Strathmore Business School Logo

News

Kenya’s Economic Rigor too Critical to Fiddle with; Implies Key Private Sector Players.

  Sep 1, 2017
 

Kenya’s political scene has been under close watch worldwide, especially during this year’s 2017 General Elections. Unlike other African countries who held their general elections this year, the intensified scrutiny has been largely based on Kenya’s economic rigor and its influence thereof, in not only Eastern but Sub-Saharan Africa. Resilience and calm to enhance business operations during and after the elections has been a key concern to industry players in the private sector.

Kiprono Kittony – Chairman, Kenya National Chambers of Commerce and Industry (KNCCI) and John Ngumi, Renowned investment banker and financial services sector expert, discuss the Private Sector Resilience and the 2017 elections during Africa Media Hub’s monthly Business Journalism Policy Dialogue.

Kenya is an economic entry point to Eastern Africa

Africa has a population of 1.1 Billion, cumulatively contributing 4% of the global trade and 2% of global investments. Realities such as Africa’s cumulative GDP, is that similar to France, has for a longer time labelled Africa as a small voice, insignificant of shaking the global economy. However, Africa’s fast growing economy has become an integral part of the world economy. A report by the McKinsey Global Institute (September 2016): Lions on the Move II: Realising the Potential for Africa’s Economies, largely endorsed the validity of the Africa rising narrative.

“The continent is going through transformation that should have taken place 100 years ago. The big migration to identify and capitalize on emerging markets is largely in Africa.  6 of the 10 fastest growing economies are in Africa and so are the 20 poorest economies.  Kenya is also not new to this phenomenon. The gap between the-haves and the-have-nots in this country is completely unacceptable. We are in dire need of equitable distribution of resources,” remarked Kittony.  

There are 3 suitable entry points to Africa’s economic trading blocks: East – Kenya, West – Nigeria or Ghana and in the South – South Africa. Kenya also grants access to the other 5 Eastern African countries. This greatly influences business operations in those countries.

Why Prolonged Civic Disorder Endangers Business Operation and Foreign Investments

The breakdown of civil order is not a new concept to the World, or to Kenya. “Taking to the streets to answer to civil and political dispute has accounted to; loss of lives and physical business property damage, greatly impacting the growth of sectors such as Tourism, Manufacturing and Transport,” said Kittony.

Speaking on the effects of political and sovereign risk to investment, Ngumi shared the following remarks, “Investors greatly consider, The Political Risk Premium, when evaluating which countries to invest in. This implies that; whereas they would ask for a 5% return in politically stable countries,  25% or more, would be demanded in politically unstable countries. Such is the case for Kenya.  This largely explains why there is a progression in our economic growth, but hardly any change on the unemployment rate.”

 Attracting investments is also largely determined by the ability of a country to pay back its debt. “Kenya has a good track record in debt servicing, greatly enhanced by the constitution. Although this is good, we have not been successful in attracting Foreign Direct Investments. FDI’s tend to lean towards Oil investments. However, Kenya is attracting a quiet and purposeful investors’ class. Our strength is that we are not a single commodity country,” told Ngumi.

Concluding the session, Ngumi emphasised that the key focus of the country should be in what it does well and its major strengths. He acknowledged that the tech savvy youth of the country and Africa’s  Arable land are huge players in defining the rest of the Kenyan and African story. “We are a reservoir of an educated manpower. Our major strength is people. Capitalizing on this is dependent on how we can transform labor into yielding industrial returns. Due to our import rates as a country, Kenya remains a high-cost production base. Our inability to produce basic commodity goods is reflected by the few number of technical artisans in the country. We cannot create industries without artisans, and without productivity we cannot further our economic progression. Technical and vocational training should be a key emphasis of the country.”

About the Policy Breakfasts

The policy breakfast for business journalists are held monthly and led by experts and policy makers on matters of interest in the business and finance landscape. It is the intention of these dialogues to develop partnerships with business journalists that addresses the possible challenges of access to information when reporting.

The purpose of the policy dialogues is to gain knowledge, and enhance critical analysis that reposition Kenya into being a worthwhile economic investment destination. These policy dialogues are in collaboration with Business Advocacy Fund (BAF) that supports private-public dialogues through business associations interested in advocating improvements in the business environment in Kenya with the expectation that, if successful, reformed policies will lead to more investment and ultimately, more jobs.



Share This:

Sign up to receive important news and information from Strathmore Business School

  • This field is for validation purposes and should be left unchanged.

Global Partners

Twitter Feed


Important Links

Globals

Social Media

a Creative Y&R design