KEPSA attended the IMF Regional Economic Outlook Launch held on 5th November 2015 at Fairmont Norfolk Hotel, Nairobi. In attendance were government officials, TMEA, IMF, World Bank and other Private sector players.
During the meeting, it was stated that growth in Sub-Saharan Africa has weakened evidently, and is now expected around 3.5 percent this year and a little over 4 percent in 2016. This is down from 5 percent in 2014. Of the three factors that have underpinned the region’s solid performance in the last decade or so—a much improved business and macroeconomic environment, high commodity prices, and highly accommodative global financial conditions—the latter two have become far less supportive. However, the strong growth momentum evident in the region in recent years has degenerated.
After a steady rise in prices since the early 2000s, the decade-long commodity cycle seems to have come to an end. This represents a formidable shock for many of the sub-Saharan African countries that are still substantial commodity exporters, as it cuts into export values and fiscal revenues.
It was also noted that security-related issues still prevail in Kenya. Acts of insurgency groups such as Al shabaab not only cause human loss of lives but also weigh on economic activity and diminish the prospects for FDI.
Mr. Armando Morales from IMF said the Kenyan economy has grown by 23.6% between 2010-2014.This is much higher than the Sub-Saharan Africa average. He further said the growth is as a result of the construction boost because of the emerging middle class, trade due to openness of the economy, IT as a result of increased innovation in various sectors, Financial Services because of the macroeconomic environment that has led to financial deepening and education.
It was also noted that agriculture has also delayed growth because of the changes in weather patterns. Other factors that seem to have affected growth include; the investment climate, infrastructure bottlenecks in transport, a slow -down in the real estate boom due to issues surrounding land acquisition laws and the continuous tourism decline.
Dr. Chris Kiptoo the Kenya Country Director of Trademark East Africa (TMEA) said TMEA already has a partnership with the Private Sector through KEPSA. He said the business environment reform trajectory is on an upward trend. Further, he said that transit time to Uganda has reduced to around 5-7 days down from 18 days. “This makes Kenya remain in a position to reap from the demographic dividend come 2030”. Adds Dr. Kiptoo
On Competitiveness, it was noted that manufacturing still remains stagnant in Kenya while in other Sub- Saharan Africa countries it also continues to lag. The cost of shipping in Kenya was also noted to be still high. Dr. Chris Kiptoo from Trademark East Africa pointed out that company registration has witnessed a dramatic growth of 52.9% in 2014 from 2010. He said this signifies that more entrepreneurs are formalizing their operations and can only board well for the overall economy and revenue enhancement for the government through taxes. The increasing trend in the registration of companies comprises of more foreign companies.
Based on VAT payments, it was reported that 42.2% of large companies come from commercial and Investment sector with only 16% of them listed at the NSE. Moreover, it was said that market capitalization is equivalent to almost half of Kenya’s GDP i.e. US$ 30 Billion. On the other hand, the corporate sector has seen its capital expenditure nearly triple to US$ 2.5B from US$ 1B.
The Constructions and service sectors were mentioned as the main recipients of FDI in Kenya and wholesale and retail trade (US$2,045 million and US$34million respectively) as the least. It was also mentioned that UK and China are key sources of registered FDI in Kenya. Other countries are US and India.
As a way forward, it was agreed there is need for policy action geared towards improving competitiveness as well as need to manage cash flows as a country.
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