Moody’s Investors Service has predicted that Kenya’s economy will lose between $200 million and $250 million in tourism revenues this year, in the wake of the horrific shooting that took place a few days ago in a shopping mall in the country’s capital, Nairobi.
Tourism generates between 12% and 14% of Kenya’s GDP, and so the projected loss of revenue will no doubt create a dent in the country’s economic growth. Yet inside Kenya, the spirit is strong despite the shocking events of the past days, and the feeling of solidarity among Kenyans – young, old, rural, urban, rich and poor – has infused the country with a sense of great optimism and a will to carry on.
In a country marked by sharp ethnic divides and deep religious and tribal tension, where security is a day-to-day concern, “politicians from all sides came together to give public statements,” said Amolo Ng’weno, managing director at Digital Data Divide (DDD), a data services company in Nairobi. “We all feel that not only are we one people under threat, we are also one people working together to overcome this tragedy.”
The challenge now, Ng’weno said, will be to “harness this feeling over the longer term,” and to ensure that it can carry Kenya forward.
Investors such as Peter Thomas, founder and portfolio manager of Africa Capital Group, an investment firm focused exclusively on Africa, believe that there is a good chance that the positivity will carry forward and that the shooting will contribute towards the creation of a stronger, more unified and more peaceful Kenya.
“It’s never a good thing for a country to waste energy and resources fighting itself, and after this horrific and tragic event, there’s a certain solidarity among people that could potentially translate into more effective governance and a more positive future for Kenya,” Thomas said.
Among the many African nations, Kenya holds a special interest for investors such as Thomas, who set up African Capital Group to serve the growing interest in the continent from U.S. investors. Thomas, who formerly served as co-portfolio manager of the PIMCO Growth & Income Fund, spent several years in Ethiopia when his father, a U.S. diplomat, was posted there, and was so marked by the experience that Africa became his lifelong interest.
East Africa in general is the part of the continent that attracts the most investor interest and Kenya’s economy has been growing by 5.5% to 6%, Thomas said, adding he doesn’t believe the mall shootout will derail the country’s long-term growth story.
“Kenya is a young country with half the people are under the age of 24 and it is also a fairly wired country in terms of telecommunications, and two out of every three people have a cell phone,” he said. “People there are anxious and eager for a better economy, and I don’t think these attacks can directly impact the areas of greatest growth such as telecommunications and financials.”
On the natural resource side, Kenya’s future looks bright, based on the discovery of significant oil reserves in Turkana County in the north, where Kenya meets Ethiopia, South Sudan and Uganda. The region had been neglected by successive Kenya administrations, but is now in the limelight following the discovery last year. Kenya does not yet export oil, nor does it have its own domestic supply.
And recently, scientists discovered a gigantic underground water reserve in Kenya, whose contents could meet the country’s needs for the next 50 years or more. “Kenya has always been fertile land and an ideal place to grow tea and coffee, but it hasn’t been very well endowed in natural resources,” Thomas said. “Now, though, with the discoveries of oil and water, the future looks bright on that front.”
But being able to exploit these resources in a proper and equitable manner is going to be a huge challenge for Kenya that will make or break its future, and set it apart from other African nations that have struggled in this regard.
It’s also an issue that Kenyans including Ng’weno are deeply concerned about.
“I'm skeptical that minerals, including oil, will lead to the kind of direct foreign investment that will be of benefit to ordinary Kenyans,” Ng’weno said. “We are afraid of the sort of oil economy that has distorted production for countries such as Nigeria, or destabilized countries that should be rich, like The Congo. Water is a different story, because it promises increased agriculture output in currently arid regions, although even that needs to be managed carefully.”
Luckily, Kenya has quite a diversified economy, Ng’weno said, and successive governments have invested in education over many decades. Today, Kenya is the country with the fifth highest literacy rate in Africa.
As such, DDD is able build on a large population of young people with good education but limited economic opportunities to deliver world-class services to companies, the public sector and educational institutions around the world.
“In addition to our international clients, we also have strong domestic clientele, so we are optimistic that Kenyans can complement new opportunities in natural resource exploitation with a strong services sector, including companies like DDD,” Ng’weno said.