Sectors that will drive Kenya’s super growth projections

By WINSLEY MASESE

KENYA: Kenya’s economic growth projections to double digits are promising, thanks to the sound macroeconomic policies put in place.

Key sectors that are set to drive this growth projections include agriculture, wholesale and retail, transport, ICT, banking, and construction.

Agriculture

Agriculture remains the mainstay of the economy, contributing about a quarter of the gross domestic product.  However, over years, agriculture’s contribution to the overall economy has been declining. But still, it is the engine of the economy.

Any drop in agriculture’s share to the economy poses a major threat since more than half of the region’s population depends on agriculture for jobs.

 According to the latest report by the Kenya National Bureau of Statistics (KNBS), in the second quarter of this year, agriculture expanded by five per cent compared to a growth of two per cent during a similar quarter last year.

Most of the crops recorded improved production. Tea and horticulture remained the major contributors to the sector’s growth with tea recording a growth of 31.1 per cent during the quarter compared to 8.1 per cent growth during the same quarter last year.

Outputs of coffee and sugarcane had little influence on the growth of the sector with respective growths of 1.6 per cent and 1.1 per cent during the quarter. The growth in horticulture was mirrored in exports of vegetables and fruits that recorded respective growths of 14.3 per cent and 4.9 per cent during the quarter compared to a decline of 14.5 per cent and 16.0 per cent respective growths in the same quarter of 2012.

 Cut-flowers experienced a decline of 2.2 per cent in production during the quarter under review. In 2012, agriculture contributed 17.6 per cent of the overall GDP. Agriculture is expected to post even higher growth rates due to favourable conditions.

Wholesale and retail

The retail sector remains vibrant with supermarket chains expanding beyond boundaries. The sector has registered improved business over the last couple of years and accounted for 15.2 per cent of the GDP in 2012, according to KNBS. Buoyed by the changing lifestyle of Kenyans and the increasing urbanisation, demand for shopping has seen the rise in the number of malls constructed in Kenya. 

Major retail outlets such as Uchumi, Nakumatt, Tuskys, Naivas have increased the number of branches countrywide. Uchumi, Tuskys and Nakumatt have a presence in neighbouring countries.  The chains have also upped the game for the fight of estate customers to tap into the increasing number of the middle class.

Transport

The transport and storage sub-sector recorded a growth of 6 per cent in the second quarter of this year compared to 2.1 per cent in the same period last year, according to the Kenya National Bureau of Statistics.

The sector has received a major boost with the massive investments in infrastructure in the last couple of years.  Kenya’s transport sector is lined for better tidings in future following the expansion projects initiated by the government. Some of the key projects include the Sh1.2 trillion high-speed Mombasa-Malaba railway line, and the construction of Jomo Kenyatta International Airport greenfield airport terminal.

The terminal will help the airport handle more than 20 million passengers from the current 5 million. Another key boost to the transport sector is the launch of railway stations such as SyioKimau, Imara Daima and Makadara railway Station.

Information Technology

The information and communication technology (ICT) segment has been one of the fastest growing. According to the Communications Commission of Kenya, there were a total of 30.5 million subscriptions in the mobile telephony market segment as at June 2013. However, with the increased uptake of mobile phones has hit landlines.

Between April and June, the fixed line market continued on a downward trend to post 216,469 fixed line subscribers down from 221,287 posted in the previous quarter. The drop in fixed lines was mainly attributed to the  5.2 per cent decrease in fixed terrestrial lines during the quarter from 59,851 in the preceding period to 56,724 lines.

 Despite the decline in fixed telephony subscriptions, the volume of fixed network voice traffic increased from 27 million minutes recorded in the previous quarter to 30.4 million minutes recorded in the quarter in June, representing a 12.6 per cent growth. This trend may also point to the need to identify alternative strategies towards developing additional fixed infrastructure especially for broadband access.

In the three months to June, the Internet/data market segment registered a growth of 28.4 per cent in the number of Internet/data subscriptions to stand at 12.4 million compared to 9.6 million subscriptions recorded during the previous quarter. In comparison to the preceding year (2011/12), the number of Internet subscriptions increased by a significant margin of 61 per cent.

A report released by McKinsey last month, titled Lions to Digital indicated that ICT contributed about 2.8 per cent to the country’s GDP.

KNBS says the communication sector grew by 4.7 per cent in the second quarter of 2013 compared to a growth of 6.1 per cent last year.

Banking

Key commercial banks registered improved performances in 2013. The banking sector comprised of 43 commercial banks, one mortgage finance company, 9 deposit taking microfinance institutions, seven representative offices of foreign banks, 106 foreign exchange bureaus and two credit reference bureaus during the quarter ended September 30, 2013.

According to the Central Bank of Kenya data, the banking sector registered improved performance with the size of assets standing at Sh2.62 trillion, loans & advances worth Sh1.52 trillion, while the deposit base was Sh1.91 trillion and profit before tax of Sh92.5 billion as at September 30, 2013.

Though the sector recorded a drop in its contribution to GDP, declining from 7.8 per cent in 2011 to 6.5 per cent in 2012, the sector is expected to improve this year.

During the year, the sector has remained stable largely boosted by the decline of the Central Bank Rate from its all time high of 18 per cent in 2011 to the current 8.5 per cent.

Besides, inflationary rates have remained within manageable rates of 7.36 from 19.72 per cent recorded in 2011.

Building and construction

The industry’s performance has remained remarkable, improving from about 2 per cent in 2010 to more than 8 per cent in 2012. Its contribution has been robust in the last five years, taking advantage of the country’s mega projects such as roads, rail and ports that the government has undertaken. The housing sector has seen enormous investment directed to developing residential and commercial properties

The construction sector recorded a significant growth of 6.7 per cent during the second quarter of this year compared to 1.1 per cent growth over the second quarter of  last year. The growth was reflected in improved production and consumption of cement that grew by 12.6 per cent and 7.1 per cent respectively during the quarter.