Economy of Kenya Overview

The economy of Kenya is market-based, with several state-owned infrastructure enterprises and maintains a liberalized external trade system. Kenya is generally perceived as Eastern and central Africa’s hub for Financial, Communication and Transportation services.

As at May 2015, economic prospects are positive with 6-7% GDP GDP (Gross Domestic Product) growth expected, largely because of expansions in tourism, telecommunications, transport, construction and a recovery in agriculture.

Economy of Kenya Key Sectors

The three largest contributors to Kenya’s GDP are the services sector, agriculture and the industry and manufacturing sector.

Services

In 1980, services accounted for 47 percent of Kenya’s overall GDP. In 1990, it accounted for 51 percent, in 2000 it remained at 51 percent and in 2011, the services sector accounted for 58 percent of the country’s overall GDP.

The World Bank defines Services as jobs that are included in “wholesale and retail trade, transport, government, financial, professional and personal services.”

Tourism dominates the service sector and has shown steady growth in most years since Kenya got its independence in 1963. By the late 1980s tourism had become Kenya’s principal source of foreign exchange. In the late 1990s, tourism relinquished this position to tea exports.

However, in the last decade tourism in Kenya has seen a substantial revival and it is currently the largest foreign exchange earner, followed by flowers, tea and coffee.

Agriculture

In 1980, agriculture accounted for 33 percent of the country’s overall GDP. In 1990, the value agriculture added to GDP was 30 percent, in 2000, it rose to 32 percent, and in 2011 the value agriculture added to overall GDP fell to 23 percent.

In 2006 almost 75 percent of working Kenyans made their living on the land, compared with 80 percent in 1980. About 50 percent of total agricultural output is non-marketed subsistence production.

In 2005 agriculture, together with forestry and fishing, accounted for about 24 percent of GDP, as well as for 18 percent of wage employment and one-half of revenue from exports.

The principal cash crops are tea, horticultural produce and coffee. In 2005 horticulture accounted for 23 percent and tea for 22 percent of total export receipts. Due to depressed world prices, coffee accounted for just 5 percent of total export receipts.

The production of major food staples such as maize is subject to sharp weather-related fluctuations. Production downturns sometimes necessitate food aid. For example, in 2004 1.8 million people required food aid.

Tea, coffee, pyrethrum, corn wheat and sisal are grown in the fertile highlands. Coconuts, sugarcane, corn, cashew nuts, cotton, sisal and pineapples are grown in the lower-lying areas. Livestock predominates in the semi-arid savannah to the northern and eastern parts of the country.

Industry and Manufacturing

In 1980, the value industry and manufacturing added to Kenya’s overall GDP was 21 percent. In 1990, the value industry and manufacturing added to overall GDP decreased to 19 percent, in 2000 it dropped to 17 percent and in 2011, there was a slight increase to 19 percent.

The economy of Kenya is the most industrialized in East Africa, however, manufacturing still accounts for only 14 percent of GDP. This level of manufacturing GDP represents only a slight increase since independence.

About 50 percent of the investment in the industrial sector is foreign, with the UK providing half and the US being the second largest investor.

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