East Africa Economic Report

TWO WEEKS AGO, the government of Kenya closed down the analogue broadcast system in some parts of the country. That meant all broadcasters had to shift to the digital broadcast system. While others were crossing the bridge, three leading media house chose to shut themselves even from the digital platform on which they were broadcasting previously. Their argument, they have not been in the digital broadcast platform and that the digital carriers were carrying the content of KNT, NTV and Citizen TV illegally.  That move sparked off a debate that is still raging. The context of this piece is not to plunge into the Cacophony of noise that is passing for debate. Mine is to explain the new business model into which the media houses are moving.  The noise and shenanigans is a reflection of the failure by the media houses and their supporters- some of who claim some place in the intellectual world- to understand the concept of private Public Partnerships and what it involves. ...

LOW AND DECLINING energy costs are set to be the catalyst for economic growth in Kenya this year.  And - depending on how long the price of oil remains low- energy prices could remain key drivers in the short run. Analysts, including the World Bank expect crude oil prices to remain depressed into 2017. This means Energy prices, coupled with infrastructure development, will determine the pace of economic growth, employment, investment, the shilling’s exchange rate and wealth distribution in Kenya. And going by the current energy trends, we may not be wide off the mark.  Forget tourism, forget agriculture and insecurity.  Oil and electricity prices, coupled with infrastructure development, will drive growth in Kenya between 2015- and 2017.  Let’s look at some numbers:  Crude Oil prices have declined from US$110 in January last year to US$43 yesterday, January 2015.  In January 2014, geothermal power provided only 179 MW or 24 per cent of the 747 ...

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...