Reference no: EM133102618

Kenya

The Republic of Kenya, bordering the Indian Ocean, Somalia, and Tanzania in eastern Africa, has experienced a tumultuous history since gaining independence from the United Kingdom in 1963. Single-party rule from 1963 until 1992 led to government corruption and an abuse of presidential power. Despite multiparty participation in government in the 1990s and 2000s, tensions continue to rise. The results of the 2007 elections were heavily disputed, leading to violent protests. In an attempt to bring stability to the political situation in Kenya, the National Assembly drafted a new constitution, which was overwhelmingly approved by voters in a 2010 referendum. The new constitution adds significant checks and balances to executive power and transfers significant power from the federal government to 47 counties.67

Kenya is known for its biological and geographic diversity. The second highest mountain in Africa, Mount Kenya, sits near its southern border, and Lake Victoria is located on its western edge. With more than 48 million people, Kenya is experiencing rapid population growth. More than 40 percent of Kenyans are under the age of 15. Because of its relative stability and its location neighboring Somalia, Kenya is an attractive destination for hundreds of thousands of refugees. The Dadaab refugee site in eastern Kenya is one of the largest refugee complexes worldwide.68

Kenya is considered the economic hub of East Africa, averaging over 5 percent GDP growth for the last decade. The country boasts a growing entrepreneurial middle class, despite weak governance and high corruption. In 2018, Kenya's GDP stood at US$80 billion. One-third of Kenya's economy is dependent on the agricultural sector, which provides employment for about 75 percent of the country. For this reason, frequent droughts have caused significant hardship for many Kenyans. High rates of unemployment and poverty persist in the country, but an increasingly educated population has led to an inflow of investments by companies like Facebook and Google. Kenya should be well positioned to embrace opportunities in the technology sector as infrastructure continues to improve.69

Kenya still struggles with political challenges. Throughout 2017 and 2018, in response to a rise in acts of terror from Islamist group Al Shabaab, the Kenyan government implemented a larger police presence and curfews in the primarily Muslim coastal region of the country. Though that area had faced the brunt of the terrorist acts, regional leaders warned in May 2017 that parts of Kenya could be taken over completely by the group. Making matters worse, the presidential election of 2017 was disputed by challenger Ralia Odinga, who declared himself the "people's president" in an unofficial ceremony in Nairobi. The initial election results, in which President Uhuru Kenyatta won re-election with 54 percent of the popular vote, were nullified by the Supreme Court of Kenya, leading to increased uncertainty. New elections were held in October 2017. President Kenyatta was again victorious, though voter participation was significantly lower than in the original election.70,71

You Be the International Management Consultant

Kenya relies heavily on international financial institutions to finance its much needed infrastructure spending. Notably, Kenya has used funding from the World Bank to double its geothermal capacity, to add more than 2 million Kenyans to the electrical grid, to improve drainage in Mombasa, to construct a new terminal at Jomo Kenyatta International Airport in Nairobi, and to support road development. One country, in particular, that has spent considerable resources in Kenya is China. Significant funding for Kenya's railroad and telecommunications industries has been leveraged by Chinese creditors. Although most investments have been seen as a positive force that is helping drive Kenya's economic development, some fear that a new form of "empire building" is occurring. As of 2018, as much as two-thirds of Kenya's total external debt was held by Chinese companies.72,73

Questions

1. If you were a consultant for the World Bank, what issues concerning Kenya's development would you recommend it prioritize?

2. What international ramifications could China's investment in Kenya have?

3. Should the World Bank attempt to steer the Kenyan government away from investments with individual nations?