East Africa Economic Report

EAST AFRICA, the fastest growing region in Africa, is slated for further rapid growth. Economic conditions favour such a growth say economists. The region has rebased it GDP which found that the economies of Uganda, Tanzania and Kenya were larger than previously estimated.  The region’s wealth is 24 per cent larger than previously estimated. Currently, it is US$ 23.4 billion higher.  Before rebasing, the regional wealth stood at US$98 billion as at the end of last year. Now it stands at US$122 billion. And going by the fact that economic growth rates were found to have been higher than previously estimated, it is expected to be higher than previously estimated by the end of the current year.  Kenya is still the leader as her total national wealth was $55.2 billion at the beginning of the year. This forms 45.3 per cent of the total regional wealth. Tanzania is second commanding 35 per cent (US$42.5 billion) of the regional wealth while Uganda is third at 20 per ce...

THE KENYA SHILLING  has weakened against the US dollar in the recent weeks shaving of nearly five per cent in just about two months. Now the exchange rate stands at 90.25 to the US dollar buying down from KES 86.21 in January this year, a 4.7 per cent decline. It is a decline that sparked off a debate on whether Kenyans should mourn or cheer the weakening the shilling; is a weak shilling a bad thing or a good thing? It is a bit of both.  But first let’s understand why we need more shillings to buy the US dollar. And the first question we should ask is; which is changing, the shilling or the dollar? And what are the implications.  Our thesis the shilling has not weakened; it is US dollar that has strengthened against other major currencies including our dear old shilling. The Dollar has been strengthening against other currencies including the Euro and the British Pound.  It has gained by more or less the same rate against the Euro and the British Pou...

 IF NOTHING CHANGES , the average annual earnings per worker will rise from US$1 200 a year to US$ 1,900 a year. That is the current annual income level per worker in Senegal.  That is hardly the kind of progress that Tanzanians expect in the next 15 years, says the World Bank. Yet, with the right policies, one can expect Tanzania to become the Vietnam, Indonesia or even the Thailand of tomorrow, it concluded. In 2012, the average working Tanzanian earned the equivalent of $1,200 per year, one of the lowest earning levels in the world. Most workers, about 85%, are employed in traditionally low-productivity areas such as agriculture, retail trade, and small-scale mining where the output per worker is averaging only $700 per year. By contrast, output by worker averaged $4,500 in emerging industries.  There is no denying that Tanzania has performed well over the past decade. Her economic growth has been  7% per year or thereabouts. This growth was driven by a few...

AFRICA OIL which has a 50 percent stake in Kenyan fields where commercial reserves of crude have been found, wants to offer part of its holding by early 2016 to a new partner that can help it fund development, the chief executive said. Africa Oil and its existing partner Tullow Oil, which holds the other 50 percent, have found more than 600 million barrels of recoverable reserves. A final decision to develop the fields is expected in the first quarter of 2016. The discovery is part of a string of oil and gas finds stretching from Uganda and along Africa's east coast that have made the region one of the world's hottest untapped hydrocarbon provinces. Output could reach global markets in 2018 or 2019. "Before project sanction in 2016, we probably would like to have a partner," Africa Oil CEO Keith Hill told Reuters, although he said the plan was "not carved in stone" and the company could finance development itself if needed. The Toronto- an...

THE TANZANIAN economy is  larger than previously estimated, we can authoritatively report. The rebasing exercise, whose results are yet to be released, found that the economy was more than 27 per cent larger by the close of 2013. Two weeks ago, this publication estimated Tanzania’s GDP to be higher than US$33 billion previously estimated. Now the actual size has been found to be almost 28 per cent higher. This puts the GDP at the end of last year to US$42.51 billion at the January’s exchange rate. Re-basing of the national account series (which includes the GDP) is the process of replacing an old base year with a new and more recent base year. The base year provides the reference point to which future values of the GDP are compared. Re-basing is meant to reflect recent developments in the economy and expand the basket of consumer goods to reflect changing tastes and preferences. Consequently, countries re-base their economy once in a decade although the UN recomme...

 T hese questions will be robustly answered come the end of this month when Tanzania re-bases her GDP accounting period to 2007. Tanzania will re-base her GDP accounting year to 2007 from 2001. The re-base will rope in new sectors and is expected announce a new larger GDP. Economists estimate that Tanzania's GDP  is between 20 and 25 per cent larger than current estimates.  According to Daily News , at the end of 2013, Tanzania’s GDP stood at US$33.26 billion. Economists therefore estimate the GDP to have been anywhere between US$39.5 billion and $42 billion by the end of 2013. This will be confirmed at the end of this month when a new base year and new GDP are announced. Re-basing of the national account series (which includes the GDP) is the process of replacing an old base year with a new and more recent base year. The base year provides the reference point to which future values of the GDP are compared. Re-basing is meant to reflect recent develo...

THE FAST PACED NEWS  of oil discovery -after -discovery is making Kenya the hottest oil scene in Africa. And investors are trooping in. Not even the specter of a spillover of Islamic extremism from Somalia can dampen the atmosphere in Kenya, where commercial oil production is expected to begin in 2016 . When it comes to new oil and gas frontiers, today it's all about Africa. And more specifically, it's all about the eastern coast, with Kenya the clear darling--not just because it's outpacing neighboring Uganda by leaps and bounds, but also because despite some political instability hiccups and the threat of militant al-Shabaab, it's still one of the safest venues in the region. Six of the last 10 biggest finds have been in Africa, where—all told--there are some 130 billion barrels of crude oil waiting to be tapped by more than 500 companies, according to a  recent report  by PricewaterhouseCoopers. Topping this list are Kenya's Anza and South Lokichar ...

  KENYA is now a middle-income country.   Its GDP is US$55.2 billion, 25 percent higher than the previous estimate of US$44.1 billion, says the national statistics office. The Office carried out a rebasing of the GDP accounting period from 2001 to 2009. The exercise established that the Kenya economy was larger than office data since 2006. Further, the rebase established, the economy more than doubled in the eight-year period to December 2013, rising from US$25 billion in 2006 to $55.2 billion in 2013- a 214 percent increase.   The previous estimates indicated that the economy grew by 196 percent over the same period from US$22.5 billion to US$44.1 billion.   Consequently, the rebasing found that GDP per capita has risen to US$1246, catapulting the country into a middle-income economy. The World’s bank entry into the middle-income economy is US$1035, meaning that Kenya has just passed the threshold.   Although t he findings of the rebasing vary f...

THREE YEARS AGO, South Sudan, then the world's youngest country, was born. It was a nation full of hope and whose prospects were bright. It had functioning oil fields which pumped 375,000 barrels per day, she also enjoyed the good will of the world. Everything was going for her. Investors trooped into the country seeking for opportunities. Soon, South Sudan was receiving proposals for such mega project as the US$3 billion Juba-Lamu oil pipeline.  All those prospects evaporated In December last year when a civil war broke out. The civil war pitted the government of President Salva Kiir against Rebels led by Riek Machar, his former vice president. Oil wells have been damaged while the meagre revenue from the little oil available is being squandered on war. A nation that sits on Sub-Saharan Africa's third biggest reserves of crude is now a beggar nation staring at a potential famine. Oil Output has declined to 165,000 bpd from 375,000 bpd before the war broke. With ...

A REPORT published by the Standard Bank of South Africa last month is dishonest.   The report , Understanding the African Middle Class should be renamed Distorting the African middle class. It proposes that, nearly two decades of economic growth in Africa has had little effect on poverty reduction.   This is the antithesis of the “Africa rising narrative,” whose thesis is that robust economic growth in the continent over the last two decades has reduced poverty and widened the middle income class. The Africa rising is an accepted narrative world- wide.  The Understanding ….Africa report  states that, of the approximately 110 million households studied across 11 countries, 94 million (or 86 per cent) of them were located in the low-income category, suggesting poverty levels are as much as two times the figures shown in official records. It defines Low-income people as those spending less than $5,500 in a year or $15 per day while the lower middle class s...

KENYA  is now the leader in geothermal power generation in Africa. Her capacity now stands at 400 MW and will  rise to 680 MW by the end of this year when KenGen, the state owned power generator commissions all 280 MW from its Ol karia wells.  Such an increase will stamp further Kenya's position as the runaway leader in geothermal electricity generation in Africa. Since the new capacity will be used to retire the expensive thermal capacity, the cost of electricity is expected to decline by up to 47 per cent before the end of this year.  This has raised expectations of a general price decrease come 2015. Already, the price of electricity is down 9 per cent on last month's prices  following the commissioning of 140Mw geothermal power in July. The decline is expected to pick momentum after the commissioning of another 280MW of geothermal power later this month. This will increase the supply of geothermal power to 680MW from 260MW just two months ago. Of th...

KENYA HAS AWARDED the first of several tenders for the development of coal-fired power stations in the country. The Lamu coal-fired project was awarded to a consortium led by the Oman based Gulf Energy LLC and Centum investment, a local investment firm. The project will produce 960MW of coal-generated power on 25 years power purchase agreement. Apart from being the first coal-fired power generator in Kenya, the project is also the first major independent power producer in the country.  It is thus a curtain raiser as far as PPP in power generation is concerned. It will increase the supply of electricity by almost 50per cent.  As of now, the country produces 1668MW a majority of it is generated by Kengen, the largest generating company in Kenya.  KenGen will add another 280MW to the national grid later this month thus raising the total capacity to 1948 MW. The Lamu project will add 960MW which is 49.3 percent of the capacity at the end of September 2014. Th...

KENGEN, KENYA'S leading power generating company, has drilled o the biggest geothermal well in Africa and fifth biggest in the world. The well, christened Olkaria OW-921 has a production capacity of the 30MW of geothermal energy.  The 3KM deep well is located at Ol karia and is one of the five largest geothermal wells in the world. It was completed in 46 days. The firm is the leading geothermal in Africa. This new discovery firmly establishes Kenya as major geothermal power house in the world. It is also a major help in the realization of the goal to produce 5000MW in the next four years. The well will be connected to Olkaria IV power station. Ol Karia geothermal fields are located some 230 Kilometres North west of Nairobi, the capital city. Meanwhile, KenGen will commission an additional 280MW of geothermal power next month. This will raise her generating capacity to 11462MW. The firm plans to produce another 30000MWby 2018 bringing her total capacity to more than 500...

A Poster from CDC&P Nigeria Don't eat bushmeat Keep calm and carry on- The Economist THE FEAR OF THE DREADED  disease, Ebola, what we shall call Ebolaphobia, is proving more disruptive and expensive than the disease itself. Although the numbers are not yet crunched, some indications are emerging. The affected parts of West Africa will suffer significant economic costs. For instance Liberia which has already lost $12 million so far and has already indicated that she will miss the projected GDP growth of 5.9 per cent in 2014 by significant margin. Ebola will shave off two percentage points from  Sierra Leone’s growth target. As of now, projections have been downgraded to 12 per cent this year from the projected 14 per cent.  It could shrink even further if the virus is not controlled soon.  In Nigeria, the economic cost of Ebola is tagged at $3.5billion dollars. Yet only 12 people have been confirmed to be infected so far, with two of th...

Trade, not aid is the new mantra THANKS TO THE BIRTH  of China as the leading developing economy, the new world order has been born. In the new order driven by the corporate sector, politics is taking a back seat as Corporate Moguls push the aficionado in the direction of  opening new markets.  In this new order, such fancy ideologies as “human rights,” civil society good governance and yes, democracy are being sidelined.  The new mantra: trade and investment-not aid. In recent weeks, we have seen the West, which champions such lofty issues as gay rights tone down on such issues in favour of doing business with the developing world, especially Africa.  And the developing world, specifically Africa, has taken the center stage in this new world order.  This is because the continent is in the second decade of robust economic growth and is headed for the pole position. A growth pole region is a region whose growth sparks growth in other ...