More money for enhanced energy

Profiling the effects of an investment climate geared towards multi-sectoral growth in East Africa

Kenya has posted an impressive 5.6 per cent growth rate in the 2010/11 financial year.

 

Key economic indicators show growth in almost all sectors with roads and housing propelling the nation's growth, creating over half a million jobs in the financial year ending in June 2011.

According to the latest Economic Survey Report of 2011, housing and roads created jobs at 11.6 per cent overtaking transport and communications at 6 per cent with wholesale, retail, restaurants and hotels posting 5.5 per cent.

Personal services made 4.6 per cent of the jobs, manufacturing registered a 4.4 per cent growth and demand for petroleum products rose by 80 per cent, despite oil prices. Other factors such as adequate rainfall, stable exchange rates and the passing of the new constitution also played a role.

“Agriculture which contracted by 2.6 per cent in 2009 recovered to 6.3 per cent in the 2010 due to adequate rains,” said Planning Minister Wycliffe Oparanya. The country benefited from improved prices of coffee and tea as well as horticulture produce as demand rose following improved prospects in the global economy. But with economic growth comes increased demand for power, which represents a challenge for a country thinly cushioned against power outages. The solution? Investment. The country has an installed capacity currently standing at 1,462MW against a peak demand of 1,188MW.

To boost power production for the next three years, the state has secured a $1.9bn from the local treasury and multi-lateral lenders to exploit coal, wind and geothermal sub-sectors. This is expected to generate 1,233MW out of the 1600MW expected to enter the national grid over the next three years.

About 402MW will be generated from geothermal wells, 531MW from coal and 300MW from wind. “This investment would enable the country to become selfsufficient in energy while reducing power costs which have constrained economic expansion,” said Mr. Patrick Nyoike, permanent secretary to the Minister of Energy.

The Kenya Association of Manufacturers (KAM) estimates that the high energy costs are accounting for up to two-fifths of the total production cost, which makes locally manufactured goods uncompetitive compared to those from other economies in the region. The long view, however, is a positive one and growth is expected to continue, despite global economic issues and the rising price of oil.

Mwangi Mumero

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