Reading the Kenya Economic Survey 2016, I was reminded of a commentary by Christine Lagarde, the Managing Director of IMF in 2011.
Then on a visit to Nigeria, Ms Lagarde said the world was in the middle of its most dangerous phase. With mature markets saturated, escalating risk surrounding trusted industries, and old business models being put to new tests, she called the phase ‘a global crisis of confidence’. These sentiments rang true as I looked at highlights of the survey that found the country’s Gross Domestic Product (GDP) expanded by 5.6 per cent in 2015.
Predictably, this development was mainly supported by three pillars: Agriculture, Real Estate and the Financial Services sectors. Interestingly, our growth came from the very same sectors that Ms Lagarde believed had caused the ‘crisis in confidence’; in a stagnant global economy a few years ago. According to the World Bank, this is not viable for future growth. In their study released a month ago, the World Bank based their projections for 7 percent growth by 2017 on Kenya’s ability to diversify its income.
This would mean including more revenues from untapped sources such as infrastructure, manufacturing and the services industries. For instance, as the engine of any modern economy, manufacturing creates jobs, delivers export opportunities and enhances competition as it pits local and global competitors against each other.
Unfortunately, Kenya’s manufacturing sector has remained subdued over the last few years, with low overall productivity. The large differences in firms’ productivity across subsectors have also stifled competition.
So, how do we create the catalysts for new growth that can drive our economy over the next ten years? My belief is that we must start with our people. The story of Safaricom provides a relevant example of how this can be done. Late last year, we asked KMPG to conduct a study aimed at discovering our True Value. Designed to be a measure of how we impact the Kenyan economy, KPMG found that for every shilling we invested, we created societal value for Kenya which was at least nine times greater than our reported financial profits of Sh32 billion last year. This translated to additional economic activity amounting to Sh315 billion that was created due to the revenue generated by Safaricom – the equivalent of 6 per cent of Kenya’s GDP.
KPMG found that we boosted government revenue by Sh127 billion over the year. But for me, the real impact lies in the story of the people whose lives were changed as a result of that growth. In the last year, Safaricom created 4,251 direct jobs as well as 108,000 indirect jobs. The report shows us that these 108,000 individuals: the mama mbogas, kiosk owners and newspaper vendors who now exist because of Safaricom, are the real drivers of our company. They are also the soul of our economy. And yet they, and millions like them, continue to be excluded from actively participating in our future.
As part of the over 70 per cent of Kenyans who make their living in the jua kali sector, they have traditionally been locked out of any interventions we may create. Isn’t it a good time to let them in? One of the easiest ways we can do this is by disrupting the way we think about our economy, and by extension, our companies.
For Kenya to survive the uncertainties of the global environment, we must be ready to embrace new drivers of change, or we will face a crisis of confidence similar to the one Lagarde described.We have the opportunity to reallocate our resources. This means that a strong agricultural sector must be supported by vibrant manufacturing, and traditional mainstays like tourism.
This must be supplemented by additional sectors as competition goes global. It means that the Kenya’s economic revolution must be centered on new revenue drivers that include viable social development. It requires that we turn to some of the success stories in the Small and Medium-sized Enterprise (SME) space to drive these new commercial models. It also means that we must take advantage of tools such as technology, to transcend traditional barriers and extend services to more Kenyans. We have a unique advantage in this area as we are not encumbered with the traditional infrastructure that other economies must accommodate.
Whichever route we may adopt, it is clear that the demand to diversify our economic income has never been more urgent. The time is now to heed the signals that are highlighting the fact that growth must be actively and continually renewed. Only then can we start a tidal wave of rapid economic change that benefits and includes all Kenyans. It is then that we will be able to avert a crisis of confidence.