Kenya is the 6th largest economy in Sub Saharan Africa and home to 46 million people. It is the regional hub for trade and finance in Eastern Africa and the natural entry point to the region. The country has a market-based economy with a liberalized foreign trade policy. Kenya officially became a lower middle-income country in 2014 and Kenya’s income per capita now stands at US$1.376. World Bank’s Ease of Doing Business 2016 report ranks Kenya 108 out of 189 up 21 places from 2015.
GENERAL INDICATORS 2015
(% of population)
25 % (2015)
Corruption Perception Index
26 / Rank 145
Income per Capita
Income Distribution (gini index)
Tourism contribution to GDP
Annual growth rate
Wholesale & retail sector (% of GDP)
Travel Turist industry growth forecast
5.2 % (2015)
Trading partner - EXPORT
Uganda (11.9%), UK (7.8%), Tanzania (7.6%), Netherlands (6.8%), US (6.3%) (2015)
Main export of goods (USD):
Tea, fresh cut flowers, refined petroleum oil, coffee, vegetables
Trading partner - IMPORT
Main import of goods (USD):
Petroleum oils, crude palm oil, medicines, cars
Sources: World Bank, AfDB, CIA Factbook & Transparency International
- World Bank: Population, Income pr. Capita (current USD 2015), Annual growth rate (2015), Urbanization (% of population), Income distribution (Gini index of 0 represents a perfectly equal distribution of income, where all income recipients receive the same income. The greater inequality, the higher the gini index. If the gini-index is 100, one person earns the entire income in the economy. ), Poverty at 1,25/day
- AfDB 2011: Middle class distribution: Middle class with floating class ($2-20 per day) / Middle class without floating class ($4-20 per day)
- Transparency International 2014: Corruption Perception Index (a scale from 0-100, where 0 means the country is highly corrupt and a 100 mean that a country is perceived as very clean). The ranking is out of 168 countries.
- The Travel & Tourism Competitiveness Report 2015, World Bank
- World Integrated Trade Solutions, World Bank 2015: Trading partners, main imports and exports of goods
The political climate
Kenya is a member of the Eastern African Community (EAC), an intergovernmental organization composed of six countries in East Africa; Burundi, Kenya, Rwanda, South Sudan, Tanzania and Uganda. The ultimate goal of the EAC is to evolve into a political federation. Since the establishment of the EAC, the six countries have achieved a Customs Union, a Common Market and faster steps to a Monetary Union. In 2014 the EAC and EU finalized the negotiations for an Economic Partnership Agreement (EPA).
Kenya has since 1992 held regular democratic elections and experienced relatively peaceful transition of power three times. A new constitution was adopted in 2010 and is seen as a chance to break from an over-centralised system that failed to hold previous governments accountable. Under the new constitution, there is greater opportunity for public accountability as separate branches of national government have gained more independence from the executive branch.
President Uhuru Kenyatta was elected in 2013 and will remain in power until the next election in August 2017 where he is expected to run for a second term. The main policy challenge is to improve structural constraints, such as weak infrastructure but the coming election and global uncertainties will prevent more rapid development. The GDP growth from 2017-2021 is expected to be between 4% and 5.9% and will be driven by ongoing investment in infrastructure development, increased regional trade within the East African Community (EAC), large irrigation projects, and strong consumer demand.
In 2015, Kenya was ranked 139 out of 168 in the World Transparency International Corruption index. Despite market reforms, numerous surveys reveal that corruption is still widespread and that businesses frequently encounter demands for bribes and informal payments in order to ‘get things done’ in Kenya. The public procurement sector in Kenya suffers too from corruption amongst officials. The president has been an advocate of tackling Kenya’s culture of corruption within government. Kenya has the necessary legal framework in place to address the problem, but change amongst the political elite is a slow-moving affair. Kenya is facing serious security problems mostly due to the political instability in the neighbouring regions South Sudan and Somalia. The main threat is the Somali based terrorist group Al-shabab which has carried out a number of terror-attacks in Kenya and is recruiting local radicals. Other security challenges are the fact that long term ethnic rivalries can flare up again and the failure to push ahead with electoral reforms, including governance, which can raise the risk of post-election violence.
Agriculture remains the backbone of the Kenyan economy, contributing to 26% of GDP and another 27% of GDP indirectly through linkages with other sectors. The agricultural sector employs roughly 75% of the population who work at least part-time in the agricultural sector, including livestock and pastoral activities. Over 75% of agricultural output is from small-scale, rain-fed farming or livestock production. The main challenge smallholders face is the lack of water storage facilitates and poor irrigation infrastructure which covers only 20% of the agricultural land. The farmers are thus vulnerable to drought and the unpredictability of weather patterns resulting from climate change. All of Kenya’s top commodity exports are agricultural products including tea, coffee and fresh cut flower. Kenya is a net importer of agricultural commodities and food products and in 2015 accounted the agricultural sector for 65% of export earnings.
|Agriculture, value added (% of GDP)||Food imports (& GDP)||Food exports (% GDP)|
Agriculture is one of the most important sectors in the EAC and internal competition among the member states is high. In 2006 the countries signed the common Agricultural and Rural Development Strategy focused on ensuring food security.
The agricultural sector in Kenya is dominated by smallholder farmers and is highly dependent on private donations. In 2008 the government of Kenya adopted the Vision 2030 which formed a new blueprint for Kenya’s development over the next two decades. Its main aim is to transform Kenya into a “newly industrialized middle-income country providing a high quality of life to all its citizens in a clean and secure environment”. In Vision 2030 agriculture is identified as a key sector in achieving the projected annual economic growth rate. This shall be realized by transforming the sector from small-hold farms to a modern and market-oriented part of the Kenyan economy.
After the election in 2013 the Ministry of Agriculture, Livestock and Fisheries was created effectively combining three ministries into one. This move meant the responsibility for service delivery within the agricultural sector was relocated from the national government to the regional governments. This has left the national governments to focus on the development of public policy and institutional frameworks for the sector.
Kenya’s middle class is 44.9% and proportionally the largest in the East African region. The large middle class have encouraged advancements of social, economic and institutional reforms that are a catalyst for the realization of inclusive growth, innovation and entrepreneurial drive. The middle class has a positive effect on the national economy through increased consumption and over the past five years the average value of consumer spending has risen by as much as 67%, making Kenya the continent’s fastest-growing retail market. Kenya’s urban population remains the largest consumer market of high value consumer-oriented foods and an emerging eating out culture by Kenya’s middle class is driving growth in restaurants, fast food and coffee shops. The population of Nairobi accounts for 3.5 million, 7%, of the total population but accounted for 39.9% of Kenya’s total spending in 2014.
The Kenyan people love their own food. This is partly reflected in their trade policy, which has protectionist tendencies. Approximately 40% of Kenyans do their grocery shopping in formal retail outlets which makes Kenya’s retail sector the second-most formalised in Africa. As the economy is growing and the middle income class is expanding, preferences is shifting towards the efficiency and transparency of shopping in formal retail outlets. The outlook for the retail sector is estimated to be over $7 billion and Kenya is starting to be perceived as an ideal point of entry for launching retail outlets and consumer goods distribution into East and Central Africa. Carrefour opened its first Kenyan store in May 2016 and is the latest international player that are looking to shake up Kenya’s family-run private retailers which have dominated the supermarket scene. Other major players are Walmart’s sub brand Massmart and Botswana’s Choppies.
|Wholesale & retail sector (% of GDP)||Retail Growth||Informal/traditional open trade|
|7,5 % (2015)||8,1 % (2015)||60 % (2016)|
Power relations in Kenya are very hierarchical, everybody has a place and there is no need for further justification of this. Centralisation in organisational hierarchy is prevalent, subordinates expect to be told what to do and the ideal boss is a benevolent autocrat. Kenya is a collective society which is manifested in strong relationships where everyone takes responsibility for fellow members of their group. Loyalty is paramount and overrides most other societal rules and regulations and offence leads to shame and the loss of face. Kenya is considered a relatively masculine society which is based on the shared value that people should “strive to be the best they can be” and that “the winner takes all”. Conflicts are resolved at the individual level and the goal is to win. The analysis reveals no clear preference for the need for uncertainty avoidance.
The Kenyan society is still structured around the father figure of the chief, whose blessing is required for everything from political advancement to cutting down a tree. Despite a strong influence of the “newer” religions, old beliefs die hard. Kenyan religion is therefore often a mixture of ancient beliefs and more recent. This is less true in the cities, but in the rural areas a third of the population is thought to observe traditional practices such as ancestor worship, sacrifice, spells and curses. These often coexist seamlessly with modern religious belief.
Kenya has invested heavily in the development of its infrastructure in the past years. Kenya’s development plans include significant improvements to roads, railways, seaports, airports, water and sanitation, as the country attempts to increase its competitiveness in the global market.
Ports stand out as one of the keys to Kenya’s future growth. There are currently major ports at Mombasa, Lamu and Malindi. Mombasa is the main port, serving not only the Kenyan hinterland, but also markets in neighbouring countries such as Uganda and the location is therefore ideal as an entry point into the East African region. Over the last decade, Mombasa has steadily seen total cargo volumes grow by an annual average of 11.6% compared to a global average of 7.1%. Mombasa is however facing delays capacity constraints and congestion on the rail and road feeder system. The government of Kenya has therefore in collaboration with Ethiopia, South Sudan and many international investors invested US $23 billion in a multi-faced Lamu Port and Lamu-Southern Sudan-Ethiopia Transport Corridor (LAPSSET). The city of Lamu at the southern end of the Corridor is the cornerstone of the project and will be transformed into a trade hub through the construction of a new 32-berth port.
Kenya is the regional leader in air transportation where Jomo Kenyatta International Airport in Nairobi is the major international airport hub in sub-Saharan Africa. The domestic air transport sector in Kenya is booming, and is the fourth-largest in sub-Saharan Africa according to the World Bank.
Massive investments are being made into improving Kenya’s road network. These include the new Nairobi-Thika superhighway, which has decreased travel time between the two cities from 2-3 hours to 30-45 minutes. Other projects include the development of highways with the neighbouring countries Ethiopia and Uganda. It is projected that this will decrease cargo transport time and increase tourism in the region.
|Paved roads (% of total)||total network (railways km)||Mobile Cellular subscribers (per 100 people)||Airports with paved runways|
|7 %||3.334 km||82||16|
The investment in the Standard Gauge Railway (SGR) has been described as the most ambitious project in Kenya’s independent history. Around $4 billion has been invested in 600 km of rail tracks connecting Mombasa and Nairobi, which is expected to open in 2017 and be a net contributor to the economy for the years to come.
Tourism contributes to 4.8 % of GDP and the sector is expected to grow with 5.2 % in the coming year. Tourism in Kenya is highly sensitive to security issues and dropped sharply in 2014 following a terrorist attack in the country. The government priorities the tourist industry highly and allocated 7 % of its budget to the industry in 2015.