Kenya’s Big Four Agenda No Silver Bullet for Economy, BMI Says

NAIROBI (Capital Markets in Africa) – Kenya’s Big Four agenda, a set of development goals geared at fuelling output, will not necessarily drive economic growth to the targeted 7 percent from 2020 to 2022, according to BMI Research.

A key hurdle is the government’s weak fiscal position, with debt projected to cross the 60 percent to gross domestic product threshold in 2018, the Fitch Group unit said in a note. East Africa’s biggest economy’s chief development plan includes increasing the supply of low-income accommodation, providing universal healthcare, buttressing manufacturing so it can contribute a bigger portion to output and improved food security.

“The overall impact on GDP growth may be muted, meaning we uphold our average growth forecast of 5.4 percent between 2018 and 2022,” according to the emailed note.

Kenya’s bid to increase manufacturing to 15 percent of GDP from 8.4 percent may receive a boost as country’s improving transport network drives investment in agro-processing, according to BMI. However, relatively high labor and electricity costs could diminish its attractiveness to investors.

A proposal to increase corporate tax for companies earning in excess of 500 million shillings ($4.96 million) a year to 35 percent from 30 percent, the highest of any East African Community country, may deter large manufacturers, it said.

Slow Progress
The ambition to roll out universal healthcare by 2022 from 36 percent currently will be “very challenging” because inadequate infrastructure and delays in the completion of facilities will limit the availability of services to particularly those in remote areas, it said.

“Moreover, corruption, which has seen private healthcare companies make significant losses, will likely continue to slow progress on healthcare reform,” BMI said, citing investigations into the possible loss of more than 400 million shillings for a medical cover for government officials in March and another probe looking into the Ministry of Health failing to account for 5.3 billion shillings.

The final objective to boost the supply of affordable homes by constructing 500,000 dwellings by 2022 is also facing supply constraints, according to BMI. Treasury Cabinet Secretary Henry Rotich projects the annual housing deficit will rise to 300,000 by 2020 from 200,000.

Source: Bloomberg Business News