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Is Kenya’s 5.8pc GDP growth for real?


It’s a week now since Kenya National Bureau of Statistics (KNBS) released the 309-page 2017 Economic Survey that indicated that Kenya’s economy expanded by 5.8 per cent last year.

But as Kenyans digest the impressive growth data unveiled by the country’s statistics chief Zachary Mwangi, the new estimates of 5.8 per cent is seen by skeptics as “too optimistic and “too good’ to be realistic.

After a bad drought experienced during the year –  and with key corporates issuing profit warnings and worst still thousands of workers being laid off by these companies during the review period, many expected a drop in growth rate if not by a slight dip.

Also a key indicator of growth is the country’s stock market. A significant change in GDP, whether up or down, usually has a significant effect on the stock market. It’s not hard to understand why; a bad economy usually means lower earnings for companies, which translates into lower stock prices, which ironically has been the case for Kenya during the year.

Losses at NSE have seen billions of shillings investors’ wealth wiped out as 20-Share index dips to 3,128.69 from a high of 5499.64.

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But instead, Mwangi announced the GDP rate in 2017 climbed by 0.1 per cent over last year’s rate brushing aside previous cautionary statements by Treasury, World Bank and the International Monetary Fund (IMF). They had indicated that growth was likely to decelerate due to biting drought, depressed commercial bank lending and investors delaying investments ahead of the August 8 election.

The apparent slowdown is also confirmed by data released by Mwangi, the KNBS Director General, which showed that major sectors such as agriculture, manufacturing, mining and quarrying, construction, human health and social work activities and financial and insurance activities all recorded a dip in growth rate.

While agriculture was at three-year low, financial sector succumbed to a four-year low growth rate as private sector credit sank to 10-year low.

It also showed that drought hit food prices. They are at 11-month high due to drought that begun in the fourth quarter of last year. This puts the lives of over four million Kenyans at risk. The latest threat of worms’ invasion in key maize growing areas puts more threat to food security. To an ordinary Kenyan, the news of economy expanding puts a contradicting in the mind as captured in social media.

Luther Odhiambo, a lecturer at the University of Nairobi School of business opines that development of agriculture is essential to economic development. “Failures in the agricultural sector disorient the whole system of planning. The government should not be spending scarce foreign currency, which can be used to import more essential goods to import food grains,” he noted.

The Economic Survey 2017 is supposed to provide up-to-date information that is critical for evidence-based planning, budgeting, monitoring and policy evaluation process. “The country’s Gross Domestic Product (GDP) grew by 5.8 per cent in 2016 compared to a revised growth of 5.7 per cent in 2015. It remained resilience in the face of one of the worst drought,” reckoned Mwangi.

Good news. The economy waded through drought and considerable slowdown in uptake of credit in the fourth quarter of 2016 as observed by KNBS boss. “Problem with the economy is that it has to be felt in pockets, at the till, on pay cheques (but) not on graphs and pie charts,” said Ben Kairu, a Kenyan citizen, on his twitter handle.

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Too critical is the release of the document in an election year that KNBS boss was flanked by his entire board, Devolution and Planning Cabinet Secretary (CS) Mwangi Kiunjuri, Mining CS Dan Kazungu and the Principal Secretary for Planning and Statistics Irungu Nyakera at the country’s largest conference Centre, KICC.

But after the numbers had been read out, Chief Guest CS Kiunjuri, in unusual remark cautioned Kenyans who will discredit the growth figures. “Look at negative thinking way of some Kenyans who do not want to appreciate that the country is moving forward,” he said.

He promised to hit back on anyone discrediting the survey findings as well as that of the recently launched government delivery portal that highlights the success of Jubilee administration. While KNBS agrees that its sampling method may contain errors such as biased respondents or incomplete feedback, it insists that the document meets international best practices.

According to KBS boss, the data used to compile this annual document is obtained through administrative records from government offices, statistical surveys and censuses administered to enterprises and households.

One of the most disputed element in the report is on job creation. In the survey, the economy is said to have generated 832,900 jobs with 747,300 coming from the informal sector. “We administer questionnaires to enterprises to establish the number of jobs created. We measure at a particular time since it is a stock concept. We only look at June,” said the KNBS Director General.

In a phone interview with Financial Standard, James Gatungu, the Director for Production of Statistics at KNBS, said that the agency works on assumption that June of every year is a normal month.

However, he admits that the agency has no way of capturing data of an employee, who say before June, was sent home packing.

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“We get stock as at June 30. We don’t bother whether say within April or March you sacked some. All we ask is the employment status in the organisation as at June 30,” Mr Gatungu told Financial Standard.

Capturing job losses, he says, may be hard. To capture jobs created in the informal sector, Gatungu says KNBS relies on a labour model that factors in total labour force of the country within the year (based on population census) and the population leaving colleges and other education institutions.

This may mean that all college leavers may be viewed as doing something in the economy, either in the formal or informal sectors of the economy.

Last year was marred with public outcry as many companies announced job sheds. In the recent past, media industry, banking and manufacturing have been among the major sectors that announced job cuts. However, this going by KNBS, will not be captured.

The survey further puts the average wage earnings of workers at Sh53,736. With this data coming from employers, it may be prone to manipulation, especially by firms that pay lower than the minimum required salaries.

Kiunjuri, while making his address, said that all KNBS data is aggregated and treated with confidentiality and used only for national data without mentioning individuals. According to Irungu, the 2017 Survey was unique because its review period of 2013 to 2017 coincides with the second medium term plan (MTP2) as well as spanning the first term of Jubilee government.

The MTP2, Irungu explained, outlines policies, programmes and projects which the Government set to achieve and deliver accelerated and inclusive economic growth, higher living standards, better education and healthcare.

Even with this year’s survey having been released three weeks after the National Treasury CS Henry Rotich presented the 2017-18 Budget, unlike the case in previous years, the agency said its findings still informed contents in the budget.

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