A general view shows a section of the completed phase of the Greenpark estate in Lukenya, near Nairobi. Kenya, like other nations on a continent that boasts some of the fastest growth rates in the world, is racing to upgrade neglected infrastructure, improve regulations and revise often outdated economic figures to spur investment.

Reuters

Kenya, like other nations on a continent that boasts some of the fastest growth rates in the world, is racing to upgrade neglected infrastructure, improve regulations and revise often outdated economic figures to spur investment.

For some, there are echoes of the start of Asia’s rise.

But Kenya’s challenges, many of which are mirrored across Africa, are formidable if it wants to build on recent gains. It cannot boast the high savings that helped boost Asian economies and its efforts to attract the kind of new industry that will create jobs and boost exports have had mixed results.

“It needs a higher rate of savings and more investment in infrastructure to boost the country’s productive potential,”   said Razia Khan, the head of research for Africa at Standard Chartered in London.

Gross national savings are 11% of gross domestic product (GDP), the International Monetary Fund says, below the 26% target set in the Vision 2030 economic blueprint and the kind of level seen in some Asian nations.

Savings are vital if Kenya is to avoid loading up too heavily on foreign debt to fix roads, pave dirt tracks and build power plants to meet the needs of businesses which frequently complain about the cost of electricity and outages.

French retailer Carrefour is one several new investors in Kenya, shrugging off the east African nation’s infrastructure and other challenges to bet instead on the growing number of middle class Kenyans with money to spare.

Through its Dubai-based franchisee Majid al Futtaim, Carrefour will become the anchor tenant of the new Two Rivers mall due to open next year in Nairobi.

“There is huge demand,” said James Mworia, chief executive of Centum Investment, the main investor in the mall, which is part of a bigger commercial and residential development.

“What is lacking today in Kenya and Africa generally is quality places for people to do business,” he said at the building site. But while Kenya’s consumers may catch the attention of companies like Carrefour and Porsche, the country needs to draw manufacturing and other industries if it is to generate more jobs and help expand exports beyond commodities.

Textiles are a bright spot. Kenya exported garments worth $335mn in 2013 and the business already employs 40,000 people, industry executives say. “We are making very good progress in the textile sector,” Adan Mohamed, minister for industrialisation and enterprise, said in October, adding a new factory employing 5,000 people would open in Mtwapa on the coast in November. But other firms are struggling. Even budding clothes makers complain about expensive power supplies and poor infrastructure, saying it drives some investors away.

Eveready East Africa said in October it was stopping production of batteries in Kenya, with the loss of 99 jobs, and shifting to Egypt.

“It is not competitive,” said the firm’s chief executive, Jackson Mutua. “There are a number of factors that they need to put right.” When Kenya revised data last month, the economy was judged to be 25% bigger in 2013 than originally estimated, at $53.4bn, reducing the ratio of debt to GDP from 57% to a healthier but still hefty 50%.

GDP per capita rose to $1,246, entering the World Bank’s $1,045-to-$12,746 band for middle income states.

Growth was revised upward, with 2013’s figure set at 5.7%. That is still below the 6% economists say is a minimum needed to make a tangible impact on the poor in a country where around 40% live below the poverty line, broadly defined as those living below $1.25 a day.

The economy has also been hurt by what turned out to be unfounded worries about election violence in 2013 as well as militant attacks including several in 2014. Economists say governance and corruption issues remain a drag on performance.

“We are behind,” said Gachao Kiuna, chief executive of conglomerate TransCentury, who helped draft Vision 2030. “People put a lot of emphasis on foreign direct investment, which is important, but the bigger driver is domestic direct investment.”

Kenya also languishes low down in the World Bank’s rankings on ease of doing business. In the 2014 table, it crept up one place but was still in 136th position out of 189 countries, where No 1 is the easiest place to do business.

Officials and a private sector lobby group said this year’s ranking did not properly reflect changes that came into effect around the time when the positions were settled in June.

 

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