Kenya, now third largest economy in Sub-Saharan Africa and safest tourist destination in the world.

A new estimate by the International Monetary Fund (IMF) has placed Kenya as the 3rd largest economy in Africa, after surpassing oil-rich Angola. According to The World Bank, Kenya is likely to see a GDP growth of 1% while Angola is expected to see a contraction of 1.4%.

The new estimate comes after Angola’s chief source of revenue, oil output, declined substantially following a sharp drop in oil prices and demand globally.

Angola is the second-largest oil producer in the Sub-Saharan Africa, having an output of approximately 1.37 million barrels of oil per day, with 75% of this coming from high-cost off-shore fields.

With China, the top destination for Angolan oil reducing its demand, the Southern African country has been heavily hit by the pandemic. The recent estimates are not surprising considering that Kenya has recently stood out as one of the top African countries when it comes to crypto and bitcoin adoption in the recent months.

Kenya still maintains its position as the largest economy in East Africa and the third largest economy in sub-Saharan Africa after Nigeria and South Africa in first and second respectively.

The USAID indicated that Kenya has the largest, most diversified economy and the second largest population in East Africa. Kenya also has a young, ambitious and well-educated workforce eager to contribute to the development of the country, which has helped Kenya become a leader in mobile-money and information-and-communication technology.

The economy of Kenya is a market-based economy with a liberalised external trade system and a few state enterprises. Major industries include agriculture, forestry, fishing, mining, manufacturing, energy, tourism and financial services.

In 2019, Kenya’s economic growth averaged 5.7%, placing Kenya as one of the fastest growing economies in Sub-Saharan Africa. The recent economic expansion has been boosted by a stable macroeconomic environment, positive investor confidence and a resilient services sector.

The International Monetary Fund (IMF) indicated that Kenya’s macroeconomic fundamentals were sound before the pandemic and the authorities’ policy initiatives were directed at raising medium-term growth and reducing vulnerabilities.

Projections for 2020

Real Gross Domestic Product (GDP) growth is projected to decelerate from an annual average of 5.7% (2015-2019) to 1.5% in 2020. However, if it takes longer than expected to bring the COVID-19 pandemic under control, GDP could contract by 1.0% in 2020, and see a delay in the projected recovery to 5.2% growth in 2021.

The Economist however, expects Kenya to enter a recession in 2020, with real GDP contracting by 3.3%, owing to severe disruption to the global and domestic economy caused by the pandemic. The IMF projects that real GDP growth will drop to 0.8 percent in 2020, 5 percentage points below the pre-COVID baseline.

In the first quarter of 2020, the unemployment rate in Kenya stood at 4.9 percent, same as that for the previous quarter. The rate decreased substantially in comparison to the first quarter of 2019, when it was 6.2 percent.

Rising debt stock

One of the major challenges that emanated from the outbreak of the coronavirus is the issue of huge debt stock. Most countries across the globe are in dire needs of money to help manage the spread of the virus as well as to protect lives and livelihoods and to sustain businesses.

Kenya’s public debt is expected to soar on the back of a steep economic downturn and massive coronavirus rescue spending, which will spur government’s appetite for external loans amid requests for waivers.

The fiscal deficit as at the end of 2018 was 7.8 percent of GDP, mainly attributed to a disappointing revenue outturn and higher recurrent expenditure. Due to inadequate control of spending commitments, payment arrears of about 0.6 percent of GDP accumulated. Gross public debt rose to 62.4 percent of GDP in June 2019. 

The Budget Policy Statement (BPS), prior to the outbreak of the pandemic, planned a deficit reduction of about 1.5 percent of GDP, but further dipped to 6.3 percent of GDP. This according to the BPS, will be achieved with a combination of revenue measures (including a one-off transfer of 0.7 percent of GDP of dividends from SOEs), spending cuts, and tight expenditure controls. Given shortfalls in revenues, the IMF predicted a deficit outturn of 6.7 percent of GDP in 2020.

The Economic Survey 2020 released earlier this year shows that the national government expenditure is expected to grow by 10.6 per cent this year. It is expected to rise from Sh2.94 trillion spent in 2018/19 to Sh256.1 billion in 2019/20 financial year.

According to PDONLINE, the national debt as at the end of the first quarter of 2020, stands at some Sh6.05 trillion with a total of Sh640.8 billion expected to be spent on public debt servicing in the current fiscal year.

The country’s deficit is expected to escalate as a result of the recent borrowings which are aimed at cushioning the economy.

IMF on May 6, 2020 approved the disbursement of SDR542.8 million (100 percent of quota, about US$739 million) to be drawn under the Rapid Credit Facility (RCF). This according to the Fund, will help to meet Kenya’s urgent balance of payments need stemming from the outbreak of the COVID-19 pandemic.

As a way of cushioning the economy against the economic impact of the pandemic, the president on 25 March 2020, has outlined some tax interventions the government intends to grant the citizens. This includes a 100 percent tax relief for low income earners, reduction in the top Pay-As-You-Earn (PAYE) rate from 30 percent to 25 percent.

Others include, appropriation of KES 10 billion through cash transfers to the vulnerable members of society, Disbursement of KES 1 billion for the recruitment of additional medical personnel, reduction of the standard VAT rate from 16 percent to 14 percent, and a reduction of the resident corporate income tax from 30 percent to 25 percent.

All these are expected to result in a decline in revenues and increasing expenditures. This will finally culminate into the piling up of huge debts. It is very evident that the debt situation in Kenya will worsen.

UK Support Vulnerable Families Through Cash Transfers

The United Kingdom has announced additional funding totalling Sh717 million to support 50,000 vulnerable families living in informal settlements. The selected families will receive cash transfers through mobile money platforms to help them navigate an economic meltdown triggered by the COVID-19 pandemic. The beneficiaries will be drawn from slums in Nairobi and Mombasa. British High Commissioner to Kenya, Jane Marriott, while speaking on the funding emphasized on the need for global cooperation to defeat the pandemic.

The mobile cash transfer is part of UK's wider support to Kenya in addressing impacts of COVID-19 in Kenya. It will be delivered through UK aid funded Hunger Safety Net Programme (HSNP) which has helped deliver timely and predictable cash transfers to up to 600,000 vulnerable households in four northern Kenya counties since 2007.

Tourism in Kenya

Kenya has come in the forefront recently as the safest tourist destination in the world. This is as a result of the measures put in place by the authorities to revitalize the sector which contributes much to the Kenyan economy. Kenya has already lost more than $750 million (€656 million) in revenue from tourism since the first case of COVID-19 in the country.

The safer tourism seal Award.

Kenya is the first country globally to be awarded the recommended status of the Safer Tourism Seal by Rebuilding Travel.

The Cabinet Secretary for Tourism and Wildlife, Najib Balala, was presented with the award in a virtual event that was attended by global tourism leaders under the Rebuilding Travel umbrella, a global pro-tourism industry group composed of members of tourism boards, ministers of tourism, professional associations, industry stakeholders, researchers and academics, as well as travellers.

The cabinet secretary sees the award as a testimony to Kenya’s continued efforts to ensure travellers’ safety following the global Covid-19 Pandemic.

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“As a destination, we have put together health and safety measures that are aimed at ensuring the safe reopening of the tourism sector. This is to ensure that our citizens, travellers, and workers are well protected. On behalf of my country I am happy to receive this recognition that shows we are headed in the right direction in regard to the Covid-19 safety protocols,” said Balala.

 

The Safer Travel Seal is crucial in building travellers’ confidence in the destination as International travel resumes and hospitality outlets re-open. The seal which is a recognizable symbol throughout the world will be key to positioning Kenya as a safe and preferred destination.

To receive this recognition, a destination must address key aspects known as tourism surety through ensuring travellers’ safety, security, destination’s reputation, economic viability, and health.

This recognition follows the Safe Travel Stamp award to Kenya by the World Travel and Tourism Council earlier in June this year.

The Destination Crisis and Issues Management Strategy has since been launched and a committee gazetted to oversee the crisis on a long-term basis.

The cabinet secretary after receiving the award encouraged tourists and other travellers to visit the East African Nation with confidence as the right measures have been put in place to ensure their safety.

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“I can say confidently that we have rolled out successfully the protocols we put in place together with the Ministry of Health. If you visit our hotels, eateries, and other tourism outlets in Kenya you will be ensured of safety if you adhere to the guidelines. I encourage all those who wish to visit our country to do so in confidence,” added Cabinet Secretary, Balala.

 

VIRTUAL TOURISM

But several African tourism associations have come up with the idea of supplying avid travellers with digital impressions of the continent during the pandemic. Virtual tourism has been on the rise.

The managing director of the Kenya Tourism Board, Betty Radier, told DW that in June, the tourism authority there initiated a live-stream drive as part of its #TheMagicAwaits campaign. It is meant to give the world a taste of what awaits in Kenya when the country is open to visitors once more.

"People are online and looking for places they could travel to. That is a great opportunity for us to present ourselves live as a destination," she told DW. Sixteen different destinations in Kenya are being live-streamed.

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