Kenya's economic growth and decline since independence in 1963

Kenya Economic Profile

Country profile (Kenya)

The East African republic of Kenya is a young nation which achieved its independence from the British colonialism in 1963 after a long struggle against its colonial masters. The country shares its borders with Ethiopia, Somalia, Tanzania, Uganda and Sudan. In terms of the land area the country is ranked at number 47. At the Eastern end of the country are the coastal plains which rise to the central highlands towards the West. Economically the country suffers from a high population growth rate and rampant corruption according to the UN Human Development I index, Kenya stands at the 147th position.

The official currency is the Kenyan shilling, and Nairobi is the capital city which is central to the country's economy. The country has set itself as the regional hub for trade in east Africa, it has a market-based economy with a liberalized foreign trade policy, the over reliance however of the country on agricultural production and tourism makes its economy vulnerable to international market highs and lows.

Since its independency from the British in 1963, Kenya's GDP has been inconsistent in the initial years of independency; the country achieved high economic growth of 6% which declined to 4% in the subsequent decades. In the 1990's the country's GDP fell below 1.5%. The international monetary fund and the World Bank had to intervene in the year 2000 to prevent a severe economic breakdown with the GDP growth falling to near 0.2%.

This transition from high to low growth affected all the sectors of the country's economy. For instance agricultural sector growth fell from 5% in the 1970s to less than 1% in the 190s, in the industrial sector the growth output fell from 11% in the 1970s to the relatively low of 4% and 2% in the 1980s and 1990s respectively (World Bank, 2012).

The growth rates experienced in the early years of independence can be attributed to the favorable combination of factors in this case agriculturally productive and were successfully distributed to small scale farmers who promoted the cultivation of cash crops for example coffee an d tea and hybrid maize, also his famers practiced to a large extent the development of dairy farming. As a result of good and favorable market condition rural income and the small scale share of coffee and tea production rose tremendously.

In the industry sector a mutual benefiting alliance between the business community and the government of the day provided the base for implementing an industrial strategy based on import substitution. Of a major concern for the growth of Kenyan economy however has been inflation. Since the year 2004 the rate of inflation has been on the rise above 9%, however in 2009 it hit the highest of 26.3% owing to the political instability and budget deficits.

During 2005 to 2006, following the foreign aid fraud, international agencies delayed funds advancements to the country. On top of this the post election violence experienced in the country in 2008 worsened the economic conditions. In this regard therefore without the establishment of political stability the country's economic growth will remain volatile.

Source: World Bank, (2012).

Key development challenges Kenya faces

There are quite a number of issues that inhibit the development and growth of the country. Some of these factors are historical and pre-independence perpetuated, while others are aggravated by the current events.

These inter-ethnic differences among communities found its way into post colonial era politics, for example minority communities comprising of the Luhya, Kalenjin and the coastal region communities were in favor of a political system of quasi-federalism in order to counter the dominance of the perceived major communities of the Luo and kikuyu in independent Kenya. These boundaries further led to the call of secession politics of the Somali in Kenya in their bid to join their kinsmen in the neighboring Somalia. These together with the inter-tribal wars and conflicts whose peak was experienced in 2007/2008 post election violence have acted to hinder stability in growth and made potential investors to shy away from keya.

People in Kenya continue to live in an environment increasingly characterized by human insecurity. Crime incidences are on the rise accompanied by the vulnerability of people to diminishing livelihoods, health threats and food insecurity due to drought, poverty and governance problems. Besides violence and crime there exist deaths from preventable diseases which act as impediments to the achievement of positive human development outcomes (United Nations Development Program, 2012).

Since the 1990s the country has experienced a marked decay of human security from petty crimes to the extent of ethnic cleansing. As a result of this human insecurity has become one of the biggest challenges facing Kenya today, thus making it a relevant subject for national policy dialogue. The country has however pursued a myriad of policy regimes and legislations, through legal frameworks and instituted programs aimed at reducing human insecurity and improving livelihoods. To a large extent, these efforts have directly sought economic development. Access to quality education, affordable health, property rights, social security, freedom and political participation, equality and non-discrimination have over time been seen from a purely economic perspective. In this regard, economic development has been viewed as the key determinant in the achievement of human development (Paul Andre de la Porte, 2006).

Terrorism is yet another factor that cannot be overlooked. The country's vulnerability to terrorists operating under the umbrella of al-Qaeda has been witnessed by several attacks. In 1998 for instance the U.S. embassy in Nairobi was blown by a car comb killing at least 200 people mostly Kenyan, it also happened in 2002 where suicide bombers killed 15 people in an Israel owned paradise hotel in Kikambala Mombasa where terrorists reportedly shot a missile at an Israel airline at the airport in Mombasa. These were the most serious attacks on the foreign interests in Kenya that lead to most western countries issuing negative travel advisory to the country. In its response to this the country has sought to improve its security apparatus and legal framework to fight terrorism, this is evident when in 2004 Kenya opened a new counterterrorism center which is the first in Africa.

Although the country has come out as a leader in some key economic sectors notably in telecommunication, it still faces enormous development challenges brought about by social and political instability. The United Nations Development Programs' 2009 human development index ranks Kenya lowly at position 147 out of the 182 countries worldwide. The World Bank in the last years from which data were available also estimates that:

Forty percent of the Kenyan population lived below the $2 a day poverty line, with half of those falling below the $1.25 a day extreme poverty line (2005 estimates), also the average life expectance was 54 years compared to a world average of 69 years and a high income country average of 79 years (2007 estimates). Only 42% of the population had improved sanitation facilities, while 57% had improved water sources (2006 estimates).

On a positive note however the country has made progress towards the millennium development goal of universal primary education, whereby the government has committed itself to work towards improving social economic conditions through vision 2030 strategy in which social economic and political pillars are anchored on macroeconomic stability.