The Natural and Infrastructural Capital Elements of Potential Post-Electrification Wealth Creation in Kenya

Abstract

While it is widely accepted that electricity is a "necessary but not sufficient condition" for development, there is little research that explores the conditions under which electrification might lead to wealth creation post-electrification. Using Kenya as a case study, this paper uses natural capital (NC) and infrastructural capital (IC) to compare the enabling environments of entrepreneur vs. government run off-grid electrification projects, explores the role that NC and IC can play in determining wealth creation post-electrification, and develops a microenterprise development (MED) index indicating regions in Kenya that could be well positioned for wealth creation (and thus, persistent demand) post-electrification. A comparison between the MED index and a nightlights GDP per capita proxy finds that their local differences are informative towards the management and use of local resources, suggests that a nightlights proxy could provide a large underestimate, and sheds light towards regions where the gap between achieved and unrealized potential may be large. We hypothesize that the large discrepancy between our MED index and the nightlights income proxy is due to an underestimate of economic activity by nightlights (most of the economic activity in rural areas happens during the day), the nature of the MED index being a measure of 'potential', and several other factors that could affect both variables such as local climate and environmental conditions, population stress on natural resources, quality of infrastructural capital (not only access), local corruption, and ethnic favoritism. We discuss these at length throughout our paper.