Kenya may be growing but You cant eat GDP
AFP
AFP, NAIROBI: The timing was perfect. Two months before Kenyas August 8 vote, President Uhuru Kenyatta inaugurated the nations biggest infrastructure project: a railway connecting the capital Nairobi and the port of Mombasa.
With pomp and ceremony Kenyatta touted the railway as proof of his campaign promises on the economy, yet at the same time the price of maize flour, a Kenyan staple, was rising fast, stoking anger, especially among the poorest.
Rising food prices constitute a crisis on the eve of a high-stakes election in which Kenyatta, and his economic record, go head to head with longtime opposition leader Raila Odinga.
On the one hand, theres the symbol of Kenya which continues developing -- even though it means an increased debt -- and remains the most dynamic economy in East Africa, said Francis Mwangi, an analyst at Standard Investment Bank. On the other hand, theres the Kenya which hardly benefits from the effects of economic growth.
Kenyatta has put the economy at the heart of his campaign. Thanks largely to increasing household consumption and public investment Kenya has seen growth of more than five percent a year since his election in 2013.
But analysts say there is more -- and less -- to Kenyas economy than meets the eye.
The countrys debt is rising, corruption is endemic and economic growth has not benefited the countrys poor, they say.
As in many other African countries, agriculture is the dominant activity, but Kenyas economy is atypical in other ways. It has relatively few natural resources, but the countrys stability, economic dynamism and well-developed service industry stand out.
Kenyatta has presided over a slew of infrastructure projects, including airports, roads, bridges, the start of a new port in the town of Lamu and wind and geothermal energy plants to boost electricity production.
Ethiopias larger, cheaper workforce means it recently overtook Kenya as the regions biggest economy, but analysts say the worlds largest tea exporter remains East Africas most dynamic market thanks to its skilled workers, fast internet and entrepreneurial mindset.
Terror warnings and attacks, including the 2013 jihadist assault on Nairobis Westgate mall, scared off tourists for a while, but the countrys International Monetary Fund representative Armando Morales said the country has since bounced back.
Despite that, the GDP grew quite well, and conditions for business have improved, he said. But not all of Kenyas progress can be credited to Kenyatta. His term in office coincided with low oil prices and his economic policies broadly match those of his predecessor who kickstarted some of the more eye-catching infrastructure projects Kenyatta takes credit for.
Devolution has given counties more money and power, which has led to improvements in health infrastructure and the construction of wells and dams, said Winnie Mitulah, a development specialist at the University of Nairobi.
But government spending on new public works has caused Kenyas debt to balloon, increasing during Kenyattas term to over 50 per cent of GDP, much of it owed to Chinese lenders who negotiated advantageous terms.
I think Kenya had to make those investments, said Aly-Khan Satchu, a Kenyan analyst. But now, they need to reap the benefits of those investments, but they also need to space the next investments carefully.
Observers say its difficult to talk about Kenyattas economic record without including his poor performance in battling corruption. Graft is widespread in Kenya, and while Satchu said it is difficult to tell just how deep it runs, he believes it represents a major drain on the economy. Look where Kenya is now, and imagine where it could be without all that money disappearing through corruption, he said.
