KENYA

Kenya is the economic hub of East Africa with a market-based economy.

Agriculture remains the backbone of the economy, contributing 25pc of GDP. About 80pc of the country’s population (roughly 42m) works at least part-time in the agricultural sector.

Over 75pc of agricultural output is from small-scale, rain-fed farming or livestock production. Over 45pc of the country’s population lives below the national poverty line.

Inadequate infrastructure continues to hamper Kenya’s efforts to improve its economic growth which stands in 8-10pc range. With support from the World Bank and IMF and other development partners, however, the country has made significant structural and economic in the past decade.

The economy seems now to be back in balance as foreign exchange reserves, interest rates, inflation, and FDI appear moving in the right direction. Real GDP growth has averaged over 5pc for the last seven years.

Since 2014, Kenya has been ranked as a lower middle income country because its per-capita GDP crossed a World Bank threshold. As of 2015 estimates, it had a GDP of $69.97bn making it the 72nd largest economy in the world.

Per-capita GDP was estimated at $1,587. According to the Kenya National Bureau of Statistics, the 2015 economic growth was well spread although most of the sectors of the economy recorded slower growth.

Tourism holds a significant place in Kenya’s economy. Hotel industry, information and communications, and public administration are among the sectors that have improved their growth.

In 2016, the economy expanded the fastest in five years, boosted by more construction and tourism. According to the Kenya National Bureau of Statistics, GDP is estimated to have expanded by 5.8pc in 2016 compared to a revised growth of 5.7pc in 2015.

The Central Bank of Kenya has warned that 2017 is likely to be a difficult year with the economy expected to contract to 5.7pc from 5.9pc last year due to drought.

On the other hand, the Stanbic Bank has downgraded this year’s projection to 5.4pc from 5.8pc, while those at Cytonn Investments see a 5.4pc to 5.7pc expansion.

The World Bank has predicted that Kenya’s GDP growth may dampen to 5.5pc in 2017 from 5.9pc in 2016 and 5.6pc in 2015. However, it sees Kenya’s economy posting the seventh-highest expansion in sub-Saharan Africa with growth rising to 5.8pc in 2018 and 6.1pc in 2019.

FocusEconomics panelists also expect a growth slow down to 5.4pc in 2017 before picking up slightly to 5.7pc in 2018.

The key drivers for this growth include a vibrant services sector, currency stability, a growing middle-class and rising incomes, and increased public investment in energy and transportation.

2017 being an election year presents numerous challenges for business regarding political risk. In the third five-year Medium Term Plan which runs from 2018-22, the oil sector has been identified as a key sector that will drive Kenya’s economy in the future.

The country discovered commercial deposits of oil in 2012 and so far no less than 1bn barrels of oil have been identified in northern west of Kenya.

The exploration of oil is an economic activity that is bound to spur growth and development.

TANZANIA

TANZANIA is the second largest economy in East Africa and the 12th largest in Africa with a GDP of $44.5bn.

However, it remains one of the world’s poorest economies in terms of per-capita income, estimated at $3,100 in 2016.

Though the poverty rate has fallen from 60pc in 2007 to an estimated 47pc in 2016, about 12m people earn less than $0.60/day.

The economy depends on agriculture, which accounts for more than one-quarter of GDP, provides 85pc of exports and employs about 80pc of the work-force.

Industry accounts for about 25pc of GDP. The most important industrial sub-sector is manufacturing with a GDP share of about 10pc. The country remains significantly reliant on primary commodity exports and is also a top producer of gold in the region.

The financial sector has expanded in recent years and foreign-owned banks account for about 48pc of the banking industry’s total assets. Competition among foreign commercial banks has resulted in significant improvements in the efficiency and quality of financial services. But interest rates remain relatively high, reflecting high fraud risk.

Investors have been unnerved by unpredictable policies from the government. A steep drop in money supply and a spike in non-performing loans have hampered private sector credit growth.

According to the African Economic Outlook, Tanzania’s manufacturing exports have grown significantly over the past decade, while export markets have been diversified.

Political stability remains the cornerstone of its strong economic performance. Annual GDP growth in 2009-15 was an impressive 6-7pc. In 2016, the economy has shown resilience amid flagging growth in Sub-Saharan Africa.

Uncertainty over government policies and a slowdown in the private sector cut Tanzania’s GDP growth to an estimated 6.9pc in 2016, slightly below the government forecast of 7.2pc.

According to the World Bank, cost-cutting measures, including restricted travel for officials, hurt the private sector. The negative business sentiment indicators point to the need for the government to promptly engage in public-private dialogue on investment climate.

The World Bank forecasts GDP growth of 7.1pc for 2017, 2018 and 2019. However, it suggests the government to ensure effective implementation of public investments and supportive policies to promote private sector investment and growth.

FocusEconomics panel expects GDP to expand 7.1pc in 2017 and 7pc in 2018.

Published in Dawn, The Business and Finance Weekly, May 22nd, 2017