Category Archives: Britain

World Bank Reduces Kenya Economic Forecast

A new report from the  World Bank slightly revised down the forecast for Kenya economic growth from the 5.9% achieved last year to 5.5% in 2017. This is attributed to ongoing drought, depressed private sector growth, and rising oil prices while 2016 had low oil prices, tourism recovery, and favourable weather conditions.

At the launch, Central Bank Governor, Patrick Njoroge said the focus should not be on the rate change, but on the medium term in which Kenya’s economy had distinguished itself by its resilience. This comes from Kenya having a highly diversified economy  – a mix of largest export is tea but his tea, and that goes to Egypt (not the UK), the economy has a strong regional focus (25% of exports are to EAC, and 40% to sub-Saharan Africa), a dynamic private sector (that’s becoming more transparency, with good governance & better business models), a well-educated labour force and investments in infrastructure (he said more should be written about the SGR vs. the old lunatic express railway) which will improve the country’s competitiveness. He said that foreign exchange reserves were at an all-time high (5.3 months) and while rains had failed in 2017 and there was a slowdown in bank lending, the risk of Brexit to Kenya was more on foreign direct investment (FDI) side and less on exports.

At the launch, the World Bank also did a report on housing in Kenya titled unavailable and unaffordable that highlighted that there were fewer than 50,000 new houses being built each year compared to an annual demand for 200,000 homes. Also, there’s low financial participation with fewer than 25,000 mortgages in the country, yet mortgages are one of the most secure loans, as people do not default on their homes easily.

The World Bank proposes having a Kenya mortgage refinance company (KMRC) that adapts from other successful models in Malaysia, Morocco (guarantees for 70% of loans) and Nigeria (fully subscribed bond scheme) to see if the number of mortgages in Kenya can go up to 60,000. They also have private-public partnership at Naivasha in Nakuru County to build 1,000 low-cost homes, most of which will be below Kshs 2 million (~$20,000)

Also see a report of an IMF staff visit to Kenya.

Britain Exits the EU: What Does this mean for Kenya?

Britain’s decision to exit the European Union (EU), as announced from the results of Thursday’s landmark “Brexit” referendum has been a hot topic around the world. 33.6 Million Britons flocked to the polling booths on Thursday with the ‘leave’ campaign marginally taking the victory with a 52%-48% vote. There is however a general consensus of uncertainty with what the UK’s (United Kingdom) decision holds for the future, with particular relevance to what it means for Kenya. Britain bus

Britain is a key ally, as well as Kenya’s third largest export market with the value of exports at Sh40 Billion in 2015. The Central Bank of Kenya has already stated that it is ready to intervene and minimize disruption in money markets. Kunal Ajmera, COO of Grant Thornton Kenya provides an insight into how Britain’s decision to leave affects trade decisions and tourism in Kenya:

  1. Britain was not just any member of the EU but also one of the largest contributors and it’s most prosperous. Depending on how things unfold in the coming years other members may also demand for a referendum and this would ultimately weaken the EU substantially.
  2. The EU spends about 100 million euros per year on development co-operation in Kenya. With uncertainties over Europe due to Brexit we may see a reduced funding in coming years. We could see funding in key projects start to be cut.
  3. Investors anywhere in the world hate uncertainty and anxiety. Brexit leaves many questions unanswered and it will can take more than a year to get some clarity. Until that happens global economy, money markets and stock exchange may go through volatility and general negativity as we are currently seeing happen.Britain sign
  4. It is highly likely that US Dollar($) will gain strength against major currencies in the world and GBP(£) will lose its value, the initial figures show that on the day of the results alone, the GBP slumped to a thirty year low, falling as much as 11% in the hours after the result. This therefore means that the Kenyan Shilling will be under increased pressure. It would be wise for businesses in Kenya to hedge against a future raise in dollar value.
  5. The UK is Kenya’s largest tourist source market. At its peak Kenya received 198,000 tourists from UK in 2013. The tourist arrival numbers from the UK have only just started to increase in last few months after years of travel advisory and terror threats. However with GBP weakening due to Brexit, it will cost the British tourists more to travel to Kenya and we may see reduced number of arrivals from UK in near future.
  6. Kenya exports a substantial number of products to the UK every year. The UK is the second largest export market for Kenya after Uganda. So far these exports were governed by EU trade laws. With UK exiting the EU, Kenya may need to re-negotiate the terms for export and this may take even a year resulting in to disruption and uncertainty.
  7. In the immediate short term, the UK is bound to have slower economic growth or even recession due to the Brexit referendum. This will also affect how it trades with other countries in the world. Since the UK is one of Kenya’s biggest trading partner, businesses in Kenya that export to the UK are bound to be nervous and must prepare for slump in business.

Britain look rightHowever, Kunal offers consolation by highlighting the potential in this decision. He states, “It’s not all doom and gloom. Brexit also presents new set of opportunities. EU laws on import and export are some of the most stringent in the world especially with agriculture, dairy, and meat items. The UK can now decide its own rules for import and export, new products may become eligible. It is worth noting that Kenya’s largest export to UK is agriculture/horticulture products.”

For further insight into the Brexit developments and its implications keep following Grant Thornton Kenya on twitter and Facebook.

Nairobi debate on BREXIT

Yesterday there was a debate in Nairobi on the UK’s referendum on EU membership, on which there will be a vote in the UK (and Gibraltar) on June 23. Europe is the second largest destination for Kenya’s exports (after the rest of Africa) and the UK is second in Europe with about Kshs 40 billion of exports from Kenya, slightly behind Netherlands (a destination for flowers). Overall, the UK is the fourth largest destination of Kenya’s exports (after Uganda, Netherlands, the US), and it imports about the same amount from the UK (Kshs 42 billion).

The debate was sponsored by the St. Paul’s Property Trust and had  Aly Khan Satchu (as the moderator), Graham Shaw (Brexiter) arguing for Britain to exit) and Chris Foot (Remainer)  arguing for Britain to remain in the EU).

 Reasons  to BREXIT

  • If #BREXIT doesn’t happen now, Britain will beholden to unelected decision-makers in Brussels for the next 40 years. Other countries will soon have similar votes.
  • The (bureaucratic) EU has 5 laws on pillow cases, 109 on pillows, and 12,000 on milk.
  • Germany bailed out Greece, and the EU will soon have to bail it out again (Italy is also shaky)
  • EU laws limit Britain’s ability to get top talent (e.g from Kenya) as they have to give preference to the EU states.
  • Under the EU, the production of a country is controlled (they may have to destroy fishing boats, and Portugal’s wine industry was destroyed by the EU).
  • Britain will have to renegotiate trade deals with 28 (and maybe 32) countries, but probably has no interest in trading with 10 of them.
Brexit debate in Nairobi

Brexit debate in Nairobi

Points against BREXIT

  • The great Winston Churchill wrote a book titled “Europe Unite”.
  • 56% of Britain exports are to the EU, – don’t BREXIT.
  • The last time the UK thrived outside the EU, it had a protectionist market called the colonial empire. 
  • There has not been much discussion about the positives of being in the EU – only the negatives – and that is not enough reason to leave.

Audience

  • Impact on Barclays Premier League (BPL)? : Arsene Wenger (Arsenal manager) asked Britain to stay in the EU (which is a huge global export, but how many in Europe watch the BPL ?).
  • The world is moving towards integration  (e.g The East African Community).
  • The rise of nationalism in Europe is a concern.
  • Britain at 16%, is Europe’s biggest export market, ahead of the US (14%), and China (8%).

Also see this forum, with the (then) High Commissioner from Britain to Kenya in which he discussed the relationship between the two countries.

Diplomatic Dialogues

Last night had the Safaricom Power Hour Series, a talk session that featured  the British High Commissioner, Dr Christian Turner. In a forum similar to Mindpeak, and other leadership series, he spoke freely on many subjects of his time as a political advisor (as an aide to prime ministers) and as diplomat in the Middle  East, Washington and Africa.
He also answered questions on issues  such as the Mau Mau settlement, the UK Miraa ban, the Scottish referendum (later this year), and Britain’s acquiescence in the weapons of mass destruction (they knew what would happen in Iraq after the war but didn’t seem to have cautioned the US)
Some points:
– An aide has to be able to break down complex issues for his/her boss and present them in rapid short sessions (such as corridor walks, or car rides) and get them to make important decisions in those few minutes. To get to this position the aide has to first earn the trust of the boss.
– A lot of what happens goes wrong in government are the result of mistakes (cock-ups), but the public likes to believe that these are due to conspiracies..the reality is much harder to fathom (Westgate)
– The important of a leader surrounding himself/herself with/and enabling people with diverse views (avoid group think – or you end up with the WMD war)
– Even in the age of twitter in which rapid opinions are formed and add on pressure to look decisive, a leader should resist that  temptation to look like they’re taking action – and sometime the best way is to go slo.
– Also avoid sweeping generalizations like the Arab Spring, and Africa Rising. He said each country in the Middle East had turbulence experienced that due to very different reasons.
– There’s no East vs. West anymore. Britain did not lose ground to China in Kenya. He said China is investing in things that Britain does not like roads and some manufacturing – and that  the balance of trade between Kenya and Britain is still almost even, while that with China is very skewed.
Funny anecdotes
– Meeting with eccentric leaders like Gaddafi who thought he was irresistible to women and Saleh (of Yemen) who boldly asked for guns (instead of capacity building assistance) from Britain
– Some people diss Britain as they drink Scotch whiskey, drive Land Rovers and watch Arsenal football.