Manufacturers, farmers to lead recovery, growth
President Uhuru Kenyatta this week started his second and final term in office with a promise to rejuvenate the struggling economy through state-sponsored agriculture and manufacturing sector reforms.
As part of the recovery measures, he announced the reduction of power tariffs charged to manufacturers by 50 per cent between 10pm and 6am starting December 1 and promised subsidies to farmers to improve food production.
The President said his government would facilitate commercial agriculture and formulate policies to deal with post-harvest losses, storage and value addition.
“Our manufacturing sector is the primary vehicle for the creation of decent jobs. Over my term, we will grow and sustain this manufacturing sector, and raise its share of the national cake from 9 to 15 per cent,” he said.
During his inauguration in 2013, the President also promised to put in place measures to address challenges faced by manufacturers and farmers to enhance the productivity of these sectors. And this week, he said his administration would now focus on agro-processing, textiles and apparel, leather processing, construction materials, innovation and information technology, mining and extractives through value addition.
The Jubilee administration’s scorecard on the economy has been under intense scrutiny after a lacklustre performance, which has seen several companies either shut down and relocate or scale down their operations, leaving thousands of workers jobless.
These include Sameer Africa, Eveready, Cadbury Kenya, Procter & Gamble, Reckitt Benckiser, Colgate Palmolive, Unilever, Johnson & Johnson and Kenya Fluorspar Company.
Government data shows that more than 2 million small-sized firms, mostly in wholesale and retail, have closed down over the past five years.
Kenya’s GDP growth has averaged 5.7 per cent in the past four years, against a 10 per cent target under the government’s long-term development blueprint, Vision 2030.
Public debt more than doubled from Ksh1.73 trillion ($17.3 billion) in June 2013 to Ksh4.04 trillion ($40.4 billion) in June 2017 while the annual debt servicing increased from Ksh255.69 billion ($2.55 billion) to Ksh438.22 billion ($4.38 billion) in the same period.
Revenues as a percent of GDP remained flat at 19.2 per cent between 2013 and 2016 while the share of expenditure in GDP increased from 25 per cent to 27 per cent in the same period.
The value of Kenya’s sovereign bonds increased from Ksh175.25 billion ($1.75 billion) in June 2014 to Ksh271.25 billion ($2.71 billion) in June 2015 and in June Ksh278.03 billion ($2.78 billion) in 2016.
Loans from commercial banks increased from Ksh58.92 billion ($589.2 million) in June 2013 to Ksh154.34 billion ($1.54 billion) in June 2016.
Inflation rose from 3.67 per cent in January 2013 to 11.7 in May 2017, before easing to 5.72 per cent in October 2017.
David Cowan, a senior economist in charge of Africa at Citi Group, blamed the poor economic growth on high inflation and politics. Mr Cowan said Kenya’s economic recovery will continue to be constrained by the agriculture and manufacturing sectors and insecurity attributed to Al Shabaab militant group, which has complicated tourism recovery plans.
Citi expects inflation to average 8.5 percent in 2017.
Among factors that are impacting the economy are high cost of living, falling private sector credit, rising public debt, falling revenue collections, increased government spending, falling corporate sector earnings and increased retrenchment in companies.