Kenya - Economy

Economy

Although Kenya is the biggest and most advanced economy in east and central Africa, it is still a poor developing country with a Human Development Index (HDI) of 0.509, putting the country at position 143 out of 185 – one of the lowest in the world and half of Kenyans live in absolute poverty. The important agricultural sector is one of the least developed and largely inefficient, employing 75 percent of the workforce compared to less than 3 percent in the food secure developed countries.

Despite western donors' early disillusionment with the government, the economy has seen much expansion, seen by strong performance in tourism, higher education and telecommunications, and acceptable post-drought results in agriculture, especially the vital tea sector. Kenya's economy grew by more than 7% in 2007, and its foreign debt was greatly reduced. But this changed immediately after the disputed presidential election of December 2007, following the chaos which engulfed the country.

East and Central Africa's biggest economy has posted tremendous growth in the service sector, boosted by rapid expansion in telecommunication and financial activity over the last decade, and now contributes 62 percent of GDP. Unfortunately, a massive 22 percent of GDP still comes from the unreliable agricultural sector which employs 75 percent of the labor force (a consistent characteristic of under-developed economies that have not attained food security – an important catalyst of economic growth) and a significant portion of the population regularly starves and is heavily dependent on food aid. Industry and manufacturing is the smallest sector that accounts for 16 percent of the GDP.

Kenya has traditionally been a liberal market with minimal government involvement (price control) seen in the oil industry. However, recent legislation allows the government to determine and gazette price-controls on essential commodities like maize flour, kerosine and cooking oil.

Privatisation of state corporations like the defunct Kenya Post and Telecommunications Company, which resulted in East Africa's most profitable company – Safaricom, has led to their revival due to massive private investment.

As of May 2011, economic prospects are positive with 4–5% GDP growth expected, largely because of expansions in tourism, telecommunications, transport, construction and a recovery in agriculture. The World Bank predicts growth of 4% in 2010 and a potential of 4.9% growth in 2011.

In March 1996, the Presidents of Kenya, Tanzania, and Uganda re-established the East African Community (EAC). The EAC's objectives include harmonizing tariffs and customs regimes, free movement of people, and improving regional infrastructures. In March 2004, the three East African countries signed a Customs Union Agreement.

The more efficient and lucrative technology-knowledge-and-skill-based service; industry and manufacturing sectors only employ 25 percent of the labor force but contributes the remaining 75 percent of the GDP.

Kenya ranks poorly on Transparency International's corruption perception index.

Kenya is East and Central Africa's hub for Financial services. The Nairobi Securities Exchange (NSE) is ranked 4th in Africa in terms of Market capitalization. The Kenya banking system is supervised by the Central Bank of Kenya (CBK). As of late July 2004, the system consisted of 43 commercial banks (down from 48 in 2001), several non-bank financial institutions, including mortgage companies, four savings and loan associations, and several score foreign-exchange bureaus.