Transcript Borko Handjiski_SET Nairobi workshop

Kenya as a services hub
The role of services in economic
transformation
Borko Handjiski
Senior Economist, World Bank
SET workshop
28th April 2015
High contribution of services in Kenya is not
atypical, but the weak growth in agriculture and
manufacturing is
Sectoral contribution to growth in Kenya (2006-13)
Sectoral contribution to growth in SSA (2002-12)
Agriculture
15%
Agriculture
16%
Industry
22%
Industry
22%
Services
62%
Services
63%
Agriculture
Industry
Services
Agriculture
Industry
Services
Kenya’s growth in agriculture and industry has falls
behind fast-growing economies in Africa and
worldwide
Annual average GDP growth (2003-12)
9
7
5
3
1
-1
High growth economies
Agriculture
SSA peers
Industry
Rest of the world peers
Services
High growth economies: China, Thailand, and Indonesia (during 1980s)
SSA peers: Uganda, Tanzania, Burkina Faso, Ghana, and Senegal
Rest of the world peers: Bangladesh, Cambodia, India, Vietnam, and Pakistan
Kenya
Not Defined
Some parts of Kenya’s service economy have
leapfrogged…
•
•
•
•
Telecommunications and mobile penetration
Mobile banking (M-Pesa)
Foreign bank presence and local banks going regional
Kenya Airways – a key player on the continent
… but flattening of growth is not yet in sight
Aviation sector (and tourism) trails behind the
most successful African countries
R E V E NU E I N 2 0 1 3 ( U S $ B I L L I O N )
EgyptAir
3
SAA
2.3
Ethiopian A.
2.3
Kenya A.
1.1
0
0.5
1
1.5
2
2.5
3
3.5
Mobile penetration is high, but can grow further,
in particular mobile internet
M O B I L E S U B S C R I P T I O N S P E R 1 0 0 I N H A B I TA N T S ( 2 0 1 3 )
Botswana
South Africa
Mauritius
Egypt
Ghana
Côte d'Ivoire
Senegal
Nigeria
Kenya
0
20
40
60
80
100
120
140
160
180
Kenya’s banking sector is thriving, and there is
further scope for growth
P R I VAT E S E C T O R C R E D I T ( A S % O F G D P )
South Africa
Vietnam
Mauritius
Egypt
Côte d'Ivoire
Senegal
Kenya
Nigeria
Botswana
Cameroon
Burkina Faso
0
10
20
30
40
50
60
70
Other
2009
Public
administration
3,000
Education
Financial
services
Communications
Transport
Trade, hotels,
and food
services
Construction
Electricity, water,
and gas
Manufacturing
Mining
Agriculture
number of workers (in 1000's)
Productivity and output growth come from
modern services…
… but these sectors employ only few works and do not add many
jobs
7,000
Employment by Sectors
6,000
5,000
4,000
2013
2,000
1,000
0
In Kenya, services pull the rest of the economy,
and not vice versa
20
40
60
Value-added, as % of total exports (in %)
0
• In the fastest
growing
economies,
services are pulled
by industry
(forward linkages),
but in Kenya
services are more
of a ‘growth oasis’
Kenya
SSA peers
Direct
Non-African
Total
High-growth
Questions for policy makers…
• Can modern services alleviate poverty?
• Are horizontal or sectoral measures needed to
accelerate growth?
• Is there potential to grow manufacturing
which in turn would boost services as well?