SA v Kenya: Ease of doing business and GDP

Kenya has a positive story to tell potential investors: In the past 5 years Kenya has risen 80 places in the World Bank’s Ease of Doing Business Index, from 136th to 56th. 80 places??!!! That is a large chunk of the table right there. I would liken it to Usain Bolt taking the baton in the final leg of the school relay, blitzing the field from last place.

This is a clear demonstration of the Kenyan government’s commitment to attract and retain local and foreign investments in the country. It is also just a statistic which is a simplification of a far more complex reality.

Regular visits to the country in this period have shown me what this change means in real life – populations have boomed, infrastructure projects are going up all over the place, demographics are changing (Chinese takeaway anyone?) and general busy-ness (as opposed to business) and traffic in hubs such as Nairobi and Mombasa have become anything from manic to unbearable.

Contrast this to South Africa’s fortunes on the index – slipping from 43rd to 84th in the last five years. These years have been blighted by massive corruption scandals, theft, crime, strong and irrational unions, and macro economic factors conspiring against the growth in SA. Labelling as junk status was inevitable. Check the below charts for GDP per capita growth over the years in the 2 countries:

SA GDP / Capita

And here is Kenya’s:

You can see from the charts that South Africa is still a far richer place. In practice this means that life here is closer to a western standard of living. It is far less chaotic and ‘Jua Kali’ as it is in Kenya. Roads are smooth, phones and power lines are (largely) unbroken. Shops have everything you could desire. You could argue strongly that life is easier here.

Probably the biggest factor working against ease of doing business here in SA is government policy and the legacy of apartheid. It still looms so heavily over every government decision. Contrast this to Kenya where independence and colonial legacy is becoming less and less of an issue. Power lies with the local elites. Tribal politics trumps racial issues.

Chips and Cool Drinks. SA & Kenya.

I have lived in Africa for most of my life (9 / 38 years in Australia and Italy – the rest in Kenya and South Africa (SA)). In reading up on trade agreements, I have only just discovered there is a country on the continent called “Saharawi Arab Democratic Republic”. But I digress.

I remember as a kid we would visit my grandmother in SA from Kenya. These trips were really exciting. South African ‘Simba Chips’ and ‘Appletiser’ cool drinks were always the very first thing we bought at the airport as we landed in Johannesburg. In the 80’s and 90’s Kenya was a far more insular country than it is today. Trade was limited and the shops had little in the way of imported goods. In an effort to grow domestic capability, President Moi made my childhood bereft of things like Kelloggs cereals, Mars ice creams, or cool drinks in a can. SA had so much more in the shops. Being oblivious of all the drama related to Apartheid, I always thought SA was the golden land of plenty. To an extent I still feel that way.

Skipping ahead many years, after I finished studying in Australia the first job that became truly available to me was in Johannesburg. I took the consulting gig and found myself in the land of plenty having to work for money. This prospect was daunting, but at least they still made Simba Chips and Appletiser – This was a comfort for me on days when I realised just how little university had prepared me for real life.

Although I found it tough to move to Johannesburg for work and to start a new life, I had a strong belief in the potential and compatibility of Kenyans and South Africans. This was largely down to three things:

  • 1. My South African mother and Kenyan father were, and are, happily married. A model of regional diplomacy and trade in action.
  • 2. My father had successfully worked for a big South African company in Kenya. During this time all I saw were Kenyans and South Africans collaborating all over the place. Positive role models.
  • 3. Simba Chips and Appletisers were by now available in Kenyan shops. Successive presidents in Kenya had loosened the trade and imports into Kenya. The old products still retained their magic charm for me. They had come to Nairobi, just as I had come to Jozi.

That was 13 years ago. As I have understood SA and Kenya a little better over the years, it strikes me that the trade between the two countries could be improved upon. This is an understatement. We are talking about 2 of the most dynamic, important economies in Africa. Two landing pads for international businesses to arrive and work on the continent. There should be Kenyans all over SA and vice versa. We should be the USA and Canada of Africa. The UK and France of Sub-Sahara. Why then is trade so limited? The stats back up my gut feeling on the relationship:

Trade between South Africa and Kenya has been minimal when considering South Africa’s global trade. From a global perspective, Kenya is ranked 27th amongst South Africa’s export destinations accounting for just about 1% of South Africa’s total exports. In terms of imports, Kenya, does not feature even in the top 30 import suppliers to the South African market. However, when considering the African market, the Kenya is ranked 10th export destination for South Africa’s goods and is ranked 22nd most important import source from Africa.

1% of total exports?? 22nd most important source from Africa??

This is bonkers to me. So bonkers that it might become my life’s mission to chart this relationship and develop it where I can. Knowing Kenya and knowing South Africa, they each have SO much to offer each other.

I am off to a good start, having married a South African woman myself. Trade and Diplomacy in action 🙂