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Kenya ppt


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Kenya ppt

  1. 1. KENYA
  2. 2. BASIC INFORMATION • Independence from UK since 12th October 1963 Location: Horn of Africa, East Africa Population: 42.7 million (2015) Capital: Nairobi Official Languages: English, Swahili, Kiswahili Religion: Christianity Government: Unitary Republic Human Development Index: 0.548-medium-48th *sources: CIA World Fact book Economist Intelligence Unit (2015)
  3. 3. CURRENT GOVERNMENT • President: Uhuru Kenyatta-since 9th April 2013 (son of Jomo Kenyatta who was the first President of Kenya from 1964 to 1978) • Vice President: William Samoei Ruto-since 9th April 2013-Head of State and Head of Government • Ruling party: Jubilee Alliance-an alliance of The National Alliance and United Republican Party. Holds the most seats in the National Assembly • Official opposition: The Coalition for Reforms and Democracy (Cord) (comprising the Orange Democratic Movement and Wiper Democratic Movement parties led by Raila Odinga and Kalenzo Musyoka) holds the second largest number of seats and is the official opposition. Holds the second largest number of seats in the National Assembly
  4. 4. Key Ministers: • Agriculture, livestock & fisheries: Willy Bett • Defence: Rachael Omamo • East African affairs, commerce & labour: Phyllis Kandie • Energy & petroleum: Charles Keter • Environment, water & natural resources: Judy Wakhungu • Foreign affairs: Amina Mohamed • Health: Cleophas Mailu • Industrialisation & enterprise development: Aden Mohamed • Interior & government co-ordination: Joseph Nkaisserry • Land, housing & urban development: Jacob Kaimenyi • Transport & infrastructure: James Macharia • Central bank governor: Patrick Njoroge
  5. 5. Political/Governmental Structure: • The President is Head of State and Head of Government of a multiparty system. Directly elected for a 5 year term. A candidate must cross the 50% threshold in a first round of voting to secure victory; otherwise the two best placed candidates must contest a second round • Executive power exercised by the government • Legislative power is vested in both the government and the National Assembly and the Senate • New constitution in 2010-came into effect on 27th August 2010 • Legal system based on English common law and the new 2010 constitution, legal system coming into effect in 2013 Legislature: Lower House: National Assembly-349 seats • Upper House: Senate-67 seats • These two houses together form Parliament Judiciary: Independent set of courts of Supreme Court, Court of Appeals, High Court and a series of subordinate courts
  6. 6. ELECTIONS• The March 2013 general elections saw Kenyatta win the presidency with 50.07% of the vote and the Jubilee Alliance win the most seats in the National Assembly with 167 • Jubilee Alliance is 8 short of an outright majority but is backed on an informal basis by several other parties, including members of the Amani coalition, the third largest grouping in parliament • A challenge to the presidential results was challenged by Kenyatta’s main rival Raila Odinga but was rejected by the Supreme Court • Next elections in August 2017 according to constitutional timelines-2 attempts to delay the elections until the end of 2017 failed to secure the 2/3 parliamentary majority needed to amend the constitution and a further attempt seems unlikely • Alliances between political parties will shift in the run up to the polls as key figures jostle for influence • Kenyatta is likely to stand for a second and final 5 year term as president, especially since the threat of ICC prosecution (on
  7. 7. • The Jubilee coalition of the National Alliance and the United Republican Party are expected to form the Jubilee Party in April 2016 to provide a unified front • A change of government in 2017 would not lead to major policy shifts as all main parties support a broadly pro- market approach *sources: Economist Intelligence Unit (2015) BBC News website
  8. 8. POLITICAL HISTORY• Kenya was a one party state under the Kenya African National Union (KANU)until 1991 after which a multi party system was introduced • Voters remained loyal until 2002 when the National Rainbow Coalition won a landslide victory and then a second term along with its allies in December 2007. However, allegations of vote rigging led to intercommunal violence and subsequently a power sharing deal and a grand coalition government • The 2002 elections saw Mwai Kibaki become president with 62.20% of the vote • The National Rainbow Coalition held 132 seats in the National Assembly • The 2007 elections saw Kibaki retain his position with 46.42% of the vote • The National Rainbow Coalition, along with its allies in the Orange Democratic Movement held 102 seats in the National Assembly
  9. 9. • In 2005 the country voted against a proposed new constitution • In 2010 a new constitution was implemented after a referendum *sources: Economist Intelligence Unit (2015) BBC News website African elections database
  10. 10. POLITICAL FORECAST • With less than two years until the 2017 election political tensions will inevitably rise • However the peaceful transition of power to Kenyatta after the 2013 election and the adoption of the 2010 constitution suggests political stability and the current government remaining in power • There are two key threats to political stability: 1. Security risks associated with terrorism 2. Institutional turf wars arising from the major changes embodied in the new constitution • Kenyatta will remain in power until the August 2017 elections • The main policy challenge will be to alleviate structural constraints such as weak infrastructure
  11. 11. • The new 2010 constitution (implemented following a referendum) provides stronger checks and balances and the devolution of powers to 47 new counties, which may lead to greater accountability and transparency in the future. However this could also be accompanied by power struggles between the various arms of government at both national and local level. The new constitution also created the Senate • Problems in transitioning devolution will arise with the deadline for passing the final batch of constitutional legislation now extended to 2016 • Al-Shabaab is a threat with the UN administered Dadaab refugee camp in northern Kenya, it is home to over 350,000 refugees from Somalia’s civil war, this potentially adds to the security risk. The al-Shabaab threat is compounded by long term ethnic rivalries and lack of a coherent government strategy to deal with radicalisation of local youths
  12. 12. • Evidence of the growing threat of al-Shabaab is shown by recent terrorist attacks such as: • September 2013: Somali al-Shabaab militants seize the Westgate shopping mall in Nairobi and kill more than 60 people, saying they want Kenya’s military to pull out of Somalia • June 2014: At least 48 people die after Islamist militants attack hotels and a police station in Mpeketeni near the island resort of Lamu • April 2015: Al-Shabaab militants carry out a massacre at Garissa University College in North West Kenya, killing 148 people
  13. 13. INTERNATIONAL RELATIONS• Foreign policy will be driven by economic interests, especially maintenance of close relations with key donors and the advancement of regional integration with the East African Community (EAC) • Kenya and other EAC members belatedly signed an economic partnership with the EU in October 2014, ratified in 2016 • Kenya will also maintain close ties, including military cooperation, with the US-underpinned by the official visit of the US President Barack Obama in July 2015. Obama praised Kenya’s progress but urged action to improve gay rights • Relations are formed with important emerging countries such as China and India • Kenya will remain deeply engaged in Somalia, as part of the African Union peacekeeping force, but there is little immediate prospect of bringing an end to the country’s long running war *source: Economist Intelligence Unit (2015)
  14. 14. CURRENCY • Kenyan Shilling (KES)-$1 is 102.67 shillings Shilling under pressure shown by: Large current account deficit Further increases in US rates Slower growth in China Investor concerns over the overall outlook for emerging markets Increasing threats of al- Shabaab on Kenyan territory Declining exports 80 90 100 110 120 2015 2016 2017 2018 2019 2020 KenyanshillingagainstUS$average Year Currency projections
  15. 15. The reintroduction of a Capital Gains Tax which charged 5% on all income from sale of shares at Nairobi securities exchange as well as property This has led to a drop in US investment • But capital inflows are likely to be sufficient to ensure that the depreciation is contained • Steady shilling depreciation expected with the rate being $1 to 105.82 shillings in 2016, declining to $1 to 117.5 shillings in 2020. The slide will be more rapid if political or economic confidence slips • Monetary tightening in 2015 helped to stem the depreciation of the shilling and stabilised it in Q4, shrugging off US interest rate increase in December 2015 • Higher interest rates will offer some support to the shilling
  16. 16. • The International Monetary Fund (IMF) has signed off a 65 billion shilling ($610.7 million) cautionary lending facility handing the Central Bank of Kenya fresh fire-power in its battle to save the shilling • The IMF has said that Kenya’s shilling will probably remain under pressure as capital inflows into East Africa’s biggest economy slow *sources: Economist Intelligence Unit (2015)
  17. 17. ECONOMIC INFORMATION AND FORECASTS GDP: Total: $142.742 billion (2015) Per capita: $3238 • Ongoing fiscal stimulus and structural reforms such as deregulation and privatisation will provide economic activity • Main constraints on growth include the prospect of further interest rate rises and weakness in tourism because of security concerns • Expectations of improved rainfall will potentially bolster the key agricultural sector • Ongoing investment in infrastructure (private and public), closer economic integration within the EAC and slightly brisker global growth will underpin expansion • Household consumption will be relatively buoyant
  18. 18. • In the years 2019 to 2020 growth will remain brisk as investment in oil related infrastructure and production facilities will support it. The exploitation of further oil reserves will not start in this period • In December 2015 a new law for special economic zones came into effect, offering concessions including lower taxes. In combination with the launch of Kenya’s Industrial Transformation Programme the government is looking to expand the manufacturing sector. This is a key policy objective • The government intends to push ahead with reforms including trade liberalisation, privatisation and deregulations in order to improve the business environment, boosting growth and cutting poverty. Increased use of public-private partnerships and roll out of key infrastructure projects will facilitate the process • Growth will remain robust in 2017-20 at an annual average rate of 6.1% helped by a sustained expansion in consumer services, urbanisation, EAC integration, structural reforms and investment in infrastructure, including a major new railway line
  19. 19. • Kenya’s relation with the IMF is sound and is committed to IMF style policy reforms focusing on fiscal management after being granted a 2 year stand by facility of US$687 million in February 2015. The Fund’s Executive Board completed the first review in September 2015. Continued IMF backing will encourage support from other donors. However problems like corruption and weak governance will potentially strain relations with external backers. The fund will continue to provide a cushion in case of adverse shocks and foreign reserves provide over 4 months of import cover • Corporation tax is 30% for resident companies and 37.5% for non-resident companies, inclusion of labour and other taxes adds a further 7-8% in each case • VAT is levied at 16% • In terms of foreign trade Kenya has a diverse export profile, led by tax and horticultural products • Kenya has close trade links with fellow members of the Common Market for Eastern and Southern Africa (COMESA) and the East Africa Community
  20. 20. • The government will prioritise the liberalisation and closer integration within the EAC as part of a drive to create a single regional market • Twin budget and current account deficits pose some risk to macroeconomic stability. Policymaking will remain vulnerable to exogenous shocks, ranging from drought and volatile commodity prices to insecurity and political infighting • Kenya will maintain a large fiscal stimulus but aims to bring down budget deficit gradually. The budget for financial year 2015/16 (July to June) projects a deficit of 8.7% of GDP because of increased outlays on wages, transfers to the counties and capital projects. The Economist projects actual deficit to be 8% of GDP because of under spending on capital projects, public sector capacity constraints and cutbacks on recurrent items • The deficit is expected to narrow to 7.3% of GDP in 2016/17, fall further to 3.6% in 2019/20, helped by improved revenue collection and robust GDP growth • The deficit will be financed using a mix of domestic and foreign borrowing with a slightly greater reliance on external debt. For example there is a US$750 million 8 year syndicated bank loan
  21. 21. • Main budget related risks are overspending on wages and recurrent items, wastage and corruption, the poor financial health of some enterprises and possible tax rises to cope with revenue shortfalls • Current account deficit will maintain a broad downward trend reaching 4.3% of GDP in 2020. The gap will remain at 6.7% in 2016 because of large capital equipment imports to support major infrastructure projects such as the new standard gauge railway line • Closer EAC integration will help to drive demand for Kenyan manufacturing while horticulture sales will benefit from the signing of a new economic partnership between the EAC and the EU in October 2014 • The merchandise trade balance will remain firmly in deficit in 2016-20 • Kenya’s trade profile will alter significantly if the country becomes an oil exporter, but this will not happen until 2021 • Invisible earnings (for example tourism, remittances and servicing regional trade) are poised to expand but will remain vulnerable to negative global and local developments
  22. 22. • Income debits will rise because of increased payments to foreign investors and debt service outlays • Current account deficits will leave Kenya dependent on external inflows to fill the gap • Prospects for banking remain generally sound, driven by robust demand for credit but regulation breaches stemming from apparent corruption which have led to two smaller banks being placed in receivership in 2015, pointing to the need for a tightening in central bank surveillance *source: Economist Intelligence Unit (2015)
  23. 23. INFLATIONARY INFORMATION• The Central Bank of Kenya (CBK) kept benchmark interest rates on hold at 11.5% in November. They are likely to sanction further increase in 2016. This signals CBK’s determination to curb inflation and support local currency • External factors will play a key role, the CBK will potentially match any US rate rises in 2016 and beyond • Inflation expected to pick up to 8% year on year, which will increase the pressure on the CBK to embrace higher rates although cheaper oil will offer some relief • Consumer price inflation jumped to 8% year on year in December, a 16 month high, because of a further upward move in food prices and the impact of new, higher excise taxes on a range of goods • Commercial banks’ lending rates will broadly track the policy rate although the spread between the two rates will gradually narrow
  24. 24. • Expect lending rates to decline from 16% in 2015 to 14.2% in 2020. This will also be helped by growing sophistication of monetary policy and competition between banks • Improved rainfall will stop growth in food prices • Electricity tariffs may stabilise in 2016, helped by an increased reliance on drought resistant geothermal power *source: Economist Intelligence Unit
  25. 25. FDI AND INFLUENTIAL INVESTORS INFORMATION• Ongoing investment in infrastructure (private and public), closer economic integration within the EAC and slightly brisker global growth will underpin expansion • Growth will remain robust in 2017-20 at an annual average rate of 6.1% helped by a sustained expansion in consumer services, urbanisation, EAC integration, structural reforms and investment in infrastructure, including a major new railway line • In December 2015 a new law for special economic zones came into effect, offering concessions including lower taxes. In combination with the launch of Kenya’s Industrial Transformation Programme the government is looking to expand the manufacturing sector. This is a key policy objective • China will provide US$1.5 billion in loan funding to extend the under construction standard gauge railway (SGR) from Nairobi to Naivasha • In terms of foreign trade Kenya has a diverse export profile,
  26. 26. • Foreign investments in Kenya remain relatively weak considering the size of its economy and its level of development. This can be explained by a number of hindrances to investment, notably the country's political instability, as well as the security issues it faces, its low quality infrastructure and an unfavourable business climate. • Nevertheless, Kenya has become one of the largest recipients of FDI in Africa, with FDI inflows significantly increasing in line with the trend of growing FDI inflows since 2010 • This rise is related to investments, mainly Chinese, in the mining and hydrocarbons sectors • Kenya has close trade links with fellow members of the Common Market for Eastern and Southern Africa (COMESA) and the East Africa Community • Kenya’s import profile is diverse with the Middle East and Asia accounting for around 60% of the profile
  27. 27. • Moreover, it is one of the most attractive East African countries to companies. A Chinese investor has launched a project to create a railroad connecting Rwanda, Uganda, South Sudan and Kenya for a cost of almost USD 14 billion • FDI inflows into Kenya have increased substantially in 2013 (over USD 500 million). The IMF declared that Kenya has become the second investing country in the region of Sub-Saharan Africa. In the classification of Doing Business 2015 issued by the World Bank, Kenya ranks 136 out of 189 countries • Foreign investors seeking to establish a presence in Kenya generally receive the same treatment as local investors, and multinational companies make up a large percentage of Kenya’s industrial sector • Furthermore, there is no discrimination against foreign investors in access to government financed research, and the government’s export promotion programmes do not distinguish between local and foreign-owned goods
  28. 28. • In the coming years, the simplification of the conditions for obtaining business licenses, together with the development of public-private partnerships as part of the "Vision 2030" strategy, should have a positive influence on FDI inflows. Moreover, most of the sectors are open to foreign investment. In recent years, it is the telecommunications sector that attracted most of the FDI, with the advent of fibre optics in 2009-2010. Other sectors attracting FDI are banking and tourism *sources: Economist Intelligence Unit (2015)
  29. 29. ECONOMIC CHARTS 4.8 5 5.2 5.4 5.6 5.8 6 6.2 6.4 Real GDP growth projection (%) Sources: World Bank Economist Intelligence Unit 0 2 4 6 8 2015 2016 2017 2018 2019 2020 Inflation projections (%) Sources: World Bank Economist Intelligence Unit
  30. 30. 28.5 29 29.5 30 30.5 2014 2015 Agriculture (as % of GDP) Sources: CIA World Fact book World Bank 16 17 18 19 20 2014 2015 Industry (as % of GDP) Sources: CIA World Fact book World Bank
  31. 31. 48 49 50 51 52 53 54 2014 2015 Services (as % of GDP) Sources: CIA World Fact book World Bank Source: Economist Intelligence Unit (2015) 0 5 10 2015 2016 2017 2018 2019 2020 Agriculture growth estimate (%) 0 5 10 2015 2016 2017 2018 2019 2020 Industry growth estimate (%) 0 5 10 2015 2016 2017 2018 2019 2020 Services growth estimate (%)
  32. 32. Source: World Bank Economist Intelligence Unit (2015) Source: IMF Economist Intelligence Unit (2015)0 20 40 60 80 2014 2015 estimate 2016 estimate 2017 estimate General government net debt (as % of GDP) 0 2 4 6 8 10 12 2014 confirmed 2015 2016 2017 2018 2019 2020 Current account deficit projections (%)
  33. 33. 29.3 17.4 53.3 GDP composition by sector (%) (2015) Agriculture Industry Services Source: CIA World Fact book
  34. 34. AGRICULTURE SECTOR SPECIFIC INFORMATION AND ANALYSIS • Agriculture is very important but the least developed and largely inefficient, agriculture employs 75% of the workforce • Over 80% of the Kenyan population live in rural areas and make a living, directly or indirectly, from agriculture • Expectations of improved rainfall will potentially bolster the key agricultural sector • Kenya will still be dependent on rain fed agriculture in 2017- 20 despite increased irrigation • Export growth will be comparatively buoyant, supported by sales of tea
  35. 35. • Agricultural sector productivity has declined over the last two decades • Less than 7% of Kenya’s cropped land is irrigated, while as much as 83% of land is arid or semi-arid and classed as ‘low potential’ • Focus on manufacturing and the vulnerabilities of this sector to weather and other environmental factors will mean investing in this sector is as risky as it has always been • The sector is important for poverty reduction since the most vulnerable groups, such as pastoralists, the landless, and subsistence farmers, depend on agriculture as their main source of livelihoods Growth in agriculture therefore can be expected to have a significant impact on a larger section of the population than any other sector *sources: Economist Intelligence Unit (2015)
  36. 36. CONSUMER SECTOR SPECIFIC INFORMATION AND ANALYSIS • Domestic consumption is at the heart of Kenya’s economic expansion. More than a third of loans this year have gone to private households. Purchases of refrigerators and televisions are increasing. There are enough mobile phone subscriptions to account for every adult in the country • Election jitters, the extension of value added tax and the Westgate shopping mall massacre have suppressed demand. The hoped-for mass injection of foreign direct investment has failed to arrive in the wake of March 2013 elections • Plans for shop openings and more shopping malls suggest that, even if individual pockets are tighter, investors are banking on Mr Shah’s sense that more punters are joining the ranks of spenders
  37. 37. • Consumption nationwide averages an annual $1,526 per capita; in Nairobi it reaches $2,827, according to McKinsey • Loan defaults have started to creep up. Kenya’s central bank said in its September credit survey, that it expected loan defaults on consumer loans to rise during the quarter ahead, “continuing the trend witnessed in the first three quarters of 2013” • This is on top of a 17 per cent increase in non-performing loans in 2012, a third of which derive from personal household loans • Spenders also feel hamstrung by rising prices. Kenya’s consumer federation predicts shoppers will change their habits in the wake of the Westgate attack, avoiding family outings and the leisure-style shopping that supported Westgate’s social status
  38. 38. • But retailers are fighting back. Westgate shop-owners are determined to reopen some stores within a few months, with full renovation expected within three years • Kenya has the most developed retail market on the continent after South Africa • Overall it seems the biggest risk in this sector is the threat from terrorism . This sector seems to have potential for investment and development if and once the fear of terrorism subsides • The $250m development on the Nairobi-Thika highway is due to open late in 2014. When the final phase is complete in 2017, the development will include office space, homes and parks as well as the mall • As always, consumption is concentrated in the capital. The World Bank estimates 40 per cent of the country’s wage earnings come from Nairobi and Mombasa *source:
  39. 39. HEALTHCARE SECTOR SPECIFIC INFORMATION AND ANALYSIS • Whereas the United States counts on 26 physicians per 10,000 people, Kenya has just one doctor per 10,000 residents, a ratio that is below average for the Africa region. More than 50% of Kenyan physicians practice in Nairobi, which, with an estimated 3 million people, represents a small fraction of the country’s population. Only 1,000 physicians work in the public sector, which serves the majority of Kenyans • A corps of 37,000 nurses supplements physician care, as do traditional midwives, pharmacists, and community health workers • The migration of trained health workers from the public sector to higher paying positions in the private sector, or away from Kenya altogether, has made retaining qualified health personnel a persistent challenge • Kenya has one of the highest net emigration rates for doctors
  40. 40. • Kenya is moderately dependent on donor funds, many of which supplement the development component of the national health budget. In 2006 external resources accounted for 14.8% of all health spending in Kenya • The United States is the largest bilateral donor, channelling funds through PEPFAR, the President’s Malaria Initiative, and United States Agency for International Development (USAID). In 2009 the United States is expected to spend $529.1M through PEPFAR programs alone • The presence of so few health personnel in Kenya can make it difficult for the government to carry out adequate disease surveillance, maintain accurate statistics regarding disease outbreaks, and report relevant findings to neighbouring countries and international organizations
  41. 41. • The United Kingdom also commits significant bilateral funds to the health sector, followed by Denmark, Germany, Japan and the Netherlands • The European Union has committed funds to health programming in Kenya, and Kenya receives support from the World Bank and agencies within the United Nations system, including WHO, UNAIDS, UNICEF and UNFPA • This sector seems pretty open, almost reliant on foreign investment, so plenty of opportunities to invest *source:
  42. 42. POLITICAL RISK ASSESSMENT • Kenya is politically stable from a domestic viewpoint with an official democratic process, or at least respect for one, in place and the 2017 elections likely to lead to a peaceful transition of power. Furthermore even if the government were to change, the likelihood of consistency in policy is high, therefore an investment would not be at risk. The only clear risk is the threat from terrorist groups such as al-Shabaab, with a number of attacks in recent years. Investment from a political standpoint is good, certainly one of the less risky choices in Africa.
  43. 43. ECONOMIC RISK ASSESSMENT • Economically Kenya is on the right track and is also stable. External investment from the IMF and other states such as China mean that Kenya has strong economic ties with the outside world which should benefit everyone involved. Investment into infrastructure and the oil industry is being carefully planned out and will reap benefits in the future, especially if Kenya becomes an oil exporter as planned in 2021. The currency is also on a relatively stable footing and future path. Investing in Kenya seems a good choice.
  44. 44. INVESTMENT CONCLUSIONS Investment? Yes, as long as the terrorist threat is one that can be dealt with and taken into account Why? The democratic process is solidly in place, the economy seems to be on the right track and the terrorist threat is one which can be tackled. The sector most logical for investment is manufacturing as the government is putting the most effort behind it with the greatest scope to develop. Healthcare is also a sector with lots of opportunities. Agriculture is risky while the consumer sector is damaged by recent terrorist attacks.