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Kenya: Dealing with the hard times

January 14, 2009

Kenyan President Mwai Kibaki’s New Year address had a sobering message; east Africa’s biggest economy should brace for a tough year because of the global financial crisis.

It was not the most encouraging message after a year that had few silver linings for the country of 36 million, still recovering from a bout of post-election violence early last year.

But the global crisis has strained even some of the world’s most advanced economies as well as many across Africa and Kibaki was not about to shield Kenyans from reality. He even cancelled the traditional New Year’s Eve state ball that is held in his official residence in Mombasa, on the steamy Indian Ocean coast.

Government minsters and officials, used to ushering in the New Year with a waltz with their spouses at the party, had to quickly make new plans for the occasion.

Indeed, redrawing plans, revising growth numbers and tightening belts is a routine which Kenyan officials are used to by now. Last week, the economic secretary in the ministry of finance told Reuters that growth estimates for 2008 had been lowered to less than 3.5-4 percent, down from an earlier forecast of 4.5-6 percent.

In the same week, the government stated its intention to declare a national emergency over a drought that has left about 10 million facing starvation.

In the trendy parts of Nairobi, all seems to be fine.

Young urban professionals still flock the numerous malls and coffee houses for a bit of shopping and animated catch-ups over drinks.

But underneath the calm, most have had to tighten their belts. A newspaper cartoonist depicted how hard times were forcing a rethink of cultural norms. Families were dispensing with the tradition of sharing a meal with visitors by asking them to carry their own food.

What expectations do you have for Kenya in 2009? How is the global crisis being felt elsewhere in Africa?

Comments

Kenya has little option but to tighten it’s belt and hunker down for a long cold spell of poor economic growth. Much of the economy is tied to super luxury expenditures by wealthy westerners and now they don’t have the money and it is not fashionable either. Political unrest in the country is likely to follow and that will even drive off the few westerners who want to venture there. Short term it doesn’t look bright for the country.

 

2009; — fuel prices should remain [relatively] low in the course of the year.

However; — depending on how crude prices behave on the international market; — we could be looking at prices of 100 shillings [about $1.28 per liter] by Q4.

Agriculture’s a mess in Kenya. Corruption sent the price of maize flour [a Kenyan staple] through the roof; — stoking possible discontent among low income earners, and by extension, raising concerns over crime.

Now, cartels are creating and taking advantage of various price differentials to make a profit. Starving Kenyans; — hundreds of thousands of them, are just ‘collateral damage.’

Public discontent over this matter, along with that over MPs refusal to pay taxes on the 6-figure allowances, may drive Kenyan politicians to the wall. Already, they complain that Kenyan media portrays them as ‘greedy’ persons; — so this kind of pressure from voters may either make them more apathetic and conservative, or force them into a paradigm shift of what being an MP in Kenya is all about.

The landfall of at least 2 fiber-optic cables in the country will give the ICT sector a much needed boost. Data costs should drop [they're already headed south anyway], and this should alter the pricing of data packages. At the moment, there’s a sustained shift, from SMEs [surprisingly], from pay-per-MB, to all-you-can-eat data plans.

Watch the growth of mobile internet access; — another breakthrough product/service could emerge here. Voice costs should hit rock-bottom this year, or at least by Q1 2010.

The Northern and Eastern frontiers need to be carefully monitored. Somalia’s a powder-keg of sorts, especially following the withdrawal of Ethiopia’s troops. South Sudan’s another area to keep a close eye one, with tensions likely to keep building between North and South as the referendum on seccession approaches.

Kenyan politicians are likely to entirely ignore the refurbishment, repair and expansion of infrastructure; — road and rail being key areas.

As we slumber; — the enterprising Rwandans will be bulding a rail and road link through Tanzania as a strategic hedge, should there be another eruption of the post-poll violence which was seen in the wake of the 2007 elections.

Posted by Ramah Nyang | Report as abusive
 

I believe the comment below is erroneous. Kenya’s economy is not tied to spending by wealthy Westerners. True, there is significant income from tourism and hospitality services, but the major income earner is diaspora remittances. The
manufacturing sector is also a key contributor, and trade forms the pivot point of Kenya’s economy. Challenges for this year will therefore be reduced diaspora remittances and declined tourism figures as a result of the global crisis. In addition, Kenya will see reduced export figures, as most African and European economies (which are the major export partners) feel the effects of the crisis. However, a reduction in the import bill should be a counter effect, as oil prices in the world markets decline or stabilize in the range of $45 – $60.

Posted by Terry Kimundi | Report as abusive
 

I am an optimist by nature and I want to believe that 2008, was not that rosy, but 2009 would be super!

The world economy is in a crisis. I am mean, this is the lowest, we can go, the next place to go is upwards! We can only get better! We will definately experience the change we can believe in! We are the change and its our desire to see it come to pass and pass indeed in out time!

 

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