This country profile was published in November 2010 in our annual 'Africa in 2011' issue. The next edition, 'Africa in 2012' will be on sale in November 2011.

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New constitution, new politics

With the economy bouncing back from the havoc caused by the post-election violence of December 2007-February 2008, Kenya is entering 2011 in a new spirit of expectation. How President Mwai Kibaki’s administration handles the host of complex, if potentially promising, challenges will determine whether his rule is remembered more for its creation of a new constitutional order or for its perpetuation of Kikuyu ethnic domination and the tradition of elite impunity. ?

The popular vote in favour of the new constitution in a referendum on 4 August, followed by its official promulgation three weeks later, means that street-level agitation has now been replaced by horse-trading in the parliamentary implementation committee which will define the details of the country’s long-term future. The initial jockeying for the leadership of the committee suggested a continuation of the rivalries inherent in the coalition government of Kibaki’s Party of National Unity (PNU) and Prime Minister Raila Odinga’s Orange Democratic Movement (ODM). Even as the ODM secured the chairmanship for the youthful Ababu Namwamba, elsewhere the prevailing ‘securocracy’ of bureaucrats, security officers and politicians was reasserting itself. ?

Devolution of powers to the new semi-autonomous county governments (a watered-down version of majimbo, or federalism) will mean a gradual loss of power for the central government. If successful, it will guarantee the transfer of approximately Ksh100bn ($1.2bn) a year to the counties by 2013, and the money will then be under the control of democratically-elected regional governments. Welcomed by Kenyans as a sort of second independence, the devolution should reduce Nairobi’s authority over the rest of the country and contribute to the weakening of the politics of regional and ethnic favouritism. The conservatives in the PNU are frightened that if the transfer is implemented too quickly, it will damage their 2012 election campaign strategy, considering their past reliance on provincial administrations to whip up national support. ?

Not only is 2011 the year in which the shape of the new constitutional order will be determined, but it will also see the beginning of the campaign cycle, with Kibaki’s role increasingly focused on the choice of his preferred candidate. With the passing of the old order, the outcome of the fight over the role of the provincial administration – Nairobi’s eyes and ears in the regions, long controlled by members of the Kikuyu community – will be critical. The reformed bill of rights should also restrict the often controversial role of the intelligence services and security forces.

?The political landscape will be radically transformed if the International Criminal Court (ICC) issues indictments against senior politicians in Central Province and the Rift Valley for their role in the 2008 post-election violence. The suspension from the cabinet in mid-October of the higher education minister, William Ruto, following a Constitutional Court ruling that he stand trial on an old corruption case, appears to be the start of a long period in the political cold for the putative leader of the Kalenjin. This could be further reinforced by the outcome of an investigation by ICC Prosecutor Luis Moreno Ocampo, if it turns out that Ruto is one of those targeted for indictment.?

Despite earlier suggestions, a new alliance between Ruto, the deputy premier, Uhuru Kenyatta (seen as Kibaki’s successor), and Vice-President Kalonzo Musyoka now seems unlikely to materialise. While Odinga’s opponents inside and outside the ODM try to cobble together a credible alliance to challenge his bid for the presidency in 2012, Kenya’s political stability will be determined by Kibaki’s ability to rise above the interests of his inner circle to embrace a new order.

?Economic indicators show that 2010 put an end to the downturn that followed the political violence of 2008. In his role as finance minister, Kenyatta told the IMF/World Bank annual meetings that real GDP growth for the year would reach 5%, while the forecast for 2011 is 5.7%.?

The government and the private sector have continued to invest in building and rehabilitating roads, electricity transmission networks, housing, commercial real estate and other infrastructure. This has helped the financial sector to register healthy growth in business and profits, while the manufacturing sector has also recorded a steady expansion of output. Good rains at the beginning of the year pushed overall agricultural output up by 5.8% in the first quarter, in turn contributing to lower inflation. By September, the year-on-year rate was 3.2%.

?Increased foreign earnings meant that the current account swung into a modest surplus in the first half of the year. Kenya’s two main foreign-exchange earners, tea and tourism, have performed especially well. Spurred by increased demand from India and China, tea exports earned 51% more in the first eight months of 2010 than in the same period of 2009. ?

Going into the December-March high season of 2010-11, tourism looks set to surpass the record set in 2007. The sector registered a 43% increase in earnings in the first six months of 2010 as compared to the same period in 2007. ?

Tourism Minister Najib Balala said Kenya’s more aggressive global marketing had brought in visitors from new sources, but he said hotels, particularly those on the coast, need to refurbish their establishments and rethink their business if they are to remain competitive with other destinations, such as South Africa. “The private sector needs to invest and be innovative,” he added. “The trends have changed. The desires have changed, and the competition has hit us hard.”?

Kenya’s trade with the East African Community (EAC) is expanding, and the region accounted for 23% of Kenya’s exports in the first half of 2010. Kenyan businesses are key investors in Rwanda, Tanzania and Uganda. In turn, as high-growth economies, they have provided a reliable market for Kenyan businesses, as well as a hedge against periods when the domestic economy is down. And yet, the EAC’s common market is only developing slowly. The hard part is translating EAC agreements into member states’ laws and bureaucracies. Judging from the experience of the customs union, which took effect in January 2005 but is still being tweaked, the common market will evolve over a period of years.

?Although it is not official policy, the EAC has evolved a two-track approach to implementing its protocols. An example is the provision for the free movement of people in the common market protocol, which states that East Africans do not need a work permit to get a job in another member state. Rwanda had already lifted that requirement for East Africans in November 2007. Kenya followed Rwanda’s example in July, as soon as the common market protocol took effect. The other members still do not permit free movement of EAC citizens within their borders.

 

Judiciary adopts (slow-speed) broadband

Kenya’s telecom sector, after rapidly growing, has to find new ways to expand. The industry sees a significant untapped data market, but no one has yet got it to grow significantly. Although three undersea fibre-optic cables landed between 2009 and 2010, most operators have been unable to offer their retail customers the much-hyped broadband at reduced prices. ?

But the public sector is slowly waking up to the value of broadband. As an example, the judiciary is rolling out a programme to computerise its operations. The Court of Appeal in Nairobi is now using video-conferencing between Nairobi and Mombasa to conduct cases, reducing travel costs for litigants and helping speed up proceedings. The plan is to then have the High Court use the same system and eventually the magistrates’ courts, which handle the bulk of cases.?

Court records are also being digitised, although this is at least seven years behind schedule. When Chief Justice Evan Gicheru took office in March 2003 he said this was one of his goals. But there has been resistance within the judiciary: lawyers say that they see computers gathering dust in judges’ offices, while many judges still insist on recording proceedings in longhand.

 

 

Kenya's Top Companies

 

Taken from the Top 500 Companies

 

 

Kenya's Top Banks

 

 

Taken from the Top 200 Banks

 

 

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