2015 report: Drivers of second quarter growth

A foreign visitor from Belgium, left, smiles after feeding a giraffe from her hand while others take photographs at the Giraffe Centre, in the Karen neighborhood of Nairobi, Kenya Monday, Sept. 30, 2013. The risk to the country's tourism was one of the first concerns expressed by officials during the initial days of the Westgate Mall siege, but tourists continue to fly to Kenya for safaris and beach vacations despite a number of foreigners being killed in last week’s attack.

Kenya’s real gross domestic product (GDP) for the second quarter of the year grew by 5.5 per cent on the back of improved performance in key sectors, among them energy and agriculture.

Data released by the Kenya National Bureau of Statistics (KNBS) last week shows the growth levels registered were, however, lower than the 6.0 per cent registered over a similar quarter last year, as horticulture and tourism held back overall growth.

Below is a breakdown of how selected sectors and sub-sectors performed, and the mitigating factors that contributed to their respective results in the period under review.

Tourism

Kenya’s tourism industry continues to climb out of a rut triggered by the country’s incursion into Somalia in 2011 and exacerbated by the Westgate siege in September 2013 that saw dozens of people lose their lives.

The sector seems to have stemmed some of the bleeding as Government, hotel owners and tour companies’ efforts begin to bear fruit.

According to KNBS, accommodation and food services improved to -0.8 per cent, a 95 per cent uptick from -19.3 per cent recorded over a similar quarter in 2014.

Tourist arrivals to the country, however, registered a mixed performance, with the Jomo Kenyatta International Airport registering a 2.8 per cent increase in passenger traffic, while arrivals at the Moi International Airport in Mombasa declined by 39.1 per cent.

Hotel occupancies also declined by 1.9 per cent.

Agriculture

Kenya’s economic backbone, the agricultural sector, enjoyed a boost from steady rainfall patterns in the country’s food-producing regions to record a 5.4 per cent increase in growth between April and June this year.

Improved yields of maize, vegetables and fruits contributed to the overall performance of the sector, which was more than 50 per cent higher than growth recorded over a similar quarter last year.

Horticulture

The performance in the horticultural sub-sector was, however, less impressive, with declined output in most export groups.

The cut flower sector, which is the third-largest foreign exchange earner for the country, registered a significant deceleration, as export volumes shrunk by 4.2 per cent to reach 29,357 metric tonnes.

The decline has been attributed to the uncertainty around negotiations on the Economic Partnership Agreement (EPA) trade treaty between the European Union (EU) and the East African Community (EAC).

Kenya commands a 30 per cent share of the cut flower market in the EU. On October 1 last year, the country temporarily lost its duty-free access to the market after the EAC missed the deadline on ratifying a new EPA treaty.

A new trade agreement was, however, signed on October 14, and cut flowers from Kenya regained access to the EU market two months later.

However, flower farmers in the country are said to have lost between Sh600 million and Sh1 billion each month on account of the new levies they had to pay during the negotiation process.

Vegetable exports further declined from 18,128 metric tonnes in the second quarter of last year to 16,023 metric tonnes in 2015.

The volume of fruit exports, however, registered a 22.2 per cent increase to stand at 12,080 metric tonnes in the period under review.

Tea production declined by 17.2 per cent to 93,646 metric tonnes, while coffee exports also declined by 10.5 per cent over the same period.

Nairobi Securities Exchange

Jitters over the reintroduction of a 5 per cent capital gains tax on traded securities seem to have had marginal effects on the Nairobi Securities Exchange (NSE).

The NSE 20 Share Index is said to have risen marginally by 0.4 per cent in June 2015 compared to June 2014, though the total number of shares traded reduced from 731 million to 681 million over the period.

Nonetheless, the value of shares traded registered a 33 per cent rise from June 2014 to Sh24.3 billion at the end of June this year.