Kenya Business Overview

by Alex Daruty | Nov 12, 2020 | Business Expansion

Kenya has made significant political, structural and economic reforms that have largely driven sustained economic growth, social development and political gains over the past decade. However, its key development challenges still include poverty, inequality, climate change, continued weak private sector investment and the vulnerability of the economy to internal and external shocks.

Kenya ushered in a new political and economic governance system with the passage of a new constitution in 2010 that introduced a bicameral legislative house, devolved county government, a constitutionally tenured judiciary and electoral body. The first election under this new system was held in 2013. The August 8, 2017 presidential elections were nullified on September 1, 2017 by the Supreme Court, and a new presidential election was held on October 17, 2017. Kenyan President Uhuru Kenyatta was sworn in for a second and final five-year term on November 28, 2017.

In 2019, Kenya’s economic growth averaged 5.7%, placing Kenya as one of the fastest growing economies in Sub-Saharan Africa, with a good number of business opportunities for investors.

Kenya’s economy is being hit hard through supply and demand shocks on external and domestic fronts, interrupting its recent broad-based growth path. Apart from the COVID-19 (coronavirus) pandemic, the locust attack which started early 2020, has affected many parts of Kenya especially the North East. It has had a negative impact on the food security and growth of the agriculture sector in the country. Real gross domestic product (GDP) growth is projected to decelerate from an annual average of 5.7% (2015-2019) to 1.5% in 2020. However, if takes longer than expected to bring the COVID-19 pandemic under control, GDP could contract by 1.0% in 2020, and see a delay in the projected recovery to 5.2% growth in 2021. The downside risks include a protracted global recession undermining Kenya’s export, tourism and remittance inflows, further tightening of COVID-19 health response measures that disrupt the domestic economic activity, fiscal slippages and weather-related shocks.

World Bank support to Kenya’s pandemic response includes emergency funding to strengthen medical services and reduce the spread of the virus, as well as budget support to help close the fiscal financing gap while supporting reforms that help advance the government’s inclusive growth agenda.

In addition to aligning the country’s long-term development agenda to Vision 2030, the President outlined the “Big Four” development priority areas for his final term as President prioritising manufacturing, universal healthcare, affordable housing and food security.

Social Development in Kenya

Kenya met several of the  Millennium Development Goals (MDGs) targets; reduced child mortality, near universal primary school enrollment, and narrowed gender gaps in education. Interventions and increased spending on health and education are paying dividends. While the healthcare system has faced challenges recently, devolved health care and free maternal health care at all public health facilities will improve health care outcomes and develop a more equitable health care system.

Kenya has the potential to be one of Africa’s success stories from its growing youthful population, a dynamic private sector, highly skilled workforce, improved infrastructure, a new constitution, and its pivotal role in East Africa. Addressing the challenges of poverty, inequality, governance, the skills gap between market requirements and the education curriculum, climate change, low investment and low firm productivity to achieve rapid, sustained growth rates that will transform lives of ordinary citizens, will be a major goal for Kenya.

Latest Positive Economic Developments in Kenya

More than 5.5 million people have befitted directly from the infrastructure and services supported under three urban sector programs; Nairobi Metropolitan Services Improvement Project, Kenya Informal Settlements Improvement Program, and Kenya Urban Support Program. Among other projects, these programs, which are spread across the country, have:

Improved health conditions of 100,000 people through improved sanitation infrastructure and services: 186 kilometres of sewer lines have been laid, three treatment plants in Ruiru, Thika and Juja rehabilitated and 21 ablution blocks constructed, resulting to 8,500 sewer connections made across the three projects
Reduced flooding through construction of storm water drainage, targeting flood prone zones: 300 kilometres of storm water drains have been constructed which have been crucial in tackling the flood menace.
Enhanced security and livelihoods through provision of 400 high masts and 2000 streetlights in dense urban neighbourhoods. Security has been enhanced for over 100,000 urban residents; urban street vendors have increased hours of operation improving incomes.
Increased access to portable water to 8,000 households improving health status of communities: 120 kilometres of water pipelines have been constructed, with 11 elevated steel water tanks erected and in use, enhancing access to clean water to 20,000 people across the country.
Improved mobility and accessibility through construction of 200 kilometres of all-season roads, with accompanying footpaths, cycle lanes, 150 kilometres of standalone non-motorised transport facilities, bridges and 10 commuter rail stations. The improved road and rail infrastructure, especially serving poor and dense neighbourhoods, has enhanced accessibility, with 350,000 people benefitted directly from the commuter rail stations.
The development of markets has improved trade: 7,000 traders are benefitting directly through the upgrading of 20 markets across the country. This has improved incomes and strengthened small and medium enterprise activities, with most businesses owned and operated by women.
Increased access to portable water to 8,000 households improving health status of communities: 120 kilometres of water pipelines have been constructed, with 11 elevated steel water tanks erected and in use, enhancing access to clean water to 20,000 people across the country.

Additional results include:

The number of skilled birth deliveries in Kenya totals 1.15 million in 2019, an outcome to which the World Bank-supported Transforming Health Systems for Universal Care Project is contributing substantially.
Time and cost of travel from Kitale to Lodwar have been reduced tremendously—from 11 to six hours—while the cost dropped from Ksh 3000 ($30) to Ksh 1500 ($15). Thanks to the improved state of the corridor including the completion of the Kainuk Bridge financed under the Eastern Africa Regional Transport, Trade, and Development Facilitation Project for Kenya.
The Kenya Devolution Support Project (KDSP) has provided performance-based grants to incentivise county governments to improve systems and capacities that underpin enhanced service delivery. There has been improvement in overall institutional performance across county governments. With respect to public financial management, for example, there is improvement in the quality of financial statements and audit opinions. More importantly, two county governments, Makueni and Nyandarua received a clean audit opinion in the FY2017/18 audit results.