What stands at stake as Kenya turns middle-income economy

The government, World Bank and International Monetary Fund officials gather on Tuesday at the Kenyatta International Convention Centre to declare Kenya a middle-income country.
While little is expected to change for the ordinary citizen, there is much at stake for the country and the corporate world.
“The rebasing, for the purpose of sovereign rating is a good thing for the economy. But there is really nothing to write home about for the ordinary Kenyan,” said Mr Bernard Omenda, head of treasury at the Equatorial Commercial Bank. 
NEW SECTORS
The rebasing of the country’s gross domestic product (GDP), constituting a review of economic indicators by capturing new sectors that have emerged in the past few years, will propel Kenya into middle-income status 16 years ahead of time.

The country’s GDP will grow by at least a fifth, even as analysts paint a morbid picture for millions of Kenyans who are faced with high cost of living, very low incomes and glaring inequalities.

The new statistics will take into account some of the fast-growing sectors of the economy like information and communications technology, financial services and the telecoms sectors, among others. Growth of mobile money is currently one of the biggest contributors to the economy.

“Mobile money transactions equal 31 per cent of the GDP and now mobile phone financial transactions have also become a new indicator, comprising a significant percentage when considered against GDP,” said Old Mutual in a report on Friday.

According to director of investment banking at Standard Investment Bank Amish Gupta, there is a lot of economic activity being driven by the new sectors such as mobile banking services as well as in the informal sector, which accounts for 80 per cent of new jobs in the country.

LACK OF DATA

“We’ve seen the amount of money moving through M-Pesa; we are also seeing houses being acquired and we cannot explain how, when there are only 20,000 mortgage accounts. These are factors of the informal and the informal GDP in the economy, which are not captured by actual statistics,” Mr Gupta said in an interview with the Nation.

The retail sector has also largely remained fragmented and lacks accurate data providing its actual contribution to the economy.
Agriculture has traditionally been rated as the largest contributor to Kenya’s GDP.

Last year, the sector accounted for 25.3 per cent of the GDP up from 24.6 per cent the previous year. But, some of the new sectors such as financial services are expected to gnaw at agriculture’s share of the economy.

The informal sector is also largely not captured by official statistics in spite of its significant contribution to the economy.

Analysts say the government should redirect its energy to streamlining the jua kali sector. This will not only create a platform for new sectors to emerge, but also provide revenue streams for the government in the dispensation of a new economic status for the country.

Kenya, which initiated the process of reviewing its annual and quarterly national accounts in 2010, joins Nigeria this year in releasing revised GDP data.