Farmers display their produce in a produce market in Kisii. High food
costs have impacted Kenya's economic growth. PHOTO | BENSON MOMANYI |
NMG
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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