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Kenya’s Economic Growth rises to 6.3 percent amid tough financial times

Agriculture registered the highest improvement to become the key sector that boosts Kenyan economy.

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Kenya is one of the fastest growing economies in Africa, but its performance is often hit by natural disasters such as drought and disruptive political tensions during elections.

During the 2007 presidential election, for instance, violence and chaos scared away some investors, hurting the country’s economic growth. After the 2013 elections, which ushered in the new constitutional era, missed revenue targets, rising public debt and uncontrolled expenditure also emerged as concerns for investors.

However, in a recently released Kenya National Bureau of Statistics (KNBS) report, the economy picked up, rising by 1.6 percent to hit 6.3 percent in 2018, compared to 4.7 per cent registered in 2017.

The growth, according to the report, was largely contributed by growth in the agricultural, manufacturing and transport sectors, amid effects of an adverse weather and political instability in the election year.

“The growth in 2018 was principally attributable to increased agricultural production, accelerated manufacturing activities, sustained growth in transportation and vibrant service sector activities. Agricultural activities benefited from sufficient rains that were well spread throughout the country,” says Zachary Mwangi, Director at KNBS.

Data from the report shows that the country’s financial sector grew at 5.6 percent in 2018 compared with 2.8 per cent in 2017, immensely contributed by increased agricultural production.

On the other hand, the economy expanded 6.3 per cent in 2018, the highest since 8.4 per cent in 2010, beating majority of projections which ranged between 5.8 and 6.1 percent.

While the majority of crucial economic segments recorded exemplary growth, it is agriculture that held the most dividends creating a knock on effect in the excelling of subsequent economic sectors.

Considered the backbone of Kenya’s economy, agriculture and related activities such as fisheries and forestry, accounted for more than 34 per cent of GDP, resulting to a sharp growth of 6.4 percent in 2018 from a revised 1.9 percent in 2017.

“We have noted the issue of sufficient rains and the multiplier effect that agriculture has on growth in other sectors,” said Mwangi during the unveiling of the report.

Maize production, the director adds, increased by 26 per cent to 44.6 million bags while tea and coffee production recorded growths of 12.1 per cent and 7 percent respectively during the period of review. The report linked the growth in agro-processing to the increased production of dairy products, tea, coffee and sugar under the favorable weather conditions.

Improved growth was recorded in sugar manufacturing, liquid milk processing, black tea and manufacture of beer and soft drinks. Improved rainfall across 2018 further stimulated the improved delivery of electricity supply, as a share of total energy generated reached 86 percent from an initial 73.3 percent at the end of 2017, according to the KNBS report.

Agricultural production, which hosts the highest share of employment in Kenya, registered a 10.1 percent growth. Manufacturing, the second largest creator of most informal jobs, also recovered from a five-year low of 0.5 per cent in 2017 to grow by 4.2 per cent in 2018, the highest increase since 7.2 percent recorded in 2011.

Citing the close correlation between conducive weather patterns, the performance of the agriculture sector and the consequential achievement of subsequent economic segments, National Treasury Cabinet Secretary Henry Rotich emphasized on the need to support interventions on the currently rain-dependent sector.

“To continue supporting the agricultural sector, the government will continue to invest in irrigation to reduce the dependence on rain-fed agriculture and increase the amount of land under crop production, in addition to targeted reforms and agendas to boost food security,” the CS said.

The KNBS economic survey warned of risks to economic growth in 2019, attributing their concerns to the delay of long rainfall season.

Unemployment soaring higher

For employment, millions of Kenyans still remain jobless since President Uhuru Kenyatta assumed power in 2013, this despite the ‘booming’ and ‘robust’ economy statistics. According to KNBS, only1.8 million jobs have been created in six years.

 

This is proportionate to 360,000 new jobs per year, which is 64 percent less than the one million jobs promised by government in 2013. Between 2017 and 2019, 92,500 jobs were lost, with the total number of employed Kenyans standing at 17.78 million.

“In 2016 alone, 1.44 million unemployed Kenyans formed part of the 19.31 million working-age population, while 5.64 million of the same population was inactive due to school and family responsibility,” The KNBS Survey notes.

During a recent interview in a local broadcast, Safaricom CEO Bob Collymore questioned sections of the ‘promising report’, saying the alluded to economic growth should reflect the reality on ground.

”The good GDP figures are just mere numbers not felt by citizens. People are struggling to put food on the table. Talk to motorcycle operators and vegetable vendors; people are struggling,” Collymore said.

More than 500,000 graduates are released into the market from universities annually, with the hope of getting formal employment. Yet job opportunities keep declining. According to the survey, the number of new jobs created last year declined by 69,400 from 909,800 reported in 2017, resulting to only 840, 600 jobs being created.

The formal sector recorded the lowest growth of new jobs from 137,900 in 2014 to 78,400 in 2018. This growth reflected a 31.46 per cent lower than the 114,400 new jobs created in 2017; a clear indication that new jobs created in the informal sector dropped for the first time since 2014 to 762, 200 jobs. However, the sector employed 281,100 people, a 1.5 per cent increase compared to 2017.

In the private sector, agriculture contributed to the bulk of Kenya’s employment, at 294,300 workers, followed by wholesale and retail with 258,900 employees and Education with 223,900 workers.

In the public sector, Education had the largest workforce of 352,900 employees followed by Public Administration and Defense jobs at 295,000 workers.

“The Teachers Service Commission, which is the largest employer in the public sector, registered a 3.5 per cent growth in employment in 2018,” the report indicated.

Despite the growth plunge in public sector hiring, the public wage bill grew by 10.3 per cent last year to Sh2.02 trillion, a larger figure compared to the private firms which paid their employees a total of Sh1.41 trillion.

In early April, the Central Bank of Kenya in collaboration with the Kenya National Bureau of Statistics and Financial Sector Deepening (FSD) launched the Financial Access (FinAccess) Household Survey 2019.

The 2019 Survey sought to improve on track records facilitating the financial growth by providing information beyond the conventional measures of access and usage. The survey provides new information on the quality and impact dimensions, examining financial health and livelihoods, consumer protection, financial literacy in addition to probing more deeply on the frequency of usage.

The survey also includes independent business and agriculture modules to better understand usage of financial products and services within these livelihoods, crucial for the development of an all-inclusive financial ecosystem for all Kenyans.

Measurement of financial inclusion in Kenya commenced in 2006 through the creation of FinAccess surveys implemented over the years by the Central Bank of Kenya (CBK), Kenya National Bureau of Statistics (KNBS) and Financial Sector Deepening (FSD) Kenya.

­­Given the fast pace of financial sector development in Kenya, the FinAccess Survey constitutes an important tool for monitoring financial inclusion trends and dynamics, thus informing policy and industry on progress towards pro-poor and pro-growth financial sector development.

The 2019 survey findings clearly exhibit that Kenya’s financial inclusion landscape has undergone a transformation since 2006. Formal financial inclusion has risen to 82.9 percent, up from 26.7 percent in 2006, while complete exclusion has narrowed to 11.0 percent from 41.3 percent in 2006.

The disparities in financial access between rich and poor, men and women, and rural and urban areas have also declined. This has been instigated by the growth of mobile money, government initiatives and support, and developments in information and communications technology (ICT).

The significant reduction in the proportion of the adult population totally excluded from financial services and products liberates the policies, strategies and reforms undertaken by the government as well as the widespread adoption of digital technology and innovations by financial sector players.

These have helped in deepening financial inclusion by enabling the population to overcome infrastructural curtailment to access especially in rural areas.

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