2017, President Uhuru’s worst financial year

Managing Director SGS Kenya Limited Albert Stockell presents the ISO 9001:2015 Certificate for the kenya national bureau of statistics to National Treasury Cabinet Secretary Henry Rotich during the 2018 economic survey report and ISO 9001:2015 launch at the KICC on April, 25 2018. [David Gichuru/Standard]

NAIROBI, KENYA: Kenya’s economy grew 4.9 per cent last year, its worst performance since President Uhuru Kenyatta’s Jubilee Party swept into power five years ago promising growth of between seven and 10 per cent.

However, a debilitating drought, prolonged electioneering period and reduced uptake of credit by the private sector might have conspired to deny the President the opportunity to sign off his first term in office in style.

The performance of key sectors as highlighted in the Economic Survey 2018, released annually by the Kenya National Bureau of Statistics (KNBS), paints the grim picture of a struggling economy, even while the Government promised a come-back in 2018.

The survey put the size of the economy at Sh7.74 trillion.

Last year’s growth of 4.9 per cent is the lowest expansion since 2012, when gross domestic product (GDP) - which is the monetary measure of the market value of all final goods and services produced in the country in a year - expanded by 4.5 per cent. In 2016, the economy grew 5.9 per cent.

“The slowdown in the performance of the economy was partly attributable to uncertainty associated with a prolonged electioneering period coupled with adverse effects of weather conditions,” said Treasury Cabinet Secretary Henry Rotich.

Largest employer

Agriculture - the mainstay of the country’s economy and the largest employer - was the hardest hit. The sector grew at a painfully slow rate of 1.6 per cent, down from 5.1 per cent in 2016. It was the slowest growth in seven years. Such dismal growth was last posted in 2011, when the sector grew by 1.5 per cent.

Production of tea, coffee, maize, wheat and sugarcane declined by 7 per cent, 11.5 per cent, 6.3 per cent, 23.1 per cent and 33.6 per cent respectively. Only cut flowers defied the odds to grow by 26.3 per cent.

Besides the failed rains, Mr Rotich blamed the decline on the invasion of maize plantations by pests, such as fall armyworms, and diseases. 

Manufacturing, another major employer especially in urban centres, continued its sluggish performance, growing by a dismal 0.2 per cent compared to 2.7 per cent in 2016. This was the slowest growth it has registered in more than 10 years. For a similarly poor performance, one would have to go back to 2009, when the sector expanded by a slightly better 1.3 per cent.

Key manufactured products declined significantly, with only soft drinks and maize meal recording increased production at 10.4 per cent and 9.8 per cent respectively. The quantity of sugar produced, on the other hand, declined by 41 per cent, as did processed milk (-14.6 per cent), cement (-7.5 per cent), galvanised sheets (-2.2 per cent) and assembled vehicles (-25.4 per cent).

Construction, a sector that has been instrumental in the growth of the economy in recent years as the Government pumped billions of shillings into roads, railways, ports and energy projects, grew at 8.6 per cent in 2017, down from 9.8 per cent in 2016.

Cement consumption, a leading economic indicator, decreased by 8.2 per cent in 2017.

And with credit to the private sector constrained by a slowing economy and a cap on interest rates, the financial sector took a hit, growing at its slowest rate in 10 years. It registered growth of 3.1 per cent compared to 6.7 per cent the previous year.

Last year was also a tough one for Kenyans as the cost of living, which is measured by looking at inflation - or the general increase in the prices of goods and services in a year - worsened. The inflation rate in 2017 was 8 per cent, up from 6.3 per cent in 2016. 

However, it was not all gloom as service offerings boosted the performance of the ICT, tourism, accommodation and energy sectors.

The accommodation and food service activities sector grew by 14.7 per cent in 2017, up from a growth of 13.3 per cent the previous year.

Rotich was, however, bullish, saying the economy would bounce back this year on the back of improved infrastructure, business confidence and strong private consumption. He also cited the resumption of the long rains, which he expects to boost agricultural productivity.

He also said investment in Uhuru’s 'Big Four' development agenda would give the sluggish economy the critical push it needed to increase growth. The agenda seeks to increase food security, create 500,000 jobs, build low-cost houses and roll out affordable healthcare to millions of Kenyans over the next five years.

Rotich projected growth of 5.8 per cent in 2018. He added that although the country’s growth had decelerated, it was still a relatively strong performance compared to the average growth registered globally, in sub-Saharan Africa and developed countries.