Regional trade center
Kenya is a country in East Africa located on the coast of the Indian Ocean with a population of 54 million. After gaining independence from the United Kingdom in 1963, a presidential republic system was introduced. Kenya is a regional trade center owing to its strategic location, and the coast with the port of Mombasa has remained an important hub of trade between Africa, the Arabian Peninsula, and India for centuries. Kenya is a member of the British Commonwealth and a crucial partner of the European Union in Africa.
Kenya is a lower-middle-income economy. In 2022, Kenya’s GDP was $113.4 billion ($2099 per capita). In the GDP structure, industry accounts for 17.2%, services for 55.1%, and agriculture for 21.2%. As for the business environment, micro, small, and medium-sized enterprises (7.4 million) account for 98% of all businesses. Reforms undertaken over the past decade have delivered sustained economic growth and increased political stability. However, despite the developments, poverty rates and social inequality remain a considerable challenge.
Kenya is a politically stable country, although Islamic militants in neighboring Somalia pose a threat regionally. The economy is based on agriculture and services, mainly tourism. Kenyan authorities promote economic transformation while maintaining the prominent role of agriculture and pursue projects to develop transportation and housing infrastructure. Kenya has also committed to reducing greenhouse gas emissions by 32% by 2030.
Population of Kenya
Kenya is home to 54 million people. The largest ethnic groups are Kikuyu (17.1%), Luhya (14.3%), Kalendjin (13.4%), Luo (10.7%) and Kamba (9.8%). After independence, a wave of emigration to Western countries began. However, Kenya also shelters refugees from conflict-affected countries in the region (Somalis are the largest refugee group at 280,000 people). In turn, the largest religious groups are Christians (85.5%), mainly Protestants (33.4%) and Catholics (20.6%), and Muslims (10.9%).
The official languages are English and Swahili, while local languages are often spoken outside urban centers. Kenya’s population is very young. Those aged 65 or older currently account for 3.28% of the population, while those aged 15-64 account for 60.26%. The labor force numbers about 25 million people. 36.1% of Kenyans live below the poverty line. The urbanization rate is 29.5%. The major urban centers are the capital, Nairobi, with a population of 5.3 million, and Mombasa, which is home to 1.4 million people.
Economy of Kenya
Agriculture, along with services, is one of the main sectors of the Kenyan economy, employing about 40% of the population. Major crops include tea, vegetables (corn, potatoes, beans), flowers, and tobacco. Kenya also promotes wildlife conservation since it has 27 national parks and 34 nature reserves. Wildlife and monuments from the period of Arab and British influence make tourism the country’s second most profitable industry after agriculture.
Kenya has no significant mineral deposits, with the primary mineral resource being soda ash, whose deposits are concentrated at Lake Magadi. Limestone, gold, salt, niobium, fluorspar, and fossil fuels are also extracted, but mining revenues contribute little to the national budget. Kenya also has proven oil deposits in Turkana County. According to estimates, they contain at least 560 million barrels. However, the expansion of this sector requires significant financial investment.
Also contributing to the development of the Kenyan economy is the plan “Kenya Vision 2030” implemented by the authorities since 2008. Its goal is to strengthen the economy’s competitiveness and raise living standards. The plan is based on three pillars (economic, social, and political), entailing the expansion of education, technology, tourism, agriculture, trade, manufacturing, and financial services. Other key areas include health care, housing, and digitization.
International trade
Kenya is the 89th largest exporter and 74th largest importer in the world. Kenya’s exports are worth $6.7 billion, and imports are $19.6 billion. Kenya’s main trading partners are China, India, the United Arab Emirates, Saudi Arabia, the United States, Japan, Uganda, Malaysia, the Netherlands, Pakistan and the United Kingdom.
The group of most imported goods is oil and mineral fuels (26%), industrial machinery (6.7%), iron and steel (5.9%), cereals (5.7%), fats and oils (5.5%), electrical equipment (5.1%), motor vehicles and parts (5%), plastics (4.6%), pharmaceuticals (3.6%), paper (2.3%), fertilizers (2%), iron and steel articles (1.4%).
The most exported goods are coffee, tea and spices (26%), horticultural products (11%), ores (7%), clothing (6%), fruits and nuts (4.2%), fats and oils (4%), plastics (2.1%), inorganic chemicals (2%), tobacco (1.8%), iron and steel articles (1.6%), pharmaceuticals (1.6%), meat (1.5%), oil and mineral fuels (1.4%).
Trade agreements
Kenya, to date, has entered into 21 bilateral investment treaties (BITs) and 27 bilateral trade agreements. As a member state of the East African Community and the Common Market for Eastern and Southern Africa, Kenya is also party to trade and investment framework agreements (TIFAs) that the United States has signed with these organizations.
Kenya enjoys preferential access to the US market under the African Growth and Opportunity Act (AGOA), which will expire in 2025. Kenya is also a party to the Cotonou Agreement, an economic and political agreement concluded in 2000 between the European Union and 78 African, Caribbean, and Pacific countries. In July 2023, the parties decided to replace this arrangement with a partnership agreement.
Agreements with associations of states:
East African Community (EAC)
Common Market for Eastern and Southern Africa (COMESA)
African Union (AU)
African Continental Free Trade Area (AfCFTA)
European Union (EU)
Kenya-European Union relations
Kenya and the European Union share a broad political and economic partnership. The Union supports the Kenyan government with financial and humanitarian aid and security initiatives. EU missions have observed general elections four times: in 2002, 2007, 2013, and 2017. The EU also helps implement the “Kenya Vision 2030” in the areas of production, food security, health care, and housing, and the European Investment Bank provides loans for infrastructure development.
The European Union is a vital market for Kenyan exports (21.1% of the total). In 2022, Kenya exported €1.2 billion of agricultural products, including tea, coffee, flowers, peas and beans. The EU receives 70% of Kenya’s flower exports, supporting 500,000 jobs. In June 2023, the EU and Kenya completed negotiations on an Economic Partnership Agreement (EPA). It provides for full liberalization of the EU market for Kenyan products, increased investment, and actions for sustainable development.
Opportunities and challenges
Among the trade barriers with Kenya are tariffs. The average tariff is 25%, but sensitive goods such as sugar, sugar plants, and dairy, for example, are subject to higher duties. Bureaucratic overgrowth and corruption should also be considered as further impediments. In 2022, Kenya was ranked 123rd by Transparency International. In turn, the activity of Somali pirates and Islamic militias in the region poses a risk to shipping.
Kenya is open to foreign investment and international cooperation. The economic policies of the Kenyan government may be a clue for foreign entrepreneurs. Considerable opportunities exist in agriculture modernization and supply of agricultural equipment and fertilizers. Further opportunities are related to infrastructure development projects, especially in the tourism and housing sectors. Cooperation on Kenya’s ongoing electrification and renewable energy sources could also be profitable in the coming years.
According to the “Kenya Vision 2030” plan, the authorities envisage the growth of the oil and gas extraction, financial services, education, retail and wholesale, healthcare, and manufacturing sectors, providing additional opportunities for foreign entrepreneurs to expand. Other prospective areas include business process outsourcing, high-tech, ICT, and communications related to the digitization of the Kenyan economy.