Kenya should invest in the growth of the agriculture and manufacturing sectors to broaden job creation and raise revenue performance, economists at global lender Citi say.
The two sectors, which account for about 35 percent of the country’s GDP, have been lagging others in growth in recent years, resulting in an economy that is producing good headline growth numbers without a trickle-down effect in terms of job creation.
Citi chief economist for Africa David Cowan on Monday said the government ought to take the lead by outlining a viable road map for strengthening the two sectors, largely through policy and enabling investments.
“By empowering agriculture and manufacturing, the jobs created will feed into the other sectors. These two sectors should ideally be growing at well over five percent,” said Mr Cowan.
In the first and second quarters of this year, agriculture sector grew by 5.3 percent and 4.1 percent respectively, lower than headline growth rates of 5.6 percent in each quarter.
Manufacturing growth stood at 3.2 percent and 4.2 percent in the first and second quarter respectively.
The two sectors have a large multiplier effect in terms of job creation across a long value chain. These include farmers, input sellers, transporters, marketers, factory workers and retailers.
Creating jobs will help the country expand its tax base, Mr Cowan said, which will in turn partly address the growing fiscal deficit, which he highlighted as a major concern for the economy.
The Treasury has been planning to cut the deficit but has found the going difficult, owing to the political sliperliness of cutting expenditure.
At the same time, revenue growth has failed to keep up with a growing GDP and expenditure, forcing the country to accelerate its borrowing and raising concerns that public debt could soon become unsustainable. The recently issued supplementary budget revealed increased spending by 2.8 percent to Sh3.13 trillion in its 2019/20 fiscal year.
At the same time, the government is lagging behind its domestic revenue target. Tax revenue was Sh60.2 billion below target in the three months to September, while internal revenues from items like fines, payments for passports and marriage fees were below target by Sh24.4 billion.
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