Kenya Economy - Manufacturing, Construction, Transport


Kenya’s inclusion among the beneficiaries of the U.S. Government’s African Growth and Opportunity Act (AGOA) has given a boost to manufacturing in recent years. Since AGOA took effect in 2000, Kenya’s clothing sales to the United States increased from US$44 million to US$270 million (2006). Other initiatives to strengthen manufacturing have been the new government’s favorable tax measures, including the removal of duty on capital equipment and other raw materials.

The manufacturing sector, which contributes about 13.2 per cent of Gross Domestic Product (GDP), is estimated to have expanded by 0.6 per cent in the twelve months to July 2000 compared with 1.0per cent in 1999. This figure is however expected to drop over the next year due to pitfalls in certain sectors of development. These include the current power shortages, which have resulted in the rising costs of production as it has necessitated purchase of alternative power sources by the industry. There is also the water shortage, which has brought about reduced supply of raw materials to agro-based industries. There has been a major threat from cheap imports and second-hand commodities and low domestic demand.

The manufacturing sector recorded a slow in between the years 1992 and 1994. Total employed persons in this sector were 190,355 persons and 197,648 persons in 1992 and 1994 respectively. The value of manufactured exports recorded an increase during this year.

During the year 1996, the growth in the manufacturing sector slowed down due to high interest rates, power rationing and high costs of manufacturing. Total employment in this sector rose from 204,790 persons in 1995 to 210,500 persons in 1996.

The volume of manufacturing production recorded a modest expansion in 1997. In real terms output growth of the sector slowed down further to 1.9 percent in 1997 compared to 3.9 percent and 3.7 percent registered in 1995 and 1996 respectively. The slower growth in output was attributed to several factors among them, deepening effects of trade liberalization, power rationing in the early part of the year and diversion of transit goods into the local market. Other factors were, deterioration of infrastructure that led to high input cost, general slowdown in operations due to uncertainties relating to the general elections and depressed local demand occasioned by high product prices as well as falling real household incomes.

The slowdown in the manufacturing sector was also reflected in slower rate of growth in employment from 2.6 percent in 1996 to 1.9 percent in 1997. Similarly demand for manufactured goods decreased as shown by provisional data on Business Expectations Enquiry (B.E.E).

Information on the Export Processing Zones shows that, in 1997, the number of gazzeted zones increased to 15 from 14 in 1996 while the number of approved enterprises increased from 70 enterprises in 1996 to 82 enterprises in 1997. Total turnover in the zones increased by 18.8 percent in 1997 while the value of export as a percentage of total turnover improved from 68 percent in 1996 to 74 percent.

Building & Construction

Adverse economic conditions prevailing in the country hampered the growth of this sector in 1992. This trend of slow growth continued in 1994 due to lack of adequate funds for public projects. Employment in this sector rose from 21,000 people in 1993 to 26,000 people in 1994. Slowdown in economic activities in the domestic economy and Lack of adequate funds for public buildings and construction projects continued to affect this sector in the years 1995 and 1996 resulting in slow growth. The high interest rates (30%) on commercial banks and building societies loans constrained growth in this sector. Cement consumption in 1996 was 1,160 thousand tonnes as compared to 1,065 thousand tonnes consumed in 1995. The growth in employment in this sector declined.

The main indicators in building and construction sector show that the sector’s activities remained low in1997. The unsatisfactory performance was partly attributable to the slow down in the public sector construction activities as a result of Government’s austerity measures and cuts in donor funds, high rates of borrowing also made investments in buildings low. Building and construction activities were also affected by unfavorable weather conditions experienced during the last quarter of the year. Consumption of cement declined by 13 percent to 816 thousand tonnes in 1997 and 5.7 percent in 1998 the lowest level since 1993. Road construction was low in 1998 due to inadequate funding for new roads, and for maintenance. The El Nino rains also affected this sector by destroying roads and bridges in some parts of the country.

The construction sector improved in 2005 with cement consumption increasing by 10.9 percent from 1,418,300 metric tonnes in 2004 to 1,572,500 metric tonnes in 2005. This growth momentum continued into 2006, with cement consumption in the first seven months of 2006 growing by 6.2 percent from 868,261 tonnes over a similar period in 2005.

Transport, Storage and Communication

The growth of this sector improved from 8.9% in 2005 to 10.8% in 2006. The volume of cargo handled at the port of Mombasa grew by 8.4% from 13.3 million tonnes in 2005 to 14.4 million tonnes in 2006.

The growth of this sector was low in 1992. This sector was affected by lack of foreign exchange and depressed demand occasioned by high transport costs. The performance of telecommunications sub-sector improved while the readership of the daily newspapers declined over the same period.

By 1994, this sector’s performance had improved considerably by recording a 17.5% growth of output in marginal terms. The good performance of this sector was partly due to the completion of the oil pipeline in Western Kenya.

The sector’s performance, which had risen to 18.9% in 1995, declined to 13% In 1996. Road transport, air transport and pipeline transport all realized appreciable economic output. During 1996, 22,224 vehicles were registered during the year 1997, transport, storage and communications sector continued to grow at slower rate compared to growth levels in 1996. The nominal value of output from the transport and communications sector went up from K£3,425.8 million in 1996 to K£3,635.9 million in 1997; a rise of 6.1 percent. Significant growth in the output value were manifested in air transport, water transport and communications sub-sectors whose growths were 11.0 percent, 7.0 percent and 7.9 percent in 1997 compared to 1996 levels.

The drop in freight tonnage transported along the railway network adversely affected the economic performance of Kenya Railways. Total freight ferried by the corporation went down by 21.3 percent from 2,059.7 tonnes in 1996 to 1,620.6 tonnes in 1997. However rail passenger journeys made during the period under review almost maintained the 1996 level. Activity at Mombasa harbour recorded mixed performance; imported freight recorded a substantial growth of 4.1 percent from 6,318 thousand tonnes in 1996 to 6580 thousand tonnes in 1997. Exported cargo, however dropped significantly from 2,376 thousand tonnes in 1996 to 1,830 thousand tonnes in 1997.

Overall performance of commercial airlines operating at Jomo Kenyatta and Moi international airports recorded substantial growths although there was a significant drop in the number of transit passengers handled. The telecommunications industry continued to boost the overall economic performance of the communications sub-sector. Activity in the information and mass media sub-sector recorded commendable performance following increased sales of new radio and TV sets. Similarly there was an increased sale of newspapers especially the weekly newspapers and magazines.

Social Scene

The Government’s expenditure on social services in 1992 was approximately K£981 million. Much of this expenditure went to the education sub-sector, which accounted for 76% and 59% of the recurrent and development expenditure respectively. Enrolment in all the four public universities by the year 1992/93 was 10,189. Teachers in both primary and secondary schools were 176,359 and 36,560 respectively.

By 1994, the government’s expenditure on social services had risen to K£ 1,925.74 million from K£ 1,319.17 million recorded in 1993. 78% of this expenditure was spent in the education sub-sector. By 1996, primary and secondary schools in the country had increased to 16,255 and 3.004 respectively. Enrolment at the two levels stood at 560,000 pupils and 658,000 students. The number of health institutions during the same period was 3,993.

The number of primary and secondary schools increased by 2 percent to reach 17,356 and 3,081 in 1998 respectively. Enrolment in primary and secondary schools rose by 4.3 percent and 1.9 percent to stand at 5.9 million and 700538 respectively. The number of primary school teachers rose from 186,590 in 1997 to 192,306 in 1998 which was a 3.1 percent increase while that of secondary schools dropped by 1.5 percent to 43,694. Teacher pupil ratios were 30.8:1 and 16:1 in both primary and secondary schools respectively.

Enrolment in the five public universities dropped by 7.0 percent from 43,591 in 1997/98 academic year to 40,523 in 1998/99 academic year with 30.5 percent being female students. Enrolment in the four private universities accredited by the government increased by 6.6 percent to stand at 3,888 in 1998/99 academic year with female students constituting 46.7 percent.

The number of health institutions increased by 1.9 percent from 4,096 in 1997 to 4145 in 1998. Annual contribution to the National Social Security Fund decreased by 3.1 percent.

Total enrolment of pupils in primary schools was 7.63 million in 2006, up from 7.59 million in 2005. Enrolment in secondary schools was 1,030,080 in 2006, up from 934,149 students in 2005, an increase of 10.3%. The number of teacher trainees enrolled increased marginally from 22,335 in 2005 to 22,620 in 2006 with 60.6% being in public institutions. Enrolment in public universities increased by 11.8% from 81,677 students in 2005/06 academic year to 91,337 in 2006/07. The number of health facilities increased by 5.3% from 4,912 in 2005 to 5,170 in 2006.

Last Updated on Tuesday 24th November 2009