KARIBU MAISHANI

KARIBU MAISHANI

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Sunday, June 3, 2012

Kenya’s middle class is growing at a fast rate and ?

Sample Analysis
EXECUTIVE SUMMARY Growing middle class remain the core of future growth
Kenya’s middle class is growing at a fast rate and this growth is set to be the main engine and indicator of economic prosperity in the country during the forecast period. As Kenya emerges from an era of huge income disparity—the gap between the rich and the poor in Kenya has traditionally been among the highest in the world—the rise of the middle class is likely to bode well for the country’s economy. Kenya is a country where over 50% of the population lives below the UN threshold of poverty, subsisting on less than US$1 a day, and over 75% live on less than US$2 a day. Meanwhile, Kenya has a large population of wealthy urban professionals. The growth of the middle class will definitely boost business and the overall economy in Kenya during the forecast period. Rebounding Kenyan economy The Kenyan economy is on the rebound from the major shock it suffered during 2008 and 2009. The effects of post-election violence which hit the country in 2008 have been far reaching, with travel and tourism, the country’s leading source of foreign exchange, taking a direct hit due to adverse travel advisories. This situation changed in 2010 and it is estimated that 2011 will turn out to be the best year yet for travel and tourism in Kenya. Furthermore, with the global economy largely on the rebound, and the country by and large shielded from Europe’s sovereign debt crisis in many ways, although the country’s travel and tourism industry may feel the negative effects of its high exposure to the European debt crisis as the UK is Kenya’s leading source of inbound tourist arrivals, constituting 16% of total inbound arrivals in 2010. However, when all indicators and factors are taken into consideration, the Kenyan economy is in much better shape than it was 2-3 years ago. Soaring cost of living due to economic factors The cost of living in Kenya is rising, driven by the declining exchange value of the Kenyan shilling. The shilling has lost over 20% of its value against the all major world currencies since the beginning of 2011. This loss in exchange value is having a negative effect across the country, which is a net importer and depends largely on foreign currency. The currency shock has had an impact on the domestic price of fuel, which is now at KES117 per litre, the highest it has ever been, and this has had a far reaching impact on the cost of production, transport, manufacturing and everyday life. Recent drought conditions have also caused an increase in the cost of electricity as over 85% of the country’s electricity is generated in hydro-electric dams, with the electricity supply now having tripled in some areas of the country. This has made life very expensive in Kenya and many products, especially in packaged food, have risen dramatically in price, by as high as 30% in some cases. 2012 election to shape economics in the next year 2012 is an election year and is particularly significant because it is the first under the new constitution, promulgated in August 2010. The new constitution has completely changed Kenya’s political landscape, with new positions created and the governance structure shaken up considerably. Furthermore, the current president, Mwai Kibaki, is constitutionally required to step down, having already served two terms. The transition of power in the new dispensation is unprecedented and how the scenario will play out remains to be seen. Memories of 2008 are still fresh in people’s minds and the world will be watching keenly to see how events will unfold in Kenya during 2012 and 2013. Accelerating growth expected in the forecast period Forecast growth for retail tissue and hygiene is expected to outperform review period’s performance. The main factor will be the rising disposable income and development of modern retailers in Kenya that will make tissue and hygiene products more accessible and visible to the growing middle class. As a result, sanitary protection should be one of the best performers on the back of better awareness among the younger generations and increasing need for convenience.

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