Kenya

V

Economy of Kenya

Traditionally, Kenya’s economy was based on farming, herding, hunting, and trade. With the establishment of colonial rule, however, Kenya was brought into the world capitalist economy. Under the British, Kenya developed an economy based on the export of agricultural products. The colonial government encouraged the settlement of European farmers in Kenya to provide a greater supply of exports. From World War I (1914-1918) through the mid-1950s, produce grown on settler farms and estates, such as coffee, sisal (a fiber used to make rope), and tea, dominated Kenya’s exports. Meanwhile, African households were encouraged to produce commodities for subsistence and for sale in local markets, and to work on European farms producing export crops.

During and after World War II (1939-1945), Kenya’s economy was altered by the initiation of import substitution manufacturing—that is, the production of goods that formerly had to be imported. The 1950s also witnessed an important change in the agricultural sector as the colonial government adopted measures to stimulate greater production by African households, including granting Africans permission to grow high-value export crops. This helped spur small-scale production over the next two decades, and despite the departure of most European farmers after Kenya gained independence, agricultural exports expanded dramatically. This, together with influxes of foreign capital and technical expertise, made Kenya’s cumulative rate of economic growth—6.8 percent—among the highest in sub-Saharan Africa between 1963 and 1980.

Kenya’s booming economy weakened in the 1980s as a consequence of a rising trade deficit, among other factors. Kenya’s slowing economic growth rate and expanding budget deficits caused the government to turn to structural adjustment policies advocated by the International Bank for Reconstruction and Development (World Bank) and the International Monetary Fund (IMF) as part of their economic assistance to Kenya. Nevertheless, the Kenyan government has set the ambitious target of achieving the status of industrialized economy by 2020. In 2006 the gross domestic product (GDP), which measures the value of goods and services produced, was $22.8 billion, or about $623.20 per person.

A

Role of Government

Since the colonial period, Kenya’s government has played a major role in the economy through its ownership of the railways, control of marketing for agricultural products, and establishment of state-owned firms. After Kenya gained independence in 1963, the government issued a series of five-year plans to guide economic development. Since the early 1990s the government has sold many state firms to private individuals and companies.

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B

Labor

In 2006 Kenya had a labor force of 16.7 million people. About 19 percent of the labor force works in agriculture, most earning their living by subsistence farming. About 62 percent work in the service sector and 20 percent in industry. Many laborers earn their living in what is called the jua kali sector—that is, through informal employment as mechanics, metalworkers, or in some other small-scale skilled craft. Kenya’s unemployment rate was estimated at about 21 percent in 1994. Trade unions represent a substantial proportion of private sector employees. All unions were brought under state control in 1965 with the creation of the Central Organization of Trade Unions (COTU).

C

Agriculture

In 2006 agriculture contributed 27 percent of Kenya’s GDP. This represents a decline from 1963, when agriculture accounted for 38 percent of GDP. Kenya’s principal domestic commodities are the food crops maize (corn), millet, sorghum, and cassava. The most important export crops are tea, coffee, horticultural products (flowers, fruits, and vegetables), chrysanthemums (flowers from which pyrethrum insecticides are made), and sisal. The country’s principal livestock are cattle and goats. Since independence, Kenya’s small farm sector has contributed an increasing share of export production.

D

Tourism and Other Services

The service sector accounts for 54 percent of Kenya’s GDP. This includes the various services provided by the government and the increasingly important restaurant, hotel, and safari industries, which have grown in response to the increasing number of tourists visiting Kenya.

Tourism in Kenya has expanded dramatically since 1963, and since 1989 it has been the country’s leading source of foreign currency. Tourist arrivals, mainly from Europe and North America, numbered 1,399,000 in 2005. Kenya’s main tourist destinations are the beaches along the Indian Ocean coast; national parks and game reserves, such as Masai Mara Game Park, Tsavo National Park, and Amboseli National Park; and museums and historical sites.

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