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Kenya: Charting the path to economic supremacy in Africa

27 November 2023
– 6 Minute Read

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Six decades ago, Kenya emerged as a fledgling nation, having gained independence in 1963. These formative years were marked by grand development plans centring around a primarily agrarian economy and establishing foundational industries. The Kenyan narrative of today, however, paints a drastically different picture.

Kenya has evolved to become the major economic force. in East and Central Africa, continually redefining its trajectory. The nation now aspires to a loftier ambition, charting a course towards becoming an economic bastion reminiscent of Singapore’s extraordinary rise in Asia.

In the 1960s, around the same time as Kenya got independence, Singapore stood in shoes similar to Kenya’s, a nascent state grappling with its newfound independence and the myriad challenges it presented. Fast forward to today day, and Singapore towers as a dazzling paragon of economic prosperity. Its transition from a humble port city to a universally acclaimed financial nucleus is a compelling tale of transformation.

Singapore’s success story, underpinned by strategic positioning, stalwart legislation, and a pro-business environment, offers a replicable model for burgeoning economies. And it’s in this proven blueprint that Kenya can find its inspiration.

The country already treads a path that bears striking parallels to Singapore’s ascent. At this pivotal juncture, Kenya, with its robust policies, booming sectors such as fintech, ICT and renewables, a very able and young workforce, and strategic geographic locale, stands on the cusp of becoming Africa’s rendition of Singapore.

A roadmap for economic development

According to the World Bank, Kenya’s economy achieved broad-based growth averaging 4.8% per year between 2015 and 2019, significantly reducing poverty from 36.5% in 2005 to 27.2% in 2019. Real GDP is anticipated to rise to 5% in 2023 and 5.2% on average in 2024 and 2025 – a strong indication of the country’s economic resilience as it recovers from the polycrisis. Moreover, the World Bank’s Ease of Doing Business index placed Kenya 56th out of 190 economies in 2020, a substantial climb from its 113th rank in 2013.

Kenya’s thriving economic climate is a compelling endorsement of the strength and fairness of its 2010 Constitution, effective legislative frameworks, and forward-looking regulatory policies – all sculpting a competitive business landscape that propels economic development.

However, there is room for improvement.

Kenya’s competitiveness could be amplified by fine-tuning its antitrust and competition regulations. Tweaking the thresholds for compulsory reporting or approvals can attenuate transactional impedance and investment barriers, benefiting smaller ventures. 98% of all Kenyan businesses are small and medium enterprises (SMEs). Given that these SMEs provide livelihoods for the majority of Kenya’s working populace, any policy modification bolstering this sector’s growth promises profound economic dividends.

The pursuit of inclusive growth is also central to Kenya’s aspiration of becoming an economic fulcrum. While Kenya’s constitution advocates fairness and inclusivity, the spectre of corruption looms large. Transparency International’s 2022 Corruption Perceptions Index ranks Kenya at 123 out of 180 countries. This sobering position emphasises the imperative to rein in corruption – an endeavour with potentially vast economic implications, considering that recent estimates put public money lost to corruption at 7% of Kenya’s GDP in 2020.

Concomitantly, Kenya must also scrutinise its constitutional expenses. By identifying and eliminating any inefficiencies, the implementation of the Constitution becomes more affordable and sustainable. This rationalised approach to expenditure would contribute to fiscal prudence and further solidify the country’s economic health.

A careful evaluation of Kenya’s existing legal framework also shines a spotlight on the need for revising and updating certain laws. By doing so, inconsistencies that pose potential hurdles to investors can be mitigated. Crucially, this would involve investing in capacity building for legal and regulatory bodies. Strengthening these institutions is a key step towards ensuring the uniform resolution of complex legal issues and fostering consistency in decision-making.

There is a real opportunity for Kenya to further the development of an independent and competent judiciary.  Much more work needs to be done to rid the judiciary of corruption and also to get certain jurisdiction that creates a stable and predictable business environment.

Although already on the path of digitisation of Government services and registries, a sharp focus on completing the digitisation of lands and business-related registries is key to increasing efficiencies.

The role of public-private partnerships (PPPs) in infrastructure development is also pivotal. To reap the full benefits of PPPs, however, Kenya should revisit the current legal framework governing these partnerships. Simplifying processes, cutting through red tape, and enabling swift project implementation would make PPPs more attractive, fuelling infrastructure growth.

On the human side, investment in education and vocational training is key to reaping the benefits of a youthful population.  Kenya’s public universities are creaking and need a serious overhaul and need to offer modern and fit-for-purpose curricula.  Vocational training in sectors such as healthcare, tourism, and manufacturing will make the already attractive human capital in Kenya even more competitive and attract more investment into Kenya.

Finally, a significant aspect of Kenya’s path forward involves reforming its complex and aggressive tax laws. An overhauled, clear, and equitable tax structure would expand the tax net, foster a conducive business environment, and amplify Kenya’s appeal to local and foreign investors.

Leveraging future opportunities

Mirroring Singapore’s recognition of the nexus between economic growth and sustainability, Kenya has positioned itself at the forefront of green growth in Africa. A staggering 93% of Kenya’s electricity generation capacity in 2020 hinged on renewable energy. However, like other developing nations, the financing of green initiatives presents a challenge that Kenya confronts with its commitment to championing sustainable finance solutions on global platforms.

As we dive deeper into the digital era, Kenya’s blossoming technology industry also requires a supportive legislative environment. An astute ‘light-touch’ regulatory approach would strike the necessary balance – enabling industry growth while ensuring regulatory compliance.

Furthermore, the African Continental Free Trade Area (AfCFTA) offers an unrivalled prospect for pan-African economic integration. To optimally capitalise on this opportunity, Kenya’s need to harmonise national legislation with AfCFTA provisions is acute. With approximately 40% of the East African Community’s GDP credited to it, Kenya is equipped to assume a leadership role in AfCFTA’s implementation. Drawing upon its experience fostering regional integration within the East African Community, Kenya is well-positioned to shepherd the AfCFTA agenda.

Kenya’s quest to emulate Singapore’s economic triumph hinges on steadfast action and unwavering commitment to economic competitiveness, inclusive growth, sustainability, and regional integration. The challenges are daunting but not insurmountable. Kenya has demonstrated a readiness to confront these hurdles head-on, laying a robust foundation for its future.

The road ahead for Kenya is illuminated with the promise of not only its prosperity but also that of the African continent. With sustained efforts and strategic interventions, Kenya’s vision of replicating Singapore’s success story on African soil is within reach.