Doing Business in Africa: Kenya

Doing Business in Africa: Kenya

For the time being Kenya’s economic growth remains dominated by agriculture though that may soon be changing. First, the country’s manufacturing sector is the most developed in the region and of Africa’s big three economies the importance of the sector to the overall economy is second only to South Africa. This may seem surprising, but a well-known side-effect of oil-led development such as exists in Nigeria is a withering of other sectors as resources get poured into it and a stronger currency chokes off non-oil exports. Not having an oil sector, Kenya does not have these problems.

For now, at least. International oil explorers operating in the country’s four geologic basins have so far discovered a little over a billion barrels of oil in the country, the majority in the country’s Lokichar Basin in its Southern Great Lakes region. At present global price levels that oil represents about $1 Trillion in wealth just waiting to be unlocked. What’s more, Kenya’s government is keen to see its oil wealth tapped and put to productive use.

Kenya is also likely to play a vital role in the unfolding oil boom in the region as a whole. Slightly smaller amounts of oil have been  discovered in Uganda while Tanzania’s onshore potential and South Sudan’s present production all need a way to get to market – and Kenya is almost ideally situated to serve as a transport and export hub. Talks are in the works to create a pipeline linking all these country’s present and predicted oil producing regions with an export terminus somewhere on the Kenyan coast, likely in the Lamu region.

Kenya also has other significant opportunities as well. It remains a center for aerial transport in Africa and tourism, long a mainstay, continues to be important. Urbanization is helping manufacturing remain steady, especially in the light consumerables portion of the market while emerging export zones are likely to assist the country in promoting exports abroad. Combine that with finance, telecommunications, and information technology sectors that go along with being a regional economic hub, and Kenya’s future could be bright.

If, that is, politics can remain being relatively unproblematic. This a tricky thing for any newly democratized country, let alone one as diverse as Kenya. So far the growing pains that have come with having real contested, multi-party politics and elections are relatively mild compared to that in much of the rest of Africa or, indeed, elsewhere in the world. There is no threat as of yet that politics could lead to state collapse nor that the central government could at any time lose control of large swathes of the country. Kenya may become problematic from time to time as does any democracy at election time, but there is no sense that politics will become a problem with a capital “P” as it has in Nigeria.

The other big unknown in Kenya’s future is its larger region. Its western neighbors are relatively stable at the moment while Tanzania has emerged from its many decades of idiosyncratic socialist rule. This leaves its northern neighbor Somalia as the big unknown factor, and it’s a big one. Piracy has had a discernible impact on shipping in Eastern African waters while the chaos in its northern neighbor occasional spills over into Kenya itself. Indeed, the recent horrific gun attack against the Westgate Mall complex in Nairobi by Somali Islamic militants is a case in point.

Then there are the usual problems in Africa. Bad infrastructure, a shoddy legal system, and corrupt bureaucracies make for the usual difficulties in getting business done, but they are at least surmountable and not nearly as bad as compared to elsewhere in Africa. If politics can remain calm, infrastructure improved, business-friendly legal reforms made, and security ensured, Kenya could become an even more important motor of African growth than it already is.

Jeffrey Cavanaugh holds a Ph.D. in political science with a specialization in international relations from the University of Illinois at Urbana-Champaign. Formerly an assistant professor of political science and public administration at Mississippi State University, he writes on global affairs and international economics for AFK Insider, Mint Press News and BAM South.