Kenya could be inching towards economic growth take-off stage

In the past few weeks, analysts at Stanbic Bank have projected that Kenya’s economic growth will rise to 5.6 per cent this year, from 4.8 per cent in 2017, while the World Bank predicts a growth rate of 5.5 per cent in 2018. The numbers may differ slightly but the message is of strong signs of an economic rebound.

The securities exchange has consistently improved since President Uhuru Kenyatta was sworn in in November, inflation is falling and the shilling, which has lost value over the past two years, has finally turned around and started appreciating.

The positive outlook is supported by increasing business confidence and growth in manufacturing and agricultural production and services.

The growth momentum may be checked by constraints such as politics, drought and external debt burden but it appears unstoppable.

Analysts could soon be talking about Kenya moving towards the economic ‘take-off’ stage described by American economist Walt Whitman Rostow in 1960 as the period of self-reliance, when rapid economic expansion from urbanisation, industrialisation and technological advancement increases people’s incomes, savings and investments.

BRIGHTER TIMES

Public and private initiatives underwrite the prospects for brighter times ahead.

First, the government’s accelerated infrastructure investments in electricity connectivity, the standard gauge railway, roads (urban and rural), airports and water supply has improved the business environment and will, certainly, lower the cost of doing business.

Second, tourism is slowly but steadily recovering from last year’s big hit. Direct flights between Kenya and the United States are bound to enhance the growth and increase business exchange between the two countries. Investment in drivers of local tourism, including rehabilitation and expansion of regional airports and construction of new ones, has increased the potential for growth in domestic tourism.

Third, there are quite a few interesting initiatives by small and large investors that may not capture the headlines. For example, the shilling and Chinese yuan can now be exchanged at the counter, thanks to CFC Stanbic. Kenyans trading with China now can directly access the yuan, just like the dollar, euro and other hard currencies.

AGRIBUSINESS

Investors also see emerging opportunities in agribusiness, including cotton and avocado. Farmers in Meru and Embu are reviving cotton farming, which has been abandoned for decades. That is likely to increase Kenya’s cotton output and support the growth of the textiles and apparel industry, which has a huge market in the US under the African Growth and Opportunity Act (Agoa).

Farming in central and eastern Kenya is undergoing significant transformation. Farmers in predominantly tea- and coffee-growing areas are rapidly increasing acreage under avocado, which has turned out to be a money maker. Kenya is the sixth-largest producer of the fruit.

Moreover, there’s an increasing focus on resilience and sustainability of livestock development in the arid and semi-arid areas. But the farmers need support through regular vaccination of animals to curb spread of diseases, water and feeding programmes to reduce conflicts over pasture.

FOUR PILLARS

Some of these nuanced changes could become Kenya’s game changer. They will find their space in the President’s four pillars of economic development — manufacturing, food security, healthcare and housing. The draft 2018/19 Budget policy statement identifies specific projects and programmes set to achieve this.

The space and stimulus for growth are much stronger than before. The tragedy is that, when opportunities such as Agoa, SGR and now the insatiable global market for avocados come knocking, those who should benefit from them are caught napping.

Mr Warutere is a director of Mashariki Communications Ltd. [email protected].