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Looking into the Economic Future for 2015

07 Feb

Economists in Kenya have predicted a mixed outlook in the country’s economic growth and whether the country will achieve higher economic growth rates. With security a major determinant in the country’s economic performance, tourism is the sector worst hit by insecurity. The World Bank lowered Kenya’s economic growth forecast for this year and next after a delay in seasonal rains reduced the outlook for agricultural production and amid worsening insecurity. East Africa’s largest economy will probably expand an annual 4.7 percent in 2014 and 2015, the lender said in a bi-annual economic report handed to reporters today in the capital, Nairobi. The lender in December forecast expansion of 5.1 percent this year and 5.2 percent next year. “The rains arrived late and the security situation has deteriorated, which is hurting the tourism sector and instilling fear in both existing and prospective investors,” the Washington-based bank said. “These developments caused the World Bank to revise its projection downward.”

Tourism, which is the second-biggest foreign-currency earner after tea shipments, has been damaged by a spate of attacks claimed by Islamist al-Shabaab militants, including a raid on a Nairobi mall in September that left at least 67 people dead. Al-Qaeda’s affiliate in Somalia claimed responsibility for attacks in Lamu county at the coast last week that killed at least 60 people, even though President Uhuru Kenyatta blamed “local political networks” for the murders. Foreign governments have issued warnings for their citizens considering traveling to the country amid heightened threats. Tourist arrivals declined to 1.4 million visitors last year from 1.7 million in 2012. This shows a critical need to address the security situation in the country as a matter of extreme importance.

However it is not all gloomy in the long run for the economy. Updated GDP figures have not led us to significantly revise outlook for the Kenyan economy. Achieving ‘middle income status’ may increase investor interest in the country over the longer term.Kenya’s fiscal health is improving, but disappointing real GDP growth and increased transfers to county-level governments will slow fiscal consolidation. The fiscal deficit will narrow from 5.3% in 2014/15 to4.5% in 2018/19.An improving food security situation and government cuts to fuel  and energy prices will keep Kenyan inflation contained. While a rate hike remains almost certain, the bank will wait until early 2015 before increasing interest rates from 8.5% to 9.0%. Chinese multi-national companies are active in Kenya in the sectors of food production, engineering and construction, communication, telecommunications, aviation and motor vehicle manufacturing. Statistics by the Kenya Investment Authority shows that at least 18 Chinese companies established business in Nairobi in the past two years targeting diverse markets such as footwear and electronics..




Big Blackout of January 2015

02 Feb

More than half of Kenya, including the capital Nairobi, suffered a power outage early on Friday 16 January after a major transmission line failed as reported by Kenya Power, which is the country’s sole electricity distributor, said the blackout started at 03:39. It managed to restore power to most places by 07:15. The outage resulted from a system disturbance on a 220 kV transmission line running between Nairobi and Olkaria, about 100km northwest of the capital. East Africa’s largest economy is struggling with an ageing energy infrastructure that sometimes curbs efforts to improve supply in order to attract investments. The outage affected some police operations that rely on power supply. Some hospitals that do not have standby power supply were also affected.

The costs are calculated and the country is losing millions of dollars in loss of production due to these power outages. Calls for the government to step up the upgrading of power supply infrastructure have increased over the years but response to it has been minimal and slow. Only last year Kenya Power contracted a 17 billion shillings long term loan from standard chartered bank to aid in upgrade of its systems which often suffer technical hitches as well as loss of about 30 percent of electricity during transmission. Kenya power has admitted that they need additional resources to revamp its ageing network to make the county’s electricity supply secure. Businesses in the country often rely on diesel generators to make up the gap between power demand and output and cite frequent localised power blackouts as one of the key barriers to economic growth. Therefore, the supply and pricing of electricity is a critical pillar in the race to attract new investments in the economy and tackle the time bomb of growing youth unemployment—which is a core issue of President Kenyatta’s government. While Kenya Power has been clamouring for increasing tariffs the government is stuck between allowing the tariffs to increase and their duty to protect the citizens from high prices.  The big question in investors’ mind is whether the economy is comfortable with cheaper and erratic electricity supply or plentiful and costly power. There is need to reach a middle ground on this query. What the country needs most is renewable energy such as wind power, hydro and geothermal to meet its needs. In sum, there is need for consultations to guarantee cheaper and adequate electricity instead on taking easy, populist decisions.



M-Pesa International Money Transfer

30 Jan

M-PESA International Money Transfer (IMT) is an innovative way to send from abroad to someone in Kenya. The money is sent directly in to the Receiver’s Mobile phone, to the M-PESA Account, and can then be used in various ways. The money transfer is received close to instantly (time of an SMS text message). Both the Sender & Receiver are sent a confirmation SMS text message from M-PESA.

The scheme is live between the UK and Kenya, and the system is such that additional corridors can easily be added, subject to local regulations. The recipient must be a Safaricom customer to receive IMT. This is because to be registered you need to be on Safaricom. People not registered for M-PESA, on any network, can receive money via M-PESA. You must be registered for M-PESA to send money.

If the recipient is not registered on M-PESA, he gets an SMS confirming that he has received funds from the UK & WU and he needs to register within 21 days to access the funds. (Depending on the Agent from which your friend in UK is sending money, you may receive an SMS advising you to register)

Charges for sending money from UK via M-PESA vary depending on the amount sent and the agent at which the money is being sent from.

Charges vary between ₤4.00 and ₤6.90, for sending up to ₤250. Participating Agents publish their transaction charges; which are currently:

Fee, up to ₤100 Fee, ₤101 to ₤200
Western Union ₤4.90 ₤6.90
Fee, ₤10 to ₤150 Fee, ₤151 to ₤250
Provident Capital ₤4.00 ₤6.00
Mukuru.com ₤3.00 ₤5.00

Obama come home!

26 Jan

There has been a lot of publicity regarding US president Barrack Obama and his Kenyan roots. Kenya is the land of his father and expectantly people were keen on how this irrefutable bond will influence the relationship between the two countries. The most optimistic of us predicted a surge in US – Kenya relations transcending to a mutual benefit especially on the economic front.Kenya’s former president Mwai Kibaki specifically hailed Obama’s victory as significant not only in the history of the United States, but also for Kenya, his ancestral homeland. He added that the victory of Obama was their own victory because of his roots in Kenya. This turned out not to be the case, as Obama had other plans. Ever since his first inauguration on January 20, 2009, Obama has travelled to 46 different states internationally. In Africa, he has ironically only visited four including Ghana in 2009, Senegal, South Africa, Tanzania in 2013. He has visited Indonesia the land of the his step father twice during his presidency and analysts have attributed part his demise in approval ratings to his failure to ignite his home spirits, his home connections, his roots.

In 2013, Obama embarked on his second official African trip and he snubbed Kenya in favour of South Africa, Senegal, and Tanzania, Kenya’s next-door neighbor and perennial rival. International relations experts have observed that historically, Kenya has been a strong U.S. ally. According to a 2012 BBC global opinion poll, 79% of Kenyans view the U.S. positively, making citizens of the nation some of the most pro-American in Africa. The deterioration of relations between the governments of the U.S. and Kenya is unfortunate, but it is not an isolated example in Africa and epitomizes the failure of American’s engagement strategy throughout the continent. The lack of restraint in scolding African governments on how they govern is directly opposite to the quite diplomacy practised by China which partly the reason why China has emerged as the top Global powerhouse. Lucrative commercial opportunities aside, the U.S. will rightfully strive to be an inspiration to African governments by encouraging them to embrace more robust democratic ideals, aggressively fight corruption, and invest more in social development. But this goal can be accomplished without the U.S.’ usual “name-and-shame” approach to diplomacy that African leaders have become accustomed to, and have increasingly ignored now that a partnership with non-judgmental China presents a viable alternative.

In more positive recent news President Obama met with President Uhuru and the US leader has finally declared he will visit Kenya in the near future. He however has not given a date, but Washington and Nairobi are working on the finer details of the proposed visit.



Remittances and the Kenyan Economy 2

23 Jan

A remittance is money sent by a person in a foreign land to his or her home country. Due to the huge sums involved, remittances are now being recognized as an important contributor to the country’s growth and development. Remittances are one Kenya’s largest source of foreign exchange and  they have played a vital role in alleviating the liquidity constraints that would otherwise prevent the state (or households) from investing in important areas like children’s education and housing construction. The Central Bank of Kenya conducts a survey on remittance inflows every month through the formal channels that include commercial banks and other authorized international remittance service providers in Kenya like mukuru.com. Remittance inflows to Kenya increased by 18.6 per cent, from USD 107.5 million in September 2013 to USD 127.4 million in September 2014, and were slightly lower than USD 128.8 million recorded in August 2014.

While the main sources of diaspora remittances to Kenya are from Europe and the United States, Kenyan’s living in other African countries are also attracting interest from Pan African Banks such as West African-based Ecobank Group. The bulk of the money sent goes into household expenditure and supporting investments such as shares and real estate.Currency dealers reckon that the increased flow will help support the shilling.World Bank estimates put total remittances that come through the banking system and unofficial channels such as personal deliveries at over one billion dollars per annum. An increase in the volume of cash remitted by Kenyans working or living abroad has attracted the attention of local and international banks, telecommunication and money transfer firms; all keen to cash-in on this growing segment of the market. This evidences the positive impact on the local economy these remittances have on the local economy. Many have found ways to add on services and and several downstream services have sprung up to allow citizens to get a piece of the proverbial pie.

Security of transfer is a big concern and efforts have more than tripled in a bid to make the transactions safe from various forms of crime. The diaspora remittances business has attracted the attention of Kenya’s monetary authority – Central Bank of Kenya (CBK) – which has already put in place the regulatory framework to monitor cross boarder money transfer activity. Money Remittance Regulations have already been formulated, creating the necessary legal framework for licensing of stand-alone money remittances providers. Companies like mukuru.com have invested heavily in beefing up security to protect all interested parties.

The importance of remittances in the Kenyan economy cannot be underestimated. Kenya’s Vision 2030, the government’s national policy blue print, recognizes the role played by diaspora remittances in national development and therefore highlights diaspora remittances as one of the flagship projects under the financial sector.



Kenyan Motorists Celebrate

20 Jan

There is relief for Kenyan motorists as the country’s Energy Regulatory Commission (ERC) has lowered oil prices. The fuel price drop is the highest since the ERC was set up four years ago. Super petrol is down to 92 Kenyan shillings per litre, Diesel is at 83 Kenyan shillings per litre, while Kerosene is down to 65 Kenyan shillings in Nairobi. The significant drop since last June has been driven by the instability in two chief oil-producing countries, Libya and Iraq. Crude oil prices have plunged in recent times by about 55 per cent on the back of low demand due to weak economic activity and a growing shift from oil to other efficient energy sources. The cost of crude oil now hovers around $45 a barrel so the winners in this epic encounter are importers of crude oil who spend less to buy and stock oil.

Certainly, households, particularly the rural poor, would see more money in their pockets after filling up at the pumps while businesses will benefit from lower input costs. The ERC promised a further drop over at least the next three months, since Kenya imports refined products with a lag time of two months, compared to global crude oil prices. This means the current prices reflect what happened in the world market two months ago.

It is not just motorists who are heaving a sigh of relief following the reduced prices. Kenya’s manufacturing sector stands to register millions in savings on energy prices. The average price of imported diesel, a large component in manufacturing, dropped from $748.73 (Sh68,000) per tonne in November to $641.17 (Sh58,331) per ton in December 2014.

This 14.37 per cent drop is expected to reduce the cost of doing business for manufacturing companies as far as energy costs are concerned with the savings passed on to consumers in terms of reduced shelf prices of goods and services. According to Johnstone Nderi, an advisory manager at ABC Capital, the downward trend in fuel prices should have a net positive effect for investors. As a result of high savings, you are likely to see more resources available for investment which will lead to more productivity and generally a higher standard of living. The downside expected is an increase on the number of vehicles on the roads which can lead to traffic jams and increased emissions into the atmosphere.






Kenya breaks Chinese Cyber Crime Syndicate

16 Jan

A fire broke out in the upmarket neighbourhood in Nairobi of Rhunda Estate in which one person died, preliminary investigations show that the fire was triggered by a faulty server which was part of a complex network of high end communication equipment that looks to having being used for various forms of cyber crimes. Further raids on these premises revealed equipment being operated that are capable of infiltrating bank accounts, Kenya’s M-Pesa mobile banking systems and cash machines. Numerous telephone headsets, computers linked to high-speed internet and monitors were found. So far, police have arrested and charged 77 Chinese nationals in connection with these illegal activities. During the raids, police found soundproof rooms fashioned like military dorms that were full of computer equipment and outfitted with high-speed Internet connections, which is uncommon in Kenya. In Kenya, the perpetrators of computer fraud and criminal hacks are rarely found or arrested, say experts. In this recent case, fire blamed on a malfunctioning computer server revealed the suspects. With the fire spreading quickly, killing one person, the Chinese nationals refused help from their Kenyan neighbours, creating suspicion that prompted them to call the police

The discovery of what police call a cybercrime command centre comes as Kenya is experiencing a wave of computer crime, with criminal hackers carrying out phishing campaigns to extort money from citizens and launching attacks on banks. The arrests are a fortunate break for a police force struggling to contain the problem. Kenya loses close to 22.8 million US dollars annually to cyber crime which is a huge problem that often goes unnoticed.

However suspicions are rife that the group are actually on a espionage mission which could dent diplomatic relations between Kenya and China. The suspects are also facing charges of being in the country illegally as some do not have passports or any sort of identification. Kenya’s foreign ministry also summoned China’s top diplomat in Nairobi as it sought to establish if Beijing was in anyway linked to the affair. Equally hair raising is the quick response from China in pin pointing the groups activities to criminal activities targeting Chinese institutions and an immediate request for extradition. Suspicion is that the gang was on an espionage mission on behalf of the Chinese government as their equipment is capable of infiltrating Kenyan communications systems and this would be a breach of national security. The Kenyan government is looking into this matter and roped in experts to investigate further into the matter.



Christmas in Kenya

23 Dec

How does two big days of partying with the whole family sound to you? That’s how Kenyans typically celebrate their Christmas – and it’s not so dissimilar to how we observe the holidays in the West. To mark the festive season, this article will describe the traditions of Christmas in Kenya.

Most Kenyans in the cities have left their families in the rural areas for work or study reasons, so the first activity that marks the holidays is a mass migration of people back to the villages to their parents’ home. Although only about half the population is Christian (Muslims make up the larger part of the other half), everyone has holidays at this time of year. However, the shops are not doused in Christmas decorations at this time. Some shops decorate modestly and you may catch the odd Christmas tune in the supermarket, but it is nothing close to shopping malls in the West.

By December 24, everyone has usually gathered in the rural home. The home is decorated in the morning with flowers and a Cyprus tree. Christians attend church in the evening, for midnight mass. On returning from church, the party starts! There’s no time for sleep. A goat is usually killed for the occasion and the family will make traditional bee rand the special dishes of their particular tribe. In Kenya most families invite close friends and loved ones for a dinner celebration after attending church services. Rice pudding, chicken, and other roasted meats are typically the main dishes in a Kenyan Christmas dinner and more often than not the dinner is followed by dancing either at a public venue or in the home. Dancing at the public venues is for all ages and can sometimes last until very late at night. Plenty of singing occurs, starting with the traditional songs of the family’s tribe and finishing nowadays with the Christmas carols we all know.

Some people attend church on December 25, but it’s usually women and old men. Most people, however, are still partying and the celebrations continue through the day with more eating, drinking, singing and catching up with family members. For many, this is the only time of the year that they have the opportunity to see their families, so it is a very important time to reconnect. Boxing Day, December 26, is the day for curing the hangover and giving gifts. Christmas in Kenya is not as commercialized as it is in Europe and the United States. This being the case, only the few who can afford gifts give them out. The interesting thing about all of this is the fact that the emphasis of the holiday remains on its religious component, which is the celebration of the life of Jesus Christ. In fact, a lot more goes on in the church than actual gift giving. It is common for people to purchase new (albeit inexpensive) clothing in order to celebrate Jesus. A gravy-like soup made from the goat’s blood and bone is a typical (and sworn-by) hangover cure… and it’s not as bad as it sounds! Gifts are given if the family can afford such a luxury, although usually even something small is appreciated.

In KiSwahili, the greeting is “Heri ya Krismasi” (Merry Christmas) and the response is “Wewe pia” (You also).So to all of you who have been reading my articles I wish you all Heri ya Krismasi. Thank you for your support this year.


Troubled times for Kenya Rugby

19 Dec

Kenya Sevens rugby has been rocked by news of the resignation of national sevens coach Paul Treu after the Nelson Mandela Bay sevens in South Africa. The former South African coach has struggled considerably since he took charge of the team last season, and judging from the string of results, this has been one of the reasons that are being speculated as the cause of the South African’s demise as head coach.

In a statement posted on the KRU website, Treu said it has been a very difficult decision, to make but believes it was  the right decision for him at this stage in life.His statement said:”It has just been over a year since I accepted the offer from the Kenya Rugby Union (KRU) to take charge of the team. We have experienced interesting times, that is for sure. “We have had challenges; highs and lows. We know that this is the nature of sport and the game of rugby that we all love. If it was not too easy, we wouldn’t know the joy of achieving our goals and knowing we worked hard to make them happen.

Disgruntlements have been the order of the day in the national set up, ranging from funding, to player administration, work conditions and relationships with the coaches from the national framework. It has been alleged that Treu had once accused his players of taking banned substances. Treu said it was never his intentions to walk away from Kenya Sevens team but KRU board members were on war path of destruction that will not have let him execute his duties as team’s coach. KRU chairman Mwangi Muthee acknowledged that there has been big interference at Kenya Sevens technical bench by some members of the board. Muthee said it is sad that it has now become a business for some board members to hound out coaches as they continue to interfere with the technical bench. “We had great plans with Treu but people who have never played rugby at high level and first team are now experts,” said Muthee. “It’s a high time the rugby fraternity put its feet down and get the right people who can run rugby.”

Supporters of Kenyan rugby are distraught by these latest developments. Many see this as a step in the wrong direction detrimental to the sport as a whole, while some likened this chaos to what was happening to Kenya cricket. Kenya cricket has been on a steady decline since the heights of the 2003 world cup.





Tackling Unemployment

16 Dec

According to statistics from multiple sources, about 70 per cent of the young working class in Kenya, or almost 10 million people, are unemployed.The World Bank estimates that approximately 800,000 Kenyans join the labour market each year, and only 50,000 succeed in getting professional jobs. Not surprisingly, the high level of unemployment has been blamed for escalating incidents of crime and insecurity in the country.An employers lobby plans to hold a labour summit in a bid to find ways of addressing the high unemployment rate in the country.The summit, scheduled for next year, will also seek to find ways of tackling growing insecurity, which the Federation of Kenya Employers (FKE) believes is a result of having many disillusioned job-seekers. The summit will also involve workers’ representatives.

The Federation of Kenya Employers was created in 1959 to represent employers’ interests, both locally and internationally. It has a membership of 1,500 across the country. Amongst its objectives for the 2015 conference the FKE would next year engage institutions of higher learning with a view of finding the root cause of the skills mismatch that exists among graduates. The idea is for FKE to put its case to training institutions with the aim of ensuring that the curriculum meets the expectations of employers.

In line with efforts to tackle unemployment has seen the Kenyan parliament debate over The Strategic Youth Industries Bill which seeks to put Kenya on the path many developed countries travelled. The Bill seeks to establish the Strategic Youth Industries Board and have the government commit at least 0.1 per cent of its annual revenue to the board to establish industries that should be profitable, sustainable and provide employment to Kenyans in the ratio of Sh100,000:1 employee. This means if the board was to spend Sh100 million in setting up a given industry, the industry should employ a minimum of 1,000 employees and of these, 80 per cent should be young people to solve unemployment. Before establishment of any industry, the board will submit to Parliament a comprehensive proposal, giving a thorough study of the target markets; capital, profitability and employment projections. It is only after debate and approval of the proposal by Parliament that the board can establish the proposed industry. This oversight mechanism over the board by Parliament will ensure none of the proposed industry will be run down as has been the case for some public entities in the past.

The Bill demands that every industry to be set up be privatised within five years. This will see the exit of the industry from the Strategic Youth Industries framework into a listed company, therefore posing a performance target for the board since for any successful privatisation, the industry should have posted good profits over the five years.

The Kenyan government must come to realise that entrepreneurship is a skill not owned by everyone and some people are comfortable being employees rather than beginning their own ventures and the economy must also cater to the needs of these people.  Essentially the bill will cater for both the entrepreneurs and those who seek employment in various sectors of the economy.