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IMPORTANCE OF STRUCTURAL
TRANSFORMATION IN KENYA’S
INVESTMENT AND TRADE AGENDA
– THE CASE FOR KWALE COUNTY
A paper presented by
Hon. Gervase B K Akhaabi,
LLB (Hons.) (Nbi); Dip. Phil.; PGD Trade Policy and Law (Dist.)
(Lund).
AT
THE INAUGRAL KWALE COUNTY INVESTMENT CONFERENCE
24th to 30th August, 2014
Introduction
The economic structure of a country refers to;
 the economic diversification;
 the variety of the export sectors and commodities.
Economic structure
 will determine the value of the produce;
 The price of the produce;
 the technological sophistication of the economy; and
 Ability to withstand shocks
Structural Transformation
• diversification of the economy; by
• re-allocating resources from low economic productive
activities to the more productive ones
• expansion of the production and export sectors and
commodities.
• modernization of small-holder agriculture
• integration into fast growing agri-business and agroindustries
• decline in the share of agriculture and increase of
manufacturing and services in GDP and employment.
• When focused on economic efficiency an economy’s ability
to trade and invest are increased and growth and
development will result
• Structural reforms come in different forms,
shapes and effects in different societies.
• However, they should have as primary objectives
of:a) Opening the market through trade reforms;
b) Lowering the cost of doing business;
c) Increasing production;
d) Stimulating growth and investments; and
e) Creating wealth and improving the people’s
wellbeing
Kenya’s Economic Structure
• Agricultural commodity production and export
(21% of GDP);
• narrow and low level manufacturing and
export (16%);
• services especially tourism, financial and
telecommunication (62.3%); and
• development assistance
Kenya: largest economy in the East Africanregion
 growing at about 4.7 %,
 low income devolping economy
 GDP the US$54 billion in 2014
 Steady growth - 1963 and 1973
 Decline – 1974 -1993
 Stagnation – 1994 – 2003
 Trade and investment catalytic in economic
development
Kenya’s economic structure base
 Trade and investment in agricultural production and
commodities
 Development assistance
 Services including financial telecommunication and
tourism
 Industrial production and manufacturing
 and better performance than many other African
countries in similar circumstances
Aspiration
• Middle-income economy
Vision 2030 - by 2030
International Monetary Fund (IMF) and the
World Bank (WB) – on the verge
Kenya and the Kwale County should both
focus on economic growth and development
Both economic structural and trade reforms
are mandatory
 Potential of County as Kenya transits to
middle-income economy.
 The economic structure and the resources in
Kwale County  How do these structures and resources help
the people of Kwale to make the transition.
 What reforms if any are required to facilitate
the transition.
Kwale County
• An agricultural commodity-dependent county
• Dominated by small-scale agriculture - County 98% low
agricultural potential; sparse and unpredictable rainfall
• dry and poor soils; high soil erosion
• Other than sugar cane no major cash crop
• Tourism – major employer challenged by insecurity
• Mining; and
• Manufacturing – sugar mills
• Land not registered or otherwise with issues
County Government
• Commodity-dependence – a factor for Africa’s
economic stagnation
• Constitution of Kenya, 2010
 Establishes a county government
 Devolution - right of the people to participate in
making decisions
 managing their own affairs and furthering their
development.
 Efficient and effective service delivery.
Articles 174 and 175 of the
Constitution
• Promotion of social and economic development;
and
• Guaranteeing the provision of proximate, easily
available services based upon set values and
principles.
• County governments to have reliable sources of
revenue to enable them to govern and deliver
services effectively
• Consultation and cooperation with national
government.
Under the Fourth Schedule of the
Constitution
• Agriculture, veterinary services, other than policy
- functions the county governments.
• trade, other than international trade and trade
policy in as far as it may form part of the National
economic policy - county governments.
• Two levels of government to ensure that Kenya
attains the middle-income status.
• Counties and their governments active and
critical participants in this transition.
Structural Transformation Kwale
County
• Address land ownership and tenure to facilitate
access to bank credit
• Improve agricultural production – facilitate access
to farm inputs and raise incomes from farming
• Where possible, use irrigation
• Address marketing by improving transport
infrastructure
• Establish agribusiness and encourage value
addition - industrialize
• Form and improve cooperatives
Conclusion and recommendations
• Transformation possible ifa) Both the national and county governments commit
themselves to develop infrastructure;
b) Prudently trade with and utilize the natural resources
for the benefit of the people
c) Transparent and accountable processes are used.
d) Both levels of government invest in education and
skills development and
Cont.
e) Both levels of government promote
improvement in agricultural productivity and
value addition.
f) Diversification and expansion of the sources
of economic growth and opportunity are
g) The Country encouraged to expand its market
hold by actively promoting and participating
in regional economic integration processes
• Structural reforms
Foster an environment that supports efficient
functioning of the market
Contribute to macroeconomic stability,
productivity and growth
Lead to higher real wages, higher standards of
living and more attractive returns to
investment