Wednesday, 19 December 2018

Demand for Diesel Power Generation wanes in Kenya

Wind, Solar, Geothermal, and Hydro 
the leading  sources of power
Green energy sources of Power generation in Kenya have surpassed 2.4GW thus paving the way for decommissioning of Diesel powered generation. Demand for Thermal power is declining as other cheaper sources come on stream. 
This process will begin in two years’ time, the President has announced. Kenya is also, self-sufficient in electric power generation in the short run.

The current capacity has risen to 2351 MW against a peak demand of 1802 MW, says KPLC, the electricity distributor.  Ninety percent (or 2.4 GW) of this capacity is supplied by green sources-hydro, geothermal, wind, and Solar sources. 
The spare capacity, which is a requirement in power generation, stood at 23 percent by June 31, 2018, says the power Distributor, KPLC’s in its annual report 2017/18. Since then, an additional 364 MW have been added to the grid which puts the total capacity at 2715 MW.
That there is more capacity to spare is a plus for the power generating community for it ensures that they do not operate under pressure.
And in a vindication to our earlier diagnosis on why Kenya’s electricity bills remain high,, thermal power is slated for decommissioning.
We had diagnosed the cause of high electricity tariffs to PPAs signed with thermal power producers. The contracts, signed more than 10 years ago, have a clause for paying for idle capacity. New technologies in power generation have rendered this sources redundant, we reported.
The Phaseout will cover mainly the Coast and Western Kenya, announced President Uhuru Kenyatta, two weeks ago.
SGR: To be run on electricity
 The president announced that some 1060 MW of green energy has been added to the national grid in the last five years, of which 364 MW, were added in the last three months.
The bulk of these additions, analysts say, is in geothermal, Solar and wind power. In fact, the 364 MW added in the last three months were Windpower 310 MW and Solar Power 54 MW. Wind power and Solar are fastest growing electricity generators in the country followed by geothermal energy. This is mainly due to the low initial Capital outlay required to set them up.
Sources in the industry say that geothermal energy, in which Kenya is the leader in Africa, has already replaced Hydro generated power as the base load.  Kenya boasts of 700 MW of geothermal energy and will soon cross the 1 GW mark.
Already there are more than 600MW in the Pipeline to wit: 105 MW from Menengai fields, 300MW from Suswa fields and another 300MW from Ol-Karia fields, owned by KenGen, the state-owned power generation Corporation.  The firm plans to add another 160MW of geothermal energy by Mid-Next year.
 That the Coast region, which is heavily dependent on Thermal power, has received 100MWof geothermal energy as the base supply, is an indication that the days of Thermal power are numbered. The region hosts three of the high capacity Diesel powered generators in the country, these are; Rabai power (90 MW), Tsavo power (75MW), and Kipevu (90 MW).
KETRACO to build more transmission 
The Thermal plants slated for decommissioning are relatively older contracts and produce small quantities of power. They, therefore, can be paid off the remaining years to close down so that power costs shrink.
 Kenya targets to generate 10GW by 2030. Whether that target is reached remains to be seen. However, going by the speed at which investment is flowing into the sector, they could reach at least 80 percent of the target in ten years’ time. 
The drivers of this growth will be Geothermal, Wind and Solar sources. Already there are 200MW of wind power and more than 600MW of geothermal energy in the pipeline. Once they all come on stream three years down the road, Kenya’s power generation capacity will cross 3GW mark.

In line with the growing capacity of electric power generation, the firm that constructs power transmission lines, KETRACO, has applied for clearance from the environmental authority to electrify the Standard Gauge Railway line from Mombasa to Nairobi and the adjoining economic zones. 
 The project proposed to last for 28 months will see the Railway line shift from diesel to electric powered engines. The project will involve the construction of 12 transmission lines and 14 substations to benefit industries along the railway line.
Meanwhile, the power distributor Kenya Power and Lighting Company has announced that it has connected close to 70 percent of Kenya’s population, and has therefore reached a saturation point. Consequently, it will go slow on network expansion. The firm had 6.7 million customers by the end of the last financial year suggesting it has reached saturation point.

It will thus build 3400 kilometres of medium voltage power lines this year, a 50 percent drop on 6674 km built in the previous year. Further,

it will build 14 new substations, 13 less than the previous year which ended in June.

Friday, 7 December 2018

A Tsunami Brewing at Kenya Pipeline Corp.

Joe Sang: Jumped ship,was arrested
 A Tsunami is brewing at Kenya Pipeline Corporation. And, it will ravage many people in a wide corruption network that thrives on milking KPC, we can report. The arrest of several senior managers is just the tip of the iceberg. More arrests are expected next week if documents in our possession are anything to go by.
 The paper documents the extent of sleaze and outright theft of public resources at KPC. That charges were approved and arrests made hardly a week after the sleuths officially began investigations suggests that the charges were already with the DPP.
The potential arrests include senior government officials, top officials at the corporation, politicians, their relatives, friends, associates, and dummy companies.  
Kenya Pipeline Company is a den of iniquity, we can report. Everything unethical takes place at the corporation with impunity- graft, theft and nepotism rule the company.  The crimes include employment and promotion of quacks.
John Ngumi: Chairman BOD:
Will he survive the purge?
 In addition to an alleged loss of 21 million litres of fuel from its stock in mysterious circumstances- which triggered the investigation, the firm is a den of corruption and plunder of public resources. The documents show how Senior officials made a total of  Shs 1.9 billion through inflated contract costs and kickbacks for awarding certain contractors jobs. The Theft includes even the Board of Directors and top Officials in the ministry of energy.
According to the document, Corruption at KPC is driven by top officials in the Ministry of energy and in the firm including the Board of Directors and senior management.  It has made billionaires of senior officials- both at the company and the Ministry of energy.
 Bribes and outright theft runs into billions of shillings every year. And because of this recklessness, the company is a disaster waiting to happen. Employees are not vetted making it a national security threat since criminal gangs and other undesirable characters are feared to have infiltrated this vital cog in the nation’s economic well-being.
The detailed document lists a litany of graft avenues and even names the suspects and lists their phone numbers.
Among the malpractices are corruption in the award of tenders, inflation of contracts in order to get kick-backs, outright theft of funds through unperformed contracts, and poor employment practices. The DCI sleuths have their work cut out of them as the document provides critical leads into the murk. There will be a Tsunami in there, we can predict- It is overdue.
The Managers mint millions through contracts awarded to their friends who in turn reward them with Plots of land in leafy parts of Nairobi, Luxury cars, foreign holidays and millions of shillings in out- of pocket cash to spend during the trip, and outright bribes of cash running into hundreds of millions per head. The money is paid directly to the officers or through a network of relatives, friends and dummy companies. Some of these networks have also mint millions of shillings in these deals.
For instance, the document says, a total of Kshs 1.1 billion was paid out as bribes to senior officials for the Line 5 contract from Mombasa to Nairobi. The payouts saved the contractor, Zakheim International, some Kshs 300 million when the design was changed and also to cover-up inflated prices. The document questions the speed at which the financial evaluation of the winning bid and award of the contract were done.
Andrew Kamau: PS will he escape
 the dragnet?
In other instances, senior Officials simply raise the price of the contract and share the difference with the contractor. A case in point is the Kisumu Oil Jetty whose price was suddenly raised from Kshs 900 million to Khs 1.7 billion at the orders of senior government officials. For this, they were paid a total of Kshs 410 million in kickbacks. The same officials also pocketed another kshs 158 million from the Sinedet-Kisumu Pipeline which was awarded to a company that was in constant contact with top managers before the tender award. In the case of the installation of Fibre Optic contract, the price was raised by Kshs 200 million of which Shs 154 million was shared between the ministry and KPC senior managers.
All ICT tenders are outright thefts says the document. It says that the alleged “upgrades are never commissioned,” despite having been paid for fully. Instead, the firm’s ICT systems have been compromised by these cosmetic updates designed to cover up the scandals.
 It also states that 60 percent of all business given to the Waka Family ends up in the pockets of senior officers at KPC.
The same team made a whopping Kshs 110 million from the purchase of a two-acre piece of land whose price was inflated to Kshs 653 million up from an internal Valuation of Ksh320 million. The officials transferred the valuation of the land to NLC instead of Ministry of Lands and, the document says, some directors of KPC were in contact with NLC valuers.
The document questions the role of some directors in the deal and why an Eldoret based advocate was contracted for the conveyance while there are hundreds in Nairobi who do the job. It also questions why the advocate, who has his own Law firm, was transacting under a different firm.

And to keep their records clean, the officials intimidate or bribe auditors to drop certain queries. The report cites a case in which the team auditing the books for financial years 2015/16-2027/17 were paid Kshs 60 million in addition to other payments in Kind to drop all audit queries. A senior Official also in the OAG was also paid to ask no questions.

Monday, 19 November 2018

Tanzania: Prey turned Predator?

President Magufuli: Bull in a China shop
Tanzania recently passed a legislation which criminalizes criticism of official statistics. The legislation drew immediate protest from The World Bank and is viewed as a major contributor to the Bank's decision to cancel a proposed $300 million in financial support to the country.  This adds to the plethora of legislation and edicts that make the country’s Policy and legal environment baffling. While the laws and edicts are issued in the name of protecting Tanzania’s interests, they appear to have the opposite effect. 
Consequently, investors are leaving, others have held back their plans, proposed acquisitions have been cancelled, businesses are closing, development partners are withdrawing and her mega- projects have no takers. And, with development partners also holding back their support, trouble is brewing in the Tanzanian pot.
Apart from the Laws, edicts by Ministers and provincial administrators add to the confusion. The sum effect being the country is beginning to sound like the Biblical tower of Babel.
The government has exploited alleged war against corruption to stifle dissent and turn into a predator- a society that exploits the vulnerability of its potential partners. And one that wants to gain its unfair share- against its interests. That is called covetousness- the desire to have things others have without working for them.
 First, it was hoarding of parastatal’s revenue at the Bank of Tanzania, the country’s Central Bank,  then the confrontation with the mining sector over allegations of corruption and cheating the government out of its rightful revenue, then a law legalizing robbery, then one criminalizing contradiction of official statistics.  Finally, the virtual ban on imports of dairy products.
And investors and traders are responding by standing back to watch with their chequebooks tacked away.  The recent Law barring anyone from producing statistics that contradicts the official statistics is a pointer that things aren’t rosy in Tanzania. And the business community is likely to keep away from the country.
The passing of the Law implies that the official statistics, especially on economic data, are cooked. It will be recalled that last year, there was an uproar over the release of statistics suggesting that the economic growth rate had slowed to 6.9 per cent down from 7.2 per cent previously. While 6.9 per cent is robust compared to her East African neighbours, a slow-down would be an indictment of the President’s wrong management.
The Law is then seen as an attempt to cover up the drastic decline in economic fortunes in the country. But the truth is still piling up. Tanzania is no longer attractive to investors and financiers.

Soon, trading its partners could also stand back. The latest in the “Bull in a China shop Policy pronouncement,” is the virtual ban of dairy products imports into the country and the order to raise Cashew nut farm-gate prices by more than 90 per cent. Exporters of the crop held back.
The Policy, which came into effect this month, will certainly hurt Tanzanians. The import duty was raised from Tshs150 (US$0.07) per kilogram to Tshs 2000($0.89) per Kilogram- a more than 1200 percent increase. It is not clear how this order-like all other orders before it- benefits the ordinary Tanzanian.
Tanzania's SGR: Funded from own resources for there are no takers
The effect of such a policy is to raise domestic prices of dairy products – whether imported or local-beyond the reach of many a Tanzanian. This, in a country where per capita milk consumption is way below the WHO recommended level of 200 litres per year. Tanzanians consume 45 litres a year per person. That is just 22.5 per cent of the recommended level. This suggests that there is a massive demand for dairy products in Tanzania but the supply is minuscule.
 Tanzania’s milk output a year, according to official data, is estimated at 4.4 billion litres or 12.055 million litres a day, on average. However, the milk processing capacity is 700,000 litres a day. And even this capacity is under-utilized. The processors operate at 40 per cent capacity due to a shortage of milk. At 280,000 litres a day, Tanzania’s capacity is the same as the output of small dairies in neighbouring Kenya.
In terms of per capita consumption, Tanzania’s dairy processing capacity can only supply  5.6 litres a year per person. That is to say that imports top up the difference, that is, 39.4 litres to reach the per capita consumption of 45 litres. The result of this edict will be a massive shortage of processed milk in Tanzania and the prices will soon shoot through the roof denying Tanzanians the health benefits of milk consumption.
Another troublesome Law allowed the government to toss -out of the window previous mining contracts and renegotiate them afresh. It also grants the government a free-rider 16 per cent stake in all mining ventures with an option to acquire 50 per cent for free. Investors immediately headed for the exit door. Those left behind have held back and are shopping for buyers who have become scarce.
This policy and legal uncertainty are holding the flow of critical investment funds in such areas as high potential infrastructure projects in the transport, energy, and water- at a time when investors and contractors are fighting for similar projects in Tanzania’s neighborhood.
Take the SGR project for instance.  The contract for the construction of the Central Corridor Railway line had been awarded to a Chinese contractor who was kicked out by the Magufuli administration citing corruption. China withdrew funding for the project. It’s funding is now a subject of myths and fables.
To be sure, Tanzania has borrowed a commercial loan of US$1.4 billion to extend the line from Morogoro to Dodoma, the capital city.  But President Magufuli’s scant respect for due process is keeping away investors from Tanzania, only recently a darling of investors. Tanzania stands out as a risky venture!
 To counter investor reluctance to enter the country, Tanzania which badly needs infrastructure to develop its economy has opted to finance its mega projects from own pockets.  But this raises serious doubts about its ability.
Tanzania’s budget in the current financial year (2018/19) is Tshs 32.5 trillion (US$ 14.5 billion). An estimated 40 per cent of the budget (Tshs 13 trillion US$5.791 billion) will be set aside for development projects.
The projects lumped together will require an estimated $10 billion, twice the development budget for this year.   This, in a country where the potential tax revenue will shrink as the business community stays away.

Tuesday, 9 October 2018

USA heightens the war for the African Market

President Xi Jinping and DonTrump: 
Standing eyeball-to-eyeball
  The USA has stoked the fires for a fierce competition for Economic and Political Influence in Africa. A new legislation, to be signed into Law soon, will double US Corporate investments in Africa to $60 billion.
The Build Act also creates a government agency to lead the effort. The agency, International Development Finance Corporation, IDFC, will do more than its predecessor because it will buy a stake in development projects in Africa.
 That makes it the pathfinder for and driver corporate America’s entry into Africa for, by buying a stake, IDFC will oblige Corporate America, whose understanding of Africa is minimal, to take the risk and enter the continent’s development agenda. Some commentators have already placed Kenya, South Africa, Nigeria, Ghana, Zambia and Ethiopia on the radar because they are considered low-risk countries.
 These countries are also on the investment radar of the eastern dragons led by China, but also increasingly, Japan. As at now, the battle for economic alliances is between China and Japan. With the entry of the USA, the battle is a triumvirate.  Japan’s investment in Africa is estimated at $35 billion. 
However, with the US’ Rambo- like entry into the arena, Japan slides to position three but his expected to throw a few punches of its own to make its presence felt. By upping the US investment flow into Africa to US$60 billion, the Trump administration has matched, dollar-for-dollar, China’s recent offer of US$60 billion for infrastructure development.
At this rate, we expect another round of increases in investment commitments to Africa. There is room for more investors in the continent which the UN Economic Commission for has slated as the next economic growth pole.  It should, for it is the last frontier of emerging markets.
Africa's economic prospects are brightening presenting mouthwatering opportunities for investors anywhere in the world.  These are Africa’s pluses: a young and growing population. Researchers say that by 2040, Africa will have the youngest and well-educated population anywhere in the world.
Kenyatta and Trump: Will the hyandshake benefit Kenya?
 A report by Bloomberg back in 2014 said this growing population is an asset -not a liability. Being healthy and well- educated, it forms a large pool for labour in the world and also a large market for goods. The report also said that in 2014, Africa’s growing middle class spend $1.3 trillion on consumption. It projects that consumption expenditure will grow to $4.2 trillion by 2030. Of these, says the African Development Bank, Agriculture and agribusiness will gobble up $1 trillion, leaving a huge balance for other goods and services.
There are many opportunities open for investment in manufacturing, agriculture, housing, energy and transport sectors.
In the energy sector, Estimates show that the current demand for power in sub-Saharan Africa is about 100GW of which 22 per cent or22GW, is supplied by hydro. This means that 78% of electricity in Africa is provided largely by thermal sources including diesel-powered generators and Coal.
 By 2040, electricity demand will rise to 385 GW and Hydro will generate only 100GW of this, leaving the bulk of the demand to be supplied by other sources. Hydro, despite being a plentiful resource in Africa, is surely the bottleneck to economic progress in the continent. There’s, therefore, an opportunity for investment in green energy sources to bridge the gap.
Wind and geothermal are proving the most popular and are growing into an industry within the sector. In just about five years, Wind is emerging as the top industry in the energy sector. So far an estimated 4300MW are already on stream and more are in the pipeline.
South Africa is the leader in the wind industry with 1170 MW already on the grid. Construction for another 700MW is set to begin later this year and come live by 2021. South Africa targets 8GW of wind-generated power by 2030.  Others are; Morocco 920MW; Egypt 750 MW; Ethiopia 320 MW; Kenya 26 MW.  Morocco is targeting 2GW of wind power by 2030.
Kenya, a late entrant in the wind industry, is expected to leapfrog Ethiopia soon when the 310 MW Lake Turkana, the largest wind farm in Africa, will connect to the national grid.  This will raise the total wind-generated energy to 336MW. The commissioning of this project that will raise Africa’s wind power capacity to 4300MW. Kenya’s wind potential is said to be 3GW. 
There is also the geothermal power of which Kenya is the leader in Africa. Already 700MW are on the national grid. The potential is estimated at 10GW meaning that we’ve just scratched the surface.
Power Generation and Connectivity
  crying for  investment
Africa’s agriculture and agro Business stood at US$ 310 billion in 2014, and it is projected to hit US$1 trillion 12 years down the road. Of this amount, Africa imports $35 billion worth. At this rate, estimates the Africa Development Bank, imports of Agricultural produce will hit $110 billion in 2025. 
 Therefore, Africa must work hard to produce an extra 174 million tons of food by 2025, says the Bank. It has taken the lead in creating Stable Foods processing Zones which will make agriculture a profitable venture.
 The Dragon is already the continent’s largest economic partner, and the leader in infrastructure financing, where it controls 50% of all EPC projects, says the Mckinsey &Co, report.
Although China trails in the stock of FDI in the continent with only $32billion in 2015, fourth after USA $79 billion, Britain at $71 billion, and France $70 billion, the potential of China tipping the scales is high because its rate of FDI growth at 25 per cent is way higher than its closest rival, South Africa  at 13 per cent.
The US and UK trail at 11 per cent and 10 per cent respectively. But with the Build Act, the US FDI rate will accelerate, perhaps standing neck-to-neck with China in the near future, or beating it hands down. Commentators at home are urging the US to up its act and beat China in the game.
 In terms of Infrastructure Finance, China is way ahead of the pack with $21 billion committed in 2015 while the rest are below five billion dollars. But even China’s investment is way below Africa’s needs estimated at $160 billion a year in the next decade in

order to build a sufficient stock of infrastructure needed to spur industrialization in the continent.
A recent Brookings Institution report shows that in many parts of Africa, tradable services in agriculture, information technology and tourism are driving economic growth. Kenya, Rwanda, Senegal and South Africa have emerged as IT front-runners.
The Americans are uncomfortable with Chinese producing their IT Software and hardware. Some want the production of the same to be returned home. The conditions at home have not changed much, therefore companies departing China could end up in Africa.
Then Konza City, our own Silicon Savannah, could turn out to be the hub of IT services in Africa, leading in outsourced services as automation of manufacturing globally grows apace.

Tuesday, 25 September 2018

African market entices the Beast and the Dragon

A Prototype of Konza  ICT City:
Some of Africa's ambitious projects
Africa is becoming the theatre for economic giants in the East and the West to battle for domination. And because of the demonization campaign going on, we term it the battle of the Beast vs the Dragon. The beast represents the West while the dragon represents China.

Africa is rising and its economic prospects brightening presenting mouthwatering opportunities for investors anywhere in the world.  These are Africa’s pluses: a young and growing population. Researchers say that by 2040, Africa will have the youngest and well-educated population anywhere in the world.

 A report by Bloomberg back in 2014 said that Africa’s growing population is an asset, not a liability. Being healthy and well- educated, it forms a large pool for labour in the world and also a large market for goods. The report also said that in 2014, Africa’s growing middle class spend $1.3 trillion on consumption. It projects that consumption expenditure will grow to $4.2 trillion by 2030. Of these, says the African Development Bank, Agriculture, and agribusiness will gobble up $1 trillion, leaving a huge balance for other goods and services.

 Given these mouthwatering pluses, economic players in the East and the West are rearing to enter Africa. China is the first off the block, having displaced the West as Africa’s top economic partner.  A research by McKinsey &Company, says that China has taken the top perch among Africa’s economic partners in the last decade.

This was the time when the beast, was grappling with the effects of the financial Crisis of 2008 which saw a number of large financial institutions collapse.

A Geothermal Plant: Looking for investors
 The Dragon, on the other hand, warmed its way into the continent’s largest economic partner perch, becoming the leader in infrastructure financing, where its controls 50% of all EPC projects. China, the second largest economy in the world is now Africa’s biggest economic partner. Its trade in goods stood at $188 billion in 2015, followed by India at $59 billion, France at $57 billion, US at $56 billion and Germany at $47 billion, says the McKinsey report.

Although China  trails in the stock of FDI  in  the continent with only $32 billion, fourth after USA whose stock  stood at $79 billion in  2015,  followed by Britain at $71 billion, and France at $70 billion, the potential of China tipping  the scales is also  high  because its rate of FDI growth at 25
percent is way higher than its closest rival, South Africa at 13 percent. The US and UK trail at 11per cent and 10 percent respectively.

 In terms of Infrastructure Finance, China is way ahead of the pack with $21 billion committed in 2015 while the rest are below five billion dollars.

Now you can see why the USA is mad at China which is fast elbowing them out of Africa. China is also eating into the domestic markets in the West.

It is for the reason that commentators in the West are telling it to ignore Africa at its own peril. And the Mantra in the West, which considered Africa a bad economic prospect, is now turning to entering “Africa is the only choice.”

 Back in 2006, George Bush Senior was the President of the USA. He was worried about China’s growing influence in the world, and particularly Africa, the then “the hopeless Continent.” The continent was beginning to shed this tag and posting rapid economic growth rates. It was becoming an Emerging Market. China was making inroads into the continent and the West was getting worried.
A Highway in Kenya: Africa needs more of these
Apparently, the West did not know how to tame Chinese influence. So they got into propaganda: “The Chinese are bribing their way into Africa. They are bribing to get contracts.” Chinese workmanship is substandard. The Chinese will destroy your industries.” Ad nauseam.

 The bullying tactic didn’t sell in Africa. So Tony Blair, then British Prime Minister, diagnosed what hails the West’s relationship with Africa. “If Africa goes to China and say they need a road, the Chinese are there the next day with their shovels,” he said and added: “The West will load the African officials with sheaths of paper that last months to read and understand.” George Bush did not buy that. But that was the truth.

China is now the largest development partner in Africa. But the propaganda still rages on. It has now turned to “China’s debt into Africa is unsustainable. China will take over your wealth,” so the narrative goes. But the dragon is not deterred, in the FOCAC last month, China committed $60 billion to Africa’s infrastructure development which Africa receives with gratitude.

Granted. Debts can be crippling to individuals and governments alike. Therefore we must keep a keen eye on our indebted because debts can be a nuisance. And according to the Bible, your creditor is your master.

 However, we must take a cost-benefit approach and ask: what is the necessity for borrowing? What would happen if we don’t borrow at all? What would happen if we borrowed a little? Would we be better or worse off if we abandoned or delayed implementation of development projects? Delay to when and where will the money come from, at what cost?

A Factory: Manufacturers gain from efficient Infrastructure
We assume that this is what informs governments’ decision to borrow and invest in infrastructure development.

According to Africa Development Bank’s Africa Economic Outlook 2018, the continent needs to invest $160 billion a year in infrastructure development for the next seven years. This will enable the “dark continent” to build a sufficient stock of infrastructure to spar industrialization and open up intra -Africa trade.
 The continent, says the outlook, can only raise $55 billion of these leaving a financing gap of between $65 -105 billion a year. This gap means only one of the two things: borrow or craft bankable business plans to attract the Private sector into infrastructure development.
Either way, we are borrowing because, at the end of the day, someone has to recover the money sunk into the development of; Water, Roads, Railways, Airports, Seaports, Oil pipelines, energy generation plants, and such other infrastructure. China is playing its part, financing infrastructure development. But what about the production of goods.
This takes us back to “Entering Africa is the only choice” narrative. A Bloomberg columnist advises

the  West: “Instead of standing on the sidelines and wringing their hands over China’s investments, Westerners and people in other rich countries should be looking to copy or surpass China’s efforts to tap the final frontier of emerging markets.”

That infrastructure development will improve productivity in Africa is not in doubt. The question is; whose productivity? Factories, farmers, traders .name them.  Time to Enter into Africa is now else you’d be too late and live on crumbs

Wednesday, 12 September 2018

How to go slow on taxes,debts

A 14-year analysis of remittances 
 Remittances by Kenyans living and working abroad have risen 569 percent in the 13-year period from 2004 to 2017. They increased from US$ 338 million in 2004 to $1.9 billion in 2017, posting a massive 44 percent increase a year.  Remittances appear set to pass the US$2.5 billion mark this year if the trend recorded by Central Bank of Kenya is anything to go by.
 The data shows that by the end of June this year,  remittances exceeded $1.3 billion. An analysis of the 14-year trend shows that mid-year figures are a pretty good indicator of the trend to the end of the year.
Academic research and commentaries by the financial experts indicate that remittances have reduced poverty, enhanced human capital since it helps recipient households to finance education, health care, housing, small businesses, and farming. Recipients tend to put more money into these sectors than those who do not receive.
 Research also indicates that remittances are finding their way into investments in the Real estate   and the capital market
 Given that much of the remittance is driven more by Philanthropic goals, there are indications that Diaspora remittances are a huge financial source yet to be fully exploited. And this where, creative thinking, thinking outside the box, is required.
 Granted, the government recognizes remittances as a potential source of developments funds. How to channel them to areas of greater impact to national development seems to be the problem.

The money remitted is not little. The $1.3 billion (Kshs130 billion) remitted in the half- year to June, for instance, forms a significant chunk of the US$7 billion in our forex reserves.  It is the equivalent of 73 percent of the Kshs179 billion allocated to the transport Ministry this financial year to build roads. If remittances hit the anticipated $2.6 Billion by the end of the year, that would be 68 percent of the cost of the proposed six-lane Mombasa highway.

All this money stays in our economy given that it is used for the consumption of local goods be they cement and other building materials. Further, that a large proportion of the money supports domestic consumption is an indicator that only a small proportion of the potential remittances finds its way home.
 This is largely because many households through who much of this money is channeled, are not savvy in high finance and may not invest in such debt instruments as bonds and shares in new ventures.  There is also the issues of many in the diaspora trusting their relatives with their funds only to come to grieve.
This is a signal that there is room for more money coming home if we found a way of channeling it to profitable areas, both to the economy and the individuals. The question then is; how do we make remittances profitable for Kenyans living abroad?
Answering that question correctly would also answer the questions how do we attract remittances into the national development agenda?

 Here we dare propose the creation of a Special Purpose Vehicle to attract remittances and channel them into nationally profitable areas such as food security and global housing. We are talking about transforming remittances from philanthropic ventures whose only reward is the degree of personal satisfaction to Commercial ventures with a financial return.

Some studies have found no correlation between remittances and economic growth in the recipient country. This is because the remittances are directed towards meeting basic family needs which exclude national development goals. 
In these days of high-speed internet and other advances in Communications technology in the financial sector, that is almost criminal.

An SPV would fit the bill. The vehicle would sell shares or long-term bonds in a project, say irrigation of one million acres. Since large-scale -irrigation is a high-skill activity, the SPV would contract skilled people to manage the irrigation scheme and sell their produce. It will then pay the bond or shareholders from their profits.

The same can be done in the housing sector and green energy generation especially geothermal, wind and solar. These are development sectors that enable the growth of other sectors such as industrialization whose major bottleneck is the availability of electric power.

Such a vehicle(s) is an incentive for Kenyans living in the Diaspora to invest at home and support the national development agenda. 
That will plug the hole in our budget and reduce the need to borrow as the government would transfer financing of such services to the “Diaspora sector,” for a financial return. We are filing tax returns from our desktop and getting certificates of clearance in a similar way. The same technology can be harnessed to sell shares and bonds and get certificates of purchase in the same way.
It would also support the growth of other sectors as the government will need to focus on infrastructure projects that the Diaspora cannot directly engage in without paying taxes.  

The financial sector cannot mobilize such funds and even if they do, the cost of borrowing the same funds will rise.

Wednesday, 29 August 2018

Kenya Airways to Hire 100 pilots, a year

KQ: Turning around, plans expansion

Kenya Airways Plc
 has plugged 30 per cent of its financial hole, reporting a decline in its loss in the first half of the current financial year.   Its losses stood at US$39.7 Million from $56.7 million a year ago.

Further, the third largest airline in Africa plans and aggressive growth of its fleet and expand to 20 new routes in the next five years. Consequently, it plans to hire as many as 100 pilots a year over the next five years, Chief Executive Officer Sebastian Mikosz said.
The carrier is facing “significant operational challenges” and needs as many as 70 additional first officers and 50 captains to operate its current fleet of 40 aircraft, along with new aircraft it plans to acquire, Mikosz said.
 The airline, which begins direct flights to New York from Nairobi ion October 28th, is preparing to take back five aircraft sub-leased to Oman Air Transport and Turkish Airlines from October and needs more people to fly them, he said.

KQ, as the airline is known, on Wednesday reported a 3.1 per cent growth in revenue to 51.2 billion shillings. The stock climbed 0.5 per cent in Nairobi, paring its loss so far this year to 38 per cent.
Analysts think the airline is up to something: "The biggest concern they have is new revenue,” Mercyline Gatebi, head of research at Kingdom Securities Ltd. in Nairobi. “If the foreign pilots are coming at cheaper negotiated rates, it means the cost-benefit analysis is well thought out and it may be of benefit for Kenya Airways’ top line.”
The carrier could source some experienced foreign pilots in order to save on training costs, according to Gerald Muriuki, an analyst at Genghis Capital Ltd. There are fears though that the Kenya Pilots Union may oppose the hiring of foreign pilots, he said.
It targets the troubled South African Airways, for some experienced pilots.
“There is no other way because we cannot have a situation where lack of crews is blocking the growth of the airline,” he said. “There are always emotions when you change things, but that’s life.”
The Pilots’ Union’s opposition if any, say, analysts, may receive hostility from the government which is the majority shareholder in the airline. In the recent past, the government of Kenya has been quite uncompromising with labour unions.

 And since the airline is facing stiff Competition in the African airspace from Ethiopian Airlines which is expanding aggressively, it may not entertain labour movement’s wiles. 

Monday, 27 August 2018

Uhuru’s Visits:What’s in it for Kenyans?

The Ngong Tunnel of SGR: 
Could spawn Industrialization Binge
 Meeting three Heads-of- state in 10 days spread across the globe! That is a tight schedule for Uhuru Kenyatta, Kenya’s President. And we would be right to ask; what’s in it for us? Plenty seems to be the answer.
 Let’s start with the US where the President is meeting President Donald Trump. What’s in it for us? Economics: Trade, investment. No begging bowls. Trade and investment –Quid pro Quo. Uhuru is there to market Kenya as an investment destination for American investors – not Government and NGOs.
 Kenya needs power, good roads and other infrastructure to unleash its growth potential and create jobs, reduce poverty and improve the standards of living in the country. It targets being a middle-income country (per capita income above $5000) in the near future. To achieve this, she needs investors to build industries in Kenya to put the youth to work.
To attract investors, she needs enabling infrastructure and enabling infrastructure is expensive. Foreigners, both in the West and East have the financial muscle to support such investments for a return.
Africa Development Bank, in its Economic Outlook 2018, says that Africa needs to invest $170 billion a year over the next seven years in productive and profitable infrastructure in order to industrialize. The continent can only raise US$50 billion of these from tax revenues, leaving a yawning gap of $108 billion.
Out there, fund managers, commercial banks, and sovereign funds are sitting over US$100 trillion seeking for investment avenues. Africa can tap into the well by crafting bankable debt instruments, says AfDB.
Which brings me to Uhuru’s goal in his visits with three foreign heads-of-state in the next ten days- Trade and investment.  And on this one, there is congruency of purpose with his peers. He is shopping for investors (and lenders) to invest in Kenya, they are looking for trade and investment opportunities (and borrowers) in Africa, “the rising continent.”
We have sunk billions of dollars in infrastructure development raising our national debt to previously unknown highs. In the process, it has generated hue and cry in Kenya. So how do we make those investments repay the debt and how will the ordinary taxpayer benefit?
Attract investments in industrialization in order to create more taxpayers to help foot the bill. Also, expand the markets for our current products. Kenya is famous for growing flowers and exporting them to Europe but now we need to explore new markets. The US is one such market that was shielded by distance. But now with Kenya Airways gearing to fly to the US in two months’ time, that market is only 15 hours away. More flowers sold means more people employed, bigger profits and more taxes for the exchequer.
In the US, there is a campaign to transfer the supply chain from Asia back home. But the campaigners miss one point: The firms moved their productions plants to Asia because of the high cost of labour. Has it declined at home? The answer is probably No.
 That means the firms will have no incentive to return their production lines to the US. Probably, they will go elsewhere and that elsewhere is Africa, Kenya included. Africa was sidelined in the past because of poor infrastructure. Now the Chinese have invested in infrastructure making Africa a viable option.
Proposed Konza Techno City
So such investments that some commentators have dismissed as white Elephants could soon become the goose that lays the golden egg. Among these is the SGR which has everyone shouting “white Elephant.” It could spawn an industrialization binge that will have them eat the humble pie.
In our highly competitive world, speed is everything. Markets need efficient delivery of products and efficient delivery needs good transport systems- be they airports, roads, seaports or Railway lines. And Kenya has invested and continues to invest in such enabling infrastructure.
So the proposed widening of the Mombasa road to a six-lane highway, which critics say is unnecessary, could turn out to be the selling point for Kenya in terms of attracting investment. The proposed Konza City could soon just live up to its ambition of becoming Africa’s silicon savannah. Why? Because it is served by high-speed roads and Railway.
To attract investments, these are the infrastructure the President has to showcase in order to widen our trade portfolio and markets.  According to a document by Uganda’s Ministry of Transport, the country’s goal is to produce High-end products for high-end markets by 2040. To achieve that, the Ministry recommended that Uganda builds its SGR from Malaba to Entebbe. That way, it shall have a seamless transport within 24 hours to the Port of Mombasa. Consequently, the Ministry rejected the Dar-es-Salaam link because it could not guarantee such speeds. The Central Corridor has the Lake Victoria to grapple with.
 Kenya is way ahead in that exports will reach the Port in 10 hours. Kenya is therefore also angling to produce high end products for high end markets. That is in addition to our traditional exports, coffee, tea, cut flowers, Horticultural produce including Macadamia nuts, avocados and vegetables.
Kenyan Cut flowers: Need wider Market
 Britain and the US are significant sources of investment funds for industrialization and some investments in infrastructure. But give infrastructure to China. They have proven competent by completing their projects in time, nay, ahead of schedule and at cost.
China, the second largest economy in the world is creating more millionaires a year than the West, and is thus a potential market for our flowers and other “luxury goods.”
 Kenya’s literacy level is 89 per cent. That makes it a potential investment destination for manufacturers looking for trained or trainable manpower. In fact, educated manpower and high unemployment is a plus. Investors will not have to worry about labour productivity!

So should Uhuru stop marketing (and borrowing for) Kenya? Well,
that is part of his job as President.

Monday, 13 August 2018

Why Hydro Energy is losing glitter in Africa

 A hydro dam: Losing glitter
Every cloud, so the saying goes, has a silver lining. That is true of the electricity generation industry in Africa. Although the continent is blessed with various sources of power generation. It is energy poor. This is because of the tragedy of poverty in the continent. Developing such sources as Hydro, which is the leading source, is expensive and slow to implement and complete.
 Estimates show that the current demand for power in sub-Saharan Africa is about 100GW of which 22 percent or22GW, is supplied by hydro. This means that 78% of electricity in Africa is provided largely by thermal sources including diesel-powered generators and Coal. By 2040, electricity demand will rise to 385 GW and Hydro will generate only 100GW of this, leaving the bulk of the demand to be supplied by other sources. Hydro, despite being a plentiful resource in Africa, is surely the bottleneck to economic progress in the continent.
One of the causes for the slow growth of hydropower is the high investment outlay required to build a Hydro dam.  The upfront expenditure to develop a hydro dam is beyond the means of many an African government.  The second hurdle is the previous insistence by African governments that only the state-owned operators were allowed to build capacity. Consequently, demand outstrips supply by a large factor.  
A Geothermal plant: Gaining popularity
To meet growing demand, African governments, which for a long time were the only legal investors in hydro generation, relied on expensive fossils generated power. Many deep-pocketed investors in Africa, invested in own generators making the price of local products expensive and uncompetitive. That is why many factories in Africa operate below capacity, at a range of 45-50%.
This is a recipe for growing unemployment and poverty. According to the World Bank, Energy poverty shaves off four percentage points from economic growth.
 To turn around its fortunes, Africa has opened its power generation sector to the private sector in a bid to attract more investments in the sector and bouy economic and social progress.  This, combined with the declining cost of other potential sources, has rekindled interest in various sources such as wind, geothermal and Solar.
Wind and geothermal are proving the most popular and are growing into an industry within the sector. In just about five years, Wind is emerging as the top industry in the energy sector. So far an estimated 4300MW are already on stream and more are in the pipeline.

South Africa is the leader in the wind industry with 1170 MW already on the grid. Construction for another 700MW is set to begin later this year and come live by 2021. South Africa targets 8GW of wind-generated power by 2030.  Others are; Morocco 920MW; Egypt 750 MW; Ethiopia 320 MW; Kenya 26 MW.  Morocco is targeting 2GW of wind power by 2030.
Kenya, a late entrant in the wind industry, is expected to leapfrog Ethiopia in a Month’s time when the 310 MW Lake Turkana, the largest wind farm in Africa, will connect to the national grid.  This will raise the total wind-generated energy to 336MW. It is the commissioning of this project that will raise Africa’s Wind power capacity to 4300MW. Meanwhile, two other projects with a total capacity of 200MW are in the pipeline.  Kenya’s wind potential is said to be 3GW.
Lake Turkana wind farm: green is becoming a Fad
 Apart from wind, Geothermal has also picked up tempo in Kenya which already generates 700MW, placing it at the top in Africa and ninth in the world.  Some 270MW is expected on the grid next year.  That will push geothermal to the number one slot of energy source in Kenya. The geothermal potential in Kenya is estimated at 10GW. Already, green energy is dwarfing hydro in Kenya and the trend could continue elsewhere in the continent.
So why has green energy become popular in Africa? Two factors; wind speed and cost of investment. Utility-scale wind power plants require a minimum average wind speed of 6 m/s (13 mph). This is readily available in coastal regions of Africa. It is then not a surprise to find that the best wind in Africa is located in the coastal regions of the continent. The five biggest markets are also originated from these areas.
The upfront investment to produce a Megawatt of wind power is estimated at US$2 million. Thus five projects with a capacity of 700MW in South Africa will cost US$1.4 billion, Enel, the Italian developer of the projects reported last week. This compares well with the US$700 million invested in Lake Turkana wind to produce 310MW.
 This, experts indicate, is what it will cost to do a feasibility study for a hydro dam project. In addition to the pocket-friendly cost, a wind power construction takes about two years to complete. A hydro dam will take about ten years to complete if the expected duration of the 20MW Thwake dam in Kenya is anything to go by.
One more advantage, Wind farms and solar parks can also provide decentralised or “off-grid” power directly to customers, reducing the load on congested transmission lines.  This will reduce the cost of power to the consumer for it cuts down the loss incurred on transmission lines.
 Innovation in the geothermal industry is also cutting the development period and attracting the private sector. Here, a government agency sinks the Wells and caps them, then invites the private sector to generate power in a PPP arrangement. Kenya has already leased Menengai Wells to the private sector to generate 105 MW. This arrangement lets the agency, Geothermal Development Corporation to focus on sinking Wells, leaving the power generation in other hands.

Africa’s demand for electricity is projected at 385GW by 2040. Hydro will supply only 26 percent of this demand. That says it is a slow growth industry. Given the slow pace of development and the high sunk costs, for which the private sector has no stomach, hydro development will soon become a longer-term investments to supplement other sources that can be developed rapidly to meet growing demand.

Monday, 6 August 2018

KQ's Direct Flights to New York: It's big business

The Pride of Africa: leading the way
The Count-down has begun. We are two months away from Kenya-Airways’ direct flights to New York from Nairobi.  Save for any unforeseen occurrence, the deal is done.

For Kenya, the start of Direct flights to the USA is more than just our colours on American airspace.  It is big business and means more jobs at home. A number of stakeholders are salivating over the prospects of getting a foothold on the US market.

 Cut flowers exporters have all along been salivating over the US market, the largest cut-flower market in the world. However, the cost of delivering them has been a draw-back.

Cut Flowers: Gunning for  10% stake in The US
Now with Direct flights, the market has drawn closer to home. It is only 15 hours away! The US Cut-flower market is estimated at US$ 2.5 billion and is dominated by Colombia which controls a large chunk of it.
Kenyan flowers have a tiny 0.4 percent of this humungous market and officials in Nairobi are baying for a 10 percent stake.  That is a whopping US$250 million!  No wonder, Kenyan flower exporters are salivating for the direct pie of the cake.

 The officials say that direct flights will make this possible since the cost of delivering cut flowers to the US market is a great drawback.

A Textile  mill: Leading exports to the US
Apart from flowers, other producers who would benefit from the Direct flights include Macadamia nut growers whose market share has been on the up and up.  Last year, Macadamia nuts exports hit the US$5 million mark. The direct flights will ease delivery and cut delivery time to just 15 hours.

 Lack of direct flights has been blamed for a lot of ills bedeviling Kenya’s ambition to enter the US market in a big way. Apparel exporters blame the long distances for failure to deliver on time. They say that it takes 135 days to fulfill an order. 75 of these are taken by delivery of yarn from Asian countries to make apparel.

Also eyeing the US market is Rivatex Mills which is modernizing its plant in order to set A foot on the US Market. Apparels exports form lion’s share of all exports to the US under AGOA, the preferential trade arrangement design to support Africa exports to the US.

Macadamia Nuts: Presence being felt
Last year, the sector earned $370 million from Exports to the US. That was a huge chunk of the US$570 million worth exported from Kenya last year.  Kenya hopes to leap-frog exports to the US market significantly with the direct flights.

Avocado, the new kid on the block is also said to be eyeing the US market as are coffee roasters. Then, of course, the Kenyan travelers to and from the US. No longer will they fly to Amsterdam or Addis-Ababa before they land home. For these, it will be a leap across the Atlantic to Nairobi.

Given all these hanging fruits, it is no wonder the government has doggedly invested in the improvement of Jomo Kenyatta International airport over the last decade. The African Development Bank estimates that construction of the US$350 million second- modern runway at the hub will generate an additional US$20 million a year to  Kenya’s GDP. Now we see how!

Friday, 20 July 2018

Why electricity costs will remain high in Kenya

Men at work: KPLC employees
 The cost of power in Kenya is unlikely to come down any time soon. And this places Kenya Power and Lighting Company between a rock and a hard place.
And it is likely to remain sandwiched in that unenviable position for a long time. The bone of contention with its customers is high electricity cost.

This is a paradox: Kenyans are protesting high electricity bills at a time when more Green energy is coming live on the national grid in droves.
The total combined output of Hydro and geothermal power is expected to rise to 2,339.9 MW in a country whose peak demand is 1775 MW. So where is the problem?

Is it taxes, corruption, inefficiency, or the billing policy?

 It could be a bit of all these plus the Power Purchase Agreements signed with thermal energy producers. The IPPs signed a 20 year Power Purchase Agreements with KPLC. Three of the IPPs with a total capacity of 225MW  have relatively new PPAs, being less than 10 years old. In the contracts, there is a clause that requires KPLC to pay for idle capacity. That means the power consumers will still pay for it through enhanced bills.
 The PPAs were not a scam as many would like us to believe. The intention of signing the PPAs was good: Hydro generation was lagging behind demand resulting in frequent blackouts. During droughts, the bad situation aggravated, hence the need for emergency power producers.  Green technologies such as Windpower were unknown in these parts of the world then, and Geothermal was taking ages to develop.
 That is how and why thermal power producers came into being. But they are expensive because they use diesel which is expensive. Last year, they were paid a whopping US$22 million out of KPLC’s total income of US$90million. This was a 174 percent increase over the previous year when they pocketed US$12million.
 This is why the government is now calling for a change in billing policy for fossil fuels generators so that all billing is in Kenya shillings in a bid to lower electricity prices.
A Hydro dam in Kenya
But will the change in pricing policy significantly reduce electricity bills in the country? Perhaps they will reduce the fuel charge or even eliminate it. But idle capacity will still be paid for. That is why cheap power may not be coming into the foreseeable future.  
Apart from the two Diesel Power Plants owned by Ken-Gen, the rest are foreign-owned. Rabai power with a capacity of 90 MW is owned by a consortium of German and British companies. Thika power plant, with a capacity of 87 MW is also foreign owned and so is Tsavo power plant with a capacity of 75MW. This means that all these will be billing KPLC in foreign currency.
Kenya's electricity generating capacity is broken under; Hydro 821MW; Geothermal 700MW; Thermal 466MW; and Wind 25.5 MW. Wind power’s capacity is set to rise to 336 MW come September when Lake Turkana wind power is expected to come of stream. It will add 310 MW into the national grid raising the share of wind to 336 MW or 13 percent of the total generating capacity which in turn, will rise to 2650MW.
 This increase will lower the percentage shares of each source as follows; Hydro 32 percent, Geothermal 27 percent, wind 13 percent, Fossil fuels 18 percent.  Thermal generators may be grounded once wind power comes live. But they will have to be paid for idle capacity. Whether the decline in electricity costs will be sufficient to make our manufacturing sector competitive and assuage the domestic consumer remains to be seen.
This is what places KPLC between a rock and a hard place. The entry of new technologies such wind in the energy sector and the rapid growth of geothermal power have left KPLC –and by extension the electricity consumer-stuck with contracts they do not need. Therefore somebody has to foot the bill.
Ol karia Geothermal Station

KPLC’s power mix comprises of geothermal 47 percent Geothermal; hydro 39 percent; Thermal 13 percent in 2018. Wind power forms only one percent of its purchases until Lake Turkana wind power comes live. That will change the equation pushing Thermal further down.
The geothermal capacity has risen to 700 MW  catapulting Kenya to the top perch in Africa and ninth globally in geothermal power generating capacity.

Wind and geothermal are rapidly growing as sources of power generation in the country.
More Geothermal capacity is expected next year as Ken-Gen, the power producer in the country, completes its Olkaria VI Power plant. The plant is expected to bring in another 160MW making Thermal power irrelevant. The question then  becomes how to decommission the Diesel plants.

Both wind power and geothermal generation have attracted the private sector. In fact, the largest output in wind generation is driven by the private sector. Geothermal and wind are preferable energy sources due to low emissions compared to thermal sources. They are fast to build and commission and also cheaper compared to thermal power when used as an alternative to mitigate depressed hydro power generation due to drought.
Kenya has a target of 5GW geothermal capacity by the year 2030. Wind power capacity is said to be around 3GW which means the current capacity is just scraping the surface. And the private sector is warming up to these sectors. So far three companies are in the early stages of investing in geothermal generation.
They include; Quantum power, Sosian Power and Or4 which have been contracted to generate a total of 105 MW from Menengai fields owned by Geothermal Development Corporation, a state-owned enterprise.  There is also a proposed wind power plants in Lamu and Kipeto in Kajiado County.
The country will soon produce almost sufficient power to meet domestic demand from green energy sources with some capacity to spare. Will KenGen cut its production of Hydropower since it is the only source of power that can be stored?
Whatever action is taken, Kenya is stuck with expensive idle capacity in power generation. And the Kenyan consumer will have to bear the cost of honouring the PPA Contracts. We have become victims of rapid technology development which is rendering expensive power generation obsolete.

Tuesday, 3 July 2018

Kenya's economy headed for 6.0 percent growth this year

The PMI index up to may this year
The Kenyan economy is expected to hit 6.0 per cent growth this year, analysts say. The economy has posted a robust growth in the first quarter which is expected to continue in the second quarter. National GDP growth is expected to accelerate in the second -half of this year A Flurry of reviews on the Kenyan economy project an economy on the go.
Data on the first quarter review by KNBs shows that the economy posted a strong growth, in the region of 5.5-5.8 per cent. And the players in the private sector expect good tidings this year, says a survey by Central Bank of Kenya.
The barometer of industrial activity, the Purchasing Manager's Index (PMI) has been on the growth trajectory since last October when it hit rock bottom at 34.4. It closed last month at 55.1 down from the previous month’s 56.1. The April level was the highest in 16 months.
The PMI is a composite measure of economic performance month-on-month covering 400 firms in Kenya’s private sector. It measures weighted change in such variables as; New Orders which is weighted at  0.3, Output at 0.25, Employment at  0.2, Suppliers’ Delivery Times at  0.15, Stock of Items Purchased at  0.1 A reading above 50 shows growth in economic activity while a reading below 50 projects a decline.
The PMI does not project the future but its survey found some latent demand, an indication that the growth trajectory is here to stay. Even then, analysts say, that it points to a robust growth this year.
This has analysts, including the Central Bank of Kenya, see the economy posting a 6.2 growth this year. Going by the pace of the first quarter, analysts expect the economy to raise the tempo in the second half. The long rains were good and well distributed and this is expected to buoy agriculture output going forward. The sector grew by 5.1 percent in the first quarter. Consequently, many agree with the CBK that the economy could touch 6 percent.
 The turnaround has been caused by many factors, among them; good long rains, the end of prolonged political bickering, following swearing of President Kenyatta for his second term.  The handshake on March 9th removed major risk factor in the economy –Raila Odinga’s militancy and the risk of frequent riots and violence. This opened the purse-strings both in Kenya and overseas resulting in a rise in domestic and foreign demand for local goods.
These factors will be strengthened by low power bills that will become effective next week. The cost of electricity is likely to go down further once the 310MW Lake Turkana wind power comes on stream in September.
 The Windpower will raise the total generating capacity from renewable energy sources to 1967 MW which is 74 percent of the 2650 MW capacity. The availability of all these cheap sources is expected to lower demand for fossil fuels generated energy and lower prices.
But the goose that lays the golden egg is the agriculture sector. Expert reports show that Agriculture in generates 24 percent of the GDP directly, that is $18 billion at the current GDP estimated at US$75 billion. It also contributes another 27 percent indirectly to the GDP that is $20.25 billion.  In effect, the sector contributes, both directly and indirectly half of the national wealth that is, $39 billion.
 The sector produces 62 percent of our exports, employs 40 percent of the entire labour force and 70 percent of the rural folk. It also generates an estimated 45 percent of Government revenue. The sector also produces over 75% of industrial raw materials and more than 50% of the export earnings. The National Statistics Office says that the sector grew by 5.1 percent in the first quarter. And given the good rains in the second quarter, the sector is expected to drive robust growth this year.
 Experts say there is a positive correlation between productivity in the agricultural sector and other sectors. It thus drags others sectors out of the doldrums.
Given the conducive environment, all analysts expect the economic growth to accelerate in the second half. In January, all analysts including the projected a growth above five percent. The Economist Intelligence Unit, for instance, projects a growth of 5.3 percent this year which is in the range of projections by other analysts whose projection range from 5.7 to 6.2 percent. 
However, the favourable environment is likely to push the growth further, perhaps to six percent.
The ongoing construction of mega projects
is said to be one of the sectors driving growth in Kenya.  The expected turn around in the Kingpin of the economy, “agriculture supported by good rains, and an upturn in investment should bump up growth this year,” says the Economics Focus group, a view supported by the AFDB in its Kenya’s outlook which projects a 5.6 percent growth rate this year.

It expects the services sector to continue leading the growth because, Kenya is the hub of ICT, Financial and logistics services in East Africa. It states that the continued investment in Rail and roads and the construction of the second runway at Jomo Kenyatta International airport will be a shot in the arm for economic performance this year. The start of direct flights from Nairobi to New York expected in October is expected to open new markets for Kenyan produce in the US. Macadamia nuts are said to be pushing ahead with an export of US$52 million last year up from $72,000 ten years ago,