Main article: Economy of Kenya
Although Kenya is the biggest and most advanced economy in east and central Africa and a minority of the wealthy urban population often leaves a misleading impression of affluence, Kenya is still a poor developing country with a Human Development Index (HDI) of 0.519, putting the country at position 145 out of 186 – 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.
The market hall in Mombasa
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 labour 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 because of massive private investment.
Apportionment of Kenya's product exports
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 estimated growth of 4.3% in 2012.
In March 1996, the presidents of Kenya, Tanzania, and Uganda re-established the East African Community (EAC). The EAC's objectives include harmonising 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 labour force but contributes the remaining 75 percent of the GDP.
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 capitalisation. 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.
Tourism
Main article: Tourism in Kenya
Tourists on a safari in Kenya
Kenya's services sector, which contributes about 61 percent of GDP, is dominated by tourism. The tourism sector has exhibited steady growth in most years since independence and by the late 1980s had become the country's principal source of foreign exchange. Tourists, the largest number from Germany and the United Kingdom, are attracted mainly to the coastal beaches and the game reserves, notably, the expansive East and West Tsavo National Park (20,808 square kilometres) in the southeast. Tourism has seen a substantial revival over the past several years and is the major contributor to the pick-up in the country's economic growth. Tourism is now Kenya's largest foreign exchange earning sector, followed by flowers, tea, and coffee. In 2006 tourism generated US$803 million, up from US$699 million the previous year.
Agriculture
Main article: Agriculture in Kenya
Cultivation on the slopes of Mount Kenya
Agriculture is the second largest contributor to Kenya's gross domestic product (GDP), after the service sector. In 2005 agriculture, including forestry and fishing, accounted for about 24 percent of GDP, as well as for 18 percent of wage employment and 50 percent of revenue from exports. The principal cash crops are tea, horticultural produce, and coffee; horticultural produce and tea are the main growth sectors and the two most valuable of all of Kenya's exports. The production of major food staples such as corn is subject to sharp weather-related fluctuations. Production downturns periodically necessitate food aid—for example, in 2004 aid for 1.8 million people because of one of Kenya's intermittent droughts. Tea, coffee, sisal, pyrethrum, corn, and wheat are grown in the fertile highlands, one of the most successful agricultural production regions in Africa. Livestock predominates in the semi-arid savanna to the north and east. Coconuts, pineapples, cashew nuts, cotton, sugarcane, sisal, and corn are grown in the lower-lying areas.
Unfortunately, the country has not attained the level of investment and efficiency in agriculture that can guarantee food security and coupled with resulting poverty (53 percent of the population lives below the poverty line), a significant portion of the population regularly starves and is heavily dependent on food aid. Poor roads, an inadequate railway network, under-used water transport and expensive air transport have isolated mostly arid and semi-arid areas and farmers in other regions often leave food to rot in the fields because they cannot access markets. This was last seen in August and September 2011 prompting the Kenyans for Kenya initiative by the Red Cross.
Industry and manufacturing
Although Kenya is the most industrially developed country in East Africa, manufacturing still accounts for only 14 percent of the GDP. Industrial activity, concentrated around the three largest urban centres, Nairobi, Mombasa, and Kisumu, is dominated by food-processing industries such as grain milling, beer production, and sugarcane crushing, and the fabrication of consumer goods, e.g., vehicles from kits. There is a vibrant and fast growing cement production industry. Kenya has an oil refinery that processes imported crude petroleum into petroleum products, mainly for the domestic market. In addition, a substantial and expanding informal sector commonly referred to as Jua Kali engages in small-scale manufacturing of household goods, motor-vehicle parts, and farm implements.
Kenya's inclusion among the beneficiaries of the U.S. Government's African Growth and Opportunity Act (AGOA) has given a boost to manufacturing in recent years. Since AGOA took effect in 2000, Kenya's clothing sales to the United States increased from US$44 million to US$270 million (2006). Other initiatives to strengthen manufacturing have been the new government's favourable tax measures, including the removal of duty on capital equipment and other raw materials.
Energy
Logo of KenGen, the largest electricity producer in Kenya
The largest share of Kenya's electricity supply comes from hydroelectric stations at dams along the upper Tana River, as well as the Turkwel Gorge Dam in the west. A petroleum-fired plant on the coast, geothermal facilities at Olkaria (near Nairobi), and electricity imported from Uganda make up the rest of the supply. Kenya's installed capacity stood at 1,142 megawatts between 2001 and 2003. The state-owned Kenya Electricity Generating Company (KenGen), established in 1997 under the name of Kenya Power Company, handles the generation of electricity, while the Kenya Power and Lighting Company (KPLC), which is slated for privatisation, handles transmission and distribution. Shortfalls of electricity occur periodically, when drought reduces water flow. To become energy sufficient, Kenya aims to build a nuclear power plant by 2017.
Workers at Olkaria Geothermal Power Plant
Kenya has proven deposits of oil in Turkana but the commercial viability of drilling is not known. Kenya currently imports all crude petroleum requirements. Kenya, east Africa's largest economy, has no strategic reserves and relies solely on oil marketers' 21-day oil reserves required under industry regulations. Petroleum accounts for 20 to 25 percent of the national import bill.
Vision 2030
The official logo of Vision 2030
In 2007, the Kenyan government unveiled Vision 2030, an economic development programme it hopes will put the country in the same league as the Asian Economic Tigers by the year 2030. In 2013, it launched a National Climate Change Action Plan, having acknowledged that omitting climate as a key development issue in Vision 2030 was an oversight. The 200-page Action Plan, developed with support from the Climate & Development Knowledge Network, sets out the Government of Kenya's vision for a ‘low carbon climate resilient development pathway’. At the launch in March 2013, the Secretary of the Ministry of Planning, National Development and Vision 2030 emphasised that climate will be a central issue in the renewed Medium Term Plan that will be launched in the coming months. This will create a direct and robust delivery framework for the Action Plan and ensure climate change is treated as an economy-wide issue.
Economic summary
GDP
$41.84 billion (2012) at Market Price. $ 76.07 billion (Purchasing Power Parity, 2012)
There exists an informal economy that is never counted as part of the official GDP figures.
Annual growth rate
5.1% (2012)
Per capita income
Per Capita Income (PPP)= $1,800
Agricultural produce
tea, coffee, corn, wheat, sugarcane, fruit, vegetables, dairy products, beef, pork, poultry, eggs
Industry
small-scale consumer goods (plastic, furniture, batteries, textiles, clothing, soap, cigarettes, flour), agricultural products, horticulture, oil refining; aluminum, steel, lead; cement, commercial ship repair, tourism
Trade in 2012
Exports
$5.942 billion
tea, coffee, horticultural products, petroleum products, cement, fish
Major markets
Uganda 9.9%, Tanzania 9.6%, Netherlands 8.4%, UK, 8.1%, US 6.2%, Egypt 4.9%, Democratic Republic of the Congo 4.2% (2012)
Imports
$14.39 billion
machinery and transportation equipment, petroleum products, motor vehicles, iron and steel, resins and plastics
Major suppliers
China 15.3%, India 13.8%, UAE 10.5%, Saudi Arabia 7.3%, South Africa 5.5%, Japan 4.0% (2012)
Oil exploration
Kenya has proven oil deposits in Turkana County: President Mwai Kibaki announced on 26 March 2012 that Tullow Oil, an Anglo-Irish oil exploration firm, had struck oil but its commercial viability and subsequent production would take about three years to confirm.
Early in 2006 Chinese President Hu Jintao signed an oil exploration contract with Kenya, part of a series of deals designed to keep Africa's natural resources flowing to China's rapidly expanding economy.
The deal allowed for China's state-controlled offshore oil and gas company, CNOOC, to prospect for oil in Kenya, which is just beginning to drill its first exploratory wells on the borders of Sudan and Somalia and in coastal waters. There are formal estimates of the possible reserves of oil discovered.
Child labour and prostitution
A child as Maasai herder in Kenya.
Child labour is common in Kenya. Most working children are active in agriculture. In 2006, UNICEF estimated, that up to 30% of girls in the coastal areas of Malindi, Mombasa, Kalifi, and Diani were subject to prostitution. The Ministry of Gender and Child Affairs employed 400 child protection officers in 2009. The causes of child labour include poverty, the lack of access to education and weak government institutions. Kenya has ratified Convention No. 81 on labour inspection in industries and Convention No. 129 on labour inspection in agriculture.