East Africa Economic Report

 Smiles at last: Following 9 years of blood, sweat and tears  FINALLY! AFRICA’S LARGEST Wind Power project, the Lake Turkana wind power project has been placed on the runway ready for take-off. The firm signed the financial closure for US$687million on March 24 th . This marks the end of “Nine years of studies, negotiations, doubts and hope,” said Kenya’s Principal Secretary for energy, Eng. Joseph Njoroge.  The ground breaking ceremony will be in six weeks’ time during which time the firm expects to have formalized all funding issues and then take off.  According to the PS Energy Mr.Joe Njoroge, the firm should produce the 150MW in 2016. Lake Turkana wind power project is the largest wind power project in Africa. It will generate some 300 MW for Kenya’s national grid. This is 20 per cent of Kenya’s e current electricity output which is growing at a rate of 80 MW every year. The US$763 million project is the largest private sector investment in the cou...

A smoker AVARRICIOUS AND DECEITFUL Anti-tobacco activists have Kenyan tobacco manufacturers laughing all the way to the bank. Their Campaigns are dishonest and hypocritical hence the number of smokers in Kenya has risen if the numbers of sticks manufactured is anything to go by. According to a report titled Exposing the tactics, between 2003 and 2008, cigarette production in Kenya rose 156 per cent to 12 billion sticks from 4.8 billion in 2003. Some estimates place the figure in the upwards of 15 billion sticks. This means that the number of smokers in the country has risen rather declined.   This is despite the punitive regulatory measures in place to tame smoking. Tobacco advertising is banned nor can the manufacturers participate in Community Social responsibility events. Taxes have almost trebled retail prices yet more people light up. And the manufacturers are laughing all the way to the bank. Why? According to the report cited above, the cigarette manufacturers in...

Vimal Shah: an economics hero in Kenya DOES DOMESTIC DIRECT investment (DDI) drive economic development? What is the impact of domestic investment in the development of a country?  Is the impact greater than, equal to or less than the impact of FDI? There are several advantages of encouraging domestic investment. Among these is that domestic investment is neutral on a country’s balance of Payments.  Local firms do not repatriate their profits to foreign owners. And since they do not have affiliates overseas, they do not engage in transfer pricing thus cheating government out of tax revenue. Some reports have it that Africa loses US$4 billion in legitimate taxes through this form of tax-cheating. On the contrary local firms invest in expansion at home thus setting the stage for further growth and hence development. In the long term they contribute to balance of Payment credit by earning foreign exchange from exports and profit repatriation.  Some experts...

KQ: Acquisition by KLM was a lifeline.  It survived and prospered   WHY IS IT THAT Air Tanzania Corporation was acquired by SAA and collapsed, while Kenya Airways acquired Precision air and it survives? In turn, Kenya Airways itself is partially owned by KLM and has thrived. Why is it that the developmental impact of cellular phone service is bigger in Kenya than in Tanzania and Uganda although the former were the first to roll out mobile phone services? These questions point to an important fact: That Foreign Direct Investment (FDI) per se is not a sufficient catalyst for economic development.  Other economic variables also have a positive causality to economic development.  These variables include the availability of skilled manpower, level of education, per capita income, market size and perhaps the capitalist culture.  Granted, Foreign Direct Investment (FDI) has a strong positive relationship with economic growth. The question; what is the imp...