Eastern Africa, part of sub-Saharan Africa, comprises two traditionally recognized regions: East Africa, made up of Kenya, Tanzania, and Uganda; and the Horn of Africa, made up of Somalia, Djibouti, Eritrea, and Ethiopia. While other regions have successfully used their integration mechanisms to improve their economic welfare, Africa lags behind with respect to GDP growth, per capita income, capital inflows, and general living standards. The challenges and complexities of promoting effective regional cooperation and integration are not unique to Africa, however. The deadlines to implement certain provisions of the Customs Union, Common Market, Monetary Union, and Political Federation have largely been missed, and even the implementation of the Customs Union and the Common Market is facing challenges of monumental proportions. Besides, the Customs Union was established in 2005 and the Common Market in 2010, while the Monetary Union and Political Federation remain open in the sense that, despite long talks and negotiations, they are still unfinished. It is also characteristic that the EAC does not speak with one voice, and the relationship between partner states may be described as asymmetric. Among member states of the EAC, the free mobility of skilled labor has not been effectively sustained. Critical steps, including cross-border movement of capital, free movement of labor, and the rights of establishment and residence, are yet to be fully realized.
Though the value of EAC exports has increased significantly in recent years (growing from $11.5 billion in 2010 to $16.7 billion in 2015), intra-EAC trade as a share of the bloc’s combined total exports, though significantly higher than the continental average, has in fact stagnated, falling from 20.5% in 2010 to c. 20% in 2015. Indeed, as the economies within the bloc grow, climbing from a combined GDP of $80 billion in 2010 to $146 billion by 2016, they appear to be trading slightly less with each other in relative terms, which is concerning given the bloc’s objective of reaching an intra-EAC export share of 25% by 2025. Kenya also has some geographic advantages. It has an extensive coastline on the Indian Ocean, and research suggests that landlocked countries have worse economic performance. Countries with a coast also find it easier to stay in touch with the rest of the world, and Kenya has relatively easy access to China and India, large markets, and sources of capital. In the current geopolitical climate, East Africa is attracting more interest from more sources than most of West Africa.
What makes Kenya significant?
Historically, Kenya has not been a robust diplomatic or political force on the continent. It was not a significant player in the establishment of key organs such as the Organization of African Unity (OAU), nor were its leaders especially influential internationally. Once a British colony, Kenya has rapidly risen since it achieved independence in the 1960s to become one of the key players within the region of East and Sub-Saharan Africa. Its foreign policy has especially propelled its growth as it has strategically transformed its traditional donor-recipient position to a more dynamic approach focused on bilateral and multilateral relations with several international actors. The nation’s strategic location makes it extremely desirable as a foreign investment destination. Thus, Kenya has widened its horizons as well as its potential by pursuing diversification in partnerships. Through the years, they have increasingly fostered South-South cooperation with China and Russia while also maintaining their pre-existing relationships with other powers such as the United Kingdom and the United States. As such, the rising star of East Africa increasingly acts as a shining example for the African continent, other developing countries, and increasingly multipolar international relations in promoting regional integration, dynamism, cooperation, and fostering mutually beneficial economic ties.
1. Economy: As it stands now, according to experts, Kenya is the dominant economy in the East African Community (EAC) and the primary source of foreign direct investment (FDI) for some of the countries of the Community. In recent years, Kenya has made major progress in financial deepening and financial inclusion. Increasingly, Kenya has become a center of innovation, especially in mobile phone-based financial services, whose growth and employment opportunities have ignited economic growth in the economy. Kenya has also been an important player in the horticulture export market. The country has a youthful population and is well positioned to reap the population dividend. In addition, the country has recently discovered oil, and it is likely to be an oil exporter in the near future and will join Uganda and South Sudan. But even without oil discovery, the Kenyan economy stands at a very strategic location in the Eastern Africa region. It serves five landlocked countries that are relatively resource-rich (Ethiopia, South Sudan, Uganda, Rwanda, and Burundi). So, its comparative advantage lies in improving its port facilities, road and railway networks, and transit airports as trade routes for these five countries.
Still, real GDP growth slowed to 5.5% in 2022 from 7.5% in 2021, attributable to the drought, increased commodity prices, and tight global financial conditions. Growth was driven on the supply side by services and on the demand side by household consumption. Inflation rose to 7.6% from 6.1% in 2021, driven by food and energy inflation. Inflation was moderated by subsidies, raising the policy rate to 8.25% from 7% in 2021. The fiscal deficit narrowed to 6.3% of GDP from 8.2% in 2021 due to improved revenue collection and adherence to the International Monetary Fund-supported fiscal consolation path. Public debt rose to 70% of GDP from 68% in 2021, driven by higher interest payments and exchange rate depreciation. The current account deficit widened to 6.0% of GDP in 2022 from 5.5% in 2021, driven by the lower trade deficit. It was financed by drawing down foreign exchange reserves, which fell to $7.42 billion (4.2 months of import cover) at end-2022 from $9.5 billion (5.8 months) at end-2021. The Kenyan shilling depreciated to 123.3 per US dollar at the end of 2022, up from 110.2 at the end of 2021. The capital adequacy ratio of 18.9% and the liquidity ratio of 55% were higher than the respective targets of 14.5% and 20%.
Moreover, the recovery of agriculture has led to improvements in food supply, and coupled with monetary policy tightening, it has helped reduce inflationary pressures. In 2023, tourism continued to expand, credit to the private sector improved, and manufacturing activity is expected to improve from the anticipated growth in the agro-processing sector. In addition to aligning the country’s long-term development agenda with Kenya’s Vision 2030, which aims to transform Kenya into a competitive and prosperous country with a high quality of life, the government’s bottom-up economic model prioritizes agriculture, healthcare, affordable housing, micro and small enterprises, and the digital and creative economy.
2. Security: Without doubt, there are specific politico-security strategic issues regarding the Horn that are directly related to Kenya and that shape Kenya’s foreign policy orientation. The Horn is synonymous with domestic and interstate instability. This state of affairs has a direct impact on Kenya’s foreign policy calculations. The instability in Somalia, Ethiopia (up to 1991), and South Sudan, with consequences for her security, has been a source of concern in Kenya. The consequences of refugees pouring into Kenya from Somalia, South Sudan, and Ethiopia continue to be a major security challenge in Kenya. With the advent of terrorism in the Horn of Africa associated to a greater extent with the refugee issue, Kenya became exasperated and began viewing them as a security challenge. The expert’s argument regarding the changing status of refugees seems to reinforce the fear that the Kenyan government has been having regarding the place of refugees in her national security calculations.
Kenya’s stability is vital for the entire Horn of Africa. The country remains East Africa’s largest and most important business, financial, and transportation hub, with 80% of the region’s trade flowing through the Mombasa Port. As such, Kenya is the first line of defense against terrorist threats, including Al-Qaeda offshoots like Al-Shabab. Part of solidifying the country as a thriving environment for trade and investment will be the fight against terrorist sects and cross-border management, in Somalia in particular. The Kenya-Somalia border represents a significant security issue, but with each country’s new president comes an opportunity for regional cooperation. Since 2011, the Kenyan military has been fighting the al-Shabab Islamist group in neighboring Somalia. A US military base located in Kenya’s coastal county of Lamu has been the backbone of those counterinsurgency operations. Similarly, Kenya is also currently overseeing a peace deal that ended Ethiopia’s two-year civil war in the northern Tigray region. President William Samoei Ruto has also been mediating among countries in the Great Lakes region, deeply divided by the chronic rebel insurgency in eastern DR Congo. Of late, Washington pledged $200 million (£157 million) to Nairobi for the UN-backed Haiti mission, drawing confidence from Kenya’s long history of supporting regional peace initiatives with relative success.
3. Technology: “Silicon Savannah,” Kenya, has seen its Information and Communications Technology (ICT) sector grow an average of 10.8% annually since 2016, becoming a significant source of economic development and job creation with spillover effects in almost every sector of the economy. Its culture of innovation is strong and growing. The fact that the world-leading mobile money system, M-PESA, was created in Kenya is not an accident. M-PESA and technology in general have seeped into the fabric of life in Kenya like almost nowhere else in Africa. While financial inclusion in Kenya was at just 26% in 2006, today 83% of the population has access to at least basic financial services. Besides simply becoming exports, these innovations have become models for other African countries. Such innovations give Kenya the potential to widen public access to myriad services and leapfrog traditional phases of development and industrialization in a way few African countries could aspire to.
In another groundbreaking achievement, Kenya launched its first satellite, Taifa-1. This initiative aimed to strengthen the country’s space capabilities and improve communication networks, particularly in remote areas. The Taifa-1 satellite will enhance internet connectivity, telecommunication services, and disaster management capabilities, further bridging the digital divide and empowering communities with access to vital resources. Similarly, Kenya’s national budget allocations for FY2022–2023 have seen the government set aside $132 million for ICT initiatives. Specific allocations included: $5.26 million for government shared services; $76 million to fast-track the development of Konza Technopolis/Smart City; $22.9 million for the last mile connectivity network; $10 million for maintaining and rehabilitating the national optic-fiber backbone NOFBI phase II expansion cable; $11.8 million for the installation and commissioning of the Eldoret-Nadapal fiber optic cable; and $2.6 million for the digital literacy program and ICT integration in secondary schools.
Bracing Kenya’s Strategic Diplomatic Alliances
Underlying Kenya’s peace and security diplomacy is the recognition of peace and stability as necessary pre-conditions for development and prosperity. Linked to this is Kenya’s conviction that its own stability and economic wellbeing are dependent on the stability of the sub-region, Africa, and the rest of the world. Dr. William Samoei Ruto was sworn in on September 13, 2022, after winning the presidential election. President Ruto made an official visit to Berlin, the Federal Republic of Germany, on November 20, 2023, to attend the G20 Compact with Africa (CWA) Conference. The President was invited to be a panelist on “Fostering Local Value Chains and Investments in Africa: The Role of the German Private Sector” and also participated in two working sessions at the Chancellery on “Strengthening Economic Co-operation and Promoting Private Sector Investment” and “Intensified Cooperation in the Energy Sector.” Discussions between Dr. William Ruto and Olaf Scholz centered on strengthening relations, the G20 Compact with Africa (CWA), trade and investment, green energy and sustainable development, labor mobility, technology, and peace and security.
Similarly, Ruto met with Emmanuel Macron, President of the French Republic, on October 21, 2023. Discussions centered on investment in infrastructure and energy, including railway development and the BRT system, regional peace and security, particularly in the Democratic Republic of the Congo (DRC) and Sudan, and cooperation in combating climate change. Recently, United States President Joe Biden has pledged to designate Kenya as the country’s first “major non-NATO ally” (MNNA) in sub-Saharan Africa during a Kenyan President William Ruto state visit to Washington, DC, to deepen ties between the two nations. But relations with other African allies are under strain as strategic rivals, including Russia and China, challenge traditional areas of Western influence. Analysts suspect the state visit is partly meant to compensate for the fact that Mr. Biden has failed to keep his own promise to visit Africa. The significant gains made during the visit totaled an impressive Sh1 trillion. Other key achievements resulting from the visit include securing Sh3.2 billion for computer literacy initiatives in Kenya’s ICT sector. In addition, Kenya’s official statement noted the generous donation of 16 helicopters, which will significantly bolster the country’s capacity to respond to security challenges and natural disasters such as floods. President William Ruto’s visit to the United States carries immense significance.
Beyond transactional diplomacy
Kenya’s location astride the volatile Horn of Africa has complicated its security, thus influencing its foreign policy behavior. It is also crucial to acknowledge that while Kenya grapples with systemic challenges such as corruption and governance issues, these hurdles do not overshadow the abundance of prospects at hand. Kenya’s involvement in the United Nations-backed intervention in Haiti and its condemnation of Russia’s invasion of Ukraine serve as evidence of this more pro-Western alignment, experts elucidate. Adding that Kenya is ultimately pragmatic in its approach and plans to maintain “strong commercial relations with China” and is open to other partnerships while also solidifying its relations with the US. Observers say the power competition in East Africa is a challenge to preventing peace and stability and that countries should work together to strengthen multilateral cooperation for regional peace and stability.
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This article expresses the views and opinions of the author and does not necessarily reflect the views of Qiraat Africa and its editors.
