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In conjunction with EY, OBG explores the taxation system, examining Kenya’s investor-friendly environment. OBG talks to Gitahi Gachahi, CEO, EY Eastern Africa, on the benefits of a regional Customs union.

Following decades of stagnation in basic health care indicators, Kenya’s health sector is slowly picking up. Health care spending however remains low, while key indicators such as maternal mortality have stayed high for a decade. Nonetheless, recent reforms have painted a brighter picture for health care in Kenya. President Uhuru Kenyatta’s goal to deliver universal health care has seen the National Hospital Insurance Fund (NHIF) significantly expand its activities and coverage in the last year, raising hopes of coverage expansion for low-income people. Meanwhile, over the past decade, intensive attention and investment have been directed at Kenya’s education sector as the government works toward industrialisation under the Vision 2030 national development plan. The introduction of universal primary education and the abolition of secondary school fees have created a more inclusive system, improving a number of basic indicators. A sharper focus on technical, industrial, vocational education and training (TIVET) activities will bolster employment outcomes, and new emphasis on ICT uptake will broaden access and enhance skills development. This chapter contains interviews with James Macharia, Cabinet Secretary, Ministry of Health; Mabel Imbuga, Vice-Chancellor, Jomo Kenyatta University of Agriculture and Technology.

Kenya has long been a popular tourist destination and the sector continues to be a critical industry for the country, although it has taken a number of serious knocks recently amid insecurity and travel advisories issued by several Western nations. Tourism directly accounted for 4.8% of GDP in 2013, or $2.09bn, with a total contribution to GDP of 12.1%, or $5.28bn. These contributions are forecast to rise by 2.9% and 3.1%, respectively, in 2014. The sector directly supported 226,500 jobs – 4.1% of total employment – in 2013. Tourism’s total contribution to employment was 10.6%, creating 589,500 jobs. While it is unlikely that international tourists from traditional markets will return to 2011 levels until confidence in security increases, the sector’s marketing efforts should replace some traffic. Kenyans reliant on tourism are likely to suffer in the short term, but a transition to business travel and domestic tourism may mitigate these external shocks. This chapter contains interviews with Phyllis Kandie, Cabinet Secretary, Ministry of East African Affairs, Commerce and Tourism (MoEAACT); and Martin Dunford, Chairman, Tamarind Group.

As the country’s largest employer and contributor to foreign exchange, agriculture is a critical pillar of Kenya’s society and economy, and the sector has grown steadily in recent years, despite facing a host of challenges. Although staple crops and subsistence farming are critical to maintaining food security, Kenya is also the world’s largest exporter of black tea, and the country’s horticulture and floriculture segments have seen rapid expansion in international markets. Sector objectives in the president’s 2013-17 manifesto include introducing affordable state loans to subsidise fertiliser and equipment, establishing a viable national irrigation scheme to cover 1m acres of land, and doubling and diversifying food reserves from 22% to 40% of annual consumption. The sector has shown promising growth, with far-reaching government development strategies expected to see production and output improve in the coming years. This chapter contains interviews with Moses Changwony, Managing Director, Sasini Tea & Coffee; and Jane Ngige, CEO, Kenya Flower Council.

Industry in Kenya encompasses manufacturing, construction, and mining and quarrying. Combined, these sectors accounted for 14% of GDP between 2009 and 2012. Policy is being guided by the Vision 2030 national development roadmap (V2030), the National Industrialisation Policy Framework 2012-30 (NIPF) and the Second Medium-Term Development Plan 2013-17 (MTDP2), in tandem with the East African Community Industrialisation Policy and Strategy 2012-32. Objectives outlined in V2030 and the NIPF will require improved productivity, market development, infrastructure strengthening and diversification into high value-added sectors. In retail, home-grown businesses form a significant proportion of Kenya’s modern retail sector. Competition is tight and the informal market continues to play a big role, but the sector is dynamic. Penetration of formal retail establishments remains low, estimated at 15-20% of the sector, and the market is highly fractured, particularly outside of the main urban centres, but devolution should encourage the expansion of modern retail space. This chapter contains interviews with Adan Mohamed, Cabinet Secretary, Ministry of Industrialisation and Enterprise Development; Manu Chandaria, Chairman, Comcraft Group; Betty Maina, CEO, Kenya Association of Manufacturers (KAM); Charles Ireland, Group Managing Director & CEO, East African Breweries.

The telecommunications sector in Kenya is one of the more dynamic in Africa, having garnered recognition in particular for its success in rolling out mobile money platforms and value-added services, and benefitting in a broader sense from the government’s effort to increase the role of telecoms and ICT in the country’s overall development. Wireless connectivity has acted as a leapfrog technology, enabling Kenyans to skip fixed-line connections and transition directly to mobile phones. An aggressive approach to building infrastructure has yielded significant benefits for Kenya, bolstered by growth in mobile money platforms, which has helped encourage start-ups and expand digital value-added services. The country’s Connected Kenya 2017 master plan for ICT and broadband development clarifies its step-by-step vision for growth and its needs for foreign investment along the way. The government’s determination to extend broadband access to all Kenyans is likely to reinforce the burgeoning innovation culture that has taken root and provides for a promising medium-term outlook. This chapter contains interviews with Fred Matiang’i, Cabinet Secretary, Ministry of Information, Communications and Technology; and Bob Collymore, CEO, Safaricom.