Projected Outlook Of Kenya’s Economy In 2023

Economic prosperity is what every country longs for, a stable economy translates to a healthy nation. Contrarily Kenya is yet again to face economic growth shockwaves and instability in the coming years Global financier and lender World Bank, during its Horn of Africa Economic update, Kenyasn Economic growth will downgrade to a magnitude of 5%   from 5.5% as earlier projected for the fiscal year 2023-2024.High inflation rates, foreign depts and food insecurity are the core factors and triggers which has seen the changes in the growth base. The prices of consumable commodities like wheat, milk and flour have recently escalated at an alarming rate strangling the feeble economy and majority of households recovering from economic hardships left by covid-19 pandemic and Russian – Ukraine conflicts.

According to Kenya National Bureau of Statistics (KNBS) report the inflation rate as of August 2022 had hit 8.5 per cent in August 2022 up from 8.3 per cent in July 2022. World Bank has warned that if there is no checks and balances on inflation rates the economic growth could downgrade further from projected outlook. Currently the Horn of Africa (Somalia, Kenya, Uganda, South Sudan, and Ethiopia) is experiencing the worst drought over decades. This has greatly affected the production of consumable products especially in Agricultural sector which has always been deemed as backbone of in Kenyan Economy. Over 20 million people are facing starvation, hunger, food insecurity and malnutrition.

World Bank on its updates as well indicated that the Global head wings will have an impact of Kenyan economic outlook. Kenya is risking stagnation amid high-interest rates and debt which has forced the Kenyan government to make difficult choices as they try to protect jobs, purchasing power and infrastructural gains. According to the National Treasury, Kenya alone has been penalized kes 1.312 billion shillings for the fiscal year ended June 2022 of which it has adversely hindered the deliverables of Kenyan Government. Technically World Bank analysis shows that economic Growth in the Horn of Africa will slow down to 3.3% for the fiscal year 2022 from 4.1 % recorded in the year ended 2021.

Kenya, Managing Debt Crisis

It is no longer a secret that Kenyan debt is scaling at alarming rates. The   current Kenya public debt clouds at 8.4 trillion, 4.2 trillion covering external and domestic debt, respectively. According to data from Economic and Budget Review (QEBR) and Central bank of Kenya the public debt grew from 7, 9966.30 billion to a magnitude of 8,206.74 billion in the last quarter of 2021.

Kenya has continued to struggle amidst the ever-growing deficit in provision of decent and affordable housing for its citizens, cost of living is becoming unaffordable, basic commodities are now becoming a dream to achieve. Then how do we mitigate this surging debt crisis? Does good governance have anything to do with quality debt capital? Recently the Kenyan parliament raised the debt ceiling to Kes 10 trillion which forced the amendment of section 50(2) of public finance Management regulations 2015 which requires that the public debt shall not exceed 10 trillion. This has not only triggered an inflated cost of living but also made life unbearable for low-income earners. In mitigating the high debt crisis, the government of Kenya reconstituted the debt borrowing procedures.

Institutionalize the right governance, process systems and tools that involves designing and incorporating a best fit management structure that helps in driving strategy and instituting robust and appropriate performance on set objectives of debt control. Managing shocks and crises especially caused by external issues should be a key priority. A high proportion of Kenyan debt is in foreign currency hence the economy is vulnerable to this and hence any slight fluctuations will have a direct impact to Kenyan Economy. The government incorporated capital management techniques like debt like foreign debt restructuring external loans.

Implementation of government standing orders will for the first time require the parliament to consider the report of the committee on Public debt and Privatization of Debt Management Strategy before the report of the Budget and Appropriations Committee (BAC) on the budget policy statement can be deliberated upon. This will not only be a measure of Quality debt but also mitigate the rationale of debt uptake. The National Assembly amended its rules to establish the committee on public debt and privatizations which will be tasked as an oversight body to counter check the debt management strategy without overstepping its mandate

Economics Of Unga Prizing In Kenya.

Fluctuating and cynical prices of consumable commodities in any country pose a very serious problem in the supply chain of goods and services. This does not only reflect the performance of the economy but also instability and unsustainable budget control of government operations. In the first half of 2022, Kenya has seen a rise in the price of maize flour from an average of Kes.112 per 2 kg to current Kes.136 across the country signifying a 21% increase between January and June 2022. Amid the excess supply of Maize from farmers in the harvest of December 2021 to the National Cereals and Produce Board (NCPB) the prices have continued to steadily increase without substantive mitigation from the government. Every two kilograms of maize that is supplied to NCPB is received at Kes.56. The hundreds of thousands of bags that are sold at Kes.800 would translate to Kes.18 per 2kg of flour. In the local mills, the cost of milling is about sh. 10 per 2kgs and what is packed and retailed in shops is grade 1 flour milled by big millers enjoying economies of scale which translates to lower costs. The ministry of agriculture estimated that maize consumption in Kenya stood at an estimated quantity of 55 million bags against a national harvest of 45 million bags of maize. This means that the country needs to meet the 10 million bags deficit by importing from countries with a surplus.

The government of Kenya has cited that cartels hoard maize for in anticipation for a prize jump. The government also argues that the country has enough grains for supply after the 2021 bumper harvest. On the other hand, maize miller’s protest about low supply level of maize stocks from farmers, high purchase price of the grains at the farm and high handling costs that are caused by a national inflation driven by high cost of fuel.

Regulation of unga prizes therefore factors all costs incurred by farmers, millers and retailers. Government subsidies are needed at each input level of the value chain. There is also a need to reassess our form of agriculture such that profits earned by farmers be driven by low input costs rather than high retail rates. Implementation of Strategic Grain Reserves should also be put in place to safeguard the needs of over fifteen million households who are not able to meet their minimum dietary requirements. These measures will not only secure a steady supply of consumable goods but also fulfill the right to food enshrined in the constitution of Kenya, 2010 Article 43 1(a).

Sailing To The Ceiling?

Implications of the cost of fuel prices in Kenya.

Over the past three months, Kenyans have felt the heat of ever-increasing fuel prices. The prices have shot up on the account of the growing demand for oil as economies shake off the impact of the COVID- 19 pandemic and the more recent Russian-Ukraine war. The Kenyan shilling has also weakened against the dollar implying that fuel importers will use more shillings to import the same volumes of oil. This led to oil vendors withholding products from the Kenyan market while diverting fuel to neighboring countries in a bid to compel the government to track their payments as well. The Kenyan government had partially withdrawn the fuel subsidy sending diesel and petrol prices to an all-time high since October last year.

With historic heights, the super petrol and diesel prices shot by sh. 5.50 signaling the increase in the cost of basic goods and services hence having a direct impact on the Kenyan economy. The energy and petroleum Regulatory Authority (APRA) set the new retail prices at sh.150.12 for a litre of super petrol and sh. 131 for diesel. This single-handedly shows that there will be tough times for households and motorists given that fuel is the key determinant of the basket of goods and services used to measure inflation. When the fuel prices increase a larger share of the household’s budget is likely to be spent which leaves less to spend on other goods and services. For businesses, whose goods must be shipped from place to place the shipping prices will be much more expensive therefore increasing the prices of goods. This price has also shifted the growth of the economy through its effect on supply and demand for goods and services brought about by the production costs increasing slightly higher than expected.

Despite the increase in fuel prices the government committed to pay marketers an estimated sh. 14.39 billion as a subsidy to prevent further price escalation. The subsidy has come under increased pressure as the state struggles to compensate for the high deltas amid the global rally in crude prices. Apart from straining the government finances, higher fuel prices drive up inflation which sees lots of economic policies not being implemented. The inflation rate is expected to rise by 50%   in the coming months with prices of commodities’ becoming unsustainable.

The Debits And Credits Of President Kibaki

Many Kenyans believe that Kenya’s economy was at its best during the reign of the late President Mwai Kibaki. Dr. Mwai Kibaki who was an economist from Makerere University in Uganda excelled in managing Kenya’s economy between 2002 and 2013 thanks to his academic and professional background and sufficient experience in national treasury prior to his presidency. During Kibaki’s reign, there was a global recession which began in the United States as a result of deregulation of the financial industry. There were also internal civil wars in the country which were fueled by tribalism in Kibaki’s government, unevenness in sharing national resources between regions and mistrust among politicians in the then ruling party. Despite all these challenges in Kibaki’s 10-year tenure as the country’s chief executive, the gentle Kenyan politician managed to place Kenya in the top 12 list of Africa’s largest economies with a moderately low appetite for foreign debt yet with fairly significant investment in infrastructure.

Just like John Myriad Keynes, a great classical economist whose ideologies are taught in business schools today, Kibaki believed in free markets and in liberalization of the economy through policy interventions. President Kibaki opened up commercial lending in the country by providing sound regulations of the money markets through the Central Bank of Kenya. Kibaki also grew revenue collections by expanding the tax collection base. He borrowed from the West and the East based on affordability of loans and reasonableness of terms and conditions. Kibaki’s success in public debt management went a long way in managing inflation levels and stabilizing the shilling against other currencies. Unemployment rate and poverty index of Kenya compared to other East African countries was slightly higher throughout Kibaki’s regime indicating that the gap between the rich and the poor existed at very wide margins. This could be attributed to the capitalistic nature of Kenya’s economy whose seeds had been sowed by Presidents Moi and Jomo Kenyatta in Kenya’s years of infancy. In my qualitative analysis of Kibaki’s performance as briefly summarized in this column, I found a leader who understood economics of the country in theory and in practice. The consummate economist set the stage for Kenya to take off as an economic powerhouse in Africa and as a significant participant in global trade. His policies on management of the economy are widely admired across political divides, private sector leaders and the electorate of his time.

Global Trade Amidst Russia -Ukraine War

The war between Ukraine and Russia has yet again put the global economy at the verge of collapsing even before the world fully recovers from disruptions caused by the COVID19 pandemic. For the past two years, unexpected events have significantly changed the way we do our things. The International Monetary Fund has warned that the fight between Russia and Ukraine could pose a great economic threat that could hurt the anticipated post-covid 19 recoveries. Global economy profoundly remains affected by the negative impact of the pandemic. However, there is slight stability in the second half of 2021 amid Omicron that threw the global markets into a frenzy.

Countries that have economic links with Ukraine and Russia are at particular risk of scarcity and supply disruption and are most affected by the increasing commodity supply. Recently the US government promised to sanction Russia for potential retaliation and this has already seen a push down of stock markets and driven up gas and oil prices. This clash could cause dizzying spikes in energy and food prices, fuel inflation fears and spook investors, a combination that threatens investment and growth in economies around the world.

For Kenya’s economy alone Kenyans have been forced to dig deeper into their pockets because of the cost of fuel due to the strengthening of the dollar relative to Kenya shillings meaning that the country will spend more on imports. This has seen the cost of fuel rise by ksh.5 and a total jump in oil prices which has hit $100 per barrel.

The world’s major economies, from Russia to the US are experiencing a multi-year high in inflation levels due to shortages in the supply of commodities whose demand is growing because of lifting covid-19 restrictions. For Kenya, food prices are expected to rise while imports will suffer delay in delivery. Manufacturing Industries may experience imported inflation which could put further pressure on the shilling against the US dollar. To mitigate the ongoing war the European Union should speedily find a solution to the war to salvage the already suffering world economy caused by Covid -19 pandemic.

Impact of 5G Network on Kenya’s Economy

We are living at a time when speed matters a lot in our daily business activities. When it comes to the internet, they say slow WIFI is worse than no WIFI. COVID has taught us that companies can still work remotely and deliver 100% service to their clients. This is only possible with good connectivity of the internet. The 5G future is here. Years in the making, the long-buzzed-about fifth generation of wireless connectivity has become a reality, ushering in an era of radical new possibilities in many industries.

Innovative use cases such as autonomous drones and smart city ecosystems promise increased efficiency and productivity for governments and businesses in a post-pandemic world, and pervasive benefits across the globe. Faster internet also opens up fresh opportunities for businesses by enabling them to leverage online marketplaces and tap into new customers and operating morals to grow their revenues.

Why 5G? The promise of 5G has been echoed throughout the business world for years.5G’s faster speed, lower latency, and ability to connect vastly higher numbers of devices than previous generations of mobile technology offered executives a glimpse of a more efficient and productive future. By providing the basis for ubiquitous ultra-fast broadband, 5G opens up possibilities far beyond the reach of 4G or Wi-Fi 6. This promise has only grown more critical today, as managers consider how best to repair, rethink and reconfigure their business for the post–COVID-19 world.

Kenya’s leading mobile network provider Safaricom in March 2021 launched 5G network powered partly by Huawei, a move seen as a show of confidence in the Chinese multinational technology company. With the launch, Safaricom became the first in Kenya and East Africa to offer the new service. It also makes Kenya just the second country in Sub-Saharan Africa to roll out 5G after South Africa. 5G will also enable the deployment of advanced digital technologies such as virtual reality, crowd gaming, autonomous drones, industrial automation, and a wide range of IoT devices. 5G technology will usher increased internet speeds and capabilities for millions across the country, laying a strong foundation for a new generation of innovators and entrepreneurs.

As leaders contemplate the decade ahead, 5G demands strategic attention—both to where and how it can create competitive advantages and to the implementation and integration imperatives that must be met for it to generate value.

Kenya, The 6th Wealthiest Nation In Africa

During the 8th state of the nation address H.E Uhuru Kenyatta presented his speech based on Economy, social structure, and democracy. President Kenyatta stated that amid Covid 19 pandemic there were interventions set in place to reinforce the resilience in the economy while cushioning millions of households against harsh effects. He further stated that economically Kenya had become 6th wealthiest nation in Africa in terms of GDP of 11 billion Kenya shillings.

The Kenyans GDP currently stands at Ksh 11 billion shillings up from 4.74 billion shillings.  On the 2nd quarter this year the economy grew by 10.1 % being the highest growth in the history of our economy. ICT sector grew by 21.15%, transport sector grew by 16% and manufacturing grew by 9.6%.

However, the claim that Kenya is 6th is the wealthiest country in Africa is true, but the approach and framework could be wrong. Kenya is only the 6th wealthiest in terms of GDP (total production of all goods and services and not evenly distributed through the economy).

A more accurate figure of economic situation is GDP per Capita or nominal GDP, Kenya is one of the bottom 20 in Africa with a per capita GDP of US$ 2,000 compared of with Seychelles with $26,120 per capita GDP.

Another indicator that reflects the wealth of a country is Purchasing Power Parity which takes into account actual income plus inflation and the prices of local goods and services. The current Kenyans inflation rate is at 5.4%. In 2020 the Kenyans Purchasing Power Parity was 44lcu from 21.3lcu from 2001 which shows there is only 3.95% growth rate annually.

Other than Gov’t expenditure which has been growing in terms of pushing the GDP is the growth of elite economy like banking, Tourism and hospitality and cooperate services Agriculture productivity has been stagnant and deteriorating. In simple terms the economic outlook is positive. The economy is projected to grow by 5.9% in 2022. The rebound assumes that the economic recovery strategy is being successfully implemented and Kenya is capitalizing on external liquidity and benefitting from initiatives to meet its external financing needs. Inflation is expected to remain within CBK target range of 2.5% to 7.5%. Downside risks could emanate from delay in fully reopening of the economy, failure to secure financing to execute the budget and bad social conditions during 2022 elections.

Kenya: Granary Without Food.

What makes a country great? Is it the authority of its government, size of its economy, power of its military, unity of its people, riches of its national culture or there’s something else? In the East African Region, Kenya is envied for its fast-growing economy characterized by vibrant towns and busy ports of call for road, rail, sea and air travelers. On the flip side, 35.5% of Kenyans live below a dollar each day thus falling into the category of poor humans. Kenya’s poverty index is worsening by day and food insecurity has become a threat to lives of many Kenyan people and livestock.

Poverty for lack of food, water, clothing, and healthcare is poverty of dignity. This is what Kenyans are facing in a regime that is busy constructing long kilometers of roads, a railway line to the wilderness and health facilities with no doctors and drugs. President Uhuru Kenyatta is on record claiming success in economic growth by GDP indicators showing a rise from a 4.4trillion shillings economy in 2013 to 11trilion in 2021 as per his reports in the state of the nation address (SON2021). While the president’s report maybe skewed to win him a legacy, there’s more to ask about this legacy when poverty index in Kenya increased from 38.9% to 53% simultaneously with the reported GDP growth rate. My submissions in this column do not seek to make readers forget the importance of infrastructural development in a country. I am however vouching for the protection of economic and social rights of all citizens by the government as a top priority over roads, railway lines, ports and building of great cities. It is the protection of these rights that will result into freedom from hunger and the development of an effective universal healthcare program that knows no discrimination between the haves and the have nots.

According to the Oxford Poverty and Human Development Initiative (OPHI), people in Kenya are significantly deprived in the living standard dimension. In a nutshell; economic growth is an important means to development rather than an end in itself. Governments should thus focus not only on investment in transport, manufacturing and housing infrastructure but also invest in food production, healthcare and areas of direct impact to the dignity of its people. Mahatma Gandhi would summarize this column by his famous quote, “The greatness of a nation can be judged by how it treats its weakest member.”

Impact of 5G Network in Kenya’s Economy

We are living at a time when speed matters a lot in our daily business activities. When it comes to the internet, they say slow WIFI is worse than no WIFI. COVID has taught us that companies can still work remotely and deliver 100% service to their clients. This is only possible with good connectivity of the internet. The 5G future is here. Years in the making, the long-buzzed-about fifth generation of wireless connectivity has become a reality, ushering in an era of radical new possibilities in many industries.

Innovative use cases such as autonomous drones and smart city ecosystems promise increased efficiency and productivity for governments and businesses in a post-pandemic world, and pervasive benefits across the globe. Faster internet also opens up fresh opportunities for businesses by enabling them to leverage online marketplaces and tap into new customers and operating morals to grow their revenues.

Why 5G? The promise of 5G has been echoed throughout the business world for years.5G’s faster speed, lower latency, and ability to connect vastly higher numbers of devices than previous generations of mobile technology offered executives a glimpse of a more efficient and productive future. By providing the basis for ubiquitous ultra-fast broadband, 5G opens up possibilities far beyond the reach of 4G or Wi-Fi 6. This promise has only grown more critical today, as managers consider how best to repair, rethink and reconfigure their business for the post–COVID-19 world.

Kenya’s leading mobile network provider Safaricom in March 2021 launched 5G network powered partly by Huawei, a move seen as a show of confidence in the Chinese multinational technology company. With the launch, Safaricom became the first in Kenya and East Africa to offer the new service. It also makes Kenya just the second country in Sub-Saharan Africa to roll out 5G after South Africa. 5G will also enable the deployment of advanced digital technologies such as virtual reality, crowd gaming, autonomous drones, industrial automation, and a wide range of IoT devices. 5G technology will usher increased internet speeds and capabilities for millions across the country, laying a strong foundation for a new generation of innovators and entrepreneurs.

As leaders contemplate the decade ahead, 5G demands strategic attention—both to where and how it can create competitive advantages and to the implementation and integration imperatives that must be met for it to generate value.