The World Bank has listed five economic sectors which it poses are likely to contribute to Kenya’s long-term economic growth and create more jobs.
In a report titled “Kenya Country Economic Memorandum - Seizing Kenya’s Services Momentum,” the World Bank highlighted five ways that the services sector, in particular, can help accelerate economic growth in the country.
First, according to the report, the services sector should shift to higher-value-added activities like Information Technology (IT), Financial, and Professional Services.
Despite such services contributing to 14% of Gross Domestic Product (GDP) and 19% to economic growth, only 2% of workers are gainfully employed in these sectors.
Thus, the Bretton Woods institution is calling for a greater focus on these areas and employment of a more skilled workforce to accelerate growth.
According to the World Bank, nurturing skilled talent in Science, Technology, Engineering, and Mathematics (STEM) courses will help develop this workforce.
The bank also points out that tapping Technical and Vocational Education and Training institutions (TVETs) is the best way to produce a skilled labour force.
In its report, World Bank suggested a better linkage between the service industry and other sectors like manufacturing.
For example, small-scale farmers who are major contributors to the agricultural sector could benefit from education by government extension officers on the latest methods of production and crop security.
Notably, only big firms in the country use software to automate services like production, tracking of movement of goods, and payment. Thus, more uptake of automated services by small and medium enterprises is encouraged.
Another proposal is adopting better methods to boost productivity in the services sector. While Kenya is leading in the technology front in Africa, the success is anchored by a few top firms, thus more entrants into the space would be an added benefit.
Kenya has lower labor productivity than Nigeria, Ghana, and South Africa. This is due to limited capital availability. The report proposes a shift from lower value-added sectors, such as personal and retail services, to higher value-added services that can compete in the global market.
In addition, according to the report, Kenya has high restrictions against services trade and investment.
For example, to establish a business in Kenya you go through two steps: registration and obtaining relevant licenses to operate. While registration of the business is easy and can be done online, obtaining the relevant licenses can be problematic.
This is because the licenses needed are many and different county governments have different requirements. A solution would be having a unified business permit that covers different areas like food, health, and fire safety. The tax policies should also be made clear and predictable.
Also, the elimination of barriers that hamper services like cross-border data flows will help enhance digital trade. This can be done by participating in a single regional data market for the East African Community.
Lastly, the report suggests using technology to further inclusivity in the services sector, allowing for more provision of services to the poor. This is achievable by expanding connectivity to disadvantaged areas and improving access to credit services.
