EFFECT OF WATER AND SANITATION INFRASTRUCTURE INVESTMENT ON KENYAN ECONOMIC GROWTH

Abstract

The impact that water and sanitation infrastructure investment has on the growth process of any economy should not be underrated. With high population growth and increasing urbanization rates especially on developing countries, adequate and efficient water delivery systems are needed due to their high demand. United Nations recommends that developing countries should commit 1% of their Gross Domestic Product to Water and Sanitation infrastructure investment for them to realize high economic growth. Though the Kenyan government has not met this benchmark, it has continued to invest in water and sanitation with the aim of achieving the envisioned 10% growth rate which still has not been met since 2012. The main objective of this paper was to determine the effect of water and sanitation infrastructure investment on economic growth in Kenya from the year 1974 to 2015. A causal research design was used to establish the cause - effect relationship among the study variables. Vector Error Correction Model was estimated using Ordinary Least Squares technique. The paper found that water and sanitation infrastructure investment has a positive coefficient of 0.3165 and significant effect on GDP growth with a p-value 0.0000<0.05. This means that unit increase in WSii will increase the GDP growth in Kenya by 31.65% when other factors are held constant. Both urbanization rate and population growth had negative and statistically insignificant effect on economic growth. The dummy variable representing the Water Act reforms of 2002 was positive and statistically significant and the one representing the 1984 drought and 1997/98 Elnino was negative and statistically significant. Therefore, the study concluded that water and sanitation infrastructure investment has a positive and significant effect on Kenyan economic growth. The study recommends the government to increase development spending on water and sanitation for universal access to clean water and adequate sanitation services to be achieved by 2030 together with mitigating the adverse effect of recurrent droughts and floods to realize the 10% economic growth rate.