Experts split on Kenya’s growth rate

Kenya National Bureau of Statistics (KNBS) chairman Terry Ryan speaks during the release of the 2015 Economic Survey Report at the KICC in Nairobi on April 29, 2015. International investment advisers appear divided over whether Kenya’s rapid economic growth rates are here to stay or whether a crash is on the horizon. PHOTO | SALATON NJAU | NATION MEDIA GROUP

What you need to know:

  • A series of reports in the international media indicate that the jury is out over whether or not Kenya is in the process of securing long-term sustainable growth.
  • The Daily Telegraph newspaper noted that the recent deal between London and Nairobi to allow around 10,000 infantry troops to train at two bases in Kenya each year is worth an estimated £58 million a year to the Kenyan economy.

International investment advisers appear divided over whether Kenya’s rapid economic growth rates are here to stay or whether a crash is on the horizon.

A series of reports in the international media indicate that the jury is out over whether or not Kenya is in the process of securing long-term sustainable growth.

Doubts on the horizon centre around the construction boom, government finances and high interest rates.

However, a report in the London-based Financial Times newspaper noted that “Kenya is somewhat insulated from global turbulence by being a net oil and commodities importer."

"Its lack of exposure to the weakening Chinese economy and its relatively strong currency also help. The amount of foreign money invested in the bond market is also small, at about five per cent."

An improvement in relations with the West and Britain and the United States in particular is only likely to improve matters.

BEFRIENDING KENYATTA
The Daily Telegraph newspaper noted that the recent deal between London and Nairobi to allow around 10,000 infantry troops to train at two bases in Kenya each year is worth an estimated £58 million a year to the Kenyan economy.

British troops also train the Kenyan armed forces.

Relations with the UK had been strained over London’s alleged support for Raila Odinga in the last elections.

Once Mr Kenyatta was elected, Britain maintained only essential communication with the Kenyan Government because of charges faced by the President and the Vice-President at the International Criminal Court over alleged involvement in post-election ethnic violence in 2007-08 and relations became very strained.

“However, those charges have now been dropped (against the President) and with a growing threat from Al-Shabaab, Western powers have sought to befriend Mr Kenyatta,” the report said.

“It is time for us to reset our relationship and put the past behind us,” Mr Cameron said after meeting Mr Kenyatta at the UN General Assembly in New York.

INCREASED PROPERTY PRICES

But while political relations have improved, questions remain over whether or not the Kenyan economy has become overheated particularly in construction. 

The latest edition of the Economist expressed concerns over Kenya’s housing boom, noting that the source of this glut of cash coming into the market “is unclear.”

Property prices have increased almost fourfold since the early 2000s.

“Some comes from savings; some from emigrants who repatriate earnings from abroad. But there are hints of less salubrious sources. The spoils of corruption are rarely kept in foreign bank accounts these days. Instead, they are invested at home.”

The Economist says that while many well-off Kenyans worry that a crash is coming, this is unlikely as the property bubble “is not puffed up by borrowing.”