Politics and policy Old economy returns as IT, real estate shrink

A worker at a tea estate in Nandi Hills. Agriculture contributed 27.3pc of Kenya’s GDP last year. PHOTO | FILE 

By JOHN GACHIRI

In Summary

• Agriculture accounted for 27.3 per cent of Kenya’s GDP or wealth last year up from 26.4 per cent the previous year and 24.8 per cent in 2010.
• Slowdown in other key sectors has made the economy to rely on rain-fed agriculture for growth.

The structure of the Kenyan economy is returning to its older self with agriculture cementing its dominance as sectors like information technology (IT), real estate and financial services that were expected to shape the country continue to shrink.

Agriculture now accounted for 27.3 per cent of Kenya’s gross domestic product (GDP) or wealth last year up from 26.4 per cent the previous year and 24.8 per cent in 2010.

Slowdown in other key sectors has made the economy to rely on rain-fed agriculture for growth, exposing the it to weather-related risks.

The IT sector’s contribution to the GDP stood at 1.2 per cent last year, down from 1.5 per cent registered in 2013 and 2.2 per cent in 2010.

The financial services remained little changed at 6.7 per cent while real estate — which is enjoying a boom due to rising land and home prices — has shrank to 7.8 per cent of GDP from 8.3 per cent in 2010.

The increased share of the agriculture sector — the single largest employer — did not bode well for the fight against pay inequality because the industry pays one of the lowest salaries.

Workers in the sector were paid an average monthly wage of Sh19,226 last year — which was less than half the average monthly wage in the formal sector cent of Sh46, 264 last year.

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The survey shows average monthly wages for those working in financial institutions such as banks, insurers, and asset managers stood at Sh125,356 last year, up from Sh121,817 in 2013. Workers in the IT sector drew an average monthly wage of Sh62,259 last year.

Data from Economic Survey indicated that agricultural output in 2014 slowed to 3.5 per cent compared with 5.2 percent in 2013, hurt by poor weather and reduced earnings from cash crops.

“Low levels of rainfall resulted in decreased production for some crops as well as pasture availability for livestock,” noted the survey.

Maize yields dropped 4.2 per cent to 39 million bags while sugar output fell to 6.5 million tonnes from 6.7 in 2013. The value of marketed crops declined by 1.4 per cent to Sh238 billion.

“The inflation rate was 7.4 per cent in June 2014, up from 4.9 per cent the previous’ years while the real average earnings increased by 0.5 per cent compared to an increase of 10.7 per cent in 2013,” says the survey