The recent implementation of the African Continental Free Trade Agreement (AfCFTA) in 53 African Union countries brings unprecedented potential for economic growth across Africa. While many nations stand to gain, Kenya’s economic diversity makes it particularly well positioned to capitalise on opportunities provided by the deepening economic integration of the continent. To understand why, we must first look at Kenya’s economic structure.

The Kenyan economy has, since 2008, been steered by the government’s implementation of ‘Kenya Vision 2030’; an economic plan aiming to build a "newly industrializing, middle-income country providing a high quality of life to all its citizens by 2030 in a clean and secure environment” (Government of Kenya, 2013). In that cause, the Kenyan government set the rather ambitious goal of achieving 10% annual GDP growth from 2012 to 2030 – an enormous target considering that compounding 10% growth over an 18-year period would entail an increase in national GDP of 500%! While the Kenyan economy has not quite fulfilled these lofty expectations, the nation has still maintained an incredible average of 5.4% GDP growth since 2012 (The World Bank, 2021); an undeniably impressive feat in its own right.

Kenyan President Uhuru Kenyatta speaks during the opening ceremony of the Pre-Global Entrepreneurship Summit, 2015.

This rapid economic development is, in part, due to Kenya’s economic diversity in comparison to its East African neighbours. In addition to strong agricultural, mining, and manufacturing industries, the Kenyan economy has also developed a vibrant luxury tourism industry, flourishing financial services sector, and an IT sector prodigious to the extent that it has been nicknamed the “Silicon Savannah” (Fingar, 2019).

This has been made possible by the Kenyan stance on free markets and its encouragement of private industry. The nation ranked 56th in the World Bank’s Ease of Doing Business index; for comparison, Uganda and Ethiopia ranked 116th and 159th respectively. Thus, it is unsurprising that Kenya consistently receives the largest flow of capital investment of any East African country, and third largest in Africa behind South Africa and Nigeria (Lekerai, 2020). Private Equity investment in Kenya made up 73% of all PE deals in East Africa by volume and 87% by value between 2017-2018. The flow of foreign investors looking to capitalise on the growth of Kenya’s burgeoning economy has contributed significantly to the growth its more sophisticated industries have already achieved and has only served to cement its position as emerging market investors’ first choice.

Kenya’s economic diversity has not only enabled it to draw foreign investment in times of economic prosperity; it has also shielded the country from economic shocks. For example, the 2020 oil price crisis caused significant damage to the economies of oil dependant nations, such as Libya (Zahaf, 2020, p. 39) and Nigeria (Ajenifuja & Atitebi, 2021). As Kenya does not rely on one industry to support its economy, it has been able to absorb shocks more readily than many African nations. This has been noticeable during the COVID crisis; while many African economies have been battered by the virus, Kenya’s diverse economy coupled with decisive government action has allowed it to emerge with only a few scratches (Battle, 2020, p. 1796). It saw only a 1% fall in GDP, with a lot of its losses attributable to its struggling trade partners, and even saw growth in its agricultural exports of 10% (Gondwe, 2020, p. 14).

This resilience has contributed to Kenya’s fortuitous positioning with respect to the AfCFTA. Not only does the nation have a significant advantage over its counterparts due to the size and diversity of its economy, but it now has the upper hand going into the global post-COVID economic recovery. Unsurprisingly, Kenya is projected to take the lion’s share of the projected 2 million jobs and $1B in intra-African exports expected to benefit East Africa under the AfCFTA (UNECA, 2020).

Written by Hugo Khan - Joint 3rd Place in the AASOA x Exeter ACS Engage in Africa Short Essay Prize.

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Why Global Investors are Putting their Money on Kenya