• In full bloom

    With its relative stability and a mixed economy that is attracting foreign investment, Kenya has the potential to become the powerhouse economy of East Africa.

    In full bloom

    Red, pink, yellow or white… It makes little difference what the colour is but anyone receiving a bunch of roses somewhere in the EU these days stands the very good chance that their blooms were grown in Kenya.

    The country supplies more than 35% of the cut flower market to the EU and is the third-biggest floriculture exporter in the world. So important is the industry that Jomo Kenyatta Airport in the capital Nairobi has a dedicated terminal solely for flower and vegetable air freight. Nearly 3% of Kenya’s GDP comes from horticulture in general, while 1.29% is from the flower industry alone, according to the Kenyan Flower Council. It says horticulture generates around US$1 billion a year for the nation.

    Kenya’s mild tropical climate, abundant soils, good infrastructure and excellent positioning on the eastern side of the continent has made it an ideal location for a floriculture industry. There are about 130 commercial flower farms, mostly in the Lake Naivasha area, around 90 km from Nairobi. The sector comprises a variety of large and small-scale producers, many of whom have invested heavily in the latest technology, such as computerised drip irrigation in greenhouses, fertiliser recycling systems and artificial lighting.

    The council says approximately 500 000 people, including more than 90 000 direct flower-farm employees, depend on the floriculture industry for a living.

    From small beginnings, the industry has grown dramatically. In 1988, for example, the council said 10 946 tons of flowers were exported, while in 2014 it was 136 601 tons.

    The expertise of Kenya’s flower growers are now being put to use in neighbouring Rwanda – they are helping develop a 35 ha flower park near the capital, Kigali. The plan is for the park to provide about 3 million stems per year to set up the backbone of a nascent Rwandan floriculture industry.

    The key ingredients of the Kenyan floriculture industry’s success – particularly the combination of highly productive large- and small-scale operations working side by side – is replicated in the tea-farming sector, which is the biggest contributor to agriculture and the country’s largest foreign exchange earner.

    Kenya is the fourth-biggest producer in the world behind India, China and Sri Lanka. There are around 500 000 registered small growers, according to the Tea Board of Kenya, and about 70 large-scale producers. About 3 million Kenyans rely on the industry for their livelihood, says to the board. It brought in some US$1.3 billion in foreign earnings in 2013 from a record production of 432 million kg, according to Reuters. Coffee, another agricultural staple crop, earned US$214 million in 2012/13, by contrast.

    Mild in climate, rich in farming and wildlife, Kenya has traded strongly on its world-class game reserves for the development of its third-strongest foreign earner – tourism. It reportedly brings in around US$1 billion in foreign-currency earnings a year and provides a living for some 1 million Kenyans on the coast alone.

    Mombasa is slickly marketed as the ‘only safari port in the world’ where cruise ships can dock, passengers disembark for a trip to a game reserve and set sail later, all in one day.

    Despite the opportunities, the government’s National Tourism Strategy 2013–2018 paper states that a lot more can be done to attract foreign visitors. ‘Only 1.5 million tourists visit Kenya a year, compared to some 8.3 million per year to South Africa, which is grouped together with Kenya in terms of tourism destinations.’ It points out that the majority of Kenyan tourism is concentrated in just seven of the country’s 26 wildlife reserves.

    ‘To increase the country‘s competitiveness, there is a need to expand product choice and the quality of tourism facilities and services, as sports tourism and ecotourism are becoming increasingly popular,’ the report states. Business conferencing is another target.

    Kenya’s position in East Africa and its proximity to Arabia in particular, means it has had a long trading history with the Middle East, beginning around the 1st century AD. Later, a series of city states were developed on the coast, most of which had Islamic rulers by the 8th century. European traders also had a long relationship with the region but serious exploration of the interior only began in the 1800s.

    Spurred by competition among rival colonial powers, the UK cemented its dominance in the region and established the East Africa Protectorate in 1895, followed by the Kenya Colony in 1920. A wave of white settlers, mostly encouraged by the potential of the land, established farms in the country after World War I and, along with a sizeable Asian influx of immigrants, added to Kenya’s rich cultural make-up.

    Independence was granted in 1963 and Jomo Kenyatta, regarded as the father of the nation, became prime minister, then president and ruled until his death in 1978. His son Uhuru is the current president.

    Kenya’s relative stability and mixed economy has traditionally made it attractive to foreign investors – a Eurobond issue in June last year raised US$2 billion – and its economic development is best seen in its stock market, East Africa’s most sophisticated and largest. The Nairobi Securities Exchange, although not as large as its South African and Nigerian counterparts, is lauded for its diversification, with its strong financial services and manufacturing sectors. It’s the only African stock market, apart from the JSE, which has demutualised and is a public traded company.

    Perhaps the biggest indication of the country’s development has come recently through internal efforts to root out corruption

    According to the World Bank, Kenya is the ninth biggest African economy, with a GDP of US$55.2 billion. The organisation says the country has met some of the Millennium Development Goals, including universal primary school enrolment and reduced child mortality. There’s also been a reduction of HIV/Aids infection figures. Poverty rates declined from 47% in 2005 to between 34% and 42%. The government has also stepped up health provision and increased spending on education.

    ‘Medium-term prospects will depend on macroeconomic stability with credible policies, increased investments in infrastructure and human capital. A stronger global economy will revive demand for Kenya’s exports and investment flows. The government must deal with emerging pressures on GDP growth, from drought, insecurity, fiscal expansion, inflationary pressure, high electricity costs and implementation of devolution,’ states the World Bank. It says that Kenya should grow by 6% this year, 6.6% in 2016 and 7% in 2017.

    Of concern to the bank is the political situation. The Somalia-based al-Shabaab group has carried out several high-profile attacks on Kenyan soil, ranging from the 2013 assault on the Westgate mall in Nairobi where at least 67 died, to the massacre this April at a college near the Somalia border where nearly 150 were killed. This has affected tourism and put severe pressure on the government.

    ‘To sustain momentum, Kenya needs to continue investing in infrastructure and jobs, improve its business climate, and boost its exports,’ Diarietou Gaye, the World Bank’s country director for Kenya, told the media earlier this year.

    Infrastructure, particularly power generation, has been a priority. China is partly financing and building a US$3.6 billion railway from Mombasa to Nairobi, and the government has focused on electricity generation, saying it intends to have 5 000 MW capacity installed by 2017. Bloomberg reports that Kenya’s peak electricity demand is currently 1 500 MW, and is growing by 8% a year.

    Much of the new output is coming from geothermal and renewable sources – such as the Olkaria IV geothermal facility, which began operating in October last year, and the Lake Turkana wind-power project, which will be Africa’s largest wind farm, with 365 turbines.

    Solar also has potential – the government hopes the diversification will protect the state from reliance on hydroelectric, which is used to provide some 60% of electricity but has been hampered by drought.

    Kenya has seen some oil exploration in the last three years, mostly near Lake Turkana. Meanwhile major driller Tullow Oil claims the South Lokichar basin holds an estimated 600 million barrels of oil. However, extensive development has been curtailed by the drop in the benchmark oil price.

    Mining contributes less than 1% to the country’s GDP. The Fraser Institute, in its mining jurisdictions survey, ranks the country third from the bottom, mostly due to a lack of transparency in its processes regarding mineral titles. Recently, the government announced that it intended overhauling its mining laws affecting royalties.

    ‘This bill is good not only for the government but also for the industry, as it guarantees them stability, it guarantees them their rights. It also brings transparency to the process,’ Mining Secretary Najib Balala told the media.

    Apart from its budding possibilities, perhaps the biggest indication of Kenya’s development has come recently through internal efforts to root out corruption – a plague that has blighted good governance.

    In March, seven heavyweight former officials, including two previous finance ministers, were charged with fraud relating to allegations that, for nearly 20 years, officials signed overpriced or counterfeit contracts.

    As the Economist points out, this is ‘the first serious prosecution of senior politicians accused of corruption in modern Kenyan history’. It quoted a Western diplomat who called it ‘a revolution’ in the fight against corruption. Within weeks came news that 175 officials have been implicated in a wide-ranging probe by the country’s Ethics and Anti-Corruption Commission into bribery and corruption, some involving multi-billion dollar Chinese contracts.

    The publication of the ‘list of shame’ has resulted in five cabinet ministers stepping down temporarily, pending investigation.

    By John Rossouw
    Image: Richard Garvey-Williams/NIS