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Kenya to lead African growth story in 2016

While growth prospects in SA continue to dwindle, the East African country is a rising star within the continent.

You would expect South Africa, as the continent’s most advanced economy, to feature heavily in a discussion on Africa’s growth. But it was sparsely mentioned at the 2016 Africa Outlook seminar hosted by Frontier Advisory Deloitte on Thursday. Other than to highlight its flaws and challenges, South Africa was not praised or expected to lead growth on the continent in any way this year. Instead, it was East Africa, and Kenya in particular, that emerged as the protagonists in the Africa growth story. Kenya’s openness, and investment in infrastructure and innovation, has made it one of the leading examples of fast-growing resource-poor countries on the continent.

Standard Bank Group’s joint chief executive Sim Tshabalala, singled the region out as the continent’s innovation leader; Kenya’s infrastructure spend has seen it cut railway travel costs by more than 90% and energy costs by 30%. M-Pesa, the mobile phone money transfer, financing and micro-financing service, accounted for around 25% of Kenya’s gross national product flows in 2013, according to GDP. Meanwhile, M-KOPA Solar, which offers a pay-as-you-go energy solution for off-grid consumption, has connected more than 280 000 homes in Kenya, Tanzania and Uganda to solar power, and is now adding more than 500 new homes each day.

According to the  2015 Africa Progress Report report, electricity consumption in Spain exceeds that of the whole of sub-Saharan Africa, for which half its power generation capacity is located in South Africa.

“Excluding South Africa, consumption averages around 162 kilowatt-hours (kWh) per capita per year. This compares to a global average of 7 000 kWh” – 2015 Africa Progress report.

Said Tshabalala: “Kenya, Tanzania and Uganda now compare favourably with non-African competitors with factors such as transportation and communication costs…they have also made progress with their regional integration and on linking their economies into global value chains, which has increased East Africa’s competitiveness as an exporter of manufactured goods.

Sheila M’Mbijjewe, the deputy governor of the Central Bank of Kenya, said she was quite surprised to hear Kenya being spoken of in this light.

“As a country we have put together a vision that we all seem to be working and pushing for. And, obviously, that vision is starting to pay off.”

Unlike South Africa and many commodity-driven economies on the continent that, not long ago, were the champions of the Africa and emerging markets growth story, Kenya’s growth is driven by 14 sectors. They each contribute 10-12% of GDP, with the exception of agriculture, which contributes 25%.

M’Mbijjewe said the International Monetary Fund (IMF) had revised its forecasts on Kenya’s GDP growth upwards, from 3.8 to 4.3%. South Africa’s was recently revised down to 0.7% from 1%. She also said recent visits to the country from US president Barack Obama and Pope Francis, as well as Kenya’s hosting of the tenth WTO (World Trade Organisation) Ministerial Conference last month, was an indication of how much Kenya’s role in the global economy had changed.

But being held in such high esteem is foreign territory for a country struggling with terrorism attacks, widespread poverty and an 8% inflation rate. Konrad Reuss, MD of credit rating agency Standard & Poor’s sub-Saharan office, said the country’s debt-to-GDP ratio was concerning and motivated the negative outlook S&P has on the economy.

But the IMF’s Dr Axel Schimmelpfenning, said it was a good time to spend so that, when countries come out of the cyclical downturn, they can grow quickly. M’Mbijjewe echoed this, saying that in a financial environment of pervasive loose monetary policy, it was the best time to borrow as debt was, and still is, quite cheap.

Said M’Mbijjewe: “With 60% of our population below 30, what we’re doing is developing our infrastructure to make sure that, in the future, the opportunities are there for the next generation…I don’t think we need to apologise for taking advantage of that opportunity.”

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