Experts raise doubt as Kenya's economy expands

Friday April 26 2019

economy

Kenya National Bureau of Statistics Director-General Zachary Mwangi gives his remarks during the launch of the 2019 Economic Survey at KICC on April 25, 2019. He said Kenya's economy is expanding. PHOTO | SALATON NJAU | NATION MEDIA GROUP 

PAUL WAFULA
By PAUL WAFULA
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Kenya’s economy expanded by 6.3 per cent last year, reporting its fastest growth in over five years, even as analysts and other economic actors say the country is reporting a paper growth.

The 2019 Economic Survey released Thursday also revealed that the economy created 840,600 new jobs in 2018, the bulk of which were in the informal sector.

The sector accounted for 83.6 per cent of new jobs or 762,100 in the period under review, said the report released by the Kenya National Bureau of Statistics (KNBS).

The number of people engaged, excluding those in rural small-scale agriculture and pastoralist activities, also rose by five per cent to 17.8 million people last year while employment in the public sector went up from 833,100 in 2017 to 842,900 last year.

Only 78,400 jobs were created in the modern sector. This was a decline from 114,400 in 2017.

The sector accounts for high-quality jobs that automatically end up in the tax bracket and directly contribute to an increase in tax collections.

AGRICULTURE

The informal-sector jobs are usually more volatile and harder to put a finger on since someone would be on job today and out the next day.

“Leading activities providing wage employment in the private sector were agriculture, forestry and fishing, manufacturing, wholesale and retail trade and repair of motor vehicles,” the report notes.

KNBS attributed the growth to increased agricultural production, accelerated manufacturing activities, sustained growth in transportation and a vibrant service sector.

“Agricultural activities benefited from sufficient rains that were well spread throughout the country. Similarly, the increased precipitation was a significant boost to electricity generation and consequently favourable to growth during the review period,” the report reads in part.

The economic survey is the most comprehensive government report on the economy and other sectors, among them health, education, security and governance. It is published yearly.

ROADS

The survey shows that the manufacturing output volume expanded by 5.1 per cent in 2018 from a revised contraction of 0.8 per cent in 2017.

“This was mainly on account of increase in production of dairy products, tea, coffee and sugar due to favourable weather conditions. However, plastic products, wood and its products, and other non-metallic mineral products sub-sectors registered declines in the review period,” the report says.

The report notes that the construction sector expanded by 6.3 per cent last year from a revised growth of 8.5 per cent recorded in 2017.

It says expenditure on roads is expected to rise by 23 per cent to Sh195.1 billion in 2018/19, of which Sh128.4 billion will be spent on construction of new roads.

Loans and advances from banks to the construction sector grew slightly by 1.8 per cent from Sh112 billion in 2017 to Sh114 billion in 2018, reflecting a slowdown in the industry.

But the rosy picture painted by the report appears to be far removed from the feelings of the common man on the street and other actors of the economy.

ELECTIONS

The most recent survey by research firm Ipsos Synovate indicates that about half of the country's households are perpetually broke, earning less than Sh10,000 a month.

The growth is also far ahead of projections by various organisations including the World Bank, which recently projected that Kenya’s economy will expand by about 5.8 per cent.

The Consumers Federation of Kenya (Cofek) says the figures are far from the reality on the ground. “The numbers look like those from a different country. On the ground things are a lot different. Kenyans are a lot poorer from my view than how they were two years ago before the General Election,” Cofek’s secretary-general Stephen Mutoro said on phone.

“The period before and after the election was the worst. Companies stopped investing. Kenyans were fired and some even took pay cuts. I don’t think those numbers reflect the reality on the ground,” Mr Mutoro added.

Listed companies have also been reporting profit warnings or losses, which is a pointer that growth in the economy may not be trickling down to all sectors.

HOUSING

At least 15 companies listed on the Nairobi Securities Exchange have issued profit warnings with several others plunging into the loss-making territory.

Wage employment in the sector grew by 2.2 per cent from 167,900 persons in 2017 to 171,600 persons in 2018.

The report adds that the approved government expenditure on housing in 2018/19 is expected to increase by 57.3 per cent to Sh29 billion to finance housing flagship projects.

The report says the number of international visitor arrivals increased by 14 per cent from 1.7 million two million.

“The improved performance may be attributed to a stable political environment, withdrawal of travel advisories, improved security and investor confidence in the country,” the report adds.

Kenya’s 6.3 per cent growth helped push up the regional growth of the East African community to 5.9 per cent.

Rwanda grew fastest at 8.6 per cent, followed by Tanzania 6.6 per cent, and Uganda 6.2 per cent. Burundi only managed a 0.1 per cent growth in 2018, pulling down the rest of the growth that should have been more than six per cent.