By Macharia Kamau
NAIROBI, KENYA: Nearly all sectors that have been earmarked as the drivers of the economy in the Vision 2030 development blueprint posted slower growth in the course of 2012.
While the sectors posted positive growth, they grew at slower rates compared with growth rates witnessed in 2011. The slowed growth was attributed to a mix of factors including high cost of credit, high cost of production and election jitters among business owners who adopted a wait and see attitude and withheld investments.
When launched in 2008, the Vision 2030 marked out six sectors – agriculture, financial services, wholesale and retail trade, manufacturing, tourism and business process outsourcing – that were expected to be key in steering economic growth by way of employment and wealth creation.
Of these, only agriculture accelerated at a higher rate last year, growing at 3.8 per cent in 2012 compared to 1.5 per cent growth in 2011.
The manufacturing sector grew by 3.1 per cent last year, a slower growth rate than the 3.4 per cent seen in 2011.
According to Economic Survey 2013, high production costs and increased competition from imported goods were among the factors that slowed down manufacturing.
“Manufacturing activities were negatively affected by the high production costs, uncertainties relating to the general election, the high cost of credit and strong competition from imported goods,” said the Survey. There was a marginal decline in the performance of the food industry, which is the largest component in the manufacturing sectors. This was as a result of reduced production of milk and tea, occasioned by harsh climatic conditions in some parts of the country in the first quarter of last year.
Other segments that registered a decline in output within the manufacturing sector include beverages, basic metals and refined petroleum products.
Warehouse and retail trade is another sector that posted a slowed growth. According to the Survey, the sector grew by 6.4 per cent in 2012, compared to 7.3 per cent in 2011.
The industry has been rated the second largest driver of growth after transport and communication sectors over the last five years, having a cumulative growth of 19 per cent in the past five years.
The financial services sector also slowed, mostly due to a reduction in the amount of loans issued to their customers. Due to high interest rates in the course of the first-half of 2012, there was a reduction in demand for credit from many sectors as well as individual customers.
This has, however, changed and interest rates started going down in the second half of 2012. “During the year under review, the sector recorded a slower growth rate of 6.5 per cent compared to 7.8 per cent in 2011,” notes Economic Survey 2013 in part.
