sectors chosen.”