Economy
From The Report: Kenya 2017
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Kenya was the sub-Saharan Africa’s fifth-largest economy in 2015 behind Nigeria, South Africa, Angola and Sudan, ranked 11th in inward foreign direct investment and is one of the few countries in Africa that is not primarily dependent on extractive revenues. This performance is not necessarily surprising given the country’s comparative advantages. The East African market has one of the highest financial inclusion rates in the developing world, and a strong and diversified private sector. Kenya is also seen as a safe haven for assets in the region, with significant inflows from countries such as Somalia and South Sudan a contributing factor to the country’s overall balance sheet. The highlight of 2017 will be the general elections, with hopes for a result that is clear and accepted, and a peaceful transition of power if the incumbent loses. Kenya’s fundamental economic performance continues to be strong, with GDP growth expected to grow by 6%. Key sectors such as tourism continue to rebound, however, important structural reforms are still needed to ensure sustained growth.

This chapter contains interviews with Carole Kariuki, CEO, Kenya Private Sector Alliance; Moses Ikiara, Managing Director, Kenya Investment Authority; and Akinwumi Adesina, President, African Development Bank.

Articles from this Chapter

Overview

Centre of attention: Sustained economic growth and a reputation as a safe haven for investors has turned the country into a regional powerhouse
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Even amidst a broader downturn in many African markets, Kenya has consistently been one of sub-Saharan Africa’s most reliable performers. It was the sub-Saharan Africa’s fifth-largest economy in 2015 behind Nigeria, South Africa, Angola and Sudan, ranked 11th in inward foreign direct investment and is one of the few countries in Africa that is not primarily dependent on extractive revenues. This performance is not necessarily surprising given the country’s comparative advantages. The East African market has one of the highest financial inclusion rates in the developing world, and a strong and diversified private sector. Kenya has some…

Analysis

Bonded together: Although deficit spending is on the rise, bonds have helped provide funding for large-scale infrastructure projects
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In 2014 Kenya sold its maiden eurobond, raising $2.8bn in the process. It was an important step forward as accessing dollar-based credit has been crucial to scaling up infrastructure spending and has helped diversify funding sources. Current State As of late 2016 the total amount of debt as a percentage of GDP was well within manageable ranges, and Kenya’s sovereign credit ratings are among the highest in Africa. Kenya’s sovereign debt was rated “B+” by Standard & Poor’s and Fitch,…

Analysis

All politics is local: Engagement with community leaders in rural areas is critical for firms seeking to do business
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Ensuring clear frameworks for land rights, local content and legal authority are priorities for a variety of sectors in countries around the world. Kenya is no exception and authorities have been working to address these issues, which have come to the forefront as part of the current devolution process. Since the process was first legislated in 2010 — and began in earnest in 2013 — the devolution process has seen many formerly national-level responsibilities transferred to newly formed county…

Analysis

Credit check: In the face of liquidity challenges, states are looking to local banks to help bridge funding gaps
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The market for government debt is changing across Africa, and in ways that pose risks for local banks as well as for their investors and customers. States are looking to their banks to help bridge funding gaps so they can better ride out the cycle of lower commodity prices and tepid global growth. That means it is harder to raise international funds – such as by issuing dollar-denominated eurobonds – and this has caused a jump in the issuance of domestic currency bonds, of which banks are the…

Interview

Expanding opportunities: Carole Kariuki, CEO, Kenya Private Sector Alliance (KEPSA), on recent developments to reinvigorate investment
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Interview:Carole Kariuki What impact has devolution had on the private sector outside of Nairobi and Mombasa? CAROLE KARIUKI: Three things have happened as a result of devolution. First, it has opened a lot of opportunities for businesses. Many counties have begun to have investment forums and conferences to showcase what is on offer in the different regions of Kenya. The second thing is that it has allowed investors to deal with investment related issues at the local level. Lastly, counties…

Analysis

Checks and balances: Giving power to local governments should spur growth and development, not hinder it
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Three years into its implementation, Kenya’s devolution project remains a work in progress. The country appears to be on track to reap the benefits of creating 47 new counties and devolving many of the national government’s powers to them, but not without some growing pains along the way. History When Kenya gained independence in 1963, the first constitution featured a similar sub-national structure, with regions in control of roughly a third of government functions. However, the system was…

Analysis

Expanding the base: Recent policy reforms and technological advances should help boost the percentage of revenue from tax collection
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Several changes are under way in Kenya’s tax landscape for 2017. The Kenya Revenue Authority (KRA) is in the midst of implementing long-term and multi-pronged strategies to collect more revenue, and politicians are continuing to tweak the legal environment to serve the same goals. County-level politicians have joined the discussion as well in the last several years, with the early stages of devolution impacting the revenue collection process. Tax Base Tax revenue in the FY 2014/15 budget year…

Interview

Contributing to success: Moses Ikiara, Managing Director, Kenya Investment Authority, on increasing competitiveness and the impact of devolution
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Interview:Moses Ikiara How can Kenya maintain its competitiveness as an investment destination in East Africa? MOSES IKIARA: The most important thing that needs to be done is to continue our success in reducing the cost of doing business in the country. One primary component of this is to reduce the cost of electricity, and we are aiming to reduce the cost of power to about $0.9-0.7 per KWh. We have also identified the cost of logistics as a way of reducing the cost of doing business and…

Interview

A resilient future: Akinwumi Adesina, President, African Development Bank (AfDB), on building a stronger Africa
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Interview:Akinwumi Adesina Why is regional trade integration in Africa so low? AKINWUMI ADESINA: Intra-African trade is indeed just about 15% when compared to other regions such as the EU (60%), East Asia (50%), North America (41%) and Latin America and the Caribbean (20%). Africa’s share of global trade is just about 3%. The principal reasons for this low level of intra-African trade are inadequate infrastructure – with a deficit estimated at $60bn per annum – along with a number of…

Interview

A resilient future: Akinwumi Adesina, President, African Development Bank (AfDB), on building a stronger Africa
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Interview:Akinwumi Adesina Why is regional trade integration in Africa so low? AKINWUMI ADESINA: Intra-African trade is indeed just about 15% when compared to other regions such as the EU (60%), East Asia (50%), North America (41%) and Latin America and the Caribbean (20%). Africa’s share of global trade is just about 3%. The principal reasons for this low level of intra-African trade are inadequate infrastructure – with a deficit estimated at $60bn per annum – along with a number of…