New Business mission to Kenya – March

Economic information about Kenya

Since independence was achieved in 1963, Kenya’s economy has contained both privately owned and state-run enterprises. Most of the country’s business is in private hands (with a large amount of foreign investment), but the government also shapes the country’s economic development through various regulatory powers and “parastatals,” or enterprises that it partly or wholly owns.

The aim of this policy is to achieve economic growth and stability, generate employment, and maximize foreign earnings by achieving high levels of agricultural exports while substituting domestically produced goods for those that have been imported. For a decade after independence this policy showed great promise as rising wages, employment, and government revenue provided the means for expanding health services, education, transportation, and communication. But problems that arose with the rise of global oil prices in 1973 have been aggravated by periodic drought and accelerating population growth, and Kenya’s economy has been unable to maintain a favourable balance of trade while addressing the problems of chronic poverty and growing unemployment.

The country’s ability to industrialize has been hampered by, among other factors, limited domestic purchasing power, shrinking government budgets, increased external and internal debt, poor infrastructure, and massive governmental corruption and mismanagement.

In an effort to decrease its dependence on volatile agricultural markets, Kenya attempted to diversify its exports in the last decade of the 20th century, adding horticultural products, clothing, cement, soda ash, and fluorspar. The country also made the export of manufactured goods such as paper and vehicles a priority.

Domestic restrictions on imports have been removed slowly, however, and this policy has been only partially successful. Kenya’s economy, which did not grow at a constant rate during the last two decades of the 20th century, continued to be dominated by the external market; tourism and agricultural exports were still the major source of foreign exchange for the country in the early 21st century.

Manufacturing

Kenya is the most industrially developed country in East Africa, but it has not yet produced results to match its potential. Manufacturing is based largely on processing imported goods, although the government supports the development of export-oriented industries. Major industries include agricultural processing, publishing and printing, and the manufacture of textiles and clothing, cement, tires, batteries, paper, ceramics, and leather goods. Assembly plants, which utilize imported parts, produce various kinds of commercial and passenger vehicles and even export a small quantity to other African countries such as Uganda, Tanzania, Rwanda, and Burundi.

Steel processing for reexport and for the construction industry is a growing sector, with about a dozen steel mills in operation. The petroleum industry, which was deregulated in 1994, produces diesel and jet fuel from imported crude oil at a refinery near Mombasa and provides a major source of foreign exchange.

Key government agencies within the Ministry include the Kenya National Highways Authority, Kenya Roads Board, Kenya Rural Roads Authority, Kenya Urban Roads Authority, Kenya Ports Authority, Kenya Railways Corporation, Kenya Airports Authority, Kenya Civil Aviation Authority, National Transport Safety Agency, and the National Construction Authority.

According to Business Monitor International (BMI), the Kenyan construction industry is expected to grow by 4.5% in 2021, a decline from 6.3% in 2020 and an indication of a slowdown in the short term. The sector is however expected to shake off the effects of the COVID 19 pandemic to record growth in the medium term. This growth will be driven by large infrastructure projects in roads, ports, and airports in 2022 and beyond. The elections in 2022 will, however, be something to watch. Due to budget constraints, the GOK hopes to realize more infrastructure projects as PPPs.

Tighter monetary policy by the Central Bank of Kenya has continued to provide the impetus for growth in the construction industry. However, the high cost of building materials and bank credit is still constraining demand for new developments. The economic impact of COVID-19 is also being felt in the residential/commercial real estate sector as demand dips due to reduced incomes.

In 2018, the GOK announced an ambitious development agenda dubbed ‘the Big Four’ that aims at addressing issues related to affordable housing, universal healthcare, growing manufacturing and food security. On affordable housing, the GOK’s goal is to build 500,000 homes over the next five years that will begin to address the housing deficit in the country. The GOK is looking to partner with private sector to achieve this goal.

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