The country’s status as the economic, logistical and commercial hub in the East African region makes it one of the best investment destinations in the world.
Kenya’s GDP has continued to be on an upward trajectory and is expected to continue at a similar pace in the coming years.
The successful implementation of the Economic Recovery Strategy for wealth and employment creation has poised the economy back on the path to robust growth from its stagnated GDP of 2.2 per cent annually in the 1990s rising to an average of 5.7 per cent from 2004 until 2016.
The local economy hit a record low of 0.2 percent in 2008 and an all time high of 8.4 per cent in 2010.
In 2014, the World Bank ranked Kenya as a lower middle income country after the GDP rebasing which involved changing the base calculation year from 2001 to 2009 as well as use of more accurate data on key sectors. The ranking earned Kenya a spot among the top ten economies in Africa.
Agriculture, forestry and fishing is the largest contributor of the economy at 25 per cent of the GDP followed by manufacturing at 11 per cent while tourism takes third place at 10 percent.
Other significant sectors include real estate at 8 percent, transport and storage at 7 percent, wholesale and retail trade at 7 percent, education at 7 percent, financial and insurance activities at 6 percent and construction at 5 percent.
Being the mainstay of the economy the agriculture sector provides 18 per cent of formal employment and also directly or indirectly supports about 80 per cent of the rural population.
World’s leading exporter
Agricultural exports comprising of coffee, tea and horticultural produce accounts for approximately 65 per cent of Kenya’s exports.
While coffee has declined in importance due to depressed global prices, tea is a major foreign exchange earner with Kenya being the world’s leading exporter of black tea.
Though the sector still largely depends on rainfall for production of major food staples, the expansion of credit to the agricultural sector has helped farmers venture into safer and more reliable alternatives such as green house farming and irrigation.
Although Kenya is considered as the industrial hub in the region, its manufacturing sector has continued to experience slow expansion due to poor transport infrastructure, high energy costs and influx of cheap imports.
The sector has mainly been agro-based, focusing on value addition to agricultural products through food processing industries such as sugar cane crashing, beer production and grain milling among others.
However, the sector is currently shifting focus to export oriented manufacturing as the country seeks to improve on its trade balance.
Kenya’s service sectors largely dominated by tourism has been a top contributor to the country’s GDP since independence. The country’s scenic coastal beaches and first-class game reserves coupled with its warm climate attract tourists from across the globe with the united kingdom and Germany contributing the largest numbers.
Over the last few years, the sector has experienced a downturn due to terrorism and subsequent negative travel advisories from major markets.
However, the sector is currently on a recovery path due to improved security and rigorous marketing.
Kenya’s development blue print, Vision 2030, aims at rapid industrialisation resulting in high quality life for her citizenry by the year 2030. The vision is centered around three key pillars namely; the economic, social and political pillar.
The economic development programme under the economic pillar aims at achieving an average GDP growth rate of 10 per cent per annum in the next thirteen years.
The vision’s projects are to be implemented in successive five-year term plans with the first plan having covered 2008-2012 while the second one 2013-2017 is ongoing.
The 2016 Country Economic Memorandum indicates that Kenya’s future growth prospects will be driven by the ongoing modernisation of railways, roads, seaports and airports through the standard gauge railway and LAPPSET projects.
The country’s economic growth continues to be hampered by its heavy reliance on rainfall fed agriculture, few agricultural exports vulnerable to global price fluctuations, power rationing due to prolonged drought, dilapidated infrastructure, rapid population growth surpassing economic growth, inequality, limited opportunities for skills development, poor governance and corruption.
But with its youthful skilled population, dynamic private sector and strategic position in east and central Africa, Kenya has the capability to become one of the continent’s greatest success stories if it manages to address these challenges.