The Freddie Omany blog: Facts about the Kenyan Economy: Comparing the economy in 2008(after the violence) and Now

Before we begin, Brace yourselves, this is going to hurt. Second, this post is long so be prepared (to break the monotony of continuous text in going to drop in a few cool pics for you to give you the strength to go through this long painful post).

P.S. This picture has nothing at all to do with the post.

In the 25 years after independence, Kenya has generally performed well but have we archived our potential?

Background

Widespread violence followed the 2007 election when both Mwai Kibaki, who had won the presidency in 2002, and rival Raila Odinga claimed victory. Months of negotiations resulted in a power-sharing arrangement. The political situation remains unstable as the government attempts to implement a new constitution. Corruption remains commonplace. Kenya is the transportation, communication, and financial hub of East Africa. Economic growth—hindered for decades by government mismanagement, counterproductive economic policies, and corruption—was improving before the post-election instability in 2007 and has picked up again since 2009. Civil service reform has been slow, and the government employs about one-third of the formal labor force. Nearly 80 percent of employment is informal. Agriculture accounts for about a quarter of GDP and employs a majority of the population.

So how far have we come in the past 5 years?

Quick Facts

Population:
- 39.7 million
GDP (PPP):
- $66.0 billion
- 5.0% growth
- 4.5% 5-year compound annual growth
- $1,662 per capita
Unemployment:
- 40.0%
Inflation (CPI):
- 3.9%
FDI Inflow:
- $133.0 million

Key facts about the Kenyan economy in end 2007:

* KENYA'S ECONOMY TOWARDS THE END OF 2007:
-- Kenya's economy grew 6.1 percent in 2006 compared with a revised growth rate of 5.7 percent the previous year. The government expects it between 6.9 and 7.0 percent in 2007.

-- World Bank figures show gross domestic product at $21.2 billion for 2006, with per capita income of about $580.

-- The shilling was trading at 63.35/45 against the dollar last week compared to a year low of 71.55/65 in January 2007.

-- Annual inflation rose to 11.8 percent in November from 10.6 percent in October. Underlying inflation, which excludes food prices, stood at 5.8 percent in November.

* TOURISM AND OTHER SECTORS:

-- Kenya received more than $870 million from tourism in 2006, catapulting it ahead of horticulture and tea as its biggest foreign currency earner, with revenue topping $1 billion in 2007.

-- Manufacturing, accounting for about a tenth of GDP, grew 6.9 percent in 2006 and 7.4 percent during the first quarter of 2007, compared with 7.1 percent in the first quarter of 2006.

-- Agriculture -- representing a quarter of GDP -- expanded by 5.4 percent in 2006 and by 12 percent in the first quarter of 2007, compared with 0.3 percent in the same period in 2006, boosted by tea production.

-- Kenya produced a total 108,701 tons of tea in the first quarter of 2007, up from 49,470 tons in the same period in 2006. However, coffee production declined to 16,573 tons in the first quarter of 2007 from 17,606 tons a year before.

CORRUPTION & UNREST:

-- Kenya's business community says the country is losing 2 billion shillings ($31.45 million) worth of taxes daily due to businesses being shut, partly as a result of political unrest.

-- According to a survey of 78 companies by PricewaterhouseCoopers, more than two-thirds of Kenyan companies have suffered from corruption or other economic crimes in the past two years, losing an average of nearly $300,000 each.

-- In 2006, the IMF and World Bank delayed handing over millions of dollars in aid to Kenya over graft scandals, but both institutions resumed lending in 2007.

Sources: Reuters; Government of Kenya; World Bank (www.worldbank.org)

Oh Look, another photo that has absolutely nothing to do with this post, keep reading...

Where We Stand Now.

Kenya’s economic freedom score is 57.5, making its economy the 103rd freest in the 2012 Index. Its score is virtually unchanged from last year, with gains in monetary freedom and the control of government spending offset by a significant loss of trade freedom. Kenya is ranked 13th out of 46 countries in the Sub-Saharan Africa region, and its overall score is below the world average.
The foundations of economic freedom are fragile and uneven across the country. Poor protection of property rights and widespread corruption discourage entrepreneurial activity. The rule of law is weak, and local courts are subject to substantial political interference.
After several years of strong economic growth, Kenya’s economic performance has deteriorated, partly because of the global economic slowdown and also because of the generally slow pace of efforts to improve regulatory efficiency and open markets to international trade and investment. Reforms in public finance management have continued, but progress has been sluggish.

Rule of Law

Property Rights 30.0

Freedom From Corruption 21.0 t

Kenya’s judicial system, which is modeled on the British system, remains weak and fails to provide strong protection for private property rights. The independence of the courts is severely compromised, and the judicial system is mired in incompetence, executive interference, and corruption. The process for acquiring land titles is often non-transparent and cumbersome. The new constitution promulgated in 2010 aims to root out corruption.

Limited Government

Government Spending 75.3

Fiscal Freedom 77.7

The top income and corporate tax rates are 30 percent. Other taxes include a value-added tax (VAT) and a tax on interest, with the overall tax burden amounting to 20.7 percent of total domestic income. Government spending is equivalent to 28.7 percent of total domestic output. The deficit has increased to over 5 percent of GDP, and public debt has reached 52.3 percent of GDP.

Regulatory Efficiency

Business Freedom 61.7

Labor Freedom 63.3

Monetary Freedom 79.1

The implementation and enforcement of reforms to enhance regulatory efficiency have been uneven. Launching a business still takes more than the world averages of seven procedures and 30 days. A large portion of the labor force is employed in the informal economy. Monetary stability has weakened with rising inflation. The government continues to regulate prices through agricultural marketing boards and state-owned enterprises.

Open Markets

Trade Freedom 66.7

Investment Freedom 50.0

Financial Freedom 50.0

The trade weighted average tariff rate is quite high at 9.2 percent, and myriad non-tariff barriers further constrain freedom to trade. The poor investment regime lacks efficiency and transparency, discouraging investment activity. The financial sector remains vulnerable to government influence and inadequate supervision. The state owns or holds shares in several domestic financial institutions and continues to influence the allocation of credit.

In comparison to our regional neighbors;

Regional Ranking

rank	country	overall score	change from previous
1	Mauritius	77	0.8
2	Botswana	69.6	0.8
3	Rwanda	64.9	2.2
4	Cape Verde	63.5	-1.1
5	South Africa	62.7	0.0
6	Madagascar	62.4	1.2
7	Namibia	61.9	-0.8
8	Uganda	61.9	0.2
9	Ghana	60.7	1.3
10	Burkina Faso	60.6	0.0

Our overall score is at 57.5 percent so yeah, tuko down.

KEY FINDINGS

Kenya’s economy is stabilizing but still vulnerable. At the end of 2011, the government increased interest rates and lowered the fiscal deficit by curbing expenditures. These policy actions helped to stabilize the economy.
But more than ever, Kenya’s economy is out of balance. The current account deficit has reached new record levels and could exceed 15 percent of GDP in 2012. Kenya needs to rebalance its economy, increase savings and create more incentives for exports. In times of economic turbulence, deepening EAC integration can serve as an additional buffer for external shocks.
For 2012 and 2013, the World Bank maintains its growth forecast of 5 percent. However, another series of shocks could easily create renewed economic turbulence, and slow down economic growth to 4.1 percent.
The EAC is a dynamic region with one of the highest growth rates in the world. Deepening EAC integration would lead to lower prices of goods and services. But Kenya is not leading the way as much as it should. Kenya imposes more regulations on its imports than do many other sub-Saharan African countries, and actually more regulations on imports from EAC countries than on imports from other countries.
East Africa can feed itself if free trade is permitted to balance surplus and deficit countries. Kenya is a food deficit country but maintains barriers to trade in maize, wheat and sugar, which result in Kenya’s exceptionally high food prices. Openness to agricultural trade would be a ‘win win’ for all EAC countries. Kenyan consumers would pay less while famers in Tanzania and Uganda would benefit from higher prices.
Rapid growth in service exports offers hope to Kenya, and indeed other EAC countries, to improve deteriorating trade balances. Removal of regulatory barriers that impede transport logistics and restrict trade in goods and services can unlock latent potential and reduce large current account deficits.

This was our GDP for the years after the PEV:

5% (2011 est.)
5.6% (2010 est.)
2.6% (2009 est.)

I wont deny it, we have tried, we have improved the PEV pulled us back we have tried our best to move on but is our best good enough?

The next five years will be the most decisive. We either make up for the ground we lost or we slump more and more to the point of no return, we were only lucky because of the global recession so other nations haven't made that much ground. At this rate the Vision 2030 will be just that, a dream.

KENYA Vs. Tanzania Vs United States GDP Growth