Kenyan economy contracts 0.3% in 2020 amid Covid-19 crisis

The Kenyan economy has been facing a turbulent time, with the gross domestic product contracting by 0.3 percent in 2020 as compared to a 5 percent growth in 2019, according to the Kenya National Bureau of Statistics Economic Survey 2021. Victor Otieno, the Managing Director of VFA Consult, delved into the details of the performance of various key sectors and the implication on small and medium enterprises (SMEs) in an interview with CNBC Africa. The interview shed light on the significant changes that have taken place, including the impact of revaluation and the shifting landscape of sectors like agriculture, manufacturing, and wholesale retail trade. One of the key takeaways from the interview was the importance of revaluation in understanding the true economic status of the country. The timely revaluation process revealed a redistribution of economic activities, with agriculture's contribution to GDP decreasing from an estimated 30% to around 17%. This shift highlighted the need for a deeper analysis to identify where the value previously generated by agriculture had been redirected. Otieno speculated that the value might have transitioned to the Information and Communication Technology (ICT) sector, emphasizing the need to scrutinize various sectors to uncover opportunities for growth and development, particularly for SMEs. Furthermore, the performance of sectors such as wholesale retail trade raised concerns, as it was notably absent from the list of top performers in 2020, unlike in 2019. This decline was attributed to the impact of the COVID-19 pandemic, which significantly affected SMEs operating in this sector. The absence of wholesale retail trade from the list of top performers underscored the challenges faced by SMEs in the wake of the global health crisis, indicating a shift in the sectors driving economic growth in the country. The interview also highlighted the declining trend in the manufacturing sector, with its contribution to GDP decreasing from 18.5% in 2010 to 16.2% in 2019. While the government had aimed to increase the manufacturing sector's contribution to 15% of GDP, the sector continued to underperform, raising questions about the effectiveness of policy interventions. Otieno emphasized the need for coherent and supportive policies to boost the manufacturing sector and drive socio-economic development effectively. Despite the challenges faced by key sectors, there remains a glimmer of hope for the Kenyan economy, with a projected growth of 6 percent in 2021, largely driven by the manufacturing sector. However, concerns were raised about the potential impact of external factors such as drought, declared a national disaster by the government, on the agriculture sector, which serves as a crucial input for manufacturing activities. The interview underscored the need for strategic policy measures and coordinated efforts to navigate the complexities of the current economic landscape and propel sustainable growth for the country.