Economic Powerhouse in East Africa - Kenya - Case Study Example

Country Report: Kenya Author’s Name: Professor’s Name: Course Name and Number: Institutional Affiliation: Date of Submission: Country Report: Kenya Introduction This analysis pertains to Kenya; an economic powerhouse in East Africa. Its specific mandate is to gauge the country as to whether it is worth investing in, especially by a foreign entity. The analysis will encompass the overall economic conditions of Kenya. In order to reach at an exhaustive and inclusive analysis, this paper seeks to use the country’s level of economic development, the economic system and gain an insight on recent employment, inflation, and economic growth figures. The risk factor in the country lies in the unstable nature of the political climate. This could cause alarm as businesses could suffer in the wake of civil unrest. Similarly, the economic state fluctuates regularly with the whims of the western sponsors. The opportunities are also numerous considering the country is an economic hub as the best pick in the region. The economic growth rate is also healthy and there is a budding new market to infiltrate. Therefore, if the company were to invest in the region it should be in this country. Furthermore, the country is not remote meaning little cost of transportation for expatriates. This paper explores the intricate interplay of all these factors with a view of assessing the country’s conditions for foreign investment. Economic analysis Overview Kenya is an agriculture-based economy. In terms of economic development, the country is at a take off stage where there is increased attention from investors. The economic activities associated with the production of the company’s item are still in the budding stage. The manufacturing sector is still young but developing all the same. The country does not have modern industries comparable to that of the first world, but it is a work in progress. The economic system is capitalist following the mother colonial country, Britain. Agriculture alone caters for around 70 percent of both direct and indirect employment. The agricultural sector performance, in terms of output, is highly dependent on the schedule of the rains. Therefore, low rainfalls in any given year affect the economy negatively. This often sets off severe chain reactions on GDP Euro Monitor website (2011). Manufacturing sector comes a distant second. The sector has its own challenges too including the unstable foreign exchange rate and unsettled political climate. Other factors also determine Kenya’s GDP; among them is corruption in the government. In fact, graft is still a serious issue affecting Kenya’s economic growth. As a result the infrastructure has not progressed or improved as well as it should have in some regions of the country. The image below represents the composition of the Kenyan GDP by its sectors The place of Agriculture in Kenya’s economy The agricultural sector is the cornerstone of the economy. According to Kenya’s Country Profile prepared by Euro Monitor website (2011), agriculture accounts for more than twenty-five percent of the economy. The most notable agricultural sub-sector is the production and export of cash crops and products. The country is the world’s biggest exporter of black tea, most of which goes to the Chinese and Indian markets. Most industries are agriculturally based. The economic policies in the country lean towards the promotion of standardized business structures. Similarly, the cost of rent and maintenance of supplies have been erratic, but bound to stabilize in the future as a new constitution is in place. Economic factors Inflation has been an increasingly major problem in Kenya since global crisis struck. In as much as the economic system has been laissez faire, the government has had to come in, on several occasions, to alter the market forces. The Central Bank often resorts to lowering the cost of borrowing in order to drive inflation down and to attract foreign currency. The falling value of the shilling against the dollar and other hard currencies has been a cause for policy planners in Kenya (Kimani, 2011). This is one of the key factors catalyzing high rates of unemployment in the country. Besides criticism, the country is strategically positioned in the region, as a hub of sorts. Furthermore, it stands to gain vastly after as the integration of the East African Community (EAC) gets underway. The integration will see installation of a central banking facility for the member states, as well as a common currency. The Common Market Protocol signed in 2009 is one of the factors that benefit the country in the integration of the region. This is because the country’s businesses are positioned to take advantage of the common market after full integration. The GDP has grown steady since the post election chaos. Analysts at the Central Bank peg the half-yearly 2010/2011 fiscal year growth at 2% (Kimani, 2011). The growth in a macroeconomic view is encouraging. The main reason is that inflation, since the post-poll chaos, has gradually decreased, and the balanced budget is on a path to steady recovery. Additionally, there were massive donations given to the government by the International Monetary Fund (IMF). It gave the country a major boost in 2009, during the world recession (Masha, 2010). The publishing industry is another sector of interest to the company. Unfortunately, the sector is still quite elementary in the country, albeit projections showed development in the industry. It still uses traditional methods and the royalty rates are minimal if they are paid at all (Okeyo, 2010). The aim of the donation was to strengthen outside accounts as well as alleviate a bit of pressure from the internal budget to avoid the straining of resources. The reserves in the duration of recovery grew steadily to a sum of over four billion dollars by the year 2010 (Masha, 2010). Having given the country an acclaim in the macro-economical sense, the other side of the coin is quite different. There is a difference between the whole picture point of view and the perspective of individuals on the ground. The spread of wealth is scattered and individualistic. This leaves the country to a market filled with tier-4 consumers living on miserable means. The psychology of these people tends to be drawn to the essentials. That means that products by the company that leans on the extravagant or is an accessory will be ignored. These people live on less than one dollar a day and so do not have much of a selection to choose from in their spending patterns. It is everyone for themselves as the rich take from the poor at the slightest negligence of the authorities. It is in this situation that the worst attribute of Marxism shows its face. It is a cruel existence to be poor in the country, especially because the politicians care less about its citizenry as illustrated in the poll chaos. The system of land ownership and matters of accumulation of capital are the elites’ reserve. The land laws and economics of spiking property values end up in a crippling situation. The poor cannot afford to purchase land. The city residents make time-sensitive deals, which bring them immense profits as the poor lounge around and wonder what happened. It is the way of the capitalist, eat or be fodder for someone else, sadly. The result sadly is that only the rich will get the benefit of the state resources and the poor will probably get the scorn and harassment of the state meted out by the police force. A difference forms in the definition of the term true citizens whereby they recognized by the state, as well to do. The rest are economic baggage. This becomes an economic risk because if RTW were to invest then, the market would be a small section of the economy, and not the whole population considering the population with the spending power. Socio-cultural analysis of Kenya Overview The cultural analysis of the country relies on variants such as include language. Their history also has a hand in the definition of their culture. Most of the people in the country are fluent in English and Kiswahili. They Arabs brought in the latter through trade, while English is the official language because of the colonial influence from the British. It is the language used in business and academic circles in the country, in a formal way, unless in the city circles. This is an advantage as there will be no need for translation. Ethnic scene There are tensions between communities although; some of these are only in stereotype. These were a valid way to evaluate community behavior as a whole, leading to some resentment up to date. The Kikuyu community for example acquired many jobs during the colonial era, and had a lot of political consciousness (Ngugi, 2008). When they quickly adapted, because of inherent skill in trade they adopted the stereotype of, always being hungry for money’. For one, the people are now in a mixed environment, not knowing each other because of their mixed ethnicities. This is one of the factors, why English and Kiswahili prevail because they are neutral, and easy to learn and adopt by the city folk. The main meal, which is dominant throughout the country, is maize. When ground into porridge or made into ‘Ugali’, it is a popular hit with most communities (Africa Guide, 2011). Education In the education sector, Kenyan graduates come out of universities expecting jobs. This would be a realistic assessment, when talking about another timeline, specifically in the past. There were few aspiring candidates in the job market. Even so, few made it to be graduates like 20 years ago. The scene changed quite rapidly when new universities emerged, and universities were suddenly teaming with students. This could be an advantage to the company because of the unoccupied labor in currently in the market. These students are skilled but do not have the means to support them. Therefore, the company could be spoilt for choice for whom to hire. The students went on to graduate found that while the universities expanded and emerged, the government of the country did little or in some cases remained the same. The students now had a feeling that the system cheated them, and embarked on various journeys to success, some quite of course from their chosen fields. They realized that their certificates were just that, pieces of paper that held little meaning in places where the job market was full, complete with a waiting line of applicants. The parents noticed the trend in the education sector and have now become skeptical about higher learning. As a result, it goes to the rich who afford to risk sending their children to learn a course they may never apply. On the other hand, the government exacerbates the problem, neglecting subsidization of high-school education in government schools. It fails to justify how funds go through the cracks and disappear through politicization and corruption. The introduction of the private sponsored students in public universities emphasizes the concept that the university is a place the affluent. These students are different from the regular candidates in that they enjoy better, flexible hours, and attention, as well as, the course of their choice, albeit, at a ridiculously higher fee. The government, although, made the situation bearable by the introduction of the free primary education. At the same time, however, it did not take into account staffing needed to handle this change. Consequenly, the students outnumber the teachers by ratios of over fifty students to one teacher. The figures that finish the system do not translate into the secondary system. Opinions on the government The justice department and the police system need more attention. Crime levels in the rural areas experienced a rise in the recent past, but the reputation of the police and the justice system holds with such disdain that the locals consider the law enforcers as part of the problem, rather than part of the solution. The locals often complain that the police participate in robberies around their areas. It seems that impunity is a way of life even at the lowest justice level. There are some changes, experienced in the social characteristics of the country’s citizens, although. The high-HIV prevalence of the country reduced significantly during recent years. This is because of the awareness spread for the disease. It is now more of a problem in the rural areas, than in the city because of the connectivity involved with the outside world. Social opportunity The number of entrepreneurs is also increasing; meaning the market for new products is getting larger which is good news for RTW. People, realizing that the agricultural business is not baring much profit for them, are opting to look for lucrative options of survival. It is justification for many individuals migrating to cities seeking reinvestments of their assets (Euromonitor International, 2010). The country is leaning toward a certain direction in the coming era such that as the number of youth joins the urban areas, there is a detaching from traditionalism according to (Euromonitor International, 2010). The more the youth market enlarges the better for the company because of increased chance of getting customers. This translates to the growing sums of people following a western taste, which is good for the company. Similarly, the steady economic growth should cater for spending power damaged in the recent past. Legal environment and Political analysis of Kenya Overview Kenya has a standard legal entity within the state whereby the government divides itself into three functional parts. These are the executive with the president as the head. He is the lead actor in the country’ political affairs. The other significant powers outside the country are the donors which are mostly the US and European countries. Britain also has its part to play being the country’s former mother country. When it comes to decision making all branches of government have their fields, but executive decisions lie with the president. The second part is the legislature consisting of the national assembly, which creates the laws governing the country. The president does not lead this, but he is an integral part of the group. Ojienda and Obura (2006), state that the third and last group is the judiciary. This group is the one that makes the decisions according to its interpretation of the law. They meet regularly and decide on processing of new bills in parliament. Political involvement in the country’s affairs has been negative, for example the scandal in the education and civil employees departments. When it comes to enforcement of organizational laws, there is a high level of bias and corruption practiced although this comes with the territory. Legal environment The constitution enacted in 1963 has eleven chapters, and was recently redrafted to fit the current situation. The legal environment needs a lot of work. A report by the government task force on integrity and anti corruption committee of the judiciary, claimed at least, a half of Kenyan judges are corrupt (Kenyan Judiciary 'Corrupt' - Task Force, 2003). The same also applies to the rule of law such that the police force also exhibits the same level of corruption if not higher. When it comes to trade barriers, the main ones of concern lie with its neighbors. Advice from numerous sources including the World Trade Organization suggests lifting of these tariffs to improve trade and thus uplift the economic situation in the region. There will be increased opportunities for business and employment, in so doing. Political history The country’s politics remained in a static position since the initiation of the country back, ranks as having one of the most unequal income equalities in Africa (Siringi, 2010). The first president of the country instituted a cabinet and a government favoring his ethnic community. However, the intriguing part is not that he favored his community, but he favored his associates. This kicked off a habit in the country of nepotism, and graft that would be hard to kill to date. Bearing this is mind; there is still the fact that Kenya kept itself together during times when other countries unraveled (Gitari, 2007). At the independence period, they grabbed most of the choice land taken by the British rule. In the process, they left quite a few paupers and squatters from their own ethnic community hanging out to dry. The next president was not much different and was responsible for most of the graft and land issues that plague the country to date. In 1982, Kenya experienced a failed military coup (Inskeep and Thompkins, 2008). Since then, the dynamics of politics went dangerously close to that of a dictatorship government. The president, being paranoid, crushed any threat to his leadership. The detaining of very many individuals perceived as trouble to the state was just a characteristic. The people went through questionable processes like coercion, and torture to affirm their involvement in plans to topple the government. In extreme cases, extra judicial killings sanctioned by the state to take care of agitators who were a problem would be the normal order. Of late, the political sphere suffered a few shocks. Of late, the political sphere suffered a few shocks due to recent events in the election polls. After the 2007 elections The effect of the post election chaos brought the country to completely new level of awareness. This was drawing of unnecessary attention from the international community. The pressure applied to the government, left no alternative, but the pursuing of unmentionables, and seeking the truth. This was revoking visas to some government officials, and more recently, the ICC prosecutions of some officials suspected of masterminding the poll chaos of 2007 (Inskeep and Thompkins, 2008). There were reforms in some areas that caused quite a stir in parliament about the constitution resulting in as little headway. A new constitution was determined as a leeway in which reforms will be inclusive. In the year 2010, the Kenyan people got their wish and the new constitution promulgated. Before all of this happened there was quite a stirring debate over the issue that lasted the previous five years. There was quite a bit of opposition and some members of parliament argued that there was not enough time to implement the reforms at the time before the 2007 election polls. President Kibaki receives a lot of criticism from public, and within the government’s opposition. The denigration stems from claims of flaccidity on the job. He lacks the exuberance that many of his colleagues do and even when responding to crises, many perceive that he is too slow. He experienced an embarrassing defeat at the time of the draft constitution vote. Many of the political analysts and the public interpreted this as a prelude to what was waiting in the poll election. Therefore, when the results appeared to have irregularities, many suspected foul play on the part of the president, especially because the president’s party was behind the opposition with quite a margin (Inskeep and Thompkins, 2008). Kenyans realized exactly what the intentions of the government are and what their goals in relation are. Realizing a large element of individualism in the political game, the citizens saw the political games being played on their emotions to obtain a desired result. What makes it more interesting is that the rest of the African continent is not different from this example. This relates from Uganda to Ivory Coast, whereby it is a blatant refusal to step down, all the way to Egypt and recently, Libya. This is because of the feeling that whosoever wins the election, gets to take the whole picture. The history of the country suggests that all through, there were rival factions during elections, competing for totalitarian leadership, whereby both parties use their power to achieve their ends. Therefore, whoever wins is just another dictator the people have to deal with eventually, and the next one is just as bad as the last. There were cases of assassinations blamed on the previous governments. An example is the J. M. Kariuki saga blamed on the retired president Daniel Moi. Political risk The recent political uprising gave many signs, showing a failure of the state in many sectors other than the electoral process. The state showed failure in some sectors including the electoral security apparatus and the judicial system. The police also displayed weakness in coordination and reaction time, although there were vast political interests in play, hindering the work that could do at the time to prevent loss of life. This is a risk, which the company will have to take if it wants to invest in the country. Considering the environment, it would be the best option so far out of the rest. Recommendation Nevertheless, the World Bank observes that Kenya is gearing up for healthy growth. The World Bank points out the five forces that are likely to spur that growth. They are “the new constitution, EAC integration, ICT innovations, strong macroeconomic management, and recent investments in infrastructure” (World Bank, 2011).It seems that the political scope of the country single handedly holds the rest of the country back from ascending to new heights. It is quite evident by this time that there are political forces that do not have the country’s best interests at heart. What matters is they gain as much as possible from its resources before they become accountable. Overall, the reforms to the country in the three sectors of the country are bearing fruit slowly but surely, even the politicians are experiencing spotlights from every direction. Thus, it would seem that this case has more advantages than disadvantages. Reference List Africa Guide. 2011. Kenya People & Culture. (Hitting the headlines article) [Online] Available at :< http://www.africaguide.com/country/kenya/culture.htm> [Accessed 12 May 2011]. Euromonitor International. 2010. Consumer Lifestyles in Kenya Available through: GMID Database [Accessed 12 May 2011]. Gitari, J.B., 2007. The Politics of Stability and Domination in Africa: A Study of Political Repression in Kenya 1902 – 2002. Dissertation; University of Denver. Available through: Factiva database [Accessed 12 May 2011]. Inskeep, S., & Thompkins, G. 2008. Kenya's Post-Election Violence Kills Hundreds. National Public Radio. 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