Man­u­fac­tur­ers, farm­ers to lead re­cov­ery, growth

The East African - - NEWS -

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.

In­fla­tion rose

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.

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