Why tourism is Kenya's best bet to accelerate economic growth

Tourism is the best bet to revamp the fortunes of Kenya’s economy, economic experts have said, with manufacturing and agriculture not delivering the expected growth.

National Treasury Principal Secretary Chris Kiptoo said at a Nairobi forum last week that the potential in tourism sector was immense and enough to propel growth in other sectors due to the service industry.

PS Kiptoo, who presented figures on the country’s economic performance, indicated manufacturing is struggling even as he shared numbers on agriculture that sustained the country’s 4.6 per cent growth in 2024.

Mining and quarrying did not do well, which is the same case with sub-sectors under construction.

“We are seeing manufacturing also not doing well. Its growth is slow with all the efforts we have made previously,” Kiptoo said.

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“We need to have a conversation about competitiveness in our manufacturing sector.”

Participants at the DTB Economic and Sustainability Forum noted Kenya’s products are no longer the envy across the border in the East African Community (EAC) economies as South Africa, India and Chinese have flooded the market.

As such, the push to have manufacturing a key pillar may not bear any fruit—also noting that manufacturing depends heavily on agriculture.

Jubilee Holdings chief executive Julius Kipngetich said bureaucracies and bottlenecks are affecting the manufacturing sector, especially at the counties.

These issues add to the already high cost of doing business.

“If you go to any factory, the level of harassment by county government is mindboggling. In manufacturing you cannot compete with Chinese or Indians. They have perfected it,” Kipngetich said.

“Let us look at areas we have competitiveness. To me, competitiveness is in tourism.”

He said tourism is labour intensive and can easily create jobs, referencing the multiplier effect the sector has had on France’s economy.

“For every 10 visitors you create one permanent job. France has 117 million visitors. Tourism has employed 11 million people. If we were to do the same in Kenya, that is actually two million jobs,” he said.

Manufacturing, as a stand-alone sector does not feature in the Ruto government’s Bottom-up Economic Transformation Agenda (Beta) five pillars.

However, the Beta agenda speaks of an elaborate plan to push the contribution of manufacturing to gross domestic product (GDP) from the current 7.2 per cent to 20 per cent by 2030.

This is to be done largely through the micro, small and medium enterprise (MSME) economy pillar through sectors such as leather and leather products and improving value chain in agriculture.

The other four pillars in the Beta agenda are agricultural transformation, housing and settlement, healthcare, digital superhighway and creative economy.

“Key value chains prioritised include: agro-processing; leather and leather products; building and construction materials; textiles and apparel; dairy products; edible and crop oils; tea and coffee, and sugar,” reads the 2025 Budget Policy Statement by the National Treasury.

While Kenya is a largely agricultural economy, most of it is small scale and Kipngetich said aggregation is key to improve its performance.

However, agriculture should not be the focus of the country’s economic growth.

“It has been a 60-year song. The most elastic industry for Kenya is tourism. And the day we focus on tourism, the way the French, who are number one in the world, and Moroccans who are number one in Africa, there will be change,” he said.

He noted that Morocco in 2001 used to receive one million visitors. In 2024 they received 15 million.

Kipngetich said the 2.4 million tourists Kenya received in 2024 is a drop in the ocean considering the country’s potential.

“We are a much better and stronger tourism product than the Moroccans,” he argued. “Ideally Kenya should be talking about 20 million, 10 times that number.”

These 20 million tourists, he said, have the purchasing power which will increase demand for food and other products.

Kenya’s economy has a symbiotic relationship with agriculture and when the sector does not do well, GDP figures drop.

For example, in 2021 and 2022, the agricultural sector shrunk by 0.3 and 1.9 per cent respectively.

According to the Kenya National Bureau of Statistics Economic Survey, in 2022 when agriculture shrunk by 1.9 per cent, GDP expanded by 4.8 per cent—much lower than the expected 7.6 per cent.

“The growth was spread across all sectors of the economy but was more pronounced in service-oriented activities,” said the 2023 KNBS Economic Survey report.

“Agriculture, forestry and fishing sector contracted by 1.6 per cent in 2022 compared to a contraction of 0.4 per cent in 2021. This was attributed to drought conditions that characterised the period under review.”

Kenya Private Sector Alliance chief executive Carol Kariuki cited tourism as an excellent product.

She said concentrating on the sector will spur growth in other areas such as building and construction due to demand for accommodation.

“We are not saying we will not do agriculture, manufacturing or banking. But because we have such an excellent tourism product, every industry will be stimulated.

“All you need to do as a country is to address the competitiveness.”

DTB head of research and analysis Faith Atiti said for long, the narrative has been that agriculture and manufacturing are the key sectors and so most resources should go there.

She, however, pointed out that the services sector has emerged as key in the country’s economy.

“Can we incetivise manufacturing and agriculture from a services perspective. If we can get tourism moving and we have all the resources why not invest there?” she posed.

She said tourism requires very little investment and the private sector will find it easy to invest, adding that Kenya can later on catch up with India and China in manufacturing once its income levels improve.

“I think banks will be very supportive. If you look at portfolio of loans to this sector is quite significant” Atiti said.