Nipate
Forum => Kenya Discussion => Topic started by: RVtitem on August 13, 2016, 04:08:35 PM
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I was recently called by a reporter to comment on an article he was writing on the findings of a study by a group of Japanese economists faulting “our economic model” ( Japan scholars punch holes in Kenya’s growth model”Business Daily, July 25).
I have not seen the study, but the gist of it is captured by the statement attributed to one of the lead authors to the effect that our economic growth “has not been broadly based in terms of poverty reduction through employment creation.”
The study reportedly also flags weakening of our manufacturing sector and stagnation of agricultural productivity.
You can imagine my bemusement as I listened to the reporter explaining to me what he seemed to think were novel earth-shaking revelations, but which, as I demonstrated to him in considerable detail, are the very things that I have been speaking and writing about week in week out for as long as I can remember.
(Read: Japanese scholars punch holes into Kenya’s economic growth model)
The young reporter is not alone. One of the lessons I have learned from decades of explaining economic ideas is that complex things can look deceptively simple — misleading many people to think they have understood concepts that they actually haven’t.
http://www.nation.co.ke/oped/Opinion/Lessons-from-Asian-tigers-/440808-3342850-8gt4ou/index.html
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The paradox in Ndii's eloquent rants is the emphasis that they are purely economic analyses. Why does he doubt himself? Is he afraid they sound political? The object is lost in the argument. Was it the Windy City Assassin who said: how does one determine the last laugh? Does the opponent have to die?
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There are some aspect of Ndii article that I agree with. Especially about opportunity cost, basically what gives more bang for the shilling. There were some grandiose projects like greenfield terminal and I don't know 6 stadiums that were scrapped that didn't make any economic sense. The proposal that building a highway along the kenyan coastal line would lead to development of metropolis with industries I find it hard to believe that it would pan out . In Mombasa there are EPZ zones that are hardly being fully utilised, why aren't the "sweatshops" putting factories there? Mind you anyone can apply for EPZ license you don't need to be in a special zone. Clearly Kenya isn't going to industrialise following the asia model of cheap labour (Ethiopia is doing that). Maybe we jump and instead of buying wheelbarrows we buy forklifts going by Ndii analogy . At the coast we should be looking at how to exploit the ridiculous potential in fish and marine industry. That sector can generate more than $1b annual like Namibia does.
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Great article! Too much bureaucracy makes it harder to do business in Kenya. It is a significant obstacle to economic growth and job creation.
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Totally agreed. Besides I dont think we want to waste our small coastline (about 200km long) by polluting it with big industries.We can probably make more money out of it from tourism and marine fishing - and move heavy polluters inward --that LAMU power plant doesn't sit right with me for instance. This Asia model is not the only model to move from poor to a developed state. There are other models out there - like you quoted Nambia - which has decent living standard - that we can copy. Many economic models out there that Prof Ndii? should be aware...of course his main beef is politically and he is always looking for something to deride..this week it is Naivasha Industrial park...I guess he has not heard of industrial park proposed in Mombasa - Ndogo Kundu or something like that.
There are some aspect of Ndii article that I agree with. Especially about opportunity cost, basically what gives more bang for the shilling. There were some grandiose projects like greenfield terminal and I don't know 6 stadiums that were scrapped that didn't make any economic sense. The proposal that building a highway along the kenyan coastal line would lead to development of metropolis with industries I find it hard to believe that it would pan out . In Mombasa there are EPZ zones that are hardly being fully utilised, why aren't the "sweatshops" putting factories there? Mind you anyone can apply for EPZ license you don't need to be in a special zone. Clearly Kenya isn't going to industrialise following the asia model of cheap labour (Ethiopia is doing that). Maybe we jump and instead of buying wheelbarrows we buy forklifts going by Ndii analogy . At the coast we should be looking at how to exploit the ridiculous potential in fish and marine industry. That sector can generate more than $1b annual like Namibia does.
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Totally agreed. Besides I dont think we want to waste our small coastline (about 200km long) by polluting it with big industries.We can probably make more money out of it from tourism and marine fishing - and move heavy polluters inward --that LAMU power plant doesn't sit right with me for instance. This Asia model is not the only model to move from poor to a developed state. There are other models out there - like you quoted Nambia - which has decent living standard - that we can copy. Many economic models out there that Prof Ndii? should be aware...of course his main beef is politically and he is always looking for something to deride..this week it is Naivasha Industrial park...I guess he has not heard of industrial park proposed in Mombasa - Ndogo Kundu or something like that.
Namibia has significant natural resources and is a major exporter of gold, uranium, zinc, diamonds, etc. Which part of that "model" can Kenya copy and how?
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Kenya has its own model "the Kaplot" model. This is where one buys big chunks of land and subdivides.
I can say so far its doing great. I have friends who have undeveloped plots worth 100million an acre in Kitisuru - wherever that is!!
Lots of other Africans come to do retail shopping in NRB. That is working well too.
Health industry is flourishing. NRB hospital built a large campus that will attract regional clients.
Totally agreed. Besides I dont think we want to waste our small coastline (about 200km long) by polluting it with big industries.We can probably make more money out of it from tourism and marine fishing - and move heavy polluters inward --that LAMU power plant doesn't sit right with me for instance. This Asia model is not the only model to move from poor to a developed state. There are other models out there - like you quoted Nambia - which has decent living standard - that we can copy. Many economic models out there that Prof Ndii? should be aware...of course his main beef is politically and he is always looking for something to deride..this week it is Naivasha Industrial park...I guess he has not heard of industrial park proposed in Mombasa - Ndogo Kundu or something like that.
Namibia has significant natural resources and is a major exported of gold, uranium, zinc, diamonds, etc. Which part of that "model" can Kenya copy and how?
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Yeah Dubai (Arab Emirates) or Sychelles are doing well - and didn't have to go through the slavish industrial manufacturing. There are lots of model out there. Kenya has shown it ready to leapfrog straight to services. Look at maturity of our financial sector for instances. Look at quality of our education. Look at our internet connectivity. We have the ingredient needed to try other models - esp in the era of information or knowledge economy.Dr Ndii himself seem to realize that when I read him later saying it doesn't matter if someone is boda boda rider (about 0.5m of them in Kenya or more) or a factory worker in China..boda boda may infact be earning more than Ethiopia dude getting 2,000 per month in Chinese ran slave factory. I recently read security companies are the fastest growing in kenya with more than 300,000 folks formally employed...earning at least minimum wage of 12,000K. When will you get factories in Ethiopia or any other country employing 0.3m people. I also read that informal wages overtook formal wages for same level of education since 2011 or about except for those in agricultural sectors. Maybe we need to just build universities that offer service oriented courses....and get our youngmen straight to services or white collar jobs. There are gazillion of new service jobs...main in IT, E-Commerce, biotech, pharmaceuticals, e-services
Kenya has its own model "the Kaplot" model. This is where one buys big chunks of land and subdivides.
I can say so far its doing great. I have friends who have undeveloped plots worth 100million an acre in Kitisuru - wherever that is!!
Lots of other Africans come to do retail shopping in NRB. That is working well too.
Health industry is flourishing. NRB hospital built a large campus that will attract regional clients.
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Kenya has its own model "the Kaplot" model. This is where one buys big chunks of land and subdivides.
I can say so far its doing great. I have friends who have undeveloped plots worth 100million an acre in Kitisuru - wherever that is!!
Lots of other Africans come to do retail shopping in NRB. That is working well too.
Health industry is flourishing. NRB hospital built a large campus that will attract regional clients.
I have to admit I never thought of any of that. Not too long ago an Asian friend asked me this: "What plans does the Kenyan government have to rapidly increase employment and lift the masses of its people out of poverty". I couldn't think of good answer. Nor could I get any out of the "experts" that I asked. But Kenya appears to have a good answer: people could be engaged in measuring sub-divisions of plots, carrying shopping bags, etc. And the NRB Hospital seems to be a really good approach: no longer will people have to go to India etc.; no longer will public hospitals in Kenya be death traps; we will be attracting regional clients; dot dot dot. But that's probably not even the half of it: I take it that the "flourishing health industry" means that no longer are so many kids under 5 suffering from the ill effects of malnutrition; no longer are so many Kenyans be dying from shit-related and easily preventable diseases; dot dot dot.
Pundit also points to a really neat solution to the employment problem (especially for our youth):
There are gazillion of new service jobs...main in IT, E-Commerce, biotech, pharmaceuticals, e-services
Read that again: gazillion!
Truly, its all onward-and-upward for our great country. Shame on those saying that we don't even have a clear industrialization policy!
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Pundit also points to a really neat solution to the employment problem (especially for our youth):
There are gazillion of new service jobs...main in IT, E-Commerce, biotech, pharmaceuticals, e-services
Read that again: gazillion!
Truly, its all onward-and-upward for our great country.
The knowledge economy is probably where it is at. Not so much e-commerce and the likes but more like manufacturing.
I am thinking focusing on something that is in constant demand, generates some grunt work, and can generate new industries like silicon chips. Start from assembly. Then manufacture. Then the whole life cycle including design. The raw materials for these kinds of things are literally oozing from the ground in the DRC.
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The knowledge economy is probably where it is at. Not so much e-commerce and the likes but more like manufacturing.
Perhaps. It depends on what the "knowledge economy" is. According to the World Bank's analysis, IT and Finance and related things will not suffice to do what is required: they can make non-trivial contributions to the GDP, but they will not do much for employment and lifting the masses out of poverty. By the way, a question: Given all the excitement about "Silicon Svannah" (aka Konza City) how is the IT sector growing in Kenya?
The World Bank etc. do not see any shortcuts for a place like Kenya. It is all very well for some to talk about different models, but there are questions: which model, when, and how? (As far as I can tell, the view of the current Kenyan government and its supporters seems to be that if they just talk about it long enough and hard enough, then it will automatically happen.)
I am thinking focusing on something that is in constant demand, generates some grunt work, and can generate new industries like silicon chips. Start from assembly. Then manufacture. Then the whole life cycle including design. The raw materials for these kinds of things are literally oozing from the ground in the DRC.
Manufacturing, yes. But note that manufacturing as a % of GDP in Kenya has pretty much been stagnant for quite some time. What will change that? When? How? Perhaps in producing rungus, uniforms, etc. for watchmen and boda-boda types ... ?
"What plans does the Kenyan government have to rapidly increase employment and lift the masses of its people out of poverty".
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Land speculation industry ought to be stopped. Its causing too much imbalances. Canadians are a good example.
www.financialpost.com/m/wp/personal-finance/mortgages-real-estate/blog.html?b=business.financialpost.com/personal-finance/mortgages-real-estate/ontario-tried-a-speculation-tax-on-property-and-the-market-collapsed-overnight
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The knowledge economy is probably where it is at. Not so much e-commerce and the likes but more like manufacturing.
Perhaps. It depends on what the "knowledge economy" is. According to the World Bank's analysis, IT and Finance and related things will not suffice to do what is required: they can make non-trivial contributions to the GDP, but they will not do much for employment and lifting the masses out of poverty. By the way, a question: Given all the excitement about "Silicon Svannah" (aka Konza City) how is the IT sector growing in Kenya?
The World Bank etc. do not see any shortcuts for a place like Kenya. It is all very well for some to talk about different models, but there are questions: which model, when, and how? (As far as I can tell, the view of the current Kenyan government and its supporters seems to be that if they just talk about it long enough and hard enough, then it will automatically happen.)
I am thinking focusing on something that is in constant demand, generates some grunt work, and can generate new industries like silicon chips. Start from assembly. Then manufacture. Then the whole life cycle including design. The raw materials for these kinds of things are literally oozing from the ground in the DRC.
Manufacturing, yes. But note that manufacturing as a % of GDP in Kenya has pretty much been stagnant for quite some time. What will change that? When? How? Perhaps in producing rungus, uniforms, etc. for watchmen and boda-boda types ... ?
"What plans does the Kenyan government have to rapidly increase employment and lift the masses of its people out of poverty".
Honestly I am not sure how to jump start such an industry from the ground. I just know a lot of things now and in the future are incorporating chips. If we can master creating that stuff, there is a market for it out there bigger than that for anything we can draw from the ground. Policy wonks need to look at what is required and without much fanfare make it happen.
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Honestly I am not sure how to jump start such an industry from the ground. I just know a lot of things now and in the future are incorporating chips. If we can master creating that stuff, there is a market for it out there bigger than that for anything we can draw from the ground. Policy wonks need to look at what is required and without much fanfare make it happen.
I wasn't thinking of chips in particular. My views are on manufacturing in general, and I fully agree with you that manufacturing is the way to go. But right now: (a) manufacturing (of anything) in Kenya doesn't seem to be going anywhere and (b) it's hard to see how the government intends to change that.
Beyond that, the real goal should be getting people out of poverty and to a decent standard of living. I see nothing there, other than some vague "visions" and an implicit, hoped-for, trickle-down effect.
Policy wonks? The guy in charge of planning just announced that we have no plan! :D
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You guys totally misunderstood the meaning of knowledge economy and what service economy can do. There problem we have in Kenya is simple. You have about 24m (50%) people aged 15-65yrs who should be in gainful employment. Our main problem is that bulk (60-70%) of these people are employed in agricultural activities that don't pay much nor can fully engage this people - agricluture itself generate 25-30% of GDP - so nearly 3/4 of those people are excess capacity.
The touted model is to move these guys to manufacturing jobs (so call Asian or China model) . But I think there is alternative that kenya is showing possible. Nothing novel here...other countries have done this..although they've financed it using oil(Arab Emirates) or tourism money (sychelles). It certainly possible to move from low income country to middle income country without industralizing. Kenya already is low middle income country yet it has not industralized. It's been growing at 6% the last few years.
Back to the 24m problem..we have about 2-3m in formal jobs -either in gov or private sector..nobody has big problem with that..some few(maybe 1/4) in agricluture sectors are doing well enough..we already are doing well in service sectors...lots of new jobs employed as m-pesa/bank agents (maybe anything 200,000), tourism sectors employs hundrend thousands, about 300,000 are now employed as security guards, we have nearly 1m involved in boda boda riders and transport sectors as drivers/touts, about 1m maybe employed in Mjengo jobs, then new class of SMES doing trading, you have guys working in the ever expanding formal retails..supermarket attendants as far better jobs than shopkeer, folks working as cyber attendants...all these jobs have been shown to pay as equally well as formal jobs...such a teacher or doctor...for the same level of education.
Some of these are new jobs...others are jobs now possible thanks to knowledge economy...for instance they are thousands now working online or in call centers.In short knowledge economy doesn't mean computer economy...it mean economy driven by IT(Tech) (not ICT itself). You don't have to manufacture chips, all you have to do is to create m-pesa or banking agent type of jobs that employs 200,000 - and have 1.5 financial accounts for 1 person. These achievement may look easy but you'd have to find out how long Asian tigers go their guys to own a bank account! All these jobs are now possible thanks to knowledge economy.
Find out how large an industrial park you'll need to employ 200,000 people. We can go the knowledge/service economy and succeed. All we need is more laptops/quality educations in our schools...more universities...more graduates...every household connect to power/broabband..more apps/applications...and we can take advantage of knowledge economy straight to first world. Estonia has done it. It is not industrial power.
There are things Ethiopia can do...go the China way..and there are things Kenya can do..go the Estonia way. Ethiopia have the ingredients for this...slavish wages, really poorly educated folks, cheap land owned by gov, dictatorship, cheap power, lack of private sector, gov capacity...and we don't have those advantages. Even if we remove all corruption and redtape..nobody in kenya is ready to work for 20 dollars per month in some chinese factory. But we have education systems that is acknowledge to be as good as some middle income countries. We have smart people willing to innovate. We are a democracy. We already have a thriving private sector that is already chief source of FDI for many countries in Africa. That is why M-pesa or banking agent has suceeded here and that is why internet connection or smartphone usage has hit the roof. These are not true for every country. You just need to go to Ethiopia to find out why things we take for granted here...are not.
We don't have to abandon manufacturing or agri...but we just have to grow all the other sectors..without focusing too much on the tiger asian model.
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You guys totally misunderstood the meaning of knowledge economy ...
Of course. And we are grateful to you for enlightening us. :D
But I think there is alternative that kenya is showing possible. Nothing novel here...other countries have done this..although they've financed it using oil (Arab Emirates) or tourism money (sychelles).
We don't have any serious oil; so we can skip the Emirates. Seychelles: A truly bizarre example. The place has a total population of about 97,000---less than some small surburb in Nairobi!---that, moreover, growing very slowly.
Other suggestions (or "models" as you call them) for how Kenya will finance its great leap forward?
Back to the 24m problem..we have about 2-3m in formal jobs -either in gov or private sector..nobody has big problem with that..some few(maybe 1/4) in agricluture sectors are doing well enough..we already are doing well in service sectors...lots of new jobs employed as m-pesa/bank agents (maybe anything 200,000), tourism sectors employs hundrend thousands, about 300,000 are now employed as security guards, we have nearly 1m involved in boda boda riders and transport sectors as drivers/touts, about 1m maybe employed in Mjengo jobs, then new class of SMES doing trading, you have guys working in the ever expanding formal retails..supermarket attendants as far better jobs than shopkeer, folks working as cyber attendants...all these jobs have been shown to pay as equally well as formal jobs...such a teacher or doctor...for the same level of education.
Interesting figures. If I may query just one: how do you arrive at "maybe 200,000" for MPESA/bank agents?
I'm sure there are many employed as watchmen, touts, boda-boda operators. I don't know how much they make. Do they make enough to get out of poverty?
What does "for the same level of education" mean when comparing a doctor with supermarket attendants and cyber attendants?
Lastly, out of the 24m you started with, how many do you have left?
Find out how large an industrial park you'll need to employ 200,000 people.
That simple, huh?
...and we can take advantage of knowledge economy straight to first world. Estonia has done it. It is not industrial power.
There are things Ethiopia can do...go the China way..and there are things Kenya can do..go the Estonia way
Estonia is another odd one. Apart from the advantages it has from being a member of the EU and from its geographical position (esp. w.r.t to Russia), it has a tiny---and shrinking---population: 1.3 million is about the size of Mombasa. Also, looking at its economy by sector, I don't see much of "knowledge economy". The top 4 sectors in 2015: manufacturing (15%), real estate (10%), wholesale and retail trade (12%), transport and storage (8%). And so on.
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Honestly I am not sure how to jump start such an industry from the ground. I just know a lot of things now and in the future are incorporating chips. If we can master creating that stuff, there is a market for it out there bigger than that for anything we can draw from the ground. Policy wonks need to look at what is required and without much fanfare make it happen.
I wasn't thinking of chips in particular. My views are on manufacturing in general, and I fully agree with you that manufacturing is the way to go. But right now: (a) manufacturing (of anything) in Kenya doesn't seem to be going anywhere and (b) it's hard to see how the government intends to change that.
Beyond that, the real goal should be getting people out of poverty and to a decent standard of living. I see nothing there, other than some vague "visions" and an implicit, hoped-for, trickle-down effect.
Policy wonks? The guy in charge of planning just announced that we have no plan! :D
I should have said manufacturing. Not knowledge economy.
But whichever end goal, It's past that time to go beyond flashy documents and fanfare.
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Some of these are new jobs...others are jobs now possible thanks to knowledge economy...for instance they are thousands now working online or in call centers.In short knowledge economy doesn't mean computer economy...it mean economy driven by IT(Tech) (not ICT itself). You don't have to manufacture chips, all you have to do is to create m-pesa or banking agent type of jobs that employs 200,000 - and have 1.5 financial accounts for 1 person. These achievement may look easy but you'd have to find out how long Asian tigers go their guys to own a bank account! All these jobs are now possible thanks to knowledge economy.
Find out how large an industrial park you'll need to employ 200,000 people. We can go the knowledge/service economy and succeed. All we need is more laptops/quality educations in our schools...more universities...more graduates...every household connect to power/broabband..more apps/applications...and we can take advantage of knowledge economy straight to first world. Estonia has done it. It is not industrial power.
How are these things related? What leads to what and why? What is the core product that is driving all these? What is coming out of Kenya that the rest of world will have their knickers in a twist without?
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Some of these are new jobs...others are jobs now possible thanks to knowledge economy...for instance they are thousands now working online or in call centers.In short knowledge economy doesn't mean computer economy...it mean economy driven by IT(Tech) (not ICT itself). You don't have to manufacture chips, all you have to do is to create m-pesa or banking agent type of jobs that employs 200,000 - and have 1.5 financial accounts for 1 person. These achievement may look easy but you'd have to find out how long Asian tigers go their guys to own a bank account! All these jobs are now possible thanks to knowledge economy.
Find out how large an industrial park you'll need to employ 200,000 people. We can go the knowledge/service economy and succeed. All we need is more laptops/quality educations in our schools...more universities...more graduates...every household connect to power/broabband..more apps/applications...and we can take advantage of knowledge economy straight to first world. Estonia has done it. It is not industrial power.
How are these things related? What leads to what and why? What is the core product that is driving all these? What is coming out of Kenya that the rest of world will have their knickers in a twist without?
I too have been wondering about that. E.g., these 200,000 guys in that industrial park. What exactly are they producing? And if it's just a matter of finding out how large a park is needed, why stop at just one park?
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Knowledge economy is not computer economy. M-pesa ecosystem is an example of knowledge economy. Current banking revolution is mostly thanks to computers making many things possible. You know how much a hassle banking was before computers were born.There are new jobs that you can see if you've never been to kenya in last 5-10yrs. One is ubiquitious boda boda - transport sector of the economy- that now employs millions of youths - who otherwise would be idling or under employed in farms. Their earning is certainly more than what guys make in industrial area...and way better than those in Ethiopia slave factories.As for m-pesa & banking agent jobs - all you need to find out is how many safaricom and airtel agents are out there - last I checked there were 150,000 in Safcom alone - and way bigger number than that - I have seen survey of their earning (from transactions fee) -coming down to 12-30k per agent on average. That 200K is understatement considering banks have way more agents than that.All those are example of new jobs. The traditional jobs of industrial area, farming and construction work is being suplimented by new jobs - more example Uber taxis jobs - that is knowledge economy job - thanks to a simple mapping application.
You don't have to manufacture chips to take advantage of knolwedge economy. All you need are the kind of educated, innovative, and receptive people like kenyans.
As for earning - in informal sector -catching up with formal sector - you need to look for labour survey that was done I think in 2010 or about. The constant is the level of education..so I mean std 8 drop out working formally as security guard in some company - is doing less than std 8 drop out working in transport sector as a boda boda.
With the knowledge economy - we need to rethink this manufacturing is the only way out for us.
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Knowledge economy is not computer economy.
I did not suggest otherwise, but, once again, thanks for enlightening me.
M-pesa ecosystem is an example of knowledge economy. Current banking revolution is mostly thanks to computers making many things possible. You know how much a hassle banking was before computers were born.There are new jobs that you can see if you've never been to kenya in last 5-10yrs. One is ubiquitious boda boda - transport sector of the economy- that now employs millions of youths - who otherwise would be idling or under employed in farms.
M-Pesa ecosystem is part of the knowledge economy. Good. Current banking revolution is mostly thanks to computers making many things possible. Also good. And so on, and so forth. All good. And the millions of youths supposedly employed in the boda-boda industry: how do they fit into all that? Their knowledge of bike routes?
As for m-pesa & banking agent jobs - all you need to find out is how many safaricom and airtel agents are out there - last I checked there were 150,000 in Safcom alone - and way bigger number than that ... That 200K is understatement considering banks have way more agents than that.All those are example of new jobs.
One more time: what are the sources for the numbers you give?
The constant is the level of education..so I mean std 8 drop out working formally as security guard in some company - is doing less than std 8 drop out working in transport sector as a boda boda.
Perhaps so. One question I had is whether they---watchmen, boda-boda types, etc.---are making enough to get out of poverty. The other question was in relation to your statement that:
all these jobs have been shown to pay as equally well as formal jobs...such a teacher or doctor...for the same level of education.
and here is what I asked:
What does "for the same level of education" mean when comparing a doctor with supermarket attendants and cyber attendants?
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Quit asking elementary question.Wages for boda boda and security guard will rise as the economy grows..now doing around six percent...so eventually our security guard will earn as well as us security guard.
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Quit asking elementary question.Wages for boda boda and security guard will rise as the economy grows..now doing around six percent...so eventually our security guard will earn as well as us security guard.
OK. That being so, let's celebrate them as pillars of the Knowledge Economy, Vision 3020 2030, and leap into the First World. :D
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I was recently called by a reporter to comment on an article he was writing on the findings of a study by a group of Japanese economists faulting “our economic model” ( Japan scholars punch holes in Kenya’s growth model”Business Daily, July 25).
I have not seen the study, but the gist of it is captured by the statement attributed to one of the lead authors to the effect that our economic growth “has not been broadly based in terms of poverty reduction through employment creation.”
The study reportedly also flags weakening of our manufacturing sector and stagnation of agricultural productivity.
You can imagine my bemusement as I listened to the reporter explaining to me what he seemed to think were novel earth-shaking revelations, but which, as I demonstrated to him in considerable detail, are the very things that I have been speaking and writing about week in week out for as long as I can remember.
(Read: Japanese scholars punch holes into Kenya’s economic growth model)
The young reporter is not alone. One of the lessons I have learned from decades of explaining economic ideas is that complex things can look deceptively simple — misleading many people to think they have understood concepts that they actually haven’t.
http://www.nation.co.ke/oped/Opinion/Lessons-from-Asian-tigers-/440808-3342850-8gt4ou/index.html (http://www.nation.co.ke/oped/Opinion/Lessons-from-Asian-tigers-/440808-3342850-8gt4ou/index.html)
Confession. I hadn't looked at this story at all. David Ndii as usual is thought provoking with his economic analogies. That helps me understand some economic concepts I otherwise would not. The one that catches my attention in this story is
A worker with a wheelbarrow can offload 100 boxes per hour. One worker with a forklift offloads 10 times as much, that is, 1,000 boxes an hour. Should an economy without capital invest in wheelbarrows or forklifts?
A wheelbarrow costs Sh5,000 (except in Bungoma). A forklift costs a million. One forklift buys 200 wheelbarrows. Two hundred wheelbarrows will move 10,000 boxes an hour.
The forklift raises the productivity of one worker to 1,000 boxes per hour, but the other 199 workers who would have used wheelbarrows to raise their productivity remain at the maximum manual productivity of 20 boxes per hour, for a total output of 4,980 boxes, translating to productivity of 24.9 boxes per worker, a quarter of the labour productivity of the wheelbarrow economy.
This illustration hopefully clarifies that what I have argued for many years is about allocation of capital, not redistribution of income, about inequitable distribution of tools, not of food.
The way I understand him. He is not literally suggesting replacing forklifts with wheelbarrows. It's an analogy. But rather the point he is making is that what drives economic growth actually matters a lot. He is suggesting that the inequality in benefits from Kenya's economic growth result from an inequitable distribution of the tools.
He also suggests that it is better to locate an industrial park at the coast than in Naivasha. Now if one considers the costs of transportation over short distances in that part of the world, the fact that the coast also has readily available cheap labor, what is a good argument against this point?
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Knowledge economy is not computer economy. M-pesa ecosystem is an example of knowledge economy. Current banking revolution is mostly thanks to computers making many things possible. You know how much a hassle banking was before computers were born.There are new jobs that you can see if you've never been to kenya in last 5-10yrs. One is ubiquitious boda boda - transport sector of the economy- that now employs millions of youths - who otherwise would be idling or under employed in farms. Their earning is certainly more than what guys make in industrial area...and way better than those in Ethiopia slave factories.As for m-pesa & banking agent jobs - all you need to find out is how many safaricom and airtel agents are out there - last I checked there were 150,000 in Safcom alone - and way bigger number than that - I have seen survey of their earning (from transactions fee) -coming down to 12-30k per agent on average. That 200K is understatement considering banks have way more agents than that.All those are example of new jobs. The traditional jobs of industrial area, farming and construction work is being suplimented by new jobs - more example Uber taxis jobs - that is knowledge economy job - thanks to a simple mapping application.
You don't have to manufacture chips to take advantage of knolwedge economy. All you need are the kind of educated, innovative, and receptive people like kenyans.
As for earning - in informal sector -catching up with formal sector - you need to look for labour survey that was done I think in 2010 or about. The constant is the level of education..so I mean std 8 drop out working formally as security guard in some company - is doing less than std 8 drop out working in transport sector as a boda boda.
With the knowledge economy - we need to rethink this manufacturing is the only way out for us.
I get the knowledge economy bit. It is not IT.
About the silicon chips, I think this is precisely the kind of high-tech industry that an educated, innovative and receptive people like Kenyans would benefit from. It requires huge investments in terms of infrastructure obviously.
There is a lot that goes into it, so it can spur the growth of related industries and services. From chemical processing industries, to real estate, to restaurants, and other things that follow such developments.
And in the process Kenya gets to master the production of something whose demand worldwide is virtually unlimited. I am saying we need a visionary that says by 2022, Kenya should be host to a factory assembling silicon chips and then gets down working on making it happening.
I don't get the impression that such a drive would take away or slow down the knowledge economy...if anything, it would just add to it. To be fair, I have no idea how or what the government should do to make that happen. Maybe attract one of the big players like intel or a rival to set up shop.
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About the silicon chips, I think this is precisely the kind of high-tech industry that an educated, innovative and receptive people like Kenyans would benefit from. It requires huge investments in terms of infrastructure obviously.
There is a lot that goes into it, so it can spur the growth of related industries and services. From chemical processing industries, to real estate, to restaurants, and other things that follow such developments.
And in the process Kenya gets to master the production of something whose demand worldwide is virtually unlimited. I am saying we need a visionary that says by 2022, Kenya should be host to a factory assembling silicon chips and then gets down working on making it happening.
I don't get the impression that such a drive would take away or slow down the knowledge economy...if anything, it would just add to it. To be fair, I have no idea how or what the government should do to make that happen. Maybe attract one of the big players like intel or a rival to set up shop.
A very good example of what you have in mind would be Malaysia. Take a look at its development in the electronics industry.
Red: Going by what's in all sorts of media, Kenyans have 2022 very much in mind. I just don't know about visionaries and chips ... unless it's the numerous "prophets" and potato chips done in transformer oil.
By the way, Pundit seems to have a fairly broad view of the "knowledge economy". For example:
more example Uber taxis jobs - that is knowledge economy job - thanks to a simple mapping application.
To my mind, the essence of such a job is still actually physically driving a taxi, regardless of the secondary activities and "apps" and whatever.
But to amuse myself .... My local pizza-delivery place has recently gone from taking phone orders to online-only, thus joining the "knowledge economy". The place I use for dog-walking has also taken a similar path; woof woof in the "knowledge economy". And looking at the back pages of some local rag, I see that even the local brothel too has not been left behind: online-only bookings ... f**king in the "knowledge economy" is probably sweeter than the "regular kind" ... And so on, and so forth.
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South Korean model?
www.nation.co.ke/business/South-Korea-challenges-Kenya-on-new-model/996-3369928-d5cn2g/
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My last on this. It pretty pointless arguing with some folks here. Kenya core competence right now is in the service sectors - such as financial, retail, wholesaling & trade,tourism,education,ICT -pretty much the leader in sub-sahara (outside rsa) - and manufacturing just doesn't seem to work. There are many examples of countries that have moved to developed world through focusing solely on services. Close home you have Dubai...where Oil contribution to their economy moved from 50% to 3% now. Kenya is also doing well in real estate/construction sector. Those are the sectors it need to focus on...rather than hoping everyone can replicate Asian Tigers model. Ethiopia seem to have the ingredients needed there...really low slavish wages, free land, cheap electricity, dictatorship and etc. We don't have any of those advantages.
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My last on this. It pretty pointless arguing with some folks here. Kenya core competence right now is in the service sectors - such as financial, retail, wholesaling & trade,tourism,education,ICT -pretty much the leader in sub-sahara (outside rsa) - and manufacturing just doesn't seem to work. There are many examples of countries that have moved to developed world through focusing solely on services. Close home you have Dubai...where Oil contribution to their economy moved from 50% to 3% now. Kenya is also doing well in real estate/construction sector. Those are the sectors it need to focus on...rather than hoping everyone can replicate Asian Tigers model. Ethiopia seem to have the ingredients needed there...really low slavish wages, free land, cheap electricity, dictatorship and etc. We don't have any of those advantages.
If we looked at the areas that kenya excel and its a world beater its in horticulture. The sector employs about 150k employees directly. With improved packaging technology which will allow flowers, vegetables and fruits to be shipped via ships instead of planes the sector will only expand. Maybe we need to ask ourselves what's it that the sector is doing right? The sector is no different from meat slaughtering and packing in midwest america. One thing for sure is that the industry has grown not because there was a grandiose plan by government but from pure initiatives of private sector. In kenya the fastest growing manufacturing sector is in agrimanufacturing which to me looks more like Thailand in late 80s http://www.investopedia.com/articles/investing/081815/emerging-markets-analyzing-thailands-gdp.asp .
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Thousands of young Kenyans are doing quite well in online writing -academic, articles. Have met Form Four guys doing well even for masters academic assignments after some basic writing training. Quite an indicator of education quality in Kenya. With a page going for at least Ksh. 150 up to as much as Kshs. 1,000, these are some of the quiet low hanging fruits which can be tapped if issues such as better cheaper internet connection as doing 5-10 pages is walk in the park. Most students complain that internet in universities is switched off at night when they are working!! Intervention by Equity to collaborate with Paypal was quite a timely intervention.
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About the silicon chips, I think this is precisely the kind of high-tech industry that an educated, innovative and receptive people like Kenyans would benefit from. It requires huge investments in terms of infrastructure obviously.
There is a lot that goes into it, so it can spur the growth of related industries and services. From chemical processing industries, to real estate, to restaurants, and other things that follow such developments.
And in the process Kenya gets to master the production of something whose demand worldwide is virtually unlimited. I am saying we need a visionary that says by 2022, Kenya should be host to a factory assembling silicon chips and then gets down working on making it happening.
I don't get the impression that such a drive would take away or slow down the knowledge economy...if anything, it would just add to it. To be fair, I have no idea how or what the government should do to make that happen. Maybe attract one of the big players like intel or a rival to set up shop.
A very good example of what you have in mind would be Malaysia. Take a look at its development in the electronics industry.
Red: Going by what's in all sorts of media, Kenyans have 2022 very much in mind. I just don't know about visionaries and chips ... unless it's the numerous "prophets" and potato chips done in transformer oil.
By the way, Pundit seems to have a fairly broad view of the "knowledge economy". For example:
more example Uber taxis jobs - that is knowledge economy job - thanks to a simple mapping application.
To my mind, the essence of such a job is still actually physically driving a taxi, regardless of the secondary activities and "apps" and whatever.
But to amuse myself .... My local pizza-delivery place has recently gone from taking phone orders to online-only, thus joining the "knowledge economy". The place I use for dog-walking has also taken a similar path; woof woof in the "knowledge economy". And looking at the back pages of some local rag, I see that even the local brothel too has not been left behind: online-only bookings ... f**king in the "knowledge economy" is probably sweeter than the "regular kind" ... And so on, and so forth.
Yes. Malaysia. I think Vietnam is also on the same track.
The actual plans for 2022 are centered on the tried and tested competency of tribal arithmetic. Eating. Vicariously or the real thing.
"Knowledge economy" is jargon that apparently is very flexible. At its heart it seems to describe nothing concrete outside of putting value on information.
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South Korean model?
www.nation.co.ke/business/South-Korea-challenges-Kenya-on-new-model/996-3369928-d5cn2g/
I like the self help idea. I thought devolution would lead to that kind of thing. Use local meager resources to improve conditions. Governments to facilitate or keep off. There is nothing preventing devolved governments from pursuing that approach.
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Here is an article 10 days ago on Nation about Knowledge economy by somebody who understands what we are talking about.
http://www.nation.co.ke/oped/Opinion/Africa-future-is-knowledge-economy/440808-3363258-w7shj3/
For those too lazy to read - the 21st century is knowledge economy - so folks need to quit being obsessed with industrial or agragrian revolution - and start thinking about leapfroging straight to the next revolution.
The four pillars: - An economic and institutional regime to provide incentives for the efficient use of existing and new knowledge and the flourishing of entrepreneurship;
An educated and skilled population to create, share, and use knowledge well;
An efficient innovation system of firms, research centers, universities, consultants and other organizations to tap into the growing stock of global knowledge, assimilate and adapt it to local needs, and create new technology;
Information and communication technology to facilitate the effective creation, dissemination, and processing of information
Few countries in Africa as ready as Kenya...and this great opportunity that we need to seize..and stop obsessing about manufacturing.
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Thousands of young Kenyans are doing quite well in online writing -academic, articles. Have met Form Four guys doing well even for masters academic assignments after some basic writing training. Quite an indicator of education quality in Kenya. With a page going for at least Ksh. 150 up to as much as Kshs. 1,000, these are some of the quiet low hanging fruits which can be tapped if issues such as better cheaper internet connection as doing 5-10 pages is walk in the park. Most students complain that internet in universities is switched off at night when they are working!! Intervention by Equity to collaborate with Paypal was quite a timely intervention.
I totally agree. In areas like Roysambu, wendani there are many of this self employed entrepreneurs who work as a group or individually in outsourcing industry. Most of them that I know are graduates who stopped looking for work in the "formal" sector and now they're self employed. All one needs to get started is a laptop and internet connection. Their payments is termed as diaspora remittance but its actually payment of export of services.
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I also know several. Most kids in campus are now doing these small time outsourcing. Now imagine if we could invest in really cheap broadband..and we can export several services. This to me is the future...for kenya..english speaking well educated savy workforce who've used computers since class one..who would beat that in 20yrs from now...when knowledge economy would be the mainstay economy.
I totally agree. In areas like Roysambu, wendani there are many of this self employed entrepreneurs who work as a group or individually in outsourcing industry. Most of them that I know are graduates who stopped looking for work in the "formal" sector and now they're self employed. All one needs to get started is a laptop and internet connection. Their payments is termed as diaspora remittance but its actually payment of export of services.
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Absolutely. The thing is however and I haven't seen this done yet, is regional specific decentralized workforce. Right now the culture of entrepreneurs and crowd sourcing are dominated by Silicon Valley culture. This makes it unsustainable for local economies and for collecting tax. I just think there needs to be more structures put in place to make these things systematic and sustainable for communities and to empower a nation state.
For instance India has a huge influx of knowledge based telco, IT workforce but still fall short. When I undertook my cablers exam they were all male and Indian. I noticed what they lack is an awareness of global consumer demands- global culture, media etc. I'd say 5% is producing the product or sharing knowledge and 95% is marketing and just selling it.
I don't think Kenya has the resources to market as well as big guns who well and truly spend a nation's annual GDP for marketing a product.
I think the way forward should be Kenya centric. So setting up an infrastructure that allows entrepreneurs to flourish under certain umbrellas in society. For instance allocating tender opportunities with sufficient leeway for entrepreneur development. Crowd sourcing through mpesa gateways. Make use of more structural or microfinancing type frameworks working alongside NGOs/CBOs etc.
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I also know several. Most kids in campus are now doing these small time outsourcing. Now imagine if we could invest in really cheap broadband..and we can export several services. This to me is the future...for kenya..english speaking well educated savy workforce who've used computers since class one..who would beat that in 20yrs from now...when knowledge economy would be the mainstay economy.
I totally agree. In areas like Roysambu, wendani there are many of this self employed entrepreneurs who work as a group or individually in outsourcing industry. Most of them that I know are graduates who stopped looking for work in the "formal" sector and now they're self employed. All one needs to get started is a laptop and internet connection. Their payments is termed as diaspora remittance but its actually payment of export of services.
We're tool-users (consumers) and planning on remaining so (even expanding) will not really get us anywhere.
Growth and advancement always goes to the tool-makers (manufacturers) and their point of origin (country).
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There are many examples of countries that have moved to developed world through focusing solely on services.
Tell us some---say, 10---of these "many examples of countries". We can then discuss them and see if they are suitable examples for Kenya.
Close home you have Dubai...where Oil contribution to their economy moved from 50% to 3% now.
First, Dubai started with oil and used that to finance its development and diversification into other sectors. What is Kenya starting with?
Second, oil production would be classified as "extraction" (primary sector), not services. That makes your example doubly hopeless.
(Incidentally, while oil as gone down, manufacturing has gone up to around 14% and is the 4th largest sector of that economy.)
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We're tool-users (consumers) and planning on remaining so (even expanding) will not really get us anywhere.
Growth and advancement always goes to the tool-makers (manufacturers) and their point of origin (country).
The single largest driver of Kenya's economic growth is still what we produce directly: according to KNBS data, agriculture contributed to 30% of growth in 2015. ICT on the other hand contributed 0.9%, only slighty better than "water, sewerage, and waste treatment" at 0.8%.
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The four pillars:
...
An efficient innovation system of firms, research centers, universities, consultants and other organizations to tap into the growing stock of global knowledge, assimilate and adapt it to local needs, and create new technology.
I see. So, how is Kenya doing in creating new technology?
Few countries in Africa as ready as Kenya...and this great opportunity that we need to seize..and stop obsessing about manufacturing.
Considering the general state of Africa, that's a bit like proudly announcing that the D- student is the best among those at the bottom of the class. "Best in Africa" will continue to mean little when the whole of Africa still contributes only 2-3% of world GDP.
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UAE still relies heavily on oil. It is diversifying though. To manufacturing.
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Yes. Malaysia. I think Vietnam is also on the same track.
Yes, Vietnam too seems headed that way. (They have already done boda-boda for ages, but I don't know if they have tried watchmen.)
Indonesia, Thailand, etc. are also set on that path and have started with the "easier" parts of consumer electronics, automotive parts, etc. Apparently, it has not occurred to them that all they need do is arm toddlers with laptops and then leap straight to everyone producing "apps", or that they could be among the "many examples of countries that have moved to developed world through focusing solely on services".
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Its amazing that some people see all the negative in Kenya but fail to see the good in our country. There are sectors in our country that are world class and can compete with any country. In horticulture not only are we the best in africa but world wide we're beating Israel only behind netherlands. The nascent outsourcing industry we compete with Philippines and other english speaking countries and we are winning some jobs.
Kenya is going to continue confounding people because its not conventional. Its a country of many moving parts. The recent finance survey shows that more than 50% of kenyans are self employed. If only we can continue embracing technology those self employed people can increase productivity and eventually develop big companies. Rv pundit put it right we need to induce technology or knowledge in every sector and we'll be okay.
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Its amazing that some people see all the negative in Kenya but fail to see the good in our country. There are sectors in our country that are world class and can compete with any country.
Questioning bizarre claims and theories does not mean that people see only the negative.
By the way, as a rule, there is something to be had from looking at negative things: if they can be eliminated, or even just reduced substantially, then there is a good chance of progress and positive development---both of which are rarely founded on just wild fantasy.
There are sectors in our country that are world class and can compete with any country. In horticulture not only are we the best in africa but world wide we're beating Israel only behind netherlands.
True. Kenya is certainly world-class in flowers. Tea as well.
Kenya is going to continue confounding people because its not conventional. Its a country of many moving parts.
Perhaps people are confounded, and perhaps not. I don't know. But if I may ask:
(a) What is a "conventional" country and how is Kenya "not conventional".
(b) What is a "country of many moving parts", and what are Kenya's "many moving parts" that, I assume, lead to the "confounding" and "not unconventional"?
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There are sectors in our country that are world class and can compete with any country. In horticulture not only are we the best in africa but world wide we're beating Israel only behind netherlands. The nascent outsourcing industry we compete with Philippines and other english speaking countries and we are winning some jobs.
Great stuff. I like the micro-finance thing too. Equity. Flowers, we are good too. I worry about Ethiopia snatching that market.
Generally good things. And biting poverty remains. I think that is the thrust of David Ndii's article. Which moving parts, to borrow your phrase, must we inject life into? Maybe he is clueless. But it has not been demonstrated.
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There are many example of countries that didn't become developed through natural resources or manufacturing. One more example is Australia. Service sector of Australian economy is nearly 70% of the economy. The highest manufacturing ever became important was in 60s - at 25% of GDP. This is a viable model that kenya should explore. The Asian tiger (before that Japan or British or USA) or low cost manufacturing for export route is not a viable model for us and seem to be working for Ethiopia. We have to pursue a different model. And there are many.Kenya is doing well in parts of agriculture - tea & horticulture - it doing very well in financial & intermediation services - and has spawn multinational companies there - it doing relatively well in tourism despite terror attacks here and there - it now doing very well in retail & wholesaling (secondly only to South Africa) - and doing really well also in real estate & construction. Those are kenya's greatest strength now. The economy has been growing at 6% - that is just a few % down 10% that would be required to move the country to developed world in a generation or two. I think we can easily get the 4% if we focussed on what we are good at - services - and are lucky with some mineral or two - and of course continue to get china to finance huge infrastructure - SGR alone adds 1.5% to GDP during construction. If we had several SGRS type projects -like Ethiopia - those can easily add the 4% we need on yearly basis.
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There are sectors in our country that are world class and can compete with any country. In horticulture not only are we the best in africa but world wide we're beating Israel only behind netherlands. The nascent outsourcing industry we compete with Philippines and other english speaking countries and we are winning some jobs.
Great stuff. I like the micro-finance thing too. Equity. Flowers, we are good too. I worry about Ethiopia snatching that market.
Generally good things. And biting poverty remains. I think that is the thrust of David Ndii's article. Which moving parts, to borrow your phrase, must we inject life into? Maybe he is clueless. But it has not been demonstrated.
If you look at the recent Finance survey file:///C:/Users/HP/Downloads/FinAccess%202016%20survey%20report%20(1).pdf you'll see that 18% adults are self employed and 32% derive income from agriculture. In my humble opinion is that biting poverty remains because of low productivity especially in agriculture where bulk of adults get their income from. The 18% that's self employed varies from crazy tender entrepreneurs to honest jua kali people producing real stuff. The problem is this self employed businesses are fragment and not growing fast enough to consolidate.
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There are sectors in our country that are world class and can compete with any country. In horticulture not only are we the best in africa but world wide we're beating Israel only behind netherlands. The nascent outsourcing industry we compete with Philippines and other english speaking countries and we are winning some jobs.
Great stuff. I like the micro-finance thing too. Equity. Flowers, we are good too. I worry about Ethiopia snatching that market.
Generally good things. And biting poverty remains. I think that is the thrust of David Ndii's article. Which moving parts, to borrow your phrase, must we inject life into? Maybe he is clueless. But it has not been demonstrated.
If you look at the recent Finance survey file:///C:/Users/HP/Downloads/FinAccess%202016%20survey%20report%20(1).pdf you'll see that 18% adults are self employed and 32% derive income from agriculture. In my humble opinion is that biting poverty remains because of low productivity especially in agriculture where bulk of adults get their income from. The 18% that's self employed varies from crazy tender entrepreneurs to honest jua kali people producing real stuff. The problem is this self employed businesses are fragment and not growing fast enough to consolidate.
Your link doesn't work because it is pointing to a file on your windows drive. The productivity issue is not too far off from what David Ndii is addressing. If I understand him well, he is saying we need to find ways of optimizing productivity and levels of involvement in the economy. IN other words, do we need more or less tractors, fertilizer, education etc? As efficiency improves, some of these farmhands may find themselves jobless even as the productivity and GDP goes up. Where do they go for employment? That's just my rudimentary understanding of what he is talking about.
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There are many example of countries that didn't become developed through natural resources or manufacturing. One more example is Australia. Service sector of Australian economy is nearly 70% of the economy. The highest manufacturing ever became important was in 60s - at 25% of GDP.
There you go again, with the "many examples". Another bad example here, I'm afraid. Before pointing out why, let us remind ourselves of the statement you made and should be proving:
There are many examples of countries that have moved to developed world through focusing solely on services.
I asked you to gives a list of 10 of the "many". And the list is where?
So, here's what is wrong with your "proof":
First, simply noting that a developed country has a huge services sector does not tell us that it got developed through services; a huge services sector is an aspect of developed countries.
Second, even if Australia got there without relying primarily on manufacturing, it would not tell us that it got there by "focusing solely on services". As a matter of fact, that was not the case.
Third, you do not seem to be aware of the role that huge agricultural and natural-resources (gold, iron-ore, etc.) industries played in Australia's economic history.
Fourth, on the manufacturing level: You seem to think of that 25% as a small number. Really? What are comparable numbers for the Asian Tigers? Let us take South Korea for example: in what year did manufacturing exceed that level?
The Asian tiger (before that Japan or British or USA) or low cost manufacturing for export route is not a viable model for us and seem to be working for Ethiopia.
It is, of course, possible to develop without a great focus in manufacturing: a country can, for example, start with selling stuff out of the ground (e.g. oil) and then buy its way into other things. So, why are agriculture and manufacturing being proposed for places like Kenya? Three reasons:
(a) Export-driven manufacturing has been shown to be very good at rapidly boosting employment and lifting masses of poverty.
(b) Without stuff to dig out of the ground, agriculture is a good basis for financing required for (a) and other things.
(c) After moving from agriculture to export-driven manufacturing, the exports also provide the finance to grow other sectors.
SGR alone adds 1.5% to GDP during construction. If we had several SGRS type projects -like Ethiopia - those can easily add the 4% we need on yearly basis.
Kenya borrowed about $4 billion for the SGR, which is about 8% of GDP; it's good to see that spending it is contributing to the GDP.
And, yes, if we had several "SGRS type projects" .... But the construction will come to an end and the money must eventually be paid back, so it might be a good idea to think of what the returns might be, rather than just how many we could have, all adding x% ...
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Get your facts straight.
1) For a country to go the Asian tiger model; the manufacturing contribution to GDP has to go anything 40-50%. Australia and so many developed countries never had to go through these. I give you examples - all I hear is excuses - they are small countries or have resources? I guess Singapore that get praised for that export-driven manufacturing was not small or other excuses about resources financing services sectors. Kenya is in middle - neither big neither small - we certainly have natural resources and are starting to explore those. So might not need to go Ethiopia way..and in any case I doubt it possible.
2) Secondly SGR has to been amortized for entire duration of the loan..this 20-30yr loan..split that 4-5B usd plus interest into 30yrs...and then compare with 1.5-2% it contributing to our GDP during construction and possibly for the entire duration of running. You'll realize that the cost per year is waaaaaaaaaaay less than 1.5-2% (about 1B usd every year). You just need to compare what treasury will pay every year..and what SGR gdp contribution per annum.
Kenya can and will develop without manufacturing being a key pillar. All we need to do is to focus on our comperative advantages (regionally we are best in services) and then leverage agricluture & construction - that also have huge multiplier effects.
Gov should not be afraid to borrow and fund huge infrastructural projects...I say that is probably the only way we can grow by 10% per annum (the target we need to move to developed world)...get two SGR type mega projects running every year.
But I guess all these is greek for guys who have to google around.
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Get your facts straight.
1) For a country to go the Asian tiger model; the manufacturing contribution to GDP has to go anything 40-50%.
Really? This is one we ought to be able to settle quickly. South Korea example: in what years have manufacturing as % of GDP ever been in that range? Weka answer hapa hapa. We can then start on the path to getting our "facts straight".
so many developed countries never had to go through these. I give you examples - all I hear is excuses - they are small countries or have resources?
Your claim was that:
There are many examples of countries that have moved to developed world through focusing solely on services.
So far, the only "examples" you have given as "models" that Kenya ought to follow are Namibia, Seychelles, Estonia, Dubai, and Australia, two of which don't even come to mind when one thinks of "developed". In all cases, I have pointed out the "problems" with your "models"; but I have not yet seen any counter-argument to what I have pointed out. Can you give us others of your "many examples"?
I guess Singapore that get praised for that export-driven manufacturing.
Actually, all the Asian Tigers get praised for export-driven manufacturing; it is one of their most distinctive economic characteristics. By the way, how has Singapore done with respect to your recommended 40-50%?
2) Secondly SGR has to been amortized for entire duration of the loan..this 20-30yr loan..split that 4-5B usd plus interest into 30yrs...and then compare with 1.5-2% it contributing to our GDP during construction and possibly for the entire duration of running.
Where do you get the figures as to its contribution after construction? Or is that an "elementary question"? :D
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The economy has been growing at 6% - that is just a few % down 10% that would be required to move the country to developed world in a generation or two. I think we can easily get the 4% if we focussed on what we are good at - services - and are lucky with some mineral or two - and of course continue to get china to finance huge infrastructure - SGR alone adds 1.5% to GDP during construction. If we had several SGRS type projects -like Ethiopia - those can easily add the 4% we need on yearly basis.
This seems like a really simple and neat way to go. Easily, as you put it. Kenyans and everyone ought to go for it.
I was curious as to how it might "easily" go, and there seems to some confusion in some places as to just what this 1.5% is all about---for example, there is a whale of a difference between, say, spending x% of GDP and increasing GDP by x%, just as there is between x% of GDP and x% of GDP growth. (The relevance will be apparent in what follows.)
At any rate, I took a quick look at some of it, starting with your starry-eyed notion that a few "SGR type" projects will get the Kenyan economy up there. Here is some of what I learned:
(1) Around the time the construction of the SGR started, there were plenty of 1.5% predictions. Once it started, there have been claims that the 1.5% is happening right now. Leo, hapa hapa. What seems near-impossible to find is any actual verification of this 1.5%, right here and now, while the SGR is being constructed. (Perhaps RV Pundit has some helpful sources.)
(2) Kenya's GDP growth:
2014: 5.3%
2015: 5.6%
2016: 5.9% (est.)
Let's take the 2015 figure. If that is 1.5% SGR and 4.1% Other---most unlikely---then it indicates serious problems with the other parts of the economy, considering the situation before the SGR business.
Another "scenario" is that not much has changed in the other sectors, but SGR alone is driving the growth. Also unlikely, but, in any case it is in the 0.2 to 0.3% range; not quite 1.5%.
Also, GDP growth was was 4.6% in 2012 and 5.7% in 2013; and the latest projection for 2017 is 6.1%. So, overall, it's hard to see a nice, steady and easy march to 10%. Which is a pity, because, as you note, 6% is "just a few % down 10%".
(3) On the basis of the above, I got curious as to the source and basis of this "1.5% SGR" figure, which has been bandied about all over the place: Where did it come from? Where is it going? What exactly is the SGr construction contributing to to the GDP and GDP-growth?
The figure has been repeated endlessly by GoK types, and, on that basis, repeated endlessly by numerous others. (Right up there with the one about how the SGR will reduce costs by 2.5 times.) But good luck into trying to find any basis for how GoK has arrived at it!
The other source that seems to be quoted by those giving "real proof" is the IMF. I had slightly less trouble with that one: I asked a friend who works at the IMF. He wasn't entirely sure---and perhaps RV Pundit has even better sources---but he pointed me to a couple of documents he thought had the answer:
- The 1.5% per year can be found in one of the documents. That document states that the IMF envisages GoK scaling up investment in public infrastructure to around 1.5% or GDP per year, and for several years, and that the SGR is only part of that. That's a long way from saying that 1.5% of annual growth will come from the SGR (or even all infrastructure).
- IMF made a prediction (of 7%) for Kenya's growth in 2015 and threw the SGR into that. It appears that some people interpreted that to mean that the SGR would be the sole contributor to that growth. But we need not dwell on that, as reality has since settled the matter (at 5.6%).
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Let me summarize this again.
1) For countries that have pursued export-driven manufacturing (starting from Britain to China recently) - industry(or manufacturing) at it apex contributed on average 40-50% (you'd have to find GDP component for any of those countries including the Asian tigers and do an average). That seem like an easy enough assignment. In any case that is the whole point...manufacturing has to contribute a really large portion of the economy..otherwise you're talking my model :)
2) 1.5% SGR contribution to GDP is also easy enough concept to grasp. SGR started in 2014 or about - and is set to end next year --call that 3yrs - split the 4B into 3yrs -and you have 1.1B being spend annually in steel & concrete- if you want to verify this - all you need to get is cement/steel production & consumption data. Certainly Chinese are pouring lots of cement and steel into this - and that is GDP.
I reckon without SGR - our economy would be stuck at 4% (or worse after the troubles in tea & tourism sector the last few yrs) - not 6%.
Can our economy grow at the desired 10% - yeah - this year the economy certainly will grow 7% (tea and tourism have recovered for starters & marco-economic indicators are stable) -Q1 (Jan-march) GDP data were really goodhttp://af.reuters.com/article/investingNews/idAFKCN0ZG0Z6 (http://af.reuters.com/article/investingNews/idAFKCN0ZG0Z6)-so all we need is to get SGR, LAPSET and huge infrastructure (roads, ports, power, broadband,cities) going on. We cannot finance this from any savings (say from export driven manufacturing) and so we have to borrow this on the cheap & hope the investment pay the debts and leave us something every year.
Mix the two - improve on our current advantages and get huge infrastructure going on -grow by 10% and we can fight poverty! SGR alone is employing 30,000 folks during construction.
This seems like a really simple and neat way to go. Easily, as you put it. Kenyans and everyone ought to go for it.
I was curious as to how it might "easily" go, and there seems to some confusion in some places as to just what this 1.5% is all about---for example, there is a whale of a difference between, say, spending x% of GDP and increasing GDP by x%, just as there is between x% of GDP and x% of GDP growth. (The relevance will be apparent in what follows.)
At any rate, I took a quick look at some of it, starting with your starry-eyed notion that a few "SGR type" projects will get the Kenyan economy up there. Here is some of what I learned:
(1) Around the time the construction of the SGR started, there were plenty of 1.5% predictions. Once it started, there have been claims that the 1.5% is happening right now. Leo, hapa hapa. What seems near-impossible to find is any actual verification of this 1.5%, right here and now, while the SGR is being constructed. (Perhaps RV Pundit has some helpful sources.)
(2) Kenya's GDP growth:
2014: 5.3%
2015: 5.6%
2016: 5.9% (est.)
Let's take the 2015 figure. If that is 1.5% SGR and 4.1% Other---most unlikely---then it indicates serious problems with the other parts of the economy, considering the situation before the SGR business.
Another "scenario" is that not much has changed in the other sectors, but SGR alone is driving the growth. Also unlikely, but, in any case it is in the 0.2 to 0.3% range; not quite 1.5%.
Also, GDP growth was was 4.6% in 2012 and 5.7% in 2013; and the latest projection for 2017 is 6.1%. So, overall, it's hard to see a nice, steady and easy march to 10%. Which is a pity, because, as you note, 6% is "just a few % down 10%".
(3) On the basis of the above, I got curious as to the source and basis of this "1.5% SGR" figure, which has been bandied about all over the place: Where did it come from? Where is it going? What exactly is the SGr construction contributing to to the GDP and GDP-growth?
The figure has been repeated endlessly by GoK types, and, on that basis, repeated endlessly by numerous others. (Right up there with the one about how the SGR will reduce costs by 2.5 times.) But good luck into trying to find any basis for how GoK has arrived at it!
The other source that seems to be quoted by those giving "real proof" is the IMF. I had slightly less trouble with that one: I asked a friend who works at the IMF. He wasn't entirely sure---and perhaps RV Pundit has even better sources---but he pointed me to a couple of documents he thought had the answer:
- The 1.5% per year can be found in one of the documents. That document states that the IMF envisages GoK scaling up investment in public infrastructure to around 1.5% or GDP per year, and for several years, and that the SGR is only part of that. That's a long way from saying that 1.5% of annual growth will come from the SGR (or even all infrastructure).
- IMF made a prediction (of 7%) for Kenya's growth in 2015 and threw the SGR into that. It appears that some people interpreted that to mean that the SGR would be the sole contributor to that growth. But we need not dwell on that, as reality has since settled the matter (at 5.6%).
-
Let me summarize this again.
1) For countries that have pursued export-driven manufacturing (starting from Britain to China recently) - industry(or manufacturing) at it apex contributed on average 40-50% (you'd have to find GDP component for any of those countries including the Asian tigers and do an average). That seem like an easy enough assignment. In any case that is the whole point...manufacturing has to contribute a really large portion of the economy..otherwise you're talking my model :)
And let me summarize this again: You wrote that
There are many examples of countries that have moved to developed world through focusing solely on services.
We are still waiting for the "many examples". Proper ones, I mean.
Then, while advising me to get my facts straight, you stated that:
For a country to go the Asian tiger model; the manufacturing contribution to GDP has to go anything 40-50%.
The questions that I asked you in relation to the Asian Tigers are still up there. I don't know how Britain and China come into that picture.
You have also now expanded on your case for the Great Beneficial SGR, thus:
2) 1.5% SGR contribution to GDP is also easy enough concept to grasp. SGR started in 2014 or about - and is set to end next year --call that 3yrs - split the 4B into 3yrs -and you have 1.1B being spend annually in steel & concrete- if you want to verify this - all you need to get is cement/steel production & consumption data. Certainly Chinese are pouring lots of cement and steel into this - and that is GDP.
I reckon without SGR - our economy would be stuck at 4% (or worse after the troubles in tea & tourism sector the last few yrs) - not 6%.
I don't know how much steel and cement Kung Fu is putting out there, and looking at national cement/steel production & consumption data would not necessarily help, given all the non-SGR activity (real estate etc.) that consume those. Nor would I just "split the 4B into 3yrs": I imagine that Kung Fu is out to make money here and is not just just putting it all right back into steel and concrete for the locals. Still, we need not dwell too much on such things. Some figures are readily available, e.g. GDP growth:
2013: 5.7%
2014: 5.3%
2015: 5.6%
So, after all the busy work on the SGR, we get back (2015) to just below where we were before the SGR activity started (2013); and, presumably, other sectors of the economy have been doing their bit .. or so claims KNBS. One could claim that in between things were so bad that only SGR saved the day and restored lost glory; but the 2014 figure would not support that. All in all, it doesn't look like we have a very convincing story for how we'd be in the doldrums if it weren't for this Great Beneficial SGR.
so we have to borrow this on the cheap & hope the investment pay the debts and leave us something every year.
Borrow on the cheap from where? Kenya's new "lower-middle" status means it will soon lose access to concessional loans from places like the World Bank. If the idea is that Kung Fu will step in, take a look at the current SGR deal.
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Look like you're into obfuscation. Which is not surprising considering this is probably way beyond your paygrade. You're googling stuff and trying to string up an argument as always.Probably the reason why you can't summarize. Contribution of SGR to our GDP is not in doubt. Construction sector grew by 24% in 2014/2015 thanks to SGR . All you need to do is go to KNBS or Central Bank or any other credible source and find analysis of GDP the last few years. Lets try not argue over everything -like we are experts in econometrics!! Take whatever credible institution like WB or IMF or Central bank says at it highest and we can engage better.
Let try again to summarize.
1) Asian tigers (before then Britain &Japan) and now China -among many others--followed export-driven manufacturing/industrial production - which at it apex contributed the most to their economy (call that 50% of GDP & employment). This is the much touted model for nearly every country to become developed. Manufacture things and sell them abroad -with huge made in xyz sign. And that seem your argument here.
2) That is not the ONLY economic model to move from poverty to prosperity. There are countries that haven't done much manufacturing but have developed. Some have been lucky with minerals - starting from Portugal & Spain -who basically shipped gold and diamond from South America & became rich - to recent examples of Middle East who grew from nomadic camel herding deserts to some of the most developed countries now after oil discovery in 1950s.
3) There are other countries without minerals nor manufacturing who've done it. Close home you've Seychelles who have focussed on becoming a tourist haven or Mauritus just off Indian ocean who are doing really good in service sectors.
4) Kenya service sectors is advanced for it's level of development (or underdevelopment) and it one of the things it has going for it. It the reason despite not having any minerals - it fourth biggest economy in sub-saharan Africa - and probably the largest non-mineral economy in sub-sahara Africa - South Africa,Angola,Sudan,Nigeria and even TZ across the board - all have diamond,oil, gold and name it.
Conclusion: Kenya should focus on what has made it the biggest non-mineral economy in sub-sahara Africa, throw in infrastructure from cheap chinese debt (note -export-driven manufacturing used their own export savings to build infra -see Britain, Japan, Asia tigers and now China -during their industrial revolution) and it can grow itself out of poverty.
She is already doing 6% -and is brand new low middle income country [check when China became that]- and just need to add 4% to her gdp growth- and in 20-30yrs - we would be a developed country.She can easily add 4% if she improves on efficiency and productivity of existing sectors(2%) - and get 2% from SGR like mega projects. She can do it.
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This manufacturing vs services debate reminds me of Ndii human resources vs Ndemo infrastructure argument. They are not zerosum or mutually exclusive. If you build SGR or educate folks, they will work in all sectors - agriculture, manufacturing, services and all shades in between. The reason why developed economies have a 2% agric, 20% industry, 75% services mix is because they have humongous service sectors, not a stop in agric or manufacturing. The US exports MANY softwares & ICTs - are they not manufactured? They just draw a distinction for statistical purposes, nothing is cast in stone and there is no preference. It is like AirBnB: a "service" that enables people to book/lease apartments worldwide. This new market generates billions of dollars which can be service, tourism, real estate or construction.
We have a composite model and we are not going to pick among the straightjackets. We innovate, divest, divesify, etc as we go along.
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this is probably way beyond your paygrade.
Wow. I never saw that one coming. :D
Contribution of SGR to our GDP is not in doubt. Construction sector grew by 24% in 2014/2015 thanks to SGR .
No doubt it is contributing to GDP, and it is even possible that it contributed much of the growth rate of the construction sector. But none of that was the issue, which was the supposed 1.5% and how the economy would have been stuck at 4% without SGR etc.
By the way, I wouldn't attribute it all to SGR---think of housing etc.---and I'm not sure about the 24%. I took you advice and looked up the KNBS report. Here is what I found:
The building and construction industry registered a growth of 13.6% in 2015 compared with an expansion of of 13.1% recorded in 2014. This growth was partly attributed to the ongoing
- SGR construction works
- Roadworks by national and county governments
(Similar statement but smaller figure for 2014).
Let try again to summarize.
1) Asian tigers (before then Britain &Japan) and now China -among many others--followed export-driven manufacturing/industrial production - which at it apex contributed the most to their economy (call that 50% of GDP & employment). This is the much touted model for nearly every country to become deve
And let my try again and summarize the latest claims I find problematic:
There are many examples of countries that have moved to developed world through focusing solely on services.
For a country to go the Asian tiger model; the manufacturing contribution to GDP has to go anything 40-50%.
2) That is not the ONLY economic model to move from poverty to prosperity. There are countries that haven't done much manufacturing but have developed. Some have been lucky with minerals - starting from Portugal & Spain -who basically shipped gold and diamond from South America & became rich - to recent examples of Middle East who grew from nomadic camel herding deserts to some of the most developed countries now after oil discovery in 1950s.
Gold, diamonds, oil, eh? If you look up there, you will find that I wrote this:
It is, of course, possible to develop without a great focus in manufacturing: a country can, for example, start with selling stuff out of the ground (e.g. oil) and then buy its way into other things.
I'm glad to see that you've managed to find examples of that. Now, go back and also read why the manufacturing approach is being recommended for Kenya. M
3) There are other countries without minerals nor manufacturing who've done it. Close home you've Seychelles who have focussed on becoming a tourist haven . Mauritus just off Indian ocean who are doing really good in service sectors.
You have already given us Seychelles, and I pointed out a little problem with the one: it has a population of around 97,000, equivalent to a small suburb of Nairobi. That hardly seems like the basis of a model like Kenya. Mauritius's per-capita GPD of $9K is certainly better than that of Kenya, but as a "model" for Kenya, it's Estonia-like population makes it unsuitable: around 1.3 million, the population of Mombasa (not even Nairobi).
4) Kenya service sectors is advanced for it's level of development (or underdevelopment) and it one of the things it has going for it. It the reason despite not having any minerals - it fourth biggest economy in sub-saharan Africa - and probably the largest non-mineral economy in sub-sahara Africa - South Africa,Angola,Sudan,Nigeria and even TZ across the board - all have diamond,oil, gold and name it.
I have no reason to disagree with any of that.
She can easily add 4% if she improves on efficiency and productivity of existing sectors(2%) - and get 2% from SGR like mega projects. She can do it.
We seem to have quite a few problems with the existing 1.5%, and you are already up to 2%?
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The usual nitpicking. We are long at things from big picture. Estimate for SGR was anything btw 1.5-2%. So maybe it help the economy grow by 1.783983893% who damn cares about the decimals. It certainly grew the economy.
When it come to Singapore - we can quote it day and night - Lee sijui whoa - but we can't quote Mauritus which is now a upper middle income economy (16K per capita) -coz it too small??????????
So China model only applies for India? Singapore to Mauritus? And us to where? Britain or Germany.
this is probably way beyond your paygrade.
Wow. I never saw that one coming. :D
Contribution of SGR to our GDP is not in doubt. Construction sector grew by 24% in 2014/2015 thanks to SGR .
No doubt it is contributing to GDP, and it is possible that it contributed that much of the growth rate of the construction sector. But none of that was the issue, which was the supposed 1.5% and how the economy would have been stuck at 4% without SGR etc
Let try again to summarize.
1) Asian tigers (before then Britain &Japan) and now China -among many others--followed export-driven manufacturing/industrial production - which at it apex contributed the most to their economy (call that 50% of GDP & employment). This is the much touted model for nearly every country to become deve
And let my try again and summarize the latest claims I find problematic:
There are many examples of countries that have moved to developed world through focusing solely on services.
For a country to go the Asian tiger model; the manufacturing contribution to GDP has to go anything 40-50%.
2) That is not the ONLY economic model to move from poverty to prosperity. There are countries that haven't done much manufacturing but have developed. Some have been lucky with minerals - starting from Portugal & Spain -who basically shipped gold and diamond from South America & became rich - to recent examples of Middle East who grew from nomadic camel herding deserts to some of the most developed countries now after oil discovery in 1950s.
Gold, diamonds, oil, eh? If you look up there, you will find that I wrote this:
It is, of course, possible to develop without a great focus in manufacturing: a country can, for example, start with selling stuff out of the ground (e.g. oil) and then buy its way into other things.
I'm glad to see that you've managed to find examples of that. Now, go back and also read why the manufacturing approach is being recommended for Kenya. M
3) There are other countries without minerals nor manufacturing who've done it. Close home you've Seychelles who have focussed on becoming a tourist haven . Mauritus just off Indian ocean who are doing really good in service sectors.
You have already given us Seychelles, and I pointed out a little problem with the one: it has a population of around 97,000, equivalent to a small suburb of Nairobi. That hardly seems like the basis of a model like Kenya. Mauritius's per-capita GPD of $9K is certainly better than that of Kenya, but as a "model" for Kenya, it's Estonia-like population makes it unsuitable: around 1.3 million, the population of Mombasa (not even Nairobi).
4) Kenya service sectors is advanced for it's level of development (or underdevelopment) and it one of the things it has going for it. It the reason despite not having any minerals - it fourth biggest economy in sub-saharan Africa - and probably the largest non-mineral economy in sub-sahara Africa - South Africa,Angola,Sudan,Nigeria and even TZ across the board - all have diamond,oil, gold and name it.
I have no reason to disagree with any of that.
She can easily add 4% if she improves on efficiency and productivity of existing sectors(2%) - and get 2% from SGR like mega projects. She can do it.
We seem to have quite a few problems with the existing 1.5%, and you are already up to 2%?
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This manufacturing vs services debate reminds me of Ndii human resources vs Ndemo infrastructure argument. They are not zerosum or mutually exclusive. If you build SGR or educate folks, they will work in all sectors - agriculture, manufacturing, services and all shades in between. The reason why developed economies have a 2% agric, 20% industry, 75% services mix is because they have humongous service sectors, not a stop in agric or manufacturing. The US exports MANY softwares & ICTs - are they not manufactured? They just draw a distinction for statistical purposes, nothing is cast in stone and there is no preference. It is like AirBnB: a "service" that enables people to book/lease apartments worldwide. This new market generates billions of dollars which can be service, tourism, real estate or construction.
We have a composite model and we are not going to pick among the straightjackets. We innovate, divest, divesify, etc as we go along.
Indeed it's not a simple case of one or the other. In a society like Kenya, encouraging manufacturing does not undermine any other sector as far as I can tell. veritas best captures some of the reasons knowledge and services are huge. There is more value in finding new avenues to sell actual things.
I don't consider a country of 40 million plus a candidate for a specialist economy along the lines of places like Bahamas, Monaco among others.
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Hypothetically that is true. We all want to have diversified economy. But you've to look at kenya and recommend what is actually achievable and doable. What are kenya's comparative advantages? What is kenya good in? What areas can it actually get some traction. That is for me is the big question. You can't just say go big on manufacturing or ICT service without doing a quick SWOT analysis. I don't for instance see us doing any serious manufacturing until we sort out power and wages...we are doing 3-4 times what Ethiopia is offering.
This manufacturing vs services debate reminds me of Ndii human resources vs Ndemo infrastructure argument. They are not zerosum or mutually exclusive. If you build SGR or educate folks, they will work in all sectors - agriculture, manufacturing, services and all shades in between. The reason why developed economies have a 2% agric, 20% industry, 75% services mix is because they have humongous service sectors, not a stop in agric or manufacturing. The US exports MANY softwares & ICTs - are they not manufactured? They just draw a distinction for statistical purposes, nothing is cast in stone and there is no preference. It is like AirBnB: a "service" that enables people to book/lease apartments worldwide. This new market generates billions of dollars which can be service, tourism, real estate or construction.
We have a composite model and we are not going to pick among the straightjackets. We innovate, divest, divesify, etc as we go along.
Indeed it's not a simple case of one or the other. In a society like Kenya, encouraging manufacturing does not undermine any other sector as far as I can tell. veritas best captures some of the reasons knowledge and services are huge. There is more value in finding new avenues to sell actual things.
I don't consider a country of 40 million plus a candidate for a specialist economy along the lines of places like Bahamas, Monaco among others.
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The usual nitpicking. We are long at things from big picture. Estimate for SGR was anything btw 1.5-2%. So maybe it help the economy grow by 1.783983893% who damn cares about the decimals. It certainly grew the economy.
When it come to Singapore - we can quote it day and night - Lee sijui whoa - but we can't quote Mauritus which is now a upper middle income economy (16K per capita) -coz it too small??????????
No need to get so worked up. If it will calm you down, then we accept your latest candidate for consideration as "proof" that "there are many examples of countries that have moved to developed world through focusing solely on services".
I poked around the World Bank's pages to see what I could find by way of analyses of the Mauritian economy. There are several, and they generally tend to express the view that Mauritius basically started with a focus agriculture and then into manufacturing, smartly using the money from those to increase diversification.
One that is not particularly long and is easy to read is the one entitled "Mauritius: An Economic Success Story". There, you will find:
Mauritius has transformed itself from a poor sugar economy into one of the most successful economies in Africa in recent decades, largely through reliance on trade-led development.
...
Sugar and textile revenues have been used to facilitate service-sector development and contribute to socioeconomic and higher living standards.
...
Windfalls from sugar and textile preferences have been used wisely to help promote diversification and boost growth. The structural transition away from agriculture and into manufacturing and services shows the success of the government's efforts at economic diversification.
That seems clear enough; details in that and other reports.
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The kenya situation looks similar to experiences in India.
Interesting discussion going on here about Indian case:
https://www.quora.com/Why-did-India-shift-from-agriculture-to-services-and-not-manufacturing
https://www.theguardian.com/global-development/2015/jan/06/india-china-manufacturing-services-development
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Hypothetically that is true. We all want to have diversified economy. But you've to look at kenya and recommend what is actually achievable and doable. What are kenya's comparative advantages? What is kenya good in? What areas can it actually get some traction. That is for me is the big question. You can't just say go big on manufacturing or ICT service without doing a quick SWOT analysis. I don't for instance see us doing any serious manufacturing until we sort out power and wages...we are doing 3-4 times what Ethiopia is offering.
This manufacturing vs services debate reminds me of Ndii human resources vs Ndemo infrastructure argument. They are not zerosum or mutually exclusive. If you build SGR or educate folks, they will work in all sectors - agriculture, manufacturing, services and all shades in between. The reason why developed economies have a 2% agric, 20% industry, 75% services mix is because they have humongous service sectors, not a stop in agric or manufacturing. The US exports MANY softwares & ICTs - are they not manufactured? They just draw a distinction for statistical purposes, nothing is cast in stone and there is no preference. It is like AirBnB: a "service" that enables people to book/lease apartments worldwide. This new market generates billions of dollars which can be service, tourism, real estate or construction.
We have a composite model and we are not going to pick among the straightjackets. We innovate, divest, divesify, etc as we go along.
Indeed it's not a simple case of one or the other. In a society like Kenya, encouraging manufacturing does not undermine any other sector as far as I can tell. veritas best captures some of the reasons knowledge and services are huge. There is more value in finding new avenues to sell actual things.
I don't consider a country of 40 million plus a candidate for a specialist economy along the lines of places like Bahamas, Monaco among others.
How does Kenya's labor outside Nairobi compare to Ethiopia's? It might come down to a question of location. Outside Nairobi it may not be that different from Ethiopia's.
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Minimum wage is nearly 12K per month in Kenya. So location doesn't matter. You cannot beat Ethiopia 20 dollars per month salary for a factory worker. Neither can you beat 3 usd cent per kwh (our is anything 16-20).We cannot also afford to dish lots of free land and tax incentives.
How does Kenya's labor outside Nairobi compare to Ethiopia's? It might come down to a question of location. Outside Nairobi it may not be that different from Ethiopia's.
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Minimum wage is nearly 12K per month in Kenya. So location doesn't matter.
One doesn't get the complete picture from the assertion of a single figure for the "minimum wage"; nor is it correct to state that location doesn't matter. In fact, "minimum wage" in Kenya varies by location (and also job-type).
The figures are here:
http://www.africapay.org/kenya/home/salary/minimum-wages
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How does Kenya's labor outside Nairobi compare to Ethiopia's? It might come down to a question of location. Outside Nairobi it may not be that different from Ethiopia's.
Wages in Ethiopia are generally much lower in Kenya, probably helped by the fact that (as far I can tell) Ethiopia doesn't have minimum wages (except for the civil service). But, to my mind, one key in how we can "deal with" the Ethiopias in manufacturing is in the what: Instead of thinking just in terms of things like shoes and clothes, consider things like electronics, automotive parts, high-value consumer products, etc. Look at what is happening in East Asia (including those countries with higher wages in Kenya) and consider how they are going up the chain.
Vietnam is a good example of the latter:
2014: Samsung Electronics has announced plans to spend up to $3bn (£1.8bn) to create a new smartphone factory in Vietnam.
The facility would operate alongside another $2bn plant the company already runs in the country, which began production in March.
Intel, LG, Panasonic and Microsoft's handset unit are among other tech firms to have expanded manufacturing in the country over the past couple of years.
It marks a shift away from China.
...
The announcement comes a month after Samsung Electronics revealed plans to build a $560m factory in Ho Chi Minh City, where it intends to make TVs, washing machines and air conditioners.
http://www.bbc.com/news/technology-29985467
Although Vietnam is more well known for its textile-manufacturing prowess, the country is quickly becoming the go-to location for technology manufacturers. High tech companies are starting to flow into the country as they seek to take advantage of the low-cost, young, fast learning, and rapidly expanding workforce. The country is also providing a range of financial incentives to businesses engaged in high-tech activities, such as large reductions in corporate income tax.
...
Intel was one of the first high tech companies to build a factory in Vietnam. In 2006, the company opened its factory in HCMC with a total registered capital of US$300 million. After a year, Intel increased its investment in Vietnam to US$1 billion.
...
Vietnam has attracted substantial investments from multinational giants such as Samsung and Mitsubishi, and analysts predict that once Thailand moves up the value chain, Vietnam will take its place.
http://www.vietnam-briefing.com/news/tech-vietnam-intel-increases-investment.html/
Red: It may be argued that Kenya is "more developed" than our countries in our neck of the woods. To the extent that that is so, and given that our labour costs are lower that those of the up-and-coming East Asian nations, we should be thinking in terms of such "taking place in the chain"---not just whether we can make shoes and plastic cups cheaper than the people next door.
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KENYA'S ROAD TO INDUSTRIALIZATION:
The Ministry of Industry Etc. lays it out here: http://www.industrialization.go.ke/index.php/downloads/282-kenya-s-industrial-transformation-programme (see the .pdf file).
The basic premise is stated succinctly:
Industrialization has been the modernizing force in every developed and emerging economy and this will continue to be the case for Kenya. Industry will be the bedrock upon which we grow jobs, GDP, and incomes.
We are told that:
Over the past ten years, Kenya’s manufacturing base has remained static at 11% of the country’s GDP, and its industrial exports have decreased in absolute terms. Increasing this base is critical to job creation and economic growth as well as domestic and foreign investment.
But fear not. Things are about to get better, because:
We sit in a privileged position: we are the fifth-largest economy in sub-Saharan Africa; we have a well-educated labour force; our financial services and information technology capabilities are amongst the most developed in the region; our infrastructure is the most advanced; dot, dot, dot.
and
as global production costs continue to rise in the traditional markets of Europe and Africa, we expect manufacturing to move to Africa.
We can therefore:
develop Kenya into an industrial hub in Africa.
Bedrock, privileged position, manufacturing to Africa, hubs. Excellent. Could there be a better confluence of ambition and circumstance?
Given all that, the "transformation programme" doesn't exactly paint the picture of a country that is in a hurry to industrialize. But we should, I suppose, look on the positive side and consider it a good start. For example:
- After decades of of exporting tea crazy, it has finally occurred to someone that we should do a bit of value-adding, instead of 97% bulk exports. Overall, very little of our agricultural exports is "processed" Something could be done there.
- Textiles and apparel: Costs are higher in Bangladesh, but their share of the USA market is about 15 times that of Kenya. Something can be done there, with a whole bunch of jobs created, although the "Challenges" at the end indicated that we don't enough people who can make pretty dresses.
- We could make a few shoes, instead of spending $86 million per year on imports. But on the "minus" sides, it appears that we don't have many people who can do much with leather.
- 8600 vessels are grabbing around 1 million tones of tuna in the vicinity, but only 30 do their processing here. Fishing port and fish processing industry ...
Etc. Etc. Etc.
Terminator asks:
He also suggests that it is better to locate an industrial park at the coast than in Naivasha. Now if one considers the costs of transportation over short distances in that part of the world, the fact that the coast also has readily available cheap labor, what is a good argument against this point?
No, we won't get into discussions of where "our people" are located. I bring this up only because one of the "challenges" in the "industrial transformation programme" is:
developing zone, logistics, and energy near the Port of Mombasa, critical for keeping costs low and unlocking processing and regional exports.
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I guess after some more googling we can now proceed at more "informed" level. I don't see how Kenya can become manufacturing export hub. It aint happening in nearly all categories any time soon. Low cost manufacturing (key is LABOUR COST) cannot come here when Ethiopia & the likes are offering 20 dollars per month salary plus other extras..including allowing 14yr old to work. I am not sure where in Kenya you can hire somebody for less than 300-400shs per day (-nearest tea factory in my rural home is paying nearly 500shs per day for factory worker) - except maybe as livin in househelp --where salary is still higher than 20 dollars. The mid & higher level manufacturing is also not happening with electricity cost high and unstable. In any case it cannot happen at scale to meet domestic leave alone export market.
Kenya simply cannot follow Britain, Japan, Asian tigers(South Korea,Taiwan,Singpore,HongKong,Malaysia), China, Vietnam and now Ethiopia model... of manufacturing your way out of poverty.
Kenya is showing lots of evidence that it can follow USA model..manufacturing in Kenya is still a respectable 10% (Ethiopia still at 5%) and has basically kept pace with the rest of the economy. This kind of manufacturing (bar AGOA sweatheart deal) is mainly domestic manufacturing - and that is going on very well ---with improving supply chain-esp with formalization of retail & wholesaling (supermarkets & malls).
The USA model is something I have talked about previously. This is the model kenya can and should pursue to move from low middle income country to middle income to upper middle income and eventually to high income country.The US managed to industralize while retaining high income levels for factory workers (unlike slavish labour in Ethiopia or China for example) by simply focusing on domestic market, improving efficiency and productivity. It also relied on diversified economy - with other sectors of the economy (banking/finances) doing their very well.
Focus on what is doable and we can achieve 10% GDP growth. Kenya solution to mass employment should be the construction industry (both private and public)...and it just need to focus on reducing cost of inputs (cement, steel, etc) and you can employ thousands of people working as construction workers instead of factory workers building houses, offices, malls, bridges, roads, airports, ports and railways. Although manufacturing has really higher multiplier effect, construction industry aint that bad too. If we can move half (30% of kenyans) now involved in back breaking no reward subsistence farming to mjengo jobs..we would be somewhere near middle income.
Ndii say build factories in Mombasa..I say focus on tourism,real estate, holiday homes, fishing and what we can actually do.No chinese company is going to relocate his factory to Mombasa when nobody is wiling to work really long hours for 2,000 shs a month. Certainly we can attract a slice of millions of newly rich Chinese to come enjoy our beaches and hospitality and make money out of our coastline.
This USA model is more what is happening in India,Philiphines, Indonesia, Pakistan,Brazil and such countries.
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I guess after some more googling we can now proceed at more "informed" level.
Excellent! Go for it!
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Nearly missed this. Interesting.
The kenya situation looks similar to experiences in India.
Interesting discussion going on here about Indian case:
https://www.quora.com/Why-did-India-shift-from-agriculture-to-services-and-not-manufacturing
https://www.theguardian.com/global-development/2015/jan/06/india-china-manufacturing-services-development
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Interesting but not authoritative. The most upvoted answer for instance paints of inferior service sector i.e tourism sector in whole India can't been compared to Shangai - etc etc. That can't be kenya. Second one talks about dictatorship like Asian tigers/Eth/China subduing services by focusing on "real" things. I also see someone talking about high tertiriary education in India -meaning most would like to work in service/white collar - which wasn't the case for the traditional mode. Some talks about English being a service language - and China or Ethiopia obviously can't hack it - some says services can easily be exported? bla de bla.
We can go on and on...but I believe there is a model that skips manufacturing. Esp now that we have information revolution.
Nearly missed this. You got it. India is near mirror of where will go.
The kenya situation looks similar to experiences in India.
Interesting discussion going on here about Indian case:
https://www.quora.com/Why-did-India-shift-from-agriculture-to-services-and-not-manufacturing
https://www.theguardian.com/global-development/2015/jan/06/india-china-manufacturing-services-development
Got it? That's where we will go? Interesting. The first lead (most "upvoted") answer at the first link says things like:
Can India become a developed country without a strong industrial base?
No. The process would be painfully slow if it tries. Manufacturing is the best route to development and a necessary pre-condition for sustained economic development.
...
Economic development needs widespread job creation, improvements in human capital, poverty reduction and the creation of a sizable 'middle class' to fuel consumption. Services cannot help with any of that.
The second one is entitled "Made in India? Why manufacturing is the best route to development" and concludes that
China’s story, like most economic success stories before it, is a testament to a simple yet highly relevant policy recommendation for today’s developing countries: if you want to prosper, you need to make stuff.
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I dont believe RVpundit assertion that Kenya is following a similar model as USA during its developmental stages is true. What Kenya is doing right now is follow what USA is doing now... :(
Kenya is indeed headed nowhere in terms of bringing masses out of poverty as per current trajectory.
Contemporary American politics is conducted in the shadow of historical myths that inform our present-day choices. Unfortunately, these myths sometimes lead us terribly astray. Case in point is the popular idea that America’s economic tradition has been economic liberty, laissez faire, and wide-open cowboy capitalism. This notion sounds obvious, and it fits the image of this country held by both the Right, which celebrates this tradition, and the Left, which bemoans it. And it seems to imply, among other things, that free trade is the American Way. Don’t Tread On Me or my right to import.
http://www.huffingtonpost.com/ian-fletcher/america-was-founded-as-a_b_713521.html
Here is another proof:
http://www.personal.ceu.hu/corliss/CDST_Course_Site/Readings_old_2012_files/Ha-Joon Chang - Kicking Away the Ladder-The “Real” History of Free Trade.pdf (http://www.personal.ceu.hu/corliss/CDST_Course_Site/Readings_old_2012_files/Ha-Joon Chang - Kicking Away the Ladder-The “Real” History of Free Trade.pdf)
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If you mean US protected their industries - then that is nothing knew. What I mean is that US didn't go for low cost manufacturing for export. It was more of import substitution.
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http://www.economist.com/node/18712351
More googling lead me to this paper by some WB researchers -Can Kenya Become a Global Exporter of Business Services?
http://siteresources.worldbank.org/INTAFRREGTOPTRADE/Resources/Can_Kenya_become_global_exporter_business_services_31May.pdf
What is clear is that previously held view about services having low multiplier and not being tradeable has been turned upside down by tech revolution in the world.
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Can poor countries leapfrog manufacturing and grow rich on services?
http://www.economist.com/node/18712351
Interesting. Yet a few years after that article the government of India decided to get serious about manufacturing and launched "Make In India". Here are some remarks on the launch:
Over the course of two hours these business cheerleaders, along with ministers and then Mr Modi himself, took turns to explain why it would be a great thing if industrial production, in particular labour-intensive manufacturing, could blossom in India. They are absolutely right. India needs to create lots of jobs—perhaps 1m additional ones a month—if it is to employ its booming population. One speaker suggested 90m manufacturing jobs could be created in India over the next decade. Mr Premji set out how Wipro—better known for IT—has five manufacturing units in India (they make hydraulic cylinders) and overall relied on a broad network of 1,200 Indian suppliers, meaning lots of jobs created indirectly.
http://www.economist.com/blogs/banyan/2014/09/india-s-big-manufacturing-push
The Indian government has a website to explain and promote "Make In India". There, you will find this:
Devised to transform India into a global design and manufacturing hub, Make in India was a timely response to a critical situation: by 2013, the much-hyped emerging markets bubble had burst, and India’s growth rate had fallen to its lowest level in a decade. The promise of the BRICS nations had faded, and India was tagged as one of the so-called ‘Fragile Five’. Global investors debated whether the world’s largest democracy was a risk or an opportunity. India’s 1.2 billion citizens questioned whether India was too big to succeed or too big to fail. India was on the brink of severe economic failure.
http://www.makeinindia.com/about
That's the government of India ""talking", and, as indicated above, India's "industrial heavyweights" seem to agree. Hardly "sounds" like people who believe they can "service" their way to prosperity.
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For India it make sense. It a huge country and I expect some states[size of kenya] in India will depend largely on services[Banglore/Hyberbad] but others[Gujurati] have to try manufacturing. I think from googling we've been doing...we have learnt some countries (esp small) can make do with services i.e tourism for sychelles...and for me kenya is right about in the middle...of neither big..neither small..and services can work. We definitely have superior services sectors (tourism, retail, trade, financial) than most of our peers...and we can become the service king of Africa. Ethiopia should keep on their manufacturing endeavors. We can buy from them manufactured goods and they can buy from us services.
Manufacturing in kenya is just right now hopeless...we have comparative advantage in service sectors.Kenya path to developed world doesn't have to include "Made in Kenya". Kenya can become the shopping center of manufactured goods, the financial center of Africa, the holiday & tourist paradise in Africa, the university of Africa (like Australia or UK), the hospital of Africa and of course the savannah valley of Africa.All we need is to concentrate on what we are good and can be great in.
http://www.economist.com/node/18712351
Interesting. Yet a few years after that article the government of India decided to get serious about manufacturing and launched "Make In India". Here are some remarks on the launch:
Over the course of two hours these business cheerleaders, along with ministers and then Mr Modi himself, took turns to explain why it would be a great thing if industrial production, in particular labour-intensive manufacturing, could blossom in India. They are absolutely right. India needs to create lots of jobs—perhaps 1m additional ones a month—if it is to employ its booming population. One speaker suggested 90m manufacturing jobs could be created in India over the next decade. Mr Premji set out how Wipro—better known for IT—has five manufacturing units in India (they make hydraulic cylinders) and overall relied on a broad network of 1,200 Indian suppliers, meaning lots of jobs created indirectly.
http://www.economist.com/blogs/banyan/2014/09/india-s-big-manufacturing-push
The Indian government has a website to explain and promote "Make In India". There, you will find this:
Devised to transform India into a global design and manufacturing hub, Make in India was a timely response to a critical situation: by 2013, the much-hyped emerging markets bubble had burst, and India’s growth rate had fallen to its lowest level in a decade. The promise of the BRICS nations had faded, and India was tagged as one of the so-called ‘Fragile Five’. Global investors debated whether the world’s largest democracy was a risk or an opportunity. India’s 1.2 billion citizens questioned whether India was too big to succeed or too big to fail. India was on the brink of severe economic failure.
http://www.makeinindia.com/about
That's the government of India ""talking", and, as indicated above, India's "industrial heavyweight" seem to agree. Hardly "sounds" like people who believe they can "service" their way to prosperity.
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For India it make sense. It a huge country and I expect some states[size of kenya] in India will depend largely on services[Banglore/Hyberbad] but others[Gujurati] have to try manufacturing. I think from googling we've been doing...we have learnt some countries (esp small) can make do with services i.e tourism for sychelles...and for me kenya is right about in the middle...of neither big..neither small..and services can work. We definitely have superior services sectors (tourism, retail, trade, financial) than most of our peers...and we can become the service king of Africa. Ethiopia should keep on their manufacturing endeavors. We can buy from them manufactured goods and they can buy from us services
Yes, Seychelles with its population of 97,000; Las Vegas employs more people than that in its casinos, and Nairobi has (it appears) more watchmen than that. One should also look at such aspects and not just say "looky looky!, such-and-such tinker-toy country is doing well on just X!". By contrast, export-driven manufacturing has been shown to work for all sorts of population sizes---from small ones (e.g. Singapore) to the largest (China).
Kenya can become the shopping center of manufactured goods, the financial center of Africa, the holiday & tourist paradise in Africa, the university of Africa (like Australia or UK), the hospital of Africa and of course the savannah valley of Africa.All we need is to concentrate on what we are good and can be great in.
Sounds good. When do we get started? And can we expect improvements in the service sectors of other countries, or are they all moribund and just waiting for Kenya to grab?
Take, for example, this notion of "shopping center of manufactured goods". Given that "Kenya path to developed world doesn't have to include Made in Kenya", presumably we will be importing such goods from Elsewhere---e.g. Ethiopia, as you suggest---and then re-selling, with profit margin etc. added. Why wouldn't the other countries not just import directly from the Elsewhere, thus saving themselves the additional cost of our profit margins etc.?
Or "the holiday & tourist paradise in Africa": How are other African countries doing in that regard? We can get an idea from here: https://en.wikipedia.org/wiki/World_Tourism_rankings and more details here: http://www.afdb.org/en/knowledge/publications/africa-tourism-monitor/
And on "the hospital of Africa": How about we first focus on a decent healthcare system for Kenyans? When our ex-presidents no longer have to be rushed to other African countries, when we are no longer filling planes to India, when our people are not being finished by small ailments .... then we will be in a good position to convincingly offer our services as "The Hospital of Africa"?
Etc.
Etc.
Etc.
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How does Kenya's labor outside Nairobi compare to Ethiopia's? It might come down to a question of location. Outside Nairobi it may not be that different from Ethiopia's.
Wages in Ethiopia are generally much lower in Kenya, probably helped by the fact that (as far I can tell) Ethiopia doesn't have minimum wages (except for the civil service). But, to my mind, one key in how we can "deal with" the Ethiopias in manufacturing is in the what: Instead of thinking just in terms of things like shoes and clothes, consider things like electronics, automotive parts, high-value consumer products, etc. Look at what is happening in East Asia (including those countries with higher wages in Kenya) and consider how they are going up the chain.
Vietnam is a good example of the latter:
2014: Samsung Electronics has announced plans to spend up to $3bn (£1.8bn) to create a new smartphone factory in Vietnam.
The facility would operate alongside another $2bn plant the company already runs in the country, which began production in March.
Intel, LG, Panasonic and Microsoft's handset unit are among other tech firms to have expanded manufacturing in the country over the past couple of years.
It marks a shift away from China.
...
The announcement comes a month after Samsung Electronics revealed plans to build a $560m factory in Ho Chi Minh City, where it intends to make TVs, washing machines and air conditioners.
Exactly my thinking. We have nothing on Ethiopia when it comes to making shoe laces, matchboxes, toothpicks and what have you. But they don't (or shouldn't) compare to Kenya in terms of an educated workforce. Manufacturing is not all low-tech.
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An area of manufacturing that's knowledge based is pharmaceutical manufacturing that is growing http://www.businessdailyafrica.com/Indian-firm-to-buy-Sh1bn-stake-in-Universal-Corp/539552-3076566-qngnkmz/index.html . Maybe we wont necessary produce shoes or leather bags like Ethiopia but I am sure soon there'll be a serious leather phone accessories manufacturer.The reason is there's already a ready market in Kenya for such things and later the export market can be explored.
Since kenya isnt a command economy like ethiopia,china or vietman entrepreneurs will try all kind of things the successful ones will create new or revive industries in Kenya. And maybe that's how kenya will develop unstructured until the specific companies and sectors are big enough. Actually all the sectors that have developed government hadn't little input like horticulture, after its when the government came in to offer regulation and help to open new markets.
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An area of manufacturing that's knowledge based is pharmaceutical manufacturing that is growing http://www.businessdailyafrica.com/Indian-firm-to-buy-Sh1bn-stake-in-Universal-Corp/539552-3076566-qngnkmz/index.html (http://www.businessdailyafrica.com/Indian-firm-to-buy-Sh1bn-stake-in-Universal-Corp/539552-3076566-qngnkmz/index.html) . Maybe we wont necessary produce shoes or leather bags like Ethiopia but I am sure soon there'll be a serious leather phone accessories manufacturer.The reason is there's already a ready market in Kenya for such things and later the export market can be explored.
Since kenya isnt a command economy like ethiopia,china or vietman entrepreneurs will try all kind of things the successful ones will create new or revive industries in Kenya. And maybe that's how kenya will develop unstructured until the specific companies and sectors are big enough. Actually all the sectors that have developed government hadn't little input like horticulture, after its when the government came in to offer regulation and help to open new markets.
It may not be a command economy. But the government can still provide a framework that encourages certain economic activities. That includes industrialization.
Granted flowers have worked, in spite of the government doing little besides robbing wanjiku blind. One may come away with the lesson that governance is irrelevant(typical jubilant view), or wow, imagine how much better and what else we could be doing? if the government was anything besides a vampire.
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It may not be a command economy. But the government can still provide a framework that encourages certain economic activities.
And the government can go way beyond that. One thing that the East Asian countries that have done (or are doing) well is hustling to get huge MNCs to set up shop there. We never do that; instead, whenever our leaders get around, the focus seems to be on loans and "aid".
The other thing the government can do is spend money wisely and not get involved in ways it should not. Industries like paper, textiles, etc. have suffered because the nature of government involvement encouraged inefficiencies, leading to companies that couldn't compete when the rest of the world came knocking. In hk's example, an Indian company has spent Sh. 1 billion to buy a majority stake in a pharmaceutical company. Now consider that around 2010, the government put that much into Pan Paper Webuye, and we had this:
http://www.nation.co.ke/news/Kibaki-reopens-Pan-Paper-Mills-/1056-967022-fto14sz/index.html
And then?
Having "learned something" from Pan Paper, there is now this:
http://www.nation.co.ke/business/Govt-to-inject-Sh680m-in-Rivatex-revival/996-2802556-2ufllw/index.html
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It may not be a command economy. But the government can still provide a framework that encourages certain economic activities.
And the government can go way beyond that. One thing that the East Asian countries that have done (or are doing) well is hustling to get huge MNCs to set up shop there. We never do that; instead, whenever our leaders get around, the focus seems to be on loans and "aid".
The other thing the government can do is spend money wisely and not get involved in ways it should not. Industries like paper, textiles, etc. have suffered because the nature of government involvement encouraged inefficiencies, leading to companies that couldn't compete when the rest of the world came knocking. In hk's example, an Indian company has spent Sh. 1 billion to buy a majority stake in a pharmaceutical company. Now consider that around 2010, the government put that much into Pan Paper Webuye, and we had this:
http://www.nation.co.ke/news/Kibaki-reopens-Pan-Paper-Mills-/1056-967022-fto14sz/index.html
And then?
Having "learned something" from Pan Paper, there is now this:
http://www.nation.co.ke/business/Govt-to-inject-Sh680m-in-Rivatex-revival/996-2802556-2ufllw/index.html
I agree on this. The Webuye panper revival was political and as result it collapsed. Rivatex might head the same way also. The viability of some of this companies from inception wasn't driven by market economy. Sugar and coffee bailouts are other examples of money wasted.
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Manufacturing is not all low-tech.
In the same vein, "low cost" and "low wages" are not absolute terms and do not necessarily mean "peanuts". What they really mean is "lower than where most of the stuff is currently being made".
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I am not sure about GoK hassling and rolling out red carpet for manufacturers or MNCS. I don't think a serious investor will go on looking at such kind of favours. I rather GoK worked on the fundamentals.Reducing bottleneck in doing business WB kind of things, improve power realiability & subsidizing industrial power, working on infrastructure, improving judicial systems and policing, providing land and such, reducing minumum pay, having KMA forum...all these should be done for ANYBODY...Kenya has had those MNCS..and they are closing shops...while some are thriving.
Kenya should aim to become a mature country with institutions that work....not a banana republic where PORK goes around sweat talking Samsung to set up shop. Samsung should feel free to fly here, find partners, and start or close their operation without ever seeing a minister or PORK.
Manufacturing companies should move in & out freely with their capital and investment like a true free economy that we ought to be.
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I am not sure about GoK hassling and rolling out red carpet for manufacturers or MNCS. I don't think a serious investor will go on looking at such kind of favours. I rather GoK worked on the fundamentals.Reducing bottleneck in doing business WB kind of things, improve power realiability & subsidizing industrial power, working on infrastructure, improving judicial systems and policing, providing land and such, reducing minumum pay, having KMA forum...all these should be done for ANYBODY...Kenya has had those MNCS..and they are closing shops...while some are thriving.
Blue: Hassling would definitely be bad, unhelpful, and unproductive; I proposed hustling.
Anyways ....
As usual, I think a bit of homework would help: I think you really need to actually look at what has happened in East Asia: Singapore, Malaysia, Thailand, Vietnam etc.
As for Kenya having "had those MNCs", apparently you are not considering scale: I don't just mean having a factory that employees 150 or so people; I mean really large operations that have a significant effect on the economy. An example of that are the companies that have led to Vietnam now shipping around $30 billion per year of just cell phones.
Maybe if you tell us what MNCs have established really large operations in Kenya, and of what type, then we can discuss it further.
Kenya should aim to become a mature country with institutions that work....not a banana republic where PORK goes around sweat talking Samsung to set up shop. Samsung should feel free to fly here, find partners, and start or close their operation without ever seeing a minister or PORK.
OK. Maybe they will get serious when Kenya is a "mature country" and they "feel free to fly here". In the meantime, they are going to places where efforts have been made to encourage them, and the results show: As an example, compare Kenya's GDP per capita with Vietnam's in a year as recent as 2000, and then compare where they are today.
By the way, there is a difference between some simple-minded idea of a company needing to see a minister or PORK before considering doing business in Kenya and that high-level officials of a government encouraging inward investment and not just begging for loan and "aid".
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Samsung and others moving to Vietnam or Ethiopia closer home (Tecno) are moving there coz it makes business sense. It not because somebody grovelled or extended favours. Those countries I bet fixed some fundemantals. Kenya is attracting lots of foreign companies in non-manufacturing coz it makes business sense to come to Nairobi.
We cannot convince big MNC to come here if we are losing the small ones. We have to keep working on the fundamentals and they will come flooding. The guy who will roll out the carpet in 2030 is guy you'll praise - not the guy who is working hard now to ensure we have reliable & cheap power, working ports in mombasa and lamu, SGR straight to Nairobi and the works.
Vietnam didn't happen in a day - Kenya service sector couldn't have happen if we didn't concentrate on investing heavily in our education sector for many years. Now big MNCS are daily setting shop in Nairobi and can be able to find qualified staff in the same afternoon they open an office.
I am not sure about GoK hassling and rolling out red carpet for manufacturers or MNCS. I don't think a serious investor will go on looking at such kind of favours. I rather GoK worked on the fundamentals.Reducing bottleneck in doing business WB kind of things, improve power realiability & subsidizing industrial power, working on infrastructure, improving judicial systems and policing, providing land and such, reducing minumum pay, having KMA forum...all these should be done for ANYBODY...Kenya has had those MNCS..and they are closing shops...while some are thriving.
Blue: Hassling would definitely be bad, unhelpful, and unproductive; I proposed hustling.
Anyways ....
As usual, I think a bit of homework would help: I think you really need to actually look at what has happened in East Asia: Singapore, Malaysia, Thailand, Vietnam etc.
As for Kenya having "had those MNCs", apparently you are not considering scale: I don't just mean having a factory that employees 150 or so people; I mean really large operations that have a significant effect on the economy. An example of that are the companies that have led to Vietnam now shipping around $30 billion per year of just cell phones.
Maybe if you tell us what MNCs have established really large operations in Kenya, and of what type, then we can discuss it further.
Kenya should aim to become a mature country with institutions that work....not a banana republic where PORK goes around sweat talking Samsung to set up shop. Samsung should feel free to fly here, find partners, and start or close their operation without ever seeing a minister or PORK.
OK. Maybe they will get serious when Kenya is a "mature country" and they "feel free to fly here". In the meantime, they are going to places where efforts have been made to encourage them, and the results show: As an example, compare Kenya's GDP per capita with Vietnam's in a year as recent as 2000, and then compare where they are today.
By the way, there is a difference between some simple-minded idea of a company needing to see a minister or PORK before considering doing business in Kenya and that high-level officials of a government encouraging inward investment and not just begging for loan and "aid".
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Kenya will continue to attract service sector MNCs like big tech's while the Eveready's and Sameer's move to Ethiopia and India. I see no sufficient concerted effort to address industrial fundamentals while some like labor and land cost are impossible to fix in our open market.
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Samsung and others moving to Vietnam or Ethiopia closer home (Tecno) are moving there coz it makes business sense. It not because somebody grovelled or extended favours.
Grovel is not the word, and like I said: homework.
Those countries I bet fixed some fundemantals. Kenya is attracting lots of foreign companies in non-manufacturing coz it makes business sense to come to Nairobi.
Good. But see my point above on size: How are those "lots of foreign companies" contributing to GDP and employment? Name them---"the big MNCS [that] are daily setting shop in Nairobi"---and give relevant numbers. Then we will be in a position to have a better discussion.
Kenya service sector couldn't have happen if we didn't concentrate on investing heavily in our education sector for many years.
I remember reading a World-Bank report that described Kenya's "modern services" sector as a "success story"---high productivity and an increasing contribution to GDP. It then noted that the sector is concentrated around Nairobi, but about 90% of Kenyans don't even live in Nairobi. It also noted that while sectors like finance and communications are doing really well, they aren't creating enough jobs---fewer than 10,000 per year. In terms of employment numbers, much of the service industry in Kenya seems to be in shoe-shine boys, selling mandazis by the roadside, pandering to tourists, etc. According to you (on this thread):
One is ubiquitious boda boda - transport sector of the economy- that now employs millions of youths
and (also according to you) we have ever-growing legions of watchmen.
One doesn't quite see masses-out-of-poverty activity anywhere there.
And yet we "concentrate[d] on investing heavily in our education sector for many years" to make things "happen" in that sector?
Now big MNCS are daily setting shop in Nairobi and can be able to find qualified staff in the same afternoon they open an office.
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You've managed to summarize what I am trying to put across in few words. Kenya GDP in 2005 was mere 18B - now it nearly 70B -yet it has dont much manufacturing. Of course Ethiopia has grown faster from 12B to about 70B too now - and have focused on manufacturing. Kenya did suffer PEV in 2007 that slammed growth from 7% to 1.7%....and then Alshabab terror knock us off the sail...all said and done...we would have matched Ethiopia growth. So we are not doing as badly as the pessimist would want to stay.
Kenya will continue to attract service sector MNCs like big tech's while the Eveready's and Sameer's move to Ethiopia and India. I see no sufficient concerted effort to address industrial fundamentals while some like labor and land cost are impossible to fix in our open market.
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Ohoo poor Monki, you're too slow my friend.
1) My first point remain that Kenya service sector is our comparative advantage. We don't have to grovel for service companies to set up shop in Kenya. We need to make it go from good to great. Kenya is MNC capital of SSA outside RSA. They dock in Nairobi but eventually this disperse all over the country. Our manufacturing is just not competitive...except perhaps in things that are hard to import...cement for example..or quarry stones.
2) My second point relates to INFORMAL SECTOR (boda boda). Kenya has huge informal sector - as you would expect from a country that is trying to leapfrog from agriculture to services. Conventional knowledge is that informal sector is bad - jobs are low paying, unpredictable and hard to tax. Kenya is showing that doesn't have to be true. Our informal sector are beating formal jobs (again key denominator is for the same level of education). Kenya is showing with banking revolution, mpesa and all the new "knowledge" industry - a guy in informal sector, can have a bank account, borrow loan and pretty much move from what "informal sector" to what US would call "SME sector" --which apparently is the engine of growth. We can focus on formalizing the informal sector - and - we might just become a rare exception to this touted model of primary-secondary -then services (tertiary).
So let try again modern services +modern informal sector is where kenya needs to head. She doesn't have to become huge factory selling real stuff. She can play smart. She is playing smart with mpesa, mshari, mtiba, name all these innovations happening in services sectors that are helping informal sector become SMES.
If boda boda guy like I know many in mavoko, can work hard, save 300shs in phone or bank, can be able to borrow loan and buy a taxi, build a houses, take kids to schools..and basically live life like a middle class..that is DEVELOPMENT. Same way with boda boad guy being employed to make shoes in Ethiopia for pittance (2,000ksh -salary all kenyans snear at now) and work for 20yrs...before he can buy a car.
Samsung and others moving to Vietnam or Ethiopia closer home (Tecno) are moving there coz it makes business sense. It not because somebody grovelled or extended favours.
Grovel is not the word, and like I said: homework.
Those countries I bet fixed some fundemantals. Kenya is attracting lots of foreign companies in non-manufacturing coz it makes business sense to come to Nairobi.
Good. But see my point above on size: How are those "lots of foreign companies" contributing to GDP and employment? Name them---"the big MNCS [that] are daily setting shop in Nairobi"---and give relevant numbers. Then we will be in a position to have a better discussion.
Kenya service sector couldn't have happen if we didn't concentrate on investing heavily in our education sector for many years.
I remember reading a World-Bank report that described Kenya's "modern services" sector as a "success story"---high productivity and an increasing contribution to GDP. It then noted that the sector is concentrated around Nairobi, but about 90% of Kenyans don't even live in Nairobi. It also noted that while sectors like finance and communications are doing really well, they aren't creating enough jobs---fewer than 10,000 per year. In terms of employment numbers, much of the service industry in Kenya seems to be in shoe-shine boys, selling mandazis by the roadside, pandering to tourists, etc. According to you (on this thread):
One is ubiquitious boda boda - transport sector of the economy- that now employs millions of youths
and (also according to you) we have ever-growing legions of watchmen.
One doesn't quite see masses-out-of-poverty activity anywhere there.
And yet we "concentrate[d] on investing heavily in our education sector for many years" to make things "happen" in that sector?
Now big MNCS are daily setting shop in Nairobi and can be able to find qualified staff in the same afternoon they open an office.
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Ohoo poor Monki, you're too slow my friend.
1) My first point remain that Kenya service sector is our comparative advantage. We don't have to grovel for service companies to set up shop in Kenya. We need to make it go from good to great. Kenya is MNC capital of SSA outside RSA. They dock in Nairobi but eventually this disperse all over the country.
Yes, I am indeed too slow; please just humour me. Kenya may indeed be the "MNC capital of SSA outside RSA". But the point is not just about having MNCs; it is about a contribution to employment, GDP, and getting people out of poverty. So, once again: what is the contribution there of the MNCs in "MNC capital of SSA outside RSA"? Once we have numbers ....
2) My second point relates to INFORMAL SECTOR (boda boda). Kenya has huge informal sector - as you would expect from a country that is trying to leapfrog from agriculture to services. Conventional knowledge is that informal sector is bad - jobs are low paying, unpredictable and hard to tax. Kenya is showing that doesn't have to be true.
Can you point us to concrete evidence to confirm that? The reason I ask is that on wages, for example, a 2016 World-Bank report (using data from GoK) estimates that 75% of people employed in the informal sector earn between Ksh. 1,000 per month and Ksh. 9,000 per month. Likewise, can you provide evidence that the informal sector in Kenya is predictable and easy to tax?
Our informal sector are beating formal jobs (again key denominator is for the same level of education).
Weka evidence hapa hapa. And I mean substantial and concrete, not anecdotal, evidence.
we might just become a rare exception to this touted model of primary-secondary -then services (tertiary).
Rare exception, huh? We are no longer plan to follow in the footsteps of the "many examples of countries that have moved to developed world through focusing solely on services"?
If boda boda guy like I know many in mavoko, can work hard, save 300shs in phone or bank, can be able to borrow loan and buy a taxi, build a houses, take kids to schools..and basically live life like a middle class..that is DEVELOPMENT.
Sounds good. So, how many boda-boda guys are making such a transition?
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Moonki,
One minute you're accepting as a fact that kenya service sector is advanced (after reading WB report) the next you're re-opening the issue again.
Kenya GDP has grown from 18B 10yrs ago to 70B today...mainly driven by service sectors..that got to tell your something about service sector contribution to jobs, GDP and the works. Ethiopia who have done far better in manufacturing (albeit from near zero base) have grown from 12b to 70B...and yet we have had PEV & alshabab messing up...so as you can see it doesn't matter the colour of the cat...what matters is that it catches the mice. Kenya economy can grow by 8-10% (it did 7% in 2007 before PEV crushed it) if we can be a little serious...and that is magic number we need to move to developed world in a generation!
I don't see why we should re-open issue no 1. Kenya is Sub-saharan Africa's service GIANT outside RSA. Largest non-mineral economy in SSA. KRA collects more than 12B usd per annum from that economy - I think top 4-5 in Africa or 3rd in SSA in tax revenue - just below Nigeria (with oil) and RSA. Get it. We are just no lucky with minerals or making things..but we got services pretty much cornered.
Or you need more ancedotal evidence. Tecno will open phone manufacturing plant in Ethiopia but will most likely open it's operation, marketting and after-sale service office in Nairobi - actually Samsung has it's design office here. The same is true for many MNC..manufacturing or not..they are opening offices in Nairobi every week. There are several reasons (perfect confluence -economics of consolidation) for this..but Nairobi and Kenya tick all the services boxes..but sucks in manufacturing...so Nestle will move it operation to Egypt or Ethiopia..but will retain Nairobi for marketting, call-centers, operations and name many other services that modern economy requires...and those are jobs, rental spaces and even fancy services like spas :)
There is someone who has compiled all these in thread I normally check....Nairobi the HQS of multinationals in Africa http://www.skyscrapercity.com/showthread.php?t=1559138&page=40
Let close issue no 1...so we can move to Boda Boda issue (INFORMAL SECTOR).
When you're ready to close issue no 1...we can move on.
Can we close issue no 1...as self-evident...and we can tussle over Kenya's informal sector.
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Moonki,
One minute you're accepting as a fact that kenya service sector is advanced (after reading WB report) the next you're re-opening the issue again.
It appears that you have some difficulties in reading. Here is what I wrote:
I remember reading a World-Bank report that described Kenya's "modern services" sector as a "success story"
"Modern services" are things like finance and communication, and they constitute a very small part of the Kenyan services sector. I also added that:
In terms of employment numbers, much of the service industry in Kenya seems to be in shoe-shine boys, selling mandazis by the roadside, pandering to tourists, etc.
Which part of that leads you to believe that I am now "accepting as a fact that kenya service sector is advanced"?
Kenya is Sub-saharan Africa's service kenya outside RSA. Largest non-mineral economy in SSA. KRA collects more than 12B usd per annum from that economy - I think top 4-5 in Africa or 3rd in SSA - just below Nigeria (with oil) and RSA. Get it.
Excellent. And how much is all that doing for lifting the masses out of poverty?
Or you need more ancedotal evidence.
As I have indicated, I prefer concrete and substantive evidence.
actually Samsung has it's design office here.
Really? Interesting. Where it it located? What sorts of things are being designed there? The last I had anything major of Samsung In Kenya was in late 2015 and early this year:
http://www.therecycler.com/posts/samsung-cutbacks-endanger-kenyan-printer-plant/
http://techcabal.com/2016/02/25/samsung-has-opened-its-largest-customer-experience-store-in-africa-and-its-in-nairobi/
The same is true for many MNC..manufacturing or not..they are opening offices in Nairobi every week.
Every week, huh? That's amazing. But what I have noted is this:
But the point is not just about having MNCs; it is about a contribution to employment, GDP, and getting people out of poverty. So, once again: what is the contribution there of the MNCs in "MNC capital of SSA outside RSA"?
In that regard, of your Samsung example:
The Nairobi office, which was also Samsung’s East and Central Africa HQ, had 150 permanent employees in January, including 100 Kenyans and 50 expatriates, meaning the loss of the 26 Kenyan workers reduces the local workforce by a quarter.
http://www.therecycler.com/posts/samsung-cutbacks-endanger-kenyan-printer-plant/
To my mind, 74 Kenyans and 50 expatriates aren't exactly great figures. Or have things improved since then?
Let close issue no 1...so we can move to Boda Boda issue (INFORMAL SECTOR).
Sure, tell me about things like boda boda, which, as you have stated
now employs millions of youths
who can
can work hard, save 300shs in phone or bank, can be able to borrow loan and buy a taxi, build a houses, take kids to schools..and basically live life like a middle class..
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Moonki,
You're a comedian. By services I mean modern services.Do I have define everything. Boss this is not law.We are talking economics here. So we are agreed that kenya FORMAL services are doing good. Now lets focus on the informal sector. Informal sector include informal manufacturing (Jua Kali dude making sufuria) and Boda boda (providing transport services)...and of course the bulk of farmers...who nobody knows what they produce.
Let recap the kenya formal economy
10% - Manufacturing
30% - Agri & related -employment 60%
Services (retail,financial,gov,social, etc) -60%.
Then Informal sector - this include informal agri, manufacturing and services - black market - nobody knows what they are doing -although 12m or about of kenyan are this sector. Their economic contribution can only be inferred say from consumption date (cement, beer, fuel)...so they are captured.
Our economic assignment is to move these guys in the shadows to formal sector...move the jua kali guy sweating by the roadside to cottage industry and eventually MNC? move the boda boda guy to uber-tax paying citizen earning decent salary, move matatu tout to own his own matatu and eventually transport or logistic company, move mama duka from his duka to supermarket. It mean doesn't every of these guys will become business owners. Nope it simply mean we formalize those sectors. Some boda boda guys will become taxi drivers while others will become taxi owners. Formalize this sector to SMEs as you have in developed world.
All we need is to bring them from their shadows, make them tax paying, have them earning well to sustain a middle class lifestyle, have medical insurances, have bank accounts, be able to access credit facilities, joined nssf or some pension fund, nhif, the works and generally be as any one employed in any company.
You ask how can we do that without following the touted model. They ought to be employed by some large MNC stitching shoes and doing mundane stuff, but getting regular salaries, paying taxes, getting bank accounts,being in the systems. having some pensions and some housing. This is how South Korea or Asian tiger or China or name them moved people....from peasant or jua kali...to slavish formal jobs as factory workers..then eventually to decent jobs...and eventually to service jobs (deploying capital & brains instead of labour&muscles).
Now you ask how kenya can skip all this. And I answer already kenya has taken steps to skip this.
Kenya for it's level of development now has 1.5 bank accounts for every person. Kenya has more than 50m bank accounts. The maasai herder is bring brought to the system. We can tell what he earns. This is unprecedented. It probably too you south korea or china several years of manufacturing things to get at that level. We are learning that these guys are actually making money than formal employee with education as the denominator.Kenya the last 10yrs has shown that innovation...you can easily bridge the gap. 10yrs ago...kenya as whole had maybe 1m bank account..held by the moneyed and educated...now everyone has 1 and half bank account.
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Juakali guy in Gikomba (roadside) has to move to Kariobangi(backstreet) Industries (Cottage -call it semi-formal) then eventually move to warehouse in Industrial area (formal) then he expands to UG/TZ/(MNC) with recognised Sufuria brand. Jua kali guy in gikomba is one dude, when he moves to Kariobangi he will employ spouse and maybe kids to sell stuff, then eventually when he moves the ladder he will even employ me as IT guy. For that to happen he'll need brains (skills, education,), capital (loan & partners) and of course an expanding economy. Kenya is providing all that...education investment compared to GDP is astounding...capital from banks is getting there (see how much private individual borrowed this yr)..and economy is expanding. So our Jua Kali is moving pretty fast to good life...and he doesn't have to go to Ethiopia..to earn 80shs per day...when he can make 400-1000shs per day forging Sufurias.
Do I have define everything.
In your case, alas, yes. For example, you write that:
Our economic assignment is to move these guys in the shadows to formal sector...move the jua kali guy sweating by the roadside to cottage industry and eventually MNC.
Taking a typical definition of "cottage industry":
1. an industry whose labor force consists of family units or individuals working at home with their own equipment
2. a small and often informally organized industry
how exactly would the "move" help jua-kali types to "eventually MNC"?
By the way, I'm still keen to learn more of Samsung's design office in Nairobi.
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As for samsung (or it techno) design office - they are a dozen in Nairobi - including IBM - who recognise the excellent graduates we produce here - and have moved research hubs here.
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As for samsung (or it techno) design office - they are a dozen in Nairobi - including IBM - who recognise the excellent graduates we produce here - and have moved research hubs here.
What I asked: Where is it located? What is being designed there?
As for the "dozen in Nairobi": what sort of employee numbers do they have?
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Phones.Smartphones.Mostly for Africa. Why wouldn't engineering designer not work from Nairobi designing a phone for Africa...which is HUGE market. Or you think they have to be in Seoul. Boss Nairobi is as good as Seoul for phone designer...and it even greater if you're interested in Africa.
They are not locating this in Ethiopia even if they grovel..coz they lack fundamentos :) as Ken Maria sang.,..such as well educated english speaking country with working services (such as ordering a pizza) and of course hospitality & hotel industry that is world class.
Stanford joins IBM, Samsung and Nokia who have set up innovation hubs in Nairobi. In a statement, the university says that Kenya was selected to host the East Africa lab due in part to Nairobi’s global repute for tech innovation and enterprise.
“Nairobi is important from a perspective of existing infrastructure, demographics, business climate and several other factors,” said Mr Albohm.
Columbia University has also opened a research centre in Nairobi, the Columbia Global Centre Africa, established in January 2013.
Other innovation spaces in Nairobi include the World Bank-funded Climate Innovation Centre, Brave Venture Labs, Growth Africa, the Chandaria Business Innovation and Incubation Centre at Kenyatta University, FabLab at the University of Nairobi, and C4Dlab among other
What I asked: Where is it located? What is being designed there?
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Phones.Smartphones.Mostly for Africa. Why wouldn't engineering designer not work from Nairobi designing a phone for Africa...which is HUGE market. Or you think they have to be in Seoul. Boss Nairobi is as good as Seoul for phone designer...and it even greater if you're interested in Africa.
What I asked: Where is it located? What is being designed there?
Sounds good. Let's start with Samsung in Nairobi, which is what you started with and which is what I specifically asked about: Where exactly can I find real information on that? If you tell me where they located, for example, then I can make enquiries as to what exactly is being done there.
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No idea. Google it. They last I was interested they were hawking some mobile operating system for building apps...which they abandoned..for Android. You' think you can re-connect with some korean girl there? :)
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No idea. Google it. They last I was interested they were hawking some mobile operating system for building apps...which they abandoned..for Android. You' think you can re-connect with some korean girl there? :)
No idea, huh? And yet you brought it up as one of your examples. "Hawking ... which they abandoned", eh? That was a pretty quick disappearance of the "Phones. Smartphones. Mostly for Africa."
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You are asking for granular details. I know Samsung,Intel, IBM, MIcrosoft and many of the big guys have innovation (R&D) hubs focused on Africa in Nairobi - employing PHD types to do R&D. If you're asking me to locate their physical address; then you need to pay for that. If you're interested on why they located here, not Ethiopia or TZ or Congo..be my guest.
No idea, huh? And yet you brought it up as one of your examples. "Hawking ... which they abandoned", eh? That was a pretty quick disappearance of the "Phones. Smartphones. Mostly for Africa."
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You are asking for granular details. I know Samsung,Intel, IBM, MIcrosoft and many of the big guys have innovation (R&D) hubs focused on Africa in Nairobi - employing PHD types to do R&D. If you're asking me to locate their physical address; then you need to pay for that.
Samsung was your example, and my primary interest was in just what it is that they are doing there. Since you have lost your ""Phones. Smartphones. Mostly for Africa." and ended up with ""Hawking ... which they abandoned" and "no idea", we can stop there and record another "Punditism".
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It still exist.
Samsung was your example, and my primary interest was in just what it is that they are doing there. Since you have lost your ""Phones. Smartphones. Mostly for Africa." and ended up with ""Hawking ... which they abandoned" and "no idea", we can stop there and record another "Punditism".
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Manufacturing is not all low-tech.
In the same vein, "low cost" and "low wages" are not absolute terms and do not necessarily mean "peanuts". What they really mean is "lower than where most of the stuff is currently being made".
Yep. The costs do not have to be relative to Ethiopia but rather to where they are otherwise already doing it i.e China, Vietnam. Kenya's labor costs compare favorably with those countries.
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Juakali guy in Gikomba (roadside) has to move to Kariobangi(backstreet) Industries (Cottage -call it semi-formal) then eventually move to warehouse in Industrial area (formal) then he expands to UG/TZ/(MNC) with recognised Sufuria brand. Jua kali guy in gikomba is one dude, when he moves to Kariobangi he will employ spouse and maybe kids to sell stuff, then eventually when he moves the ladder he will even employ me as IT guy.
I agree with you on the need to "upgrade" the jua-kali+informal sector, as do many experts---and I am not one---who have looked into the matter. And I quite like the idea of Mr./Ms. Jua Kali sending his/her "recognized sufuria brand" all over the place. I think where we disagree overall is in the relative weights of manufacturing vs. services, what should drive what, ... in a developing country.
In your example: If the spouse and kids (assuming they are not under-age, otherwise one expects them to be in school) are not getting paid, then their contribution to the "service" economy is not what it should be; the main point in employment is to get paid, and as a rule salespeople get paid. So let's assume they are getting paid ... and for simplicity, let's ignore things like a maid/"boy" being paid to replace the spouse, etc. The IT guy will too expect to be paid---and much more than the "sales staff". And so on, and so forth. We therefore end up needing a lot of sufurias. Maybe Mr./Ms. Jua Kali then employees more sufuria-makers or he/she borrows and invests in sufuria-producing technology that reduces the labour requirements. No matter what he/she chooses, at the end of the day what drives the business and the employment of the other people is the production of sufurias, i.e. manufacturing: not enough sufurias means the "service" people---spouse+kids salesforce, knowledge-economy IT guy, etc---have to go home.
(It is, of course, possible to have a huge services sector but without much in manufacturing, but there is a difference there between the situation in a developed country and a developing one. It is even possible to have a relatively huge "return on investment", but to what end? For example, the guy who cuts my hair whenever I am in the "reserves" in Kenya has been at it for years, with his only "investment" being in scissors and a bad chair.)
Putting aside my "jocular" comments on neighbourly Mavoko boda-boda types, I am genuinely intrigued by your comments in that area. Part of that is in a broad sense---e.g., at a national level, how does that industry compare with that of Vietnam, which has been at it for ages---but part is purely personal: I have sponsored a relative into that industry, and the last time I looked at his "books"---actually an "exercise book"---I concluded that he is in for a long struggle .... so many rides per day, bringing in at most so much per day, etc. What are the successful ones doing?
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Juakali(Manufacturing Informal sector) was one of the example I gave you. Informal sector largely reflect the formal sector. I expect guys informal informal manufacturing are 10%; 30% doing agricultural services and the rest (60%) doing services (boda boda, saloonist,mechanic,phone repair, shopkeeper,mama mboga, tout,farmer).
Now let pause and look at situation now. We know from data we've seen that informal sector are not doing badly except those engaged in agricultural activities.I have seen earnings of 12-18K kshs per month on average for informal sector. I have also seen data showing that for same level of education (0-16) the earning in informal sector if you remove agri is probably better than formal wages. Teacher or nurse formal earnings maybe 20k but someone with 12-14yrs of education engaged in informal sector maybe earning 30K kshs per month.
So what is missing puzzle btw our informal sector and USA's SME. CAPITAL & EDUCATION. We are fixing education with universal primary enrollment, really great secondary transition, and universities & colleges (need to do more) that have expanded the last 10yrs. We are also fixing capital...with technology, mpesa,agent banking and bottom pyramid banking.Your boda boda dude [I assume 8-12yrs of education] should be able to borrow money, invest in better boda boda or move to bigger town, engage in delivery services, join uber like boda boda service, get more customers, save and buy taxi, marry late & sire less kids (coz he went to school) - and generally fair as well as boda boda (taxi) dude in the USA.In the meantime this guy is becoming formal...joining the systems, having NHIF card, NSSF, bank account, paying taxes (m-pesa or bank transaction). All theses feed the private household, enterprises and gov.
We have evidence that we are fastly formalizing the informal sector...we just need to accelerate this. If their average salary move from 20k shs per month to 60-100shs per month -in the next 10yrs- then we would have become a upper middle income (2030).
The only guys we have to worry about are those in agri - who seem like a lost cause - mostly based in rural areas with little education --making poor life choices --and this where gov has to borrow chinese, world bank and everyone - and invest in huge infrastructure - and hopefully hire these lots as mjengo guy - sholving and pushing wheelbarrows.
Of course without savings from selling stuff around the world, we also hope to be lucky with natural resources, so turkana oil will come in handy.
I agree with you on the need to "upgrade" the jua-kali+informal sector, as do many experts---and I am not one---who have looked into the matter. And I quite like the idea of Mr./Ms. Jua Kali sending his/her "recognized sufuria brand" all over the place. I think where we disagree overall is in the relative weights of manufacturing vs. services, what should drive what, ... in a developing country.
In your example: If the spouse and kids (assuming they are not under-age, otherwise one expects them to be in school) are not getting paid, then their contribution to the "service" economy is not what it should be; the main point in employment is to get paid, and as a rule salespeople get paid. So let's assume they are getting paid ... and for simplicity, let's ignore things like a maid/"boy" being paid to replace the spouse, etc. The IT guy will too expect to be paid---and much more than the "sales staff". And so on, and so forth. We therefore end up needing a lot of sufurias. Maybe Mr./Ms. Jua Kali then employees more sufuria-makers or he/she borrows and invests in sufuria-producing technology that reduces the labour requirements. No matter what he/she chooses, at the end of the day what drives the business and the employment of the other people is the production of sufurias, i.e. manufacturing: not enough sufurias means the "service" people---spouse+kids salesforce, knowledge-economy IT guy, etc---have to go home.
(It is, of course, possible to have a huge services sector but without much in manufacturing, but there is a difference there between the situation in a developed country and a developing one. It is even possible to have a relatively huge "return on investment", but to what end? For example, the guy who cuts my hair whenever I am in the "reserves" in Kenya has been at it for years, with his only "investment" being in scissors and a bad chair.)
Putting aside my "jocular" comments on neighbourly Mavoko boda-boda types, I am genuinely intrigued by your comments in that area. Part of that is in a broad sense---e.g., at a national level, how does that industry compare with that of Vietnam, which has been at it for ages---but part is purely personal: I have sponsored a relative into that industry, and the last time I looked at his "books"---actually an "exercise book"---I concluded that he is in for a long struggle .... so many rides per day, bringing in at most so much per day, etc. What are the successful ones doing?
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We know from data we've seen that informal sector are not doing badly except those engaged in agricultural activities.I have seen earnings of 12-18K kshs per month on average for informal sector.
I'd be interested to know where you have seen this.
We have evidence that we are fastly formalizing the informal sector...we just need to accelerate this.
I'd be interested to see the evidence; what is happening seems to be in the other direction: Looking at 2015 KNBS data, the informal sector accounted for 81% employment in 2010 and 83% in 2014.
If their average salary move from 20k shs per month to 60-100shs per month -in the next 10yrs- then we would have become a upper middle income (2030).
I'm astonished; where did you get that figure? According to the World Bank, for that to happen, the economy would have to grow by at least 7% per year until 2030; it then notes that that has happened in only 4 of the last 40 years.
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I'll let you try google first. If you can't then pole. I say focus on the growth the last 10yrs. Not 40yrs. We've been growing at nearly 7% (if you remove PEV) and you add re-basing (which basically mean we are not measuring our economy as accurately as we should). So yeah are already doing 7%.....and will get there in 2030. We can get there faster...and we don't have to make stuff.
We know from data we've seen that informal sector are not doing badly except those engaged in agricultural activities.I have seen earnings of 12-18K kshs per month on average for informal sector.
I'd be interested to know where you have seen this.
We have evidence that we are fastly formalizing the informal sector...we just need to accelerate this.
I'd be interested to see the evidence; what is happening seems to be in the other direction: Looking at 2015 KNBS data, the informal sector accounted for 81% employment in 2010 and 83% in 2014.
If their average salary move from 20k shs per month to 60-100shs per month -in the next 10yrs- then we would have become a upper middle income (2030).
I'm astonished; where did you get that figure? According to the World Bank, for that to happen, the economy would have to grow by at least 7% per year until 2030; it then notes that that has happened in only 4 of the last 40 years.
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I'll let you try google first. If you can't then pole. I say focus on the growth the last 10yrs. Not 40yrs. We've been growing at nearly 7% (if you remove PEV) and you add re-basing (which basically mean we are not measuring our economy as accurately as we should). So yeah are already doing 7%.....and will get there in 2030.
The whole point of the World Bank report is that getting to 7% won't be easy. The data confirms that, an it is certainly not the case that we "are already doing 7%":
2011: 6.1%
2012: 4.6%
2013: 5.7%
2014: 5.3%
2015: 5.6%
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Don't ignore rebasing and black informal economy.2006 our economy was 20B- and now it's 70B usd. That annualized for me is about 10% compounded growth rate. Therefore if we grew at same rate..by 2025..our economy would be 250B..and 2030..300B. About what RSA right now is...with about same pop (60M). That is nice place to be.
2012: 4.6%
2013: 5.7%
2014: 5.3%
2015: 5.6%
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Don't ignore rebasing and black informal economy.
What make you think I'm ignoring them?
Rebasing: Rebasing changes how GDP is measured (i.e. what is included). Once rebasing is done, the proper thing to do, to understand growth rates, is to go back and recompute old GDP figures using the new inclusions.
The growth rates I listed above are from KNBS, and what KNBS did with the rebasing of 2014 was to go back and recompute both GDP and growth rates for the years 2006 to 2013 (2005 being the year of the last rebasing before 2014). You can find all that in the KNBS report "Information on Revised National Accounts"?
Black informal economy: Do you know how big it is? Even if we could measure its value, add it to that to the current GDP figures, and end up with a larger figure for GDP, is there any reason to believe that there would be an appreciable (or any change) in the growth rate? In fact, it is possible to imagine a scenario in which including the "black informal economy" led to smaller growth-rate figures
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In 2014- the economy after rebasing grew by 25%...if you smoother that over the previously years..then economy certainly grew more than 7%. I have seen some put economic growth of 2014 in 9%. I am not sure how they re-calculate this after re-basing but definitely kenya economy has grown from 18B in 2005 to 70B( in 2015)....and your pals at WB...never thought kenya was going to become middle income soon..and we did.
Even the dutch are say there will be no more aid....which is welcome..coz we need investment now.
http://www.businessdailyafrica.com/No-Dutch-aid-for-Kenya-after-2020--minister-tells-parliament/539546-3391788-jnjoy2/index.html
In 2025 - I expect Kenyan economy to be where South Africa is now (middle income with gdp per capita of 5,000 and population of 60K..300B USD economy)...and by 2030..who knows...we might even be a upper middle income country.
What make you think I'm ignoring them?
Rebasing: Rebasing changes how GDP is measured (i.e. what is included). Once rebasing is done, the proper thing to do, to understand growth rates, is to go back and recompute old GDP figures using the new inclusions.
The growth rates I listed above are from KNBS, and what KNBS did with the rebasing of 2014 was to go back and recompute both GDP and growth rates for the years 2006 to 2013 (2005 being the year of the last rebasing before 2014). You can find all that in the KNBS report "Information on Revised National Accounts"?
Black informal economy: Do you know how big it is? Even if we could measure its value, add it to that to the current GDP figures, and end up with a larger figure for GDP, is there any reason to believe that there would be an appreciable (or any change) in the growth rate? In fact, it is possible to imagine a scenario in which including the "black informal economy" led to smaller growth-rate figures
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Here someone attempting to formalize mama mboga - 700M USD fresh produce market in Nairobi. There are 40,000 mama mbogas...and these guys are using technologgy to formalize them into modern business. Excting stuff.
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In 2014- the economy after rebasing grew by 25%...if you smoother that over the previously years..then economy certainly grew more than 7%.
You seem to be measuring your own things. What rebasing did was change the size of the GDP figures from the time of the last rebasing. But that is quite a different matter from GDP growth rate (however it is measured). And that is because rebasing changes the figures for the preceding year, not just for the year in which it takes place. Let me give you an example:
(a) Suppose you counted your money last month and decided you had 10 shillings; you count it this month and decide you have 20 shillings. You may claim a 100% improvement.
(b) Now suppose you then find out that your counting was faulty---that last month you actually had 20 shillings, and this month you actually have 40 shillings. The figures here are larger than in (a), but you may still claim only a 100% improvement.
What is completely illogical is to take the 10 shillings from (a) and the 40 shillings from (b) and decide that you have a 300% improvement in the state of your "economy". You can't use the 40 shillings in (b) to "smooth over" the 10 shillings from (a) because last month's figure has also changed!
I have seen some put economic growth of 2014 in 9%.
2014 is past, and we have the figure: KNBS says it is 5.3%. I could ask where you have "seen some put it", but that would probably bring forth "nitpicking!". So I won't. But the fantastic 9% makes me wonder whether you and your friends are even measuring the same things as everyone else. For example, you wrote that:
2006 our economy was 20B- and now it's 70B usd. That annualized for me is about 10% compounded growth rate.
That's not how an organization like KNBS measures GDP growth rate.
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Interesting technical debate I rather not have. The economy the last 10yrs grew from 18B to 65B. If we grow at the same rate for the next decade; then our 70B economy will be 300B in 2026. Gdp per capita similary grew from about 500 to now about 1500. Grow it at rate..and you're looking at 5000 per capita. That is where South Africa is and where we will be in 10yrs.
In 2014- the economy after rebasing grew by 25%...if you smoother that over the previously years..then economy certainly grew more than 7%.
You seem to be measuring your own things. What rebasing did was change the size of the GDP figures from the time of the last rebasing. But that is quite a different matter from GDP growth rate (however it is measured). And that is because rebasing changes the figures for the preceding year, not just for the year in which it takes place. Let me give you an example:
(a) Suppose you counted your money last month and decided you had 10 shillings; you count it this month and decide you have 20 shillings. You may claim a 100% improvement.
(b) Now suppose you then find out that your counting was faulty---that last month you actually had 20 shillings, and this month you actually have 40 shillings. The figures here are larger than in (a), but you may still claim only a 100% improvement.
What is completely illogical is to take the 10 shillings from (a) and the 40 shillings from (b) and decide that you have a 400% improvement in the state of your "economy". You can't use the 40 shillings in (b) to "smooth over" the 10 shillings from (a) because last month's figure has also changed!
I have seen some put economic growth of 2014 in 9%.
2014 is past, and we have the figure: KNBS says it is 5.3%. I could ask where you have "seen some put it", but that would probably bring forth "nitpicking!". So I won't. But the fantastic 9% makes me wonder whether you and your friends are even measuring the same things as everyone else. For example, you wrote that:
2006 our economy was 20B- and now it's 70B usd. That annualized for me is about 10% compounded growth rate.
That's not how an organization like KNBS measures GDP growth rate.
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Interesting technical debate I rather not have.
Yes. Sometimes facts and directed questions can be awkward.
The economy the last 10yrs grew from 18B to 65B. If we grow at the same rate for the next decade; then our 70B economy will be 300B in 2026. Gdp per capita similary grew from about 500 to now about 1500. Grow it at rate..and you're looking at 5000 per capita.
Interesting numbers and predictions. Lower bounds from one place, upper bounds from another place. Anyways .... On the one hand, RV-Pundit economics; on the other hand, World-Bank economics. It's a tough choice.
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I'd go for the upper bound considering once again the huge informal sector is hard to measure and WB were wrong ; according to their previous estimate; we are not suppose to be a low middle income country. I am struggling though to understand your point. Kenya GDP & GDP per capita will rise 4 times in the next decade...and will be the size of South Africa now by the time Ruto complete his first term in 2027. That is very obvious..barring a disaster..kenya is auto-pilot to grow by 6% (and more if we get serious or lucky). And kenya will do this without having to become manufacturing giant. Optimistically our GDP per capita may reach 10,000USD in next 15-20yrs. That will be near upper middle income country...and by 2040..I expect kenya to be a developed country.
Interesting numbers and predictions. Lower bounds from one place, upper bounds from another place. Anyways .... On the one hand, RV-Pundit economics; on the other hand, World-Bank economics. It's a tough choice.
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Looking at demographics; Kenya clearly has turned the corner..and is set to enjoy demographic divided.
Pop growth rate has reduced from 4% to about 2.7%.....meaning households and govs have reducing backlog of mouths to fee.
Median age is improving from 15yrs to 20yrs...meaning you've got more working people supporting fewer kids & older people.
Mortality rate (child,under 5, etc) is reducing and life expectancy is improving...meaning less pop growth rate & more working pop.
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One wonders what's more sturdy in the long term, the UKs amazing financial services or Germany's efficient heavy industries.
IN the meantime, it's become very obvious that Tony Blair and Co convinced (grovelled?) the Japanese Nissan and Honda to set up shop in England and Wales.
Grovelling works.
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Bryan, I think you understand economics enough to know economics of consolidation (scale etc) and to appreciate that London or Germany financial or industrial consolidation is going to be hard to replicate or compete against - the reason is that when you've got it all going - then everything else falls in place. Kenya cannot try to copy others - it has to work on it's advantage and slowly consolidate them - Nairobi has emerged as service giant in Africa - we can build on that and hopefully became London in 50yrs.
As for grovelliing...no serious industry is going to move there..unless the fundamentals are right. Nissan or Honda will care only about the bottomline. Not a politician trying to find jobs and gain political milleage for his people. If it make sense to manufacture in India or China or Germany...rather than UK..they'll go there.
Tony Blair should have instead be asking China's or Japan financial services to join London impressive financial services.
One wonders what's more sturdy in the long term, the UKs amazing financial services or Germany's efficient heavy industries.
IN the meantime, it's become very obvious that Tony Blair and Co convinced (grovelled?) the Japanese Nissan and Honda to set up shop in England and Wales.
Grovelling works.
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Here is NHIF trying to formalize the 12M- strong -informal sector. This is what we should focus on....rather than dreaming about becoming industrial power.
http://www.businessdailyafrica.com/NHIF-eyes-12m-informal-sector-workers-in-fresh-recruitment/539546-3395748-jmf43fz/index.html
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According to Nation, Kenyan imports from China last year estimated at KES. 320 billion against export to China of KES. 5 billion. And it's projected to grow.
www.nation.co.ke/lifestyle/smartcompany/Kenya-full-plate-of-Chinese-imports/1226-3396052-84830o/index.html
The average retail price of a 50-kg bag of cement has dropped to Sh670 from the peak of Sh740 in 2008 due to fierce price wars.
Asian manufacturers enjoy lower energy costs and are entitled to State subsidies, allowing them to gain market share in East Africa where cheaper products are in high demand.
The World Bank has warned that cheap Chinese imports may hurt Kenya’s bid to join the elite club of industrialised nations as projected in its Vision 2030 economic blueprint.
“Because Kenya produces and trades few intermediate goods, researchers have concluded that Chinese imports COULD??? lead to a de-industrialisation,” the World Bank said early this year.
Kenya’s fledgling manufacturing sector has stagnated at an average of 11 per cent to the gross domestic product (GDP) in the past 10 years. This has created room for imports of goods that cannot be manufactured locally, pushing up the country’s import bill, which towers above exports, and piling pressure on the shilling.
Analysts reckon that the Chinese import growth is being driven by local traders’ preference for fast-moving cheaper stock, including those that can be made here, posing competition to local companies.
There is need for a policy rethink on imports that can be produced locally to avert possible suffocation of local industries, says X N Iraki, an economics lecturer at the University of Nairobi.
China has also been pushing for adoption of Chinese language in Kenyan universities through Confucius Institute alongside Mandarin cuisines in hotels.
The KNBS data shows, however, that Kenya deeply cut its imports of Chinese vehicles and spare parts to Sh2.4 billion in the year to June compared to Sh11.9 billion in a similar period last year and Sh3.1 billion in 2013.
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We can't beat china in this and imposing restriction is just punishing the economy for little gain. China is going to eat some local industries but is mostly eating the share of imports from UK,Japan,India and the likes.
We need to concentrate on what we are good in..for example tourism...China & India is potentially market for MILLIONS of tourist...I think China right now is biggest source of tourist in Europe and the rest of the world...we need to tap into that market....by inviting more chinese investor to open hotels, learning chinese, having tour guide who speak chinese,allow chinese airlines to fly here, allow easy transfer of money btw kenya and china, banks embracing UnionPay, ease visa restriction, serve dogs in special chinese hotels.
If we get 3m chinese coming here annually spending each 1,000USD on average...that will pay for 320B(3Busd) from the imports.
That is the smart way to play this game. Play your comparative advantage. China has no animal parks except in the zoos. China outbound tourist are anything btw 130-200M. We just need to get a slice of that...2% visiting our nation...and we can balance the trade.
But we are all obsessed with being industrial power...unaware that they are even more exciting opportunities...as 1.3B chinese become rich and want to travel the world.
According to Nation, Kenyan imports from China last year estimated at KES. 320 billion against export to China of KES. 5 billion. And it's projected to grow.
www.nation.co.ke/lifestyle/smartcompany/Kenya-full-plate-of-Chinese-imports/1226-3396052-84830o/index.html
The average retail price of a 50-kg bag of cement has dropped to Sh670 from the peak of Sh740 in 2008 due to fierce price wars.
Asian manufacturers enjoy lower energy costs and are entitled to State subsidies, allowing them to gain market share in East Africa where cheaper products are in high demand.
The World Bank has warned that cheap Chinese imports may hurt Kenya’s bid to join the elite club of industrialised nations as projected in its Vision 2030 economic blueprint.
“Because Kenya produces and trades few intermediate goods, researchers have concluded that Chinese imports COULD??? lead to a de-industrialisation,” the World Bank said early this year.
Kenya’s fledgling manufacturing sector has stagnated at an average of 11 per cent to the gross domestic product (GDP) in the past 10 years. This has created room for imports of goods that cannot be manufactured locally, pushing up the country’s import bill, which towers above exports, and piling pressure on the shilling.
Analysts reckon that the Chinese import growth is being driven by local traders’ preference for fast-moving cheaper stock, including those that can be made here, posing competition to local companies.
There is need for a policy rethink on imports that can be produced locally to avert possible suffocation of local industries, says X N Iraki, an economics lecturer at the University of Nairobi.
China has also been pushing for adoption of Chinese language in Kenyan universities through Confucius Institute alongside Mandarin cuisines in hotels.
The KNBS data shows, however, that Kenya deeply cut its imports of Chinese vehicles and spare parts to Sh2.4 billion in the year to June compared to Sh11.9 billion in a similar period last year and Sh3.1 billion in 2013.
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Some data on earnings in the formal sector
http://imgur.com/KY1GqoK (2.5M formal jobs)
http://imgur.com/iK6NXcu (about 600,000 ksh per annum earning on average or about 40K per month).
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IMF thinks Mobile Money can add 1.5% growth to our economy.
http://www.businessdailyafrica.com/Can-Africa-s-mobile-money-revolution-reduce-poverty-/539552-3397578-hfuhvoz/index.html
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Can Africa's mobile money revolution reduce poverty? NO!
--A headline with a question mark at the end means, in the vast majority of cases, that the story is tendentious or over-sold. It is often a scare story, or an attempt to elevate some run-of-the-mill piece of reporting into a national controversy and, preferably, a national panic.
https://en.wikipedia.org/wiki/Betteridge%27s_law_of_headlines
--
IMF thinks Mobile Money can add 1.5% growth to our economy.
http://www.businessdailyafrica.com/Can-Africa-s-mobile-money-revolution-reduce-poverty-/539552-3397578-hfuhvoz/index.html
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Can Africa's mobile money revolution reduce poverty? NO!
--A headline with a question mark at the end means, in the vast majority of cases, that the story is tendentious or over-sold. It is often a scare story, or an attempt to elevate some run-of-the-mill piece of reporting into a national controversy and, preferably, a national panic.
https://en.wikipedia.org/wiki/Betteridge%27s_law_of_headlines
--
IMF thinks Mobile Money can add 1.5% growth to our economy.
http://www.businessdailyafrica.com/Can-Africa-s-mobile-money-revolution-reduce-poverty-/539552-3397578-hfuhvoz/index.html
You have to actually produce stuff, alot of stuff in order to do so. This is why our billionaire "businessmen" are useless. They produce nothing, invent nothing and no value adds.
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You don't make much sense here. M-pesa is enabling people to produce stuff - goods and services - at the micro-level. The economy is set to grow by. 6-6.5% because people are definitely producing, inventing and adding value. Unless you're focusing on our renting seeking political class.
You have to actually produce stuff, alot of stuff in order to do so. This is why our billionaire "businessmen" are useless. They produce nothing, invent nothing and no value adds.
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by inviting more chinese investor to open hotels, learning chinese, having tour guide who speak chinese,allow chinese airlines to fly here, allow easy transfer of money btw kenya and china, banks embracing UnionPay, ease visa restriction, serve dogs in special chinese hotels.
I like that. Just invite them and do all these things to convince them to come. Much better than grovelling.
If we get 3m chinese coming here annually spending each 1,000USD on average...that will pay for 320B(3Busd) from the imports.
...
My impression is that Chinese people generally have little interest in visiting Africa and interacting with Africans; and to the extent that they do, South Africa does OK, because it is seen as a little "advanced", as does Egypt, because it is "not Africa".
KTB tends to have all sorts of marketing in China, including the hosting of "cultural festivals" in some large cities. How effective are these? KTB data on Chinese arrivals:
2012: 41,303
2013: 37,062
2014: 33,199
2015: 29,774
Neither the numbers nor the trend suggest that we will soon have 3m handing over 320B.
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Big difference btw attracting and grovelling. The chinese numbers reflect the general trend the last few year after we lost our tourist to TZ and elsewhere thanks to Alshabab. There is recovery underway this year..and Chinese & Indian figures hopefully will be way up..growing at double digit like it did till 2011. I think 2011 is when we receive the highest number of tourist.
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Big difference btw attracting and grovelling. The chinese numbers reflect the general trend the last few year after we lost our tourist to TZ and elsewhere thanks to Alshabab. There is recovery underway this year..and Chinese & Indian figures hopefully will be way up..growing at double digit like it did till 2011. I think 2011 is when we receive the highest number of tourist.
I'm happy to see that you now appreciate that: "grovelling" was a word that you came up with; the rest of us had in mind the government working hard to attract certain types of manufacturers. Own goal.
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We cannot attract manufacturers when many are closing shops. What is there to attract them? We can attract investors to tourism sector because it already working and just need retooling, refining, tweaking, fine-tunning and expanding it; The same way we can easily attract FDI to real estate, retail, and such industries that are already up there.. Kenya and Britain crying to chinese manufacturers to go there..is desperate grovelling. Won't work. Can't work.
We can attract chinese investor to build hotels; we cannot attract them to build factories. Our "factory" fundamentals are screwed..power at best 14 cent usd per KWH(for large commercial) and labour at 120USD per month...totally impossible when our competitors are offering 3 cent per KWH and 20usd per month salary! We have proven 1M inbound tourist every year...a billion dollar industry...that is going to attract FDI..with or without gov input.
Plain simple if someone has some economics 101 knowledge.
I'm happy to see that you now appreciate that: "grovelling" was a word that you came up with; the rest of us had in mind the government working hard to attract certain types of manufacturers. Own goal.
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We can attract chinese investor to build hotels; we cannot attract them to build factories. Our "factory" fundamentals are screwed..power at best 14 cent usd per KWH(for large commercial) and labour at 120USD per month...totally impossible when our competitors are offering 3 cent per KWH and 20usd per month salary!
I believe it has already been pointed out to you that we don't have to compete with Ethiopia on the same things.
Plain simple if someone has some economics 101 knowledge.
:) :D :o :o :D :)
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Not only Ethiopia but many other low cost manufacturing destination. I don't see it happening. Our economy is free for all. They should have come already -- but nobody is opening factories - they are opening hotels and stuff that make economic sense.
I believe it has already been pointed out to you that we don't have to compete with Ethiopia on the same things.
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Our "factory" fundamentals are screwed..power at best 14 cent usd per KWH(for large commercial) and labour at 120USD per month...totally impossible when our competitors are offering 3 cent per KWH and 20usd per month salary!
There seems to be a lot of whining and wailing and gnashing of teeth about such things and how they supposedly affect manufacturing in Kenya, but, again, this is yet another area where grovelling working to attract outsiders can work. As an example, here is what is happening in Vietnam:
SolarPark Korea Co Ltd plans to build a 300-MW solar power facility in Vietnam’s central province of Ha Tinh for a total cost of about USD 650 million (EUR 572.7m), company officials announced on Thursday.
http://renewables.seenews.com/news/solarpark-korea-eyes-300-mw-solar-project-in-vietnam-report-497642
South Korean Hanwha Group has proposed to install between 100 MW and 200 MW of photovoltaic (PV) capacity in Vietnam’s province of Thua Thien-Hue.
...
According to a statement by the provincial government last week, such a solar project is estimated to require a total investment of approximately USD 200 million (EUR 188.4m) by the South Korea-based PV cell and module maker
http://renewables.seenews.com/news/koreas-hanwha-plans-up-to-200-mw-of-pv-in-vietnam-502669
Canadian company CMX Renewable Energy is reportedly planning to construct a 150MW solar photovoltaic (PV) power plant worth $150m.
...
http://www.power-technology.com/news/newscmx-renewable-plans-to-build-150mw-solar-pv-plant-in-vietnam-4881942
That's around $1 billion and a whole bunch of MWs from just those 3 companies.
Quite apart from those companies whose main business is energy, others like Intel, having already been convinced to set up shop, are working on their own electricity supplies:
Intel Products Vietnam on April 23rd unveiled and put into use the biggest solar power system in Vietnam after nearly five months of construction. The system is made of 1,092 solar panels with 21 electric converters.
The system will produce about 321,000 kWh of electricity (replacing nearly 30% of the total power Intel Vietnam factory consumes) and reduce up to 221,300 kg of CO2 emission per year.
http://www.cel-consulting.com/en/category/market-news/Biggest-Solar-Power-System-In-Vietnam-Unveiled
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Not only Ethiopia but many other low cost manufacturing destination.
Which "destinations" do you have in mind, and what are they currently producing?
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Kenya needs trade protectionist system (sad we signed EPA), investment in energy, key collective infrastructure. The capitalism rat race should also be toned down a bit. No factories will come up when everyone, including "industrialists" are busy flooding market with foreign-ware.
Somalis have perfected the trade and it is said that they evade taxes. If importers are evading taxes, then it is even more difficult situation for producers.
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Bangladesh and SriLanka for example.
Which "destinations" do you have in mind, and what are they currently producing?
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What is standing in the way of Africa’s industrialisation?
During discussions, experts agreed that one of the main reasons for Africa’s slow industrialisation is that its leaders have failed to pursue bold economic policies out of fear of antagonising donors.
In a forcefully argued opinion in British daily The Financial Times, Kingsley Moghalu, a former deputy governor of the Central Bank of Nigeria, insists “governments must lead the way, with a firm hand on the wheel and by setting policy that creates an enabling environment for market-based growth that creates jobs”.
Many experts have called on Africa to practice sophisticated or smart protectionism – that is, to impose temporary tariffs to shield budding industries from the negative effects of cheap imports – as part of its strategy to industrialise.
In his book, Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism, Ha-Joon Chang argues that rich countries have historically relied on protectionist approaches in their quests for economic dominance.
In its review of the book, The Publishers Weekly, a US-based news magazine, says rich nations that “preach free market and free trade to poor countries in order to capture larger shares of the latter’s markets and to pre-empt the emergence of possible competitors are Chang’s bad Samaritans.”
The ECA has also maintained that African countries can pursue smart protectionism as practiced by the West.
Ethiopia, Rwanda and to a lesser extent Tanzania have proven adept at navigating the bumpy path to industrialisation. The common thread among them is that they have embraced policies that target and favour their own manufacturing industries.
In addition to pursuing what experts call a “developmental state model,” under which governments control, manage and regulate economies, they have adopted investor-friendly policies. And most importantly, they have shown a commitment to and ownership of these policies.
State control over economic policies appears to have contributed to less corruption in Ethiopia and Rwanda. Ethiopia has shown industrialisation can happen in Africa. What the continent needs is political commitment and the audacity to implement the right policies, even in the face of strong external opposition.
http://standardmedia.co.ke/mobile/article/2000219184/what-is-standing-in-the-way-of-africa-s-industrialisation
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Meaning our service sector is innovating more. Equity halts new mortar and brink branches.
http://www.businessdailyafrica.com/Corporate-News/Equity-halts-new-branches-as-it-banks-on-digital-expansion/539550-3412508-6regaf/index.html
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Meaning our service sector is innovating more. Equity halts new mortar and brink branches.
http://www.businessdailyafrica.com/Corporate-News/Equity-halts-new-branches-as-it-banks-on-digital-expansion/539550-3412508-6regaf/index.html
I.e.
The app will also enable clients conduct various transactions including loan applications, paying bills, buying and selling shares as well as procuring insurance.
Where's the more innovation?
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If you wouldn't tell an innovation if it hits your face.
I.e.
The app will also enable clients conduct various transactions including loan applications, paying bills, buying and selling shares as well as procuring insurance.
Where's the more innovation?
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If you wouldn't tell an innovation if it hits your face.
It took me a few minutes to translate that sentence into English and then parse it to determine the (intended) meaning. :D Anyways ... why don't you hit me on the face with it, and we'll then see whether I can tell or not: what exactly is the innovation here?
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In terms of economic development, most African countries are operating below the least developed country income threshold of $1,035 per person. While developing countries in East Asia, most importantly China, have been lifting millions of people out of poverty at break-neck speed, Africa’s poverty rate has barely budged. In 2011, 69.5% of people in sub-Saharan Africa were living on less than $2 a day, only three percentage points lower than in 1981. As a result, Africa’s share of world poverty is 40% higher today than it was at the turn of the millennium.
The key to China’s rapid growth, and most other countries that have experienced the transition from low to high income, has been industrial policy – targeted interventions by the state to push economies towards the global technological frontier, especially in the manufacturing sector, while relinquishing dependence on agriculture and natural resources.
There are virtually no internationally competitive manufacturing firms in Africa, so the continent desperately needs industrial policy. The report summarized in this post is the result of work I did with Dr Ha-Joon Changand Dr Muhammad Irfan, for the UN Economic Commission for Africa. Titled Transformative Industrial Policy for Africa (PDF- http://www.uneca.org/sites/default/files/PublicationFiles/tipa-full_report_en_web.pdf ). It aims to serve as a guiding tool for using industrial policy in Africa.
http://africasacountry.com/2016/06/african-economies-and-the-lack-of-a-targeted-industrial-policy/
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In terms of economic development, most African countries are operating below the least developed country income threshold of $1,035 per person. While developing countries in East Asia, most importantly China, have been lifting millions of people out of poverty at break-neck speed, Africa’s poverty rate has barely budged. In 2011, 69.5% of people in sub-Saharan Africa were living on less than $2 a day, only three percentage points lower than in 1981. As a result, Africa’s share of world poverty is 40% higher today than it was at the turn of the millennium.
The key to China’s rapid growth, and most other countries that have experienced the transition from low to high income, has been industrial policy – targeted interventions by the state to push economies towards the global technological frontier, especially in the manufacturing sector, while relinquishing dependence on agriculture and natural resources.
There are virtually no internationally competitive manufacturing firms in Africa, so the continent desperately needs industrial policy. The report summarized in this post is the result of work I did with Dr Ha-Joon Changand Dr Muhammad Irfan, for the UN Economic Commission for Africa. Titled Transformative Industrial Policy for Africa (PDF- http://www.uneca.org/sites/default/files/PublicationFiles/tipa-full_report_en_web.pdf ). It aims to serve as a guiding tool for using industrial policy in Africa.
http://africasacountry.com/2016/06/african-economies-and-the-lack-of-a-targeted-industrial-policy/
In 2015 and 2016 the World bank has issued two very interesting reports that are relevant here.
One is on Africa as a whole; it notes that at the time African countries became independent, the world's poor were mostly concentrated in Asia, but by 2050 Africa will have cornered that "market".
The other is a very detailed report on Kenya and "shared prosperity". The report notes that while some are jerking off over GPD growth, the reality is that this is not making that much of a difference in poverty levels---that while finance, ICT, and other high-end parts of the "service" sector contribute to GDP growth, but they don't create many jobs and so do little for general poverty ... that what is needed is the type of economic development and job creation that will lift the masses out of poverty.
The reality is that if one looks past "GDP per capita" and "we are now a middle-income country!" and instead looks at where most Kenyans are employed and how much they make, the situation is quite grim. People need to look beyond "Bank introduces app, no more tellers! Wank, wank, wank!" sort of thing.
Recently, The Standard has carried two very interesting articles:
http://www.standardmedia.co.ke/business/article/2000217055/many-kenyans-trapped-in-poverty-despite-economic-growth-says-report
http://www.standardmedia.co.ke/business/article/2000213076/despite-steady-wealth-creation-kenya-lags-behind-its-african-peers-in-reducing-poverty
Kenya lags behind sub-Saharan Africa in poverty reduction, as uneven wealth distribution widens the rich-poor gap ... additional wealth generation has benefited only a small section of the population, leaving millions of low-income earners trapped in cycles of poverty.
What I found most astonishing about those was not in the facts, which I already knew from other sources; instead, it was the lack of anything resembling national concern on such matters. Even at a very basic level: for example, both articles have a total of 3 comments from readers; compare that with comments on articles about politics and "money has been poured to finish our man".
The "leadership" ought to be leading, but their concerns never go beyond fleecing the sheep. What national policies, plans, and actions, do we have in place to lift the masses out of poverty?
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Bangladesh and SriLanka for example.
Which "destinations" do you have in mind, and what are they currently producing?
The other part of the question was "what are they producing?", the point being that Kenya need not compete on the same basis. I also believe that labour costs are higher in Sri Lanka. Anyways ... let's try to work with some concrete and specific information. If you go here http://www.industrialization.go.ke/index.php/downloads/282-kenya-s-industrial-transformation-programme you will find a summary of Kenya's "Industrial Transformation Programme", and on page 8 of that, under "Textiles and Apparel", you will find this:
Our labour cost is relatively cheap compared to that of Asia, and our preferential access to global markets creates a cost advantage that appeals to buyers as they look to diversify their sourcing base.
So it t looks like Kenya is well-placed for that sort of thing, and we are also told that there is the opportunity to "generate an additional USD 140 to 200 million in GDP and create 105,000 jobs". Excellent. But we also learn that
Despite its advantage over other low-cost countries, Kenya accounts for only 0.4% of the USD 84 billion American textiles market. Bangladesh, a low-cost favouite, is approximately 9% more expensive that Kenya but commands 6% of the US market".
So what exactly is Kenya's problem? I believe it's the kula nyama approach. Consider Rivatex, supposed to be spearheading the "textile" revival but actually just another example of getting universities involved in questionable activities. Last year we had this:
Eldoret, Kenya - The Government has set aside Sh680 million to revive and expand operations at the Rift Valley Textile (Rivatex) Mills in Uasin-Gishu County, Deputy President William Ruto has said. He said the Government would work with other stakeholders in providing facilities aimed at expanding the textile plant. “The Government will spend Sh680 million to expand the textile plant and purchase equipment to facilitate operations at the cotton industry,” said Mr. Ruto.
http://www.standardmedia.co.ke/article/2000170068/sh680-million-set-aside-for-reviving-rivatex-mills-in-eldoret-deputy-president-william-ruto-says
And while talking about the textile plant and the cotton industry, the Hon. Deputy President was also on a secondary mission:
Speaking during the launch of the pilot laptop and tablets assembly project at the Rivatex plant, the Deputy President said there was need to focus on manufacturing.
With a little note for the Luddites:
The Deputy President urged Kenyans to embrace technology noting that the future development of the country depended on how ‘we embrace’ technology.
Fast forward to 2016: Here is the latest on Moi University and Rivatex:
Controversy-hit Moi University could have lost up to Sh1 billion in one of the worst suspected corruption scandals in a public-owned institution of higher learning, a new audit seen by the Sunday Nation reveals.
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The government report released last month raises the red flag over Sh600 million in questionable transactions between the Eldoret-based university and the Rift Valley Textile (Rivatex),
http://www.nation.co.ke/news/Audit-reveals-Sh1bn-loss-at-Moi-varsity/1056-3401960-format-xhtml-cvvaqe/index.html
Textile plant, cotton industry, laptops and tablets? Later. For now, kula nyama or meza mate.
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Here we go with googling research studies and newspaper articles to prop nonsense. There are tonnes of research papers and articles supporting all viewpoints.
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Here we go with googling research studies and newspaper articles to prop nonsense. There are tonnes of research papers and articles supporting all viewpoints.
In that case, you shouldn't have trouble finding a few tonnes to support your "sense"---such as the "many examples of countries that have moved to developed world by focusing solely in services" and how Kenya will follow that path but then again (after we chase you around on the facts) it will be the rare exception, etc. Put up a few from tonnes that support such, and we can then discuss them.
Oh, and also comment on the bits above about Bangladesh (your example), Moi University, textiles, and the kula nyama there. Put up a bit of the "tonnes of research papers and articles supporting all viewpoints".
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We are not discussing nanotechnology or something that obscure where we need research papers to back up our arguments. We are talking commonsensical issues. I have given you example of countries that became developed through service sector and all I have heard is that they were small. I don't know how small. Kenya small? or China small? or US small? Sychelles big or Singapor big?
As for Moi university futile attempt to jumpstart textile manufacturing and try copy Bangladesh - I am not suprised they didn't go anywhere. I doubt the money was stolen - it probably just sank coz it doesn't make economic sense to manufacture clothes in kenya now. That is you argument. My argument is that Moi university should have invested in areas where we have comparative advantage...like KU is doing..opening hotels, morgues & funeral homes, hospitals,shopping malls and such areas of the economy where an investor coming in here would invest in.
Our manufacturing sector is growing at 3% - why would investor pump money in there - while retail, real estate, financial and construction has been growing at double digit the last decade. It doesn't make economic sense. And it will only make economic sense when we deal with fundamentals stunting that sector - labour/union,rail, road, ports, power and whole supply chain.
In that case, you shouldn't have trouble finding a few tonnes to support your "sense"---such as the "many examples of countries that have moved to developed world by focusing solely in services" and how Kenya will follow that path but then again (after we chase you around on the facts) it will be the rare exception, etc. Put up a few from tonnes that support such, and we can then discuss them.
Oh, and also comment on the bits above about Bangladesh (your example), Moi University, textiles, and the kula nyama there. Put up a bit of the "tonnes of research papers and articles supporting all viewpoints".
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I have given you example of countries that became developed through service sector and all I have heard is that they were small. I don't know how small. Kenya small? or China small? or US small? Sychelles big or Singapor big?
Actually if you have been reading, you should have noted that many the objections to your examples (Estonia and Mauritius) were about more than just size. Faced with the facts on those, you changed from how Kenya will follow the "many examples of countries that have moved to developed word by focusing solely on services" to how Kenya will now be the "rare exception". It's all up there.
On size: Seychelles is a country of 97,000 people. That is an example of "small". Very small. Too small to be used as any sort of model for a country like Kenya.
As for Moi university futile attempt to jumpstart textile manufacturing and try copy Bangladesh - I am not suprised they didn't go anywhere.
Let's separate the two things:
(1) Since you brought up Bangladesh, it was pointed out to you that according to GoK itself, Kenya cannot match that country in textiles, even though the latter has higher costs. Why is that?
(2) the Moi university involvement simply shows how clueless the government is in such matters and also, again, exposes the kula nyama approach.
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I don't need to quote any country when our GDP is growing at 6%! and we are already low middle income country; and if we grew at same rate the next 10yrs; our GDP will 3-4 times now; 210-280B; or about size of South Africa. Kenya is already a rare exception if go by m-pesa, the well diversified and sophisticated service driven economy. In the next few years I believe we would have gotten everything needed to leapfrog. This was the hard part...but I feel by 2022...we will have the infrastructure, the population and the stability to quickly scale the development heights...move from 1,500USd per capita now..to 10,000 per capita.
I have given you example of countries that became developed through service sector and all I have heard is that they were small. I don't know how small. Kenya small? or China small? or US small? Sychelles big or Singapor big?
Actually if you have been reading, you should have noted that many the objections to your examples (Estonia and Mauritius) were about more than just size. Faced with the facts on those, you changed from how Kenya will follow the "many examples of countries that have moved to developed word by focusing solely on services" to how Kenya will now be the "rare exception". It's all up there.
On size: Seychelles is a country of 97,000 people. That is an example of "small". Very small. Too small to be used as any sort of model for a country like Kenya.
As for Moi university futile attempt to jumpstart textile manufacturing and try copy Bangladesh - I am not suprised they didn't go anywhere.
Let's separate the two things:
(1) Since you brought up Bangladesh, it was pointed out to you that according to GoK itself, Kenya cannot match that country in textiles, even though the latter has higher costs. Why is that?
(2) the Moi university involvement simply shows how clueless the government is in such matters and also, again, exposes the kula nyama approach.