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November 16, 2010 / Dan Whipple

Kenya gets ahead

Bicycle delivery

Bicycle delivery

In my last post, I was pretty harsh about Kenyan market theory. It’s unfair of me to emphasize only the negative, however, because there is much good about what’s happening here.

One thing that can’t fail to impress you is how hard everybody works. The people who have jobs are glad to have them, don’t want to lose them, and they do them well.

Another thing that strikes you here is that everybody is ambitious, wants to get ahead. It looks like naked and not-very-attractive greed at first, because it’s couched as “getting rich.” But they’re starting from such a deep hole, you can forgive them a little grasping. I eventually realized that people don’t necessarily want to be Bill Gates (although they don’t rule it out, of course). They want to be me. Or not necessarily even as rich as me. It’s taken me awhile to fully grasp it, but we are very wealthy here. Kenyans want to be middle class. Who can blame them?

Kenya’s middle class is growing. And it’s projected to continue to grow. Judging by the frantic pace of building in Nairobi, people here are confident about this. Officially, Kenya’s economy is expected to grow between 3.5 percent and seven percent annually over the next few years, depending on whose projections you read. There was a recent housing construction bond issued paying an 8.5 percent return. This at a time when a six-year U.S. CD is paying 1.65 percent.

Kenya has recently passed a new constitution—katiba mpya—which has created a tangible air of optimism about the nation’s future politically and economically. People from cab drivers to corporate CEOs claim to see progress. One cabbie told me that the roads were being improved by the current administration, something that was talked about but not actually done previously.

Since katiba mpya, top officials accused of corruption have been forced to step aside until the cases against them are resolved. This is most unusual in a country where corruption has been endemic, anti-corruption sloganeering voluble and actual enforcement non-existent. But several people have commented to me how surprised and gratified they are by this development. This feeds the hopefulness.

A few weeks ago, we attended a lecture about electric power production in Kenya. It is remarkable how much of it comes from renewable sources. Part of the reason for this is that Kenya has few fossil fuels, but the result is an electric power fuel mix—both present and planned—that would make an American environmentalist drool. Kenya has an aggressive program to take advantage of wind, hydrothermal and geothermal energy sources. These plans will make the nation more advanced in a field—alternative energy—that is growing globally. In addition, these sources—while not without their own problems—don’t add to the global carbon emissions. Electric power growth is expected to be substantial, but Kenya is planning on meeting much of it with renewable resources. They’re planning 1,420 megawatts of geothermal and wind electric power generation by 2018, along with 150 Mw of natural gas generation. They’re assessing another 1,000 megawatts of geothermal plants for the near future.

The World Bank recently issued a report that might be the most optimistic about the developing world that it’s ever done. Titled The Day After Tomorrow, the report found that most of the developing world, including Kenya, did not get caught up in the credit balloon and bust. While the developed world spends the next few years digging its way out of that mess, the developing nations are mostly in sound fiscal positions, are improving their governance, instituting sensible economic policies. They also have considerable room for technological and productivity growth and may be a major engine driving the world economy.

The World Bank editors found four “take-home messages.” They are:

1. While the rich world puts its house in order, and macroeconomics and finance get to a new consensus, developing countries will become a (perhaps, “the”) growth engine for the world. Faster technological learning and more South-South integration will fuel that engine.
2. Governments in developing countries will be better—they may even begin to earn the trust of their people.
3. A new, smarter generation of social policy will bring the end of poverty within reach, but inequality is another matter.
4. Staying with sensible policies, many regions of the developing world will break out of their “developing” status and will graduate into something akin to “newly developed.” Africa will eventually join that group. Others, like Eastern Europe, will have a legacy of problems to fix beforehand.

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    One Comment

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    1. Mike Weber / Feb 24 2011 12:08 am

      I especially like to hear about the economics of Kenya.

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