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Kenya: Key economic sectors see decade of struggleThursday, March 10, 2016 > 09:48:57
(Media Max Network by Zachary Ochuodho)
Kenya’s service sector has surpassed agriculture and manufacturing as the force behind economic growth in the past one decade, a World Bank report has said. Between 2006 and 2013, about 72 per cent of the increase in gross domestic product (GDP) came from the service sector—though the economy still has a way to go.
“The service sector has taken off, but not enough to make Kenya a star performer,” the report says. It further says financial intermediation and mobile communications, partly due to innovative solutions such as mobile money, stimulated demand for traditional services such as trade.
The report says Kenya has had impressive economic growth over the past one decade but not inclusive enough to create jobs and reduce poverty because the key sectors—agriculture and manufacturing—have either stagnated or received negative growth.
“Agriculture, which is the mainstay of Kenya’s economy, and manufacturing have stagnated and have not created enough jobs for Kenya’s growing working-age population,” said World Bank lead economist and programme leader for Kenya, Apurva Sanghi. Agriculture suffered weather shocks, which caused the sector’s share in GDP to decline from 26.5 per cent in 2006 to 22 per cent in 2014.
Manufacturing stagnated at an average 11.8 per cent of GDP during the same period. Some sub-sectors within agriculture and manufacturing, such as horticulture and food production, have prospered, but the overall story for the two sectors has been disappointing.
Speaking while unveiling the 2016 Kenya Country Economic Memorandum, Apurva said countries in South Asia with huge growth depend on productivity, which in Kenya is only 1.2 per cent. He said in Kenya most jobs are created by the informal economy and are concentrated in low-productivity areas such as trade, hospitality and jua kali—entrepreneurs who can be hired to do just about any task.
Improving the ease of doing business, he said, is vital for job creation and higher productivity adding that reviving agriculture, in particular, remains the pathway for poverty reduction. “There is still need for creating job opportunities for the rural poor, for poverty reduction and achieving shared prosperity,” said the economist.
According to the report, accelerating growth to meet Kenya’s development goals requires technological advances and innovation that raise firms’ productivity. Treasury Cabinet secretary Henry Rotich said they are working on the macro-economic and fiscal policies to ensure the growth is all inclusive, which will be presented in Parliament for discussion soon.