NAIROBI, Kenya, Dec 2 – The telecommunications revolution that has been witnessed in the country in the last few years continues to receive accolades for not only transforming the financial sector but also its impact on economic growth.
A report released by the World Bank shows that without the tremendous growth of ICT which has outperformed all the other sectors in the last decade, Kenya’s economy would only have expanded by 2.8 percent since the 2000.
The World Bank’s Senior Economist for Kenya Jane Kiringai termed the telecoms revolution, particularly the mobile money transfer service as a ‘game changer’ for the economy.
“Mobile money is one of the greatest success stories of Kenya’s ICT revolution. But it is important to recognise that this was triggered by the liberalisation of the sector and without it Kenya’s growth would have dipped from 3.1 percent to 2.8 percent,” she said during the launch of the report titled ‘Kenya at the tipping point?’
The last five years have experienced an exponential growth in the mobile penetration estimated to close at 21 million by the end of 2010. This has in turn brought millions of Kenyans who were financially excluded into the formal sector.
As a result, bank accounts have also increased from 1.1 million in 2006 to the current 11 million while 70 percent of the country’s adult population has access to financial services compared to five percent during the same period.
Kenyans are expected to transfer Sh560 billion – which is 20 percent of the country’s Gross Domestic Product (GDP) – via their phones this year.
The existence of an optimal regulatory regime has also encouraged the development of new services and coupled with increased capacity from fibre optic cables have the potential to transform the country into a global hub of IT innovations.
The report also showed that the country is experiencing a new wave of robust and broad-based economic development, supported also by the growth in agriculture and manufacturing which have stagnated in the last three years.
“It was services (industry) that has been driving the economy but in 2010, we have begun seeing the three sectors growing in a very robust way,” Ms Kiringai who co-authored the report said, adding that it is also the first time that the country is growing above the average for sub Saharan Africa.
Other factors that have been cited as driving this positive momentum were a new Constitution, East African Community integration, strong macroeconomic management and investments in infrastructure.
These factors have compelled the Bank to adjust upwards its economic growth prospects for 2010 to 4.9 percent with Country Director Johannes Zutt saying the outlook for 2011 is even more positive.
“We project GDP growth at 5.3 percent (for 2011). Public sector investments in infrastructure will stimulate growth. Timely implementation of constitutional reforms would also bolster business confidence,” Mr Zutt forecasted.
This figure could even reach 6 percent if no internal or external shocks occurred. He therefore appealed to politicians to tone down their politicking which has been shown to affect the performance of the economy particularly during periods of electioneering.
Besides ensuring good governance, World Bank’s Chief Economist Shanta Devarajan advised that the government should also urgently address the problem of youth unemployment which has been impeding growth.
At the same time, the economist said these two problems together with infrastructure deficit were challenges that were facing many African countries and needed to be addressed to effectively place the continent as the next frontier for growth.
“Just like Kenya, Africa is at a tipping point. There has been a political support for economic growth and with this I believe that Africa is poised to embark on two decades of economic growth,” Mr Devarajan insisted.