EDITORIAL: Strategies to reverse fall in growth needed

The World Bank’s latest projection of Kenya’s economic growth is sobering.

Indicators that initially created optimism about probable high economic growth this year have dissipated and a completely new reality is dawning.

And the clear message is that Kenya must diversify its economic base and work on realistic targets.

Until last week, the government had projected growth to hit 6.3 per cent this year. However, the report, ‘Kenya Economic Update’, has slashed the target to 5.7 per cent.

And there is a reason for that. Reports about companies issuing profit warnings and resultant job losses signal economic upheavals. All it means is that achieving higher targets will require new strategies.

Kenya’s economy thrives on agriculture and tourism. But these are vulnerable and dynamics are fast-changing.

Agriculture is predicated on good rains, failure of which spells doom. That is the spectre this year. Long rains that ordinarily fall in March through to May have failed, triggering drought and starvation.

Three things have ensued. First, resources have to be mobilised to feed starving people and animals.

Secondly, cost of food has gone up, triggering inflation and raising the cost of living.

Thirdly, agribusinesses, including food processors, are starved of inputs; they may be compelled to seek alternatives such as imported raw materials, raising production costs and prices.

Tourism is equally sporadic, depending on factors such as security, political stability, infrastructure and the weather.

The past year was phenomenal as the sector registered a 38 per cent increase in arrivals and earnings rose by 31 per cent to Sh157 billion from the previous Sh119 billion.

That does not happen every year. Kenya seeks to be industrialised by 2030. But that requires a consistent national growth of 10 per cent for at least 10 years.

Kenya’s rate keeps fluctuating, which is not a good sign. Core to realising that goal is investing in manufacturing and promoting trade.

These in turn require proper infrastructure, a conducive trade regime, a friendly tax system, efficient and reliable utilities, a stable political environment and an efficient Judiciary.

Our challenge is creating that environment; it is undermined by graft and a restrictive regulatory environment.

The ‘2019 Doing Business’ report lists Kenya among the most improved trade destinations, having cut out many bottlenecks that pulled back investments.

But the impact has not been felt on the ground as potential investors complain of serious holdups.

The National Treasury should review the economic indicators and provide realistic targets while rethinking the best models to secure good economic performance.