Country FilesEast & HornCountry Profile 2014: KENYA


Posted on Thursday, 06 February 2014 14:44

Country Profile 2014: KENYA

The trials of being in government

The year 2013 was Kenya’s jubilee year. The country marked its 50th anniversary of independence in part by inaugurating an eponymously named party, at the head of which sits the son of the republic’s founding father. But as ageing members of the traditional Kilume dance troupes watched President Uhuru Kenyatta preside over an event that in many ways memorialised the days when they performed before President Jomo Kenyatta, few who witnessed the fall of the Union Jack and the rise of the Kenya flag at Uhuru Gardens could remember a time when the country was more in turmoil.





theafricareport-kenya-72dpiThe trials of being in government

The Kenyatta government has been in crisis-management mode since election

The new county governments are looking for new taxes to fund themselves

The year 2013 was Kenya’s jubilee year. The country marked its 50th anniversary of independence in part by inaugurating an eponymously named party, at the head of which sits the son of the republic’s founding father. But as ageing members of the traditional Kilume dance troupes watched President Uhuru Kenyatta preside over an event that in many ways memorialised the days when they performed before President Jomo Kenyatta, few who witnessed the fall of the Union Jack and the rise of the Kenya flag at Uhuru Gardens could remember a time when the country was more in turmoil.

Over its first 10months in office, the Uhuru Kenyatta government confronted one crisis after another, from a budgetary crisis in the middle of the year to union strikes,a fire that gutted the country’s main international airport and the bloody attack on the Westgate mall in up scale Nairobi in October. And all that on the back of a legitimacy crisis that has plagued Kenyatta and his Jubilee Alliance since it came to power in April 2013 after a controversial election. Eight months after the election, the Independent Electoral and Boundaries Commission was unable to produce credible results of the presidential contest and failed to explain a discrepancy of about one million votes in favour of the new president.


If the disputes over the election had been consigned to the history books, the other key element of the legitimacy crisis for Kenyatta and deputy president William Ruto has been their trials for crimes against humanity at the International Criminal Court (ICC). Successfully galvanising the African Union behind his attempt to defer the ICC case, Kenyatta had considerably less luck at the United Nations Security Council, which rejected his request for a deferral in mid-November. The political disputes around the cases will produce new headaches in 2014.

With former prime minister Raila Odinga’s defeated Coalition for Reforms and Democracy(CORD) bereft of its own centres of patronage, the distribution of the public purse to the counties has become a major bone of contention. Sensing this, the Jubilee government moved swiftly, if unsuccessfully, to scuttlethe devolution agenda and limit any attempts by Odinga to rebuild himself at the grassroots.

Odinga’s party controls most of the major counties, but he has been unable to sell a compelling narrative to his supporters. The result has so far been a noisy scramble to secure national subventions among a new county elite that is doing little more than transferring the games of patronage and entitlement from Nairobi to the counties.

If Odinga and his running mate Stephen Kalonzo Musyoka are unable to conduct some urgent house cleaning, it is unlikely that their alliance will survive into the next elections. Odinga’s Jubilee rivals are actively preparing for this eventuality by courting many of CORD’s more prominent legislators and governors.


Since Kenyatta and Ruto came to power, speculation on the street has dwelt on whether their political union will begin to crack. As representatives of two rival ethnic groups–Kenyatta is a Kikuyuand Ruto is Kalenjin – a breakup in the pact could set the Jubilee coalition on a dangerously unstable footing. In a political sphere deeply riven by ethnic animosity, skewed public-sector appointments and ‘tenderpreneurs’ thriving on state patronage, the Kalenjin presence in the Jubilee Alliance is perhaps the last defence against the old nationalist charge of Kikuyu ‘big tribe’ domination. Until now, the coalition has allowed an uneasy peace in the Rift Valley – one totally dependent on the friendship of its two leaders.

But little has been done fundamentally to reconcile the Rift. The mostly Kikuyu internally displaced people of the 2007-2008 post-election violence have not been resettled in their original homes. Already, with Ruto’s defence team at The Hague making pointed accusations against former President Mwai Kibaki’s government, memories of the violence are rubbing uncomfortably against an already fragile peace.

The Kenyatta government has turned the September mall attack into a platform to re-engage the West. The government’s unambiguous message to its international partners is that the response to the Westgate attack must be concerted and international. It is unlikely the West will ignore it, but Kenyatta’s government has wasted little time in using the national security argument to pursue an antireformist path. The Jubilee-dominated parliament has pursued legislation to rein in the media, to limit external funding for non-governmental organisations and to choke the independence of the judiciary. Economic analysts in Nairobi say the usual growth-contributing sectors have not been doing as well as expected. Uncertain rains in the last quarter of 2013 raised the prospect of a short fall in food production at a time of rising global prices. High-cost food imports would risk eroding the balance of payments, which is already under pressure from a large fuel import bill. This in turn could again weaken the Kenyan shilling.

theafricareport-kenya-72dpi-2RISING FOOD AND FUEL COSTS

Inflation is edging up. Fund manager PineBridge predicts a rate of 13% by April 2014 due to high food and fuel prices. In September 2013, the rate stood at 8.3%. Imports are marginally more expensive owing to the government’s imposition of a 1.5% import duty on all goods to fund a standard gauge railway from Mombasa to the Uganda border (see box).

The fiscal space to inject demand in the economy is limited. Since the 2013 election, 90 additional members of parliament have joined the national assembly while a brand new senate, complete with supporting staff, has come into place, further eating into the public coffers. The 47 new counties, each headed by a governor, have had a similar impact. County governments are debating all manner of charges to impose on an already highly taxed population. The Value-Added Tax Act came into force in September to include thousands of items that had been tax-exempt. This has left businesses complaining of weakening sales and consumers worrying about the high price of goods.

The government has little short-term ammunition to effect change. After 2008, the national treasury spent heavily with funding for roads, dams and other projects that aimed to put money in citizens’ pockets and to spur demand for goods and services. Since 2011, it has curtailed this effort due to the Kenyan intervention in Somalia and rising debt levels. The Somali situation has hurt tourism, a top foreign exchange earner.

Electricity tariffs are set to increase, so manufacturers will experience higher costs of production, compromising the 3.5% growth the sector recorded in 2012. The fast-growing construction industry should continue its expansion although returns may not be as high. There could be overproduction in the cement industry, leading to lower prices even as more investment flows into the sector.

Oil and gas exploration continues, which should keep foreign direct investment high, although proposed new legislation might yet change the mining landscape. In October, Australia’s Base Resources started production of ilmenite, rutile and zircon in Kwale. In August, the mines ministry signed a deal with China’s Geological Exploration Technology Institute of Jiangsu that will allow it to map the country’s mineral prospects. The chamber of mines has opposed a draft law that seeks to reserve a 35% state share holding in all mining projects. This will be an issue of fierce debate in 2014.


WHILE KENYA’S TRADE with both India and China has been rising rapidly, the government in Beijing came up with its first large infrastructure financing package in August 2013 during President Uhuru Kenyatta’s trip to the Chinese capital. He returned with an agreement for $5bn to build a standard gauge railway line from the port at Mombasa to the border with Uganda. The government will use the remaining funds for energy and conservation projects.

In another deal, the Industrial and Commercial Bank of China and Kenya’s CFC Stanbic Bank delivered a $108m financing package in October for Triumph Kenya to build an 83MW thermal power plant.

In April 2013 the government awarded a $484m contract to China Communications Construction Company to build the first three berths at the new port at Lamu. The government announced in November that its own financing difficulties would prevent the contractor from meeting the mid-2014 completion deadline. Japan’s Tokyo Tsusho has carried out the first feasibility studies for the wider Lamu Port-South Sudan-Ethiopia transport corridor, but the project has not advanced owing to a lack of commitment from the authorities in South Sudan and ongoing talks that could allow Uganda’s oil exporters to use the proposed export pipeline.




Rank 2012Rank 2011CompanySectorCountryTurnover (Thds $)Turnover changeNet profits
118140KENYA AIRWAYSAIR TRANSPORTKENYA1,248,36821.20%19,206



Rank 2012Rank 2011Bank nameCountryTotal assetsNet interest incomeLoansDeposits
5370KENYA COMMERCIAL BANK GROUPKENYA3,826,384454,8052,299,2483,000,205
6070KENYA COMMERCIAL BANKKENYA3,284,044246,1722,080,7952,431,708
8394EQUITY BANK GROUPKENYA2,271,120187,7011,316,9411,624,966
8883BARCLAYS BANK OF KENYA*KENYA2,068,980188,0881,045,7641,485,912
9390CO-OPERATIVE BANK OF KENYAKENYA1,947,366143,1161,265,8601,650,256
100114CFC STANBIC BANKKENYA1,737,479117,8901,097,815856,263
10395STANDARD CHARTERED BANK KENYA*KENYA1,712,95597,387724,0421,206,049
109100EQUITY BANK KENYA*KENYA1,552,920132,67200
123124INVESTMENT & MORTGAGES BANKKENYA1,250,29792,091767,853985,913
124128DIAMOND TRUST BANK KENYAKENYA1,246,84278,988824,915994,863
145149NIC BANKKENYA913,84545,170655,147767,011
146139COMMERCIAL BANK OF AFRICA*KENYA905,50981,697723,325784,271
155148NATIONAL BANK OF KENYAKENYA794,44858,788324,749656,345

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