Tourism, construction drive Kenya's economic growth

Friday April 28 2017

Tourists at the Serengeti National Park. Kenya Tourism Federation will use results of a study on two travel documents to chart the way forward for the regional industry. FILE PHOTO |

Tourists at the Serengeti National Park in Kenya. The country's economy grew by 5.8 per cent in 2016 supported by a significant increase in tourism earnings and the construction sector, according to the Economic Survey 2017. FILE PHOTO |  

By ALLAN OLINGO

Kenya’s economy grew by 5.8 per cent in 2016 — the highest in five years — supported by a significant increase in tourism earnings and the ever-growing construction sector.

Data from the Economic Survey 2017 — the primary source of official statistics — released April 19 showed a turnaround in the tourism sector, which grew 13.3 per cent after contracting 1.3 per cent the previous year.

The growth is attributed to the removal of travel advisories against Kenya issued by major tourist source countries triggered by fears of insecurity.
The construction sector grew by 9.2 per cent, a drop from 13.9 per cent recorded in 2015.

Growth in all the other critical sectors of the economy tanked, painting a gloomy picture of the economy last year that saw the jobs creation drop.
Agriculture grew by only 3 per cent, manufacturing at 3.5 per cent, down from 3.9 per cent in 2015, while financial services industry fell to 6.9 per cent from 9.4 per cent the previous year.
On the question of how the economy grew courtesy of the smaller sectors as the larger ones slowed down, management consultant and institutional specialist Denis Kabaara said slower growth does not necessarily mean a contraction, “as growth contributions are a function of the sectors’ economic size”.
Kenya is the world’s biggest black tea exporter and agriculture, which accounts for about 25 per cent of GDP, rose 4 per cent from a revised 5.5 per cent a year earlier, mostly due to debilitating drought. The country had forecast growth of 6 percent last year. The statistics agency revised 2015’s expansion upward from 5.6 per cent.
Foreign direct investment is projected to hit $2.5 billion in 2016 up from $1.5 billion dollars the previous year, according to Kenya Investment Authority (KenInvest).
 “Kenya’s attractive investment climate, being perceived as a financial hub and the ease of doing business have seen us continue to be a magnet for investors,” KenInvest managing director Dr Moses Ikiara said.
The budget statement, however, put the figure higher at $2.6 billion, alluding to improvements in the ease of doing business in Kenya. On the other hand, data from the Economic Survey 2017 paints a different picture, showing that Kenya received $2.47 billion in FDI last year.
But the Economic Survey 2017  shines the spotlight on government statistics, as some of the figures in the report are at variance from those on the government’s online portal, launched only two weeks ago; those released by Treasury Cabinet Secretary Henry Rotich at the reading of the national budget last month; and those contained in President Uhuru Kenyatta’s State of the Nation Address last month.
On the police-to-civilian ratio, President Kenyatta said: “In the Jubilee manifesto, we promised to push the ratio of police officers below one officer for every 800 citizens. Today, I am pleased to report that we have kept our promise. Our ratio of police to the population is one officer per 380 citizens, better than the prescribed UN ratio of 1 officer for every 450 citizens.”
However, data from the Survey shows that the average ratio stands at one police officer for every 478 citizens, a significant improvement from the 2013 ratio of one officer to 800. It still falls short of the prescribed UN ratio.

On roads, President Kenyatta said the government had completed the construction of 1,950 kilometres of roads, while some 7,000 were under construction.

 “Since 2013, government has constructed 1,500 kilometres of roads and another 7,000 kilometres are in different stage of construction,” Mr Rotich said during the reading of the budget speech, presenting a variation of 450 kilometres.

On the government delivery portal site, it is indicated that over 2,000 kilometres of inter-city highways are under construction, with another 500 kilometres to be procured. Another 500 kilometres of urban roads are reported to be at different stages of construction or procurement.

The Economic Survey indicates that 1,247 kilometres of roads are under construction, and another 647 kilometres under rehabilitation.

The electricity connections is another area where there have been contradictions: “Today, more than 5.2 million Kenyans have been connected to electricity compared to 2.3 million in 2013. In four years, we have connected 2.9 Million Kenyans to the grid,” Mr Rotich said while delivering the 2017/18 budget.

President Kenyatta had alluded to having an additional 3.7 million new homes connected to electricity while former Kenya Power chief executive Ben Chumo had revised the figures down to 2.33 million. The Economic Survey puts the new connections at 2.89 million.

On jobs creation, Mr Rotich told the nation: “Since 2013, our economy has generated a total of 2.3 million new jobs. In 2015 alone, 841, 600 new jobs were created with similar levels expected in 2016,” Mr Rotich said.
In his address, President Kenyatta also spoke of 2.3 million jobs created.

Data from The Economic Surveys for 2014, 2015, 2016 and 2017 indicates that a total of 2.31 million jobs were created.

The 2017 Survey showed that a slowdown last year, resulting in a drop in the job created from 841,600 a year earlier to 832,900 new formal and informal sector jobs in 2016.

This is the first time the economy has spun fewer jobs in a year since the Jubilee government came to power in 2013. At the start of 2015, the government  had pledged to create 570,000 new jobs in the formal sector between 2015 and 2017. The Survey shows that it barely managed 160,000 formal jobs over the last two years.

On revenue collection, the President had put the figure at $11.39 at the end of 2016 up from $8.47 billion in 2013.

“Revenue collection has increased from $9.46 billion in 2013/14 to the projected $14.38 billion in 2016/17, a 51 per cent increase,” Mr Rotich said.

 The Survey data is at par with the budget statement.

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