Construction, transport, and ICT sectors driving Kenyan Economy

Cabinet Secretary, Devolution and_Planning, Ms Ann Waiguru

 

The Kenya Government through the Ministry of Devolution and Planning, and Kenya National Bureau of Statistics (KNBS) released on 29th June the Kenya Economic Survey 2015 – a comprehensive view of the past year’s economic performance based on information collated from Government ministries, fiscal and monetary policymakers and championed by the KNBS.

The Economic Survey 2015 report was eagerly awaited as policymakers and the Kenyan public were keen to learn where the much taunted 5.3% economic growth came from – quantifying the slowdown in agriculture and tourism, how the state of insecurity in 2014 crystallized into stunted economic growth, and the gains of devolution – and the report did not surprise nor disappoint, but will definitely go a long way in putting the economy into perspective as the resilient economy tries hard to keep up with never ending headwinds.

Economic growth slowdown to 5.3% from 5.7% in 2013

Kenya’s economic growth slowed to 5.3 per cent in 2014 from 5.7 per cent the previous year, hurt by a contraction in tourism and weaker agricultural output.

Top performing sectors included building and construction which expanded by 13.1 per cent, transport which grew by 13.7 per cent and ICT which increased by 13.4 per cent last year.

The building and construction sector has been rapidly growing and has seen current players expand (cement makers like ARM Cement, Savannah Cement) and new players looking to join the foray like Dangote Cement.

Economic Performance Kenya

Kenyan Economy by numbers (2010-2015)

 

This trend is expected to continue into the medium term as construction and infrastructure projects continue to be key in the Government’s agenda. The sector has also gained from the devolution process, as resources that were centrally managed are now ging down to the counties boosting the counties’ business environment and economic activities.

The ICT sector has also been rapidly growing as internet penetration increases, mobile money transfer system continues to revolutionize the monetary system, mobile access becomes cheap and coverage becomes wider and literacy levels increase. Internet penetration stood at 38.3 per cent in the year under review, while total domestic Short Messaging Services (SMS) sent increased by 38.5 per cent to 27.5 billion SMS in 2014.

In 2014, the mobile money subscriptions reached at 26.0 million, representing a penetration rate of 60.6 per cent to the total population.

Data from Economic Survey indicated that agriculture output in 2014 slowed to 3.5 per cent to Sh822.5Bn, compared with 5.2 per cent in 2013, while earnings from tourism were down 7.3 per cent to Sh87.1 billion. Agriculture, which is the largest sector with 27.6 per cent share of the GDP, was 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 production dropped 4.2 per cent to 39 million bags while sugar output dropped to 6.5 million tonnes from 6.7 in 2013. The value of marketed crops declined by 1.4 per cent to Sh238 billion.

Tourism earnings fell 7.3 per cent to Sh87.1 billion in 2014, down from Sh94 billion the previous year as a spate of insecurity and travel advisories issued by key source markets continued to bite.

International visitor arrivals dropped to 1.35 million last year from 1.52 million in 2013 and 1.82 in 2011, affected this year by a string of deadly attacks on Kenya’s Indian Ocean coast and elsewhere, which were blamed on Islamist militants and prompted some Western countries to warn against travel to the country. This has seen thousands lose jobs and more than 40 top hotels close shop due to the low bed occupancy.

Manufacturing which accounted for 10 per cent of GDP, grew by 3.4 per cent to Sh537.3 billion last year compared to a growth of 5.6 per cent in 2013. The effect of lower global oil prices and reduced cost of power were yet to be fully utilized by manufacturers and are expected to crystallize in 2015-16.

Formal employment in the manufacturing sector increased by 2.9 per cent from 279.4 thousand in 2013 to 287.5 thousand persons in 2014.

The total value of manufacturing projects approved by financial institutions rose by 30.3 per cent to Sh237.9 billion in 2014 from Sh182.6 billion in 2013. The value of apparel articles export to USA under the African Growth and Opportunity Act (AGOA) increased by 24.4 per cent to Sh 30.1 billion in 2014 from Sh24.2 billion in 2013.

The Energy sector also played host to significant changes posted during the year. International crude oil prices plummeted by more than 40 per cent to 60.65 US Dollars per barrel in December 2014 and translated to reduced domestic petroleum pump prices.

Total quantity of petroleum products imported increased by 12.5 per cent to 4.5 million tonnes in 2014 from 4.0 million tonnes in 2013 as the Import bill of the petroleum products expanded by 5.6 per cent to Sh 333.1 billion.

On the Power sub-sector, total capacity installed expanded by 4.7 per cent from 1,717.8 MW in 2013 to 1,798.3 MW in 2014 mainly due to increased geothermal capacity while total electricity generation expanded by 8.2 per cent to 9,138.7 GWh in 2014.

The Transport and Storage sector registered a growth of 5.0 per cent in 2014 compared to a growth of 1.22 per cent in 2013. Output value for the road transport sub-sector rose by 15.2 per cent to Sh600.2 billion in 2014.

Total freight traffic via rail expanded by 24.3 per cent from 1.2million tonnes in 2013 to 1.5 million tonnes in 2014. The Port of Mombasa recorded a growth of 11.7 per cent in total cargo throughput handled from 22.3 million tonnes in 2013 to 24.9 million tonnes in 2014.

Container traffic handled by the port stood at 1,012.0 thousand Twenty-foot Equivalent Units (TEUs) in 2014 compared to 894.0 thousand TEUs in 2013.

Total air passenger and cargo traffic handled at the airports rose by 7.9 and 6.8 per cent, respectively, in 2014. The total number of newly registered motor vehicles recorded a 9.1 per cent increase from 94,017 units in 2013 to 102,606 units in 2014.