Hopes grow in Kenya, the economic engine of East Africa

There is no denying that the pandemic has hit its tourism sector and flower growers hard. But the country is an economic hub in East Africa. Hopes grow in Kenya, the economic engine of East Africa.

When German President Frank-Walter Steinmeier landed in Kenya on a state visit roughly a year ago, he was accompanied by a large business delegation. And for good reason, too. “Among German companies, there is growing interest in Kenya and in the huge market of the East African Community,” Steinmeier told the Kenyan newspaper “Daily Nation” before his trip. As one of the strongest economies in the region, he continued, “Kenya is Germany’s most important economic partner in East Africa.” Steinmeier also noted that Germany is one of the largest international donor nations in Kenya’s fight against poverty.

Such assistance is needed now more than ever. The coronavirus pandemic has battered the country’s economy, and many small farmers have been voicing despair given the swarms of voracious locusts that have been plaguing the countryside for months. In fact, the current locust invasion in rural East Africa is the worst seen in 25 years. And, in Kenya, the flying insects haven’t caused this much devastation in 70 years.

On the other hand, the safari tourists – and the foreign currency they bring along – are absent, and the highly lucrative exports of cut flowers to Europe have virtually collapsed. To make matters worse, roughly two-thirds of the country’s residents have no savings and survive off the money they earn on that same day. Around 350,000 day labourers have been sent home from the flower farms, and approximately 1.5 million Kenyans have lost their jobs in the tourism sector – and, for now, don’t know how to support themselves and their families.

However, experts do predict that Kenya will swiftly recover from the plagues. Among them, the World Bank is very optimistic. In its Global Economic Perspectives report released in January 2021, the bank predicts real growth in gross domestic product (GDP) of 6.9 percent. This is by far the highest growth forecast that the World Bank has made for a country in sub-Saharan Africa. The coastal state on the Indian Ocean with a population of some 53 million people has long been regarded as the region’s engine of growth, and the World Bank views it as a stable and economically up-and-coming country in Africa. And with its port in Mombasa, Kenya is also an important transit country for the economies of neighboring countries. That is also why it is likely that no German companies have so far expressed doubts about continuing their activities in the region owing to the coronavirus pandemic. As a key hub within East Africa, Kenya is simply far too important for that.

Official estimates put the number of people living in Nairobi, the capital city, at roughly 4.4 million. Though many of these work in industry, Nairobi has also become an IT hub in Africa in recent years. The foreign companies and organisations there are particularly eager to have high-quality IT services available to them. In addition, Nairobi is home to numerous startup hubs and coworking spaces. Such startups include Cellulant (offering a mobile wallet for farmers), Tala (instant micro-loans via smartphone) and Bitsoko (a blockchain solution for mobile payments).

This innovative startup climate could probably only come about because the country is reasonably stable in terms of its democracy and politics. After a contested election in 2013, Uhuru Kenyatta became the country’s head of government. He is the son of Jomo Kenyatta, who was a leader in Kenya’s struggle for independence from the British Empire as well as its first prime minister and president. Although the Republic of Kenya still ranks among the 50 poorest countries in the world, it is above-average compared to other states in sub-Saharan Africa. But rising prosperity is not being equally distributed.

The logistical centre of the counry is the port city of Mombasa. And goods destined for Kenya – such as motorbikes from India or furniture from Asia – aren’t the only ones being handled there. Besides Dar es Salaam in Tanzania, Mombasa is also the second major regional transshipment hub for goods headed to Uganda, Rwanda, South Sudan and the eastern Congo. “However, more is currently being imported into East Africa than exported from it,” says Maneesh Goel, Owner’s Representative at Hapag-Lloyd for East and North Africa. “But there is increasing demand for raw materials from East Africa, especially coffee for the European market. So we are receiving more and more inquiries from our customers about our China-Kenya-Express (CKX) service.” Besides coffee, Kenya mainly exports tea. The country exports some 500,000 tonnes of tea each year, making it the largest tea exporter in the world, and these figures are steadily increasing.

Kenyans also have very high hopes for the new African Continental Free Trade Area (AfCFTA). The opportunities are huge. “The free-trade zone will create a huge market and offers a chance for new jobs,” Dr. Lyndia Chinenye Iroulo, a research fellow at the GIGA Institute in Hamburg, recently told the German public broadcaster ARD. “This will enable Africa to catch up in economic terms and to reduce its dependence on the rest of the world.”

At the moment, the continent still has a patchwork of trade rules and tariffs. This leads to long waiting times at borders as well as endless paperwork and red tape. It is common for bribes to be demanded. In fact, official restrictions between African countries are generally higher than those between Africa and the rest of the world. According to statistics from the World Trade Organisation (WHO), based on current figures, intra-African trade only accounts for 17 percent at this time. Within Europe, the analogous figure was recently 69 percent. But everything is supposed to get better now. Trading in the new AfCFTA free-trade zone officially commenced on 1 Janaury 2021. At the end of this process, there is supposed to be a single market covering 54 countries with a combined population of 1.2 billion people. If that happens, it will be the biggest free-trade area in the world.

Ernst August Ginten