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Private Sector Development

How to kick-start Kenya’s second growth engine

Wolfgang Fengler's picture

Last year, Kenya’s economy was behaving like a plane flying through a storm on one engine. After a lot of turbulence, especially when the shilling reached a record low against the dollar, the Central Bank intervened forcefully, and brought the plane back to stability.

But Kenya’s exchange rate woes are just the tip of the iceberg (see figure). Kenya’s big challenge is to reduce the gap between the import bill and exports revenues, what economists call the “current account deficit” (which remains large, even when services—such as tourism—are included). Last year, the deficit reached more than ten percent of GDP, approximately Ksh 400 billion (US$ 4.5 billion). This is larger than Greece’s.

Professional Hazard: Migrant Miners Are More Likely to Be Infected with HIV

Damien de Walque's picture

Gold mine in Johannesburg, South AfricaSwaziland and Lesotho are among the countries with the highest HIV prevalence in the world.
Recent nationally representative estimates reveal an adult HIV prevalence equal to 26% in Swazilandand 23.2% in Lesotho2.

These countries have two other main features in common: they are small countries bordering South Africa and, during the past decades, they were exposed to massive recruitment efforts to work in South African mines. For more than a century, about 60 percent of those employed in the mining sector in the Republic of South Africa were migrant workers from Lesotho and Swaziland3.

In a recent paper4 with Lucia Corno, we started from this set of facts and investigated whether the massive percentage of migrant workers employed in the South Africa’s mining industry for a long period might be one of the main explanations for the high HIV prevalence observed in Swaziland and Lesotho.

The East African ride to Middle Income

Wolfgang Fengler's picture

You have embarked on a long train ride in Africa. The train is in bad shape, the ride is bumpy and breakdowns frequent. You wonder when you will arrive at destination or if you ever will. But after a tortuous first half of the trip, the train is starting to gain speed. There are still a number of unnecessary stops but the destination is now in sight and passengers are becoming upbeat. Just as the train is about to enter the station you are overtaken by three trains, which had been accelerating even faster.

This train could be Kenya in East Africa’s race to Middle Income. The country remains the richest in East Africa and with almost US$800 income per capita is the closest to meeting the international Middle Income threshold of US$1000.  But its EAC partners Rwanda, Uganda and Tanzania are catching up fast.

Tanzania: Building bridges through education and small businesses

Jacques Morisset's picture

Attracted by the prospects of large unexploited natural gas reserves in the south of Tanzania, big players are in town. The British Gas Group has publicly announced that it may invest over US$35 billion in the next 25 years – 1.5 times Tanzania’s current GDP. Policymakers and donors are jockeying to position themselves and understand what is at stake.

The excitement is well founded but perhaps a little bit premature. According to the most optimistic projections, revenues from natural gas will not materialize for 5-7 years. Moreover, international experience shows that commodity-driven growth does not guarantee success. The Tanzanian authorities are therefore right to prepare for the future by setting up the fiscal and financial rules required for future transparent and rational use of these funds now. They should not forget also to focus on the coming 5-7 years because the economy is facing a number of challenges.

La crise de la zone euro et ses impacts sur l’Afrique sub-saharienne

Shanta Devarajan's picture

Lors d’une mission au Mali, j’ai présenté les constats du dernier « Pouls Africain » à un séminaire avec une centaine de participants, y inclus le ministre des finances du pays.   J’ai soulevé quatre points:

Recent reforms in Sierra Leone: Beating the effects of global economic downturn

Vijay Pillai's picture

Pay phone operator in FreetownThe year 2011 ended on a high note for the reformers in Sierra Leone.  There were two significant reforms which the government saw through – reforms that had been long overdue, but which now hold the potential of unleashing new investments and economic growth in the country.  Can Sierra Leone’s use these reforms to beat the potential effects of a global economic downturn?  One hopes so.

The energy sector in Sierra Leone has long faced under-investments. Not very long ago Freetown had the dubious distinction of being the darkest capital in the world and the Bumbuna dam remained elusive.

Africa’s 2012 growth prospects appear bright, but downside risks could dampen momentum

Punam Chuhan-Pole's picture

Sub-Saharan African countries bucked the slowdown in the global economy and grew at a robust pace in 2011 (see Africia's Pulse, February 2012 Update).  

The region’s output expanded by an estimated 4.9 percent, faster than in 2010 and just shy of the pre-crisis (average of 2003-08) level of 5 percent.  Excluding South Africa, the regional growth rate was 5.9 percent.  Particularly notable is the fact that this growth was widespread:  over a third of countries posted 6 percent or higher growth; another 40 percent grew at between 4-6 percent.  Equally important is the fact that several countries saw sustained growth rates of over 6 percent a year in both 2010 and 2011.

So what can Sub-Saharan Africa expect in 2012?  Barring a serious deterioration in the global economy, the outlook for the region seems bright, with a pickup in GDP growth to 5.3 percent in 2012 and 5.6 percent in 2013.  High commodity prices and strong domestic demand, especially buoyant private consumption, are expected to sustain the expansion.

But these factors also point to Africa’s vulnerability. 

Landlocked or Policy-Locked?

Aaditya Mattoo's picture

We are used to thinking of landlocked countries as victims of geography.  We worry that Ethiopia, Mali, Rwanda and Zimbabwe, among others, cannot benefit fully from flows of trade, tourism and knowledge.  But do these countries use policies to improve connectivity and offset the handicap of location?

A new services policy database shows a perverse pattern. Landlocked countries tend to restrict trade in key “linking” services like transport and telecommunications more than other countries. 

Zambia, for example, bravely liquidated its national airline in 1994, but it still denies “fifth freedom rights” to Ethiopia to fly the Addis Ababa-Lusaka-Johannesburg route, and to Kenya to fly the Nairobi-Lusaka-Harare route.  In fact, the restrictive policies of many African countries make a mockery of the decade- old Yamoussoukro Decision (and a subsequent COMESA agreement) to liberalize air transport.

In defense of industrial policy

Shanta Devarajan's picture

Like others, I have been skeptical about industrial policy in Africa, where the government selects certain industries for support in order to trigger a process of structural transformation. It’s been tried before—with disastrous results. 

The selected industries were captured by political elites who continued to receive subsidies without generating anything close to labor-intensive growth (the Morogoro shoe factory in Tanzania never exported a single pair of shoes). Furthermore, most of the constraints to industrial growth in Africa are man-made: policies or regulations that stand in the way of poor workers’ employment prospects.

Crowdsourcing Poverty Research

Gabriel Demombynes's picture

A tremendous amount of development research is all but unknown in the countries that are the subject of that research. In Kenya, this is the case with path-breaking papers like the Kremer-Miguel Worms study and the Cohen-Dupas insecticide-treated net pricing experiment.

To increase the visibility of such policy-relevant work, we’re producing a "Kenya 2011 Poverty Research Review" that will be published early next year as part of our larger Poverty Update report, which will be widely publicized in Kenya.

The Poverty Research Review will give an overview of poverty-related research on Kenya published in 2011 in journals or working paper series. There is a wide pool of work to draw from: a search on "Kenya" and "poverty" in Google Scholar produces 12,900 references for works produced in 2011.

As an experiment, I’m going to try drawing from the wisdom of crowds for this project.  Please help me with your suggestions for high-quality papers on poverty-related issues in Kenya that you would like to see highlighted in our review.

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