Kenya grows economy nine times since independence

A sample standard railway line at Changamwe Railway Station on November 26,2013. Infrastructure expansion is a key driver of growth. FILE

By GEOFFREY IRUNGU, girungu@ke.nationmedia.com
   
 
Kenya celebrates 50 years of independence on Thursday with the economy having grown nine times.

In real terms — after adjusting for inflation — the value of all economic activities has made leaps and bounds from Sh180 billion in 1963 to Sh1.6 trillion now, on average doubling in size every six years.

However, the momentum has slowed down from an average growth rate of 8.2 per cent in the first 10 years of independence to a low of 3.2 per cent by 2002.

The foundations for growth were laid by founding President Jomo Kenyatta despite tackling political challenges such as the change from a federal to a unitary state, the Shifta war, political assassinations and the cold war between socialist and capitalist economic systems.

Sessional Paper number 1 of 1965, African Socialism and its Application to Planning in Kenya, settled the contest in favour of free market policies with critics saying only secondary emphasis was put on equity and alleviating poverty.

The capitalism route appeared imprudent at the time as transnational corporations dominated the economy and growth slowed in the face of capital outflows, with Kenya having no indigenous entrepreneurs that it now boasts of.

The homegrown business elite, however, started emerging in the 1980s culminating in Forbes Magazine recently naming Kenyatta’s widow, Mama Ngina; Manu Chandaria, Nicholas Biwott and Naushad Merali as dollar billionaires, ranking them among the 55 wealthiest people in Africa.

READ: Mama Ngina, Biwott in Africa billionaires list

The weaknesses of the sessional paper started being laid bare as global economies moved towards liberalisation while Kenya retained protectionist trade policies and price controls.

By 1978, when President Kenyatta passed on the leadership baton to Daniel arap Moi, growth had slowed to an average of seven per cent with agriculture contributing 40 per cent of gross domestic product on the back of strong performance from cash crops, notably coffee.

The lowest growth by then, 1.3 per cent, came in 1983 after a failed coup a year earlier.

The coup caused capital flight before the economy could fully recover from the high oil prices beginning 1979, the collapse of the East African Community which provided an export market for Kenyan goods in 1977, and the end of the coffee boom.

The worst drought in Kenya’s history in 1984 compounded the economic doom. Pressure from the World Bank, the IMF and market realities saw price controls come tumbling down in the 1990s, with privatisation of State enterprises, cost sharing in education and health and restructuring of the public service taking a heavy toll on jobs and social welfare.

The measures appeared successful with growth averaging 5.1 per cent in the five years to 1988, up from four per cent in the previous period, before the multi-party politics shock and tribal clashes changed the outlook.