For more than quarter of a century, the Kenyan economic story has been one of consistent and exponential growth, especially over the last ten years. According to the World Bank, Kenya's GDP has more than doubled over the past decade and now nears US$100 billion.
However, the COVID-19 pandemic put the brakes on the healthiest economies worldwide, and Kenya was no exception. In fact, 2020 was the first year in nearly thirty that saw the economy of this East African powerhouse contract.
This does not appear to be the beginning of a downward trend. A reopening of the economy in 2021 showed a healthy rebound that has exceeded expectations. The initial projections by the African Development Bank of 5.0% growth in 2021 and 5.9% in 2022 have been revised. As reported by Bloomberg in September of this year, the economy is expanding at more than 6% in 2021. The country's second quarter bounceback showed growth rates of up to 10.1%.
As a whole, Kenya has been able to face up to the unprecedented obstacles posed by the pandemic, its business community showing the kind of flexibility needed to continue to prosper in times of crisis. The Kenyan business landscape has also grabbed the opportunity to take digital processes already in process to another level, accelerating them over the last 18-24 months.
Kenya's financial sector has occupied the driver's seat in this digital revolution, with emerging FinTechs making their own mark as well as collaborating with the traditional sector. In fact, Kenya is now being seen as a global FinTech hub. Harvard Business Review claims the country's mobile-banking push has made financial inclusion shoot from 26% in 2006 to 83% by 2021.
Safaricom's M-PESA money-transfer service has been at the forefront of this transformation. Following M-PESA's success, innovators such as M-KOPA are leading a new generation in the East African financial sector as they integrate 4IR technologies like IoT into financial operations. The collaboration between emerging FinTech innovators and established financial institutions is therefore paving the road ahead for Kenyan finance.
Opportunity also beckons in the manufacturing sector with the EU, UK and US earmarked as markets for products beyond the traditional tea, textile and apparel exports, with diversification being pushed by the current government. Moreover, continued Foreign Direct Investment (FDI) in the country has strengthened industry: Investments from abroad added up to over US$1.3 billion in 2019. Former UK Foreign Secretary Dominic Raab stated that the primary beneficiaries of a £132 million in investment from his country would go toward "building new green affordable homes, connecting households to clean energy, and boosting manufacturing."
Backed by the Kenyan government, the ICT industry is connecting these burgeoning sectors. Its influence in the financial sector is clear through the new FinTech era, but other areas of the economy are also reaping the rewards of the country's technological prowess. "[We're an] ICT hub in the region; we've had a number of innovations, and I think the government's commitment toward ICT has been quite clear," says Phyllis Wakiaga, CEO of Kenya Manufacturers' Association. "We see the interplay between the work we do as a sector and the relevance of ICT. An important example of this is e-commerce. So, the ability of ICT to provide platforms for selling goods for the manufacturing sector, the paying platforms, FinTech and the ability to enable many other transactions is crucial."
In this era of big data, Betty Maina, Cabinet Secretary of the Ministry of Industrialization, identifies the key challenge for Kenyan institutions as finding the "the right mix of digital skill sets and business-intelligence digital technologies, such as robotic process automation, artificial intelligence and predictive analytics, to add business value through greater accuracy, efficiency and strategic insight, and grasp these new global opportunities."
At the center of the government's economic development strategy, the manufacturing sector has the aim to raise its own contribution to the GDP to 15% by 2022, create an additional million jobs, increase the level of FDI and improve the ease-of-doing-business ranking. To achieve this, and in keeping up with the "Buy Kenya, Build Kenya" campaign, the ministry continues to prioritize incentives that will enhance local industry competitiveness, according to Maina.
A recent surge in international collaboration further enhances Kenya's economy. "Kenya has signed double-taxation treaties with various countries, including Canada, Denmark, France, Germany, India, Iran, Mauritius, Norway, Sweden, the UK, Zambia and South Africa. Most of these agreements offer preferential rates and allow individuals to set off withholding tax against their liability in the participating nations," says Maina.
Furthermore, in November of this year, the Second Kenya-US Bilateral Strategic Dialogue took place, signaling a new era of collaboration between the two nations on the near horizon.