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INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Public Disclosure Authorized THE ECONOMY

KENYA Public Disclosure Authorized

July 10, 1964 Public Disclosure Authorized

Department of Operations Africa CURRENCY EQUIVALENTS

100 EA cents = 1 EA shilling = U.S. $0. 14 20 EA shillings = L 1 sterling = U. S. $2. 80 6 1 million sterling = U. S. $2. 8 million U.S. $1 = 7. 15 EA shillings U.S. $1 million = L 357, 143 TABLE OF CONTENTS

Page IIaps Charts Basic Data Suanary

I. BACKGROUND ...... a 1

Country and People ...... 1 Constitutional and Political Developments . . . . . 2

II. THE EC ONOMY ...... a o. . . . . o. * 5

Structure and Growth ...... Agriculture ...... 6 Forestry ...... Q ...... o . 11 Tourism and Wildlife ...... 12 YMining and Manufacturing . 12 Construction ...... 13 Electricity and Water ...... 13 Transportation . . . . 13 Government Services ...... 14 Foreign Trade and Payments *. .* . * .. . . 15 Capital Formation 0 . . . . . 0 ...... 17 Employment, Earnings and Prices ...... , . 18 Money and Credit a . . . . C . . 0 a a. . - 19 Public Finances . . . . ., a ...... 21

III. THE DEVELOPMEN4T PLAN ...... 23

IV. PROSPECTS AND CONCLUSIONS ...... 26

STATISTICAL APPENDIX Li /- c a i:

i4-

æ r> KENYA AGRICULTURAL AREAS AND TRANSPORT

C 5 ------. 4

E T H 1 O P l A.... .:

S O M A L l A

HoR T H E TE R H

u G Au D A o" EA 5 T E R N

To,

O A s T

a avar-....r...øso e.

m/NERALDE'PoSiTS AS SHOWNGz

J)NE1964 IBRU1366 KENYA MAIN COMMODITIES EXPORTED (PERCENTAGE OF TOTAL VALUE)

1954 1963

OTHER 24.8%

OTHER 26.9% COFFE COFFEE 28.1%

WATTLEE PYRETHRUIM LIVESTOCK PRODUCTS

8.4% TEA 10.3% SISAL 9.9% PRODUCTS TEA 13.0% 11.3%

TOTAL: f 20.3 MILLION TOTAL: L 43.8 MILLION

BALANCE OF EXTERNAL AND INTERTERRITORIAL TRADE (MILLIONS OFk) 80 80 NET IMPORTS

60-- 6 0

40 40

> EXPORTS TO COUNTRIES OTHER THAN UGANDA AND / TANGANYIKA 20 -F 20 / TRADE BALANCE WITH / UGANDA AND TANGANYIKA

0 I I I- _ _ _ _ 0 '46 '50 '54 '55 '56 '57 '58 '59 '60 '61 '62 '63

6/10/64 IBRD- Economic Deportment 2364 (R) KENYA SERVICE PAYMENTS ON EXTERNAL PUBLIC DEBT (MILLIONS OF DOLLARS) 60 I I I I I I 00

50___KENYA'S OWN DEBT PLUS 50 - -DEBT INCURRED FOR 50 KENYA'S OWN DEBT PLUS DEBT RAILWAYS AND HARBORS INCURRED FOR RAILWAYS AND HARBORS *. PLUS CONTINGENT DEBT SHARED 40- - - WITH UGANDA AND TANGANYIKA 40

30- 30

20-2

OWN DE BT 00 Il*...... --e* KEN YA' S

'46 '50 '53'55 '60 '65 '70 '75 '77 : ACTUAL PROJECTED >

WORLD PRICES OF MAJOR EXPORT COMMODITIES (DOLLARS PER 100 LBS.) (I PER LONG TON) 80 II200

COFFEE (MANIZALES) LEFT SCALE) %x(+--

WRGHT SCALE I~

20 50

0 '54 '55 '56 '57 '58 '59 '60 '61 '62 '63 *U.K.,annual overage prices at London auctions for East African tea. *'K'East Africa No.l, c.i.f. European parts.

6/10/64 18RD-Economic Department 2365 BASIC DATA

Area: 225,000 square miles - 583,000 square km. Population: Total (June 1963) 8.6 million Rate of Growth 3% (1948-62)

Total non-African population ' 270,000 Density of total population - 15 per square km.

Political Status: Independent since December 12, 1963 Member of Commonwealth

Membershio: Bank, IDA, IFC - February 3, 1964

Total GDP (as of 1963): I 260 million $ 728 million % of GDP from: mining and manufacturing 9.8% cash agriculture and livestock 20.% subsistence agriculture 25.65 Rate of growth of GDP - 1954-58 7.1% 1958-62 3.9%

Percentages of Monetary GDP (1963)

Gross investment 15% Gross savings 12% Exports (incl. East Africa) 34% Balance of payments c/a deficit (1962) 3% Taxation 18% Total money supply n.a.1)

Per Capita GDP (1962-63): $80 at present exchange rate

Currenc-: East African shillings Value in dcllars 0.14 Member of L area and the East African currency area.

Public Finances:

Latest budget as of 1963/64 (estimates): Current receipts Ts49.5 million Current expenditures TO0.5 million Current deficit -bl.0 million Total budget investment expenditure U14.7 million in U.S. $ equivalent Total external public debt (as of April 30, 1964): 173.7 Total annual debt service (1964): 12.4 Debt service ratio as % of total exports 10%

Balance of Payments (1963) in U.S. $ equivalent Total exports 173.6 Total imports 230.0 Net invisibles +15.1 Net current account balance - -13.4 Rate of growth in export value: 1954-62 9.8%

No data are.available on currency in circulation in individual countries of the East African currency area. Basic Data (continued)

External Assistance In U.S. $ equivalent 1954-60: grants 112 loans 46

Since 1960 (as of 1963):

Total made Total Total Source available Committed disbursed

United Kingdom n.a. n.a. 103.5 United States (June 163) 8.1 8.1 n.a. IBRD (April '64) 14.0 10.2 5.6 West Germany 14.0 14.0 10

I1F quota $25 million (undrawn as of June, 1964).

Bank/IDA/IFC Assistance

Purpose Date Amount

Bank loans African agriculture (256) May 27, 1960 $5.6 million Land Settlement (303) Nov. 29, 1961 $8.4 million IDA Credits - IFC investments SUMMARY

1. Kenya is an equatorial country the size of France on the East Coast of Africa, with a variety of climates and soils. Population and economic activity are concentrated at the coast and in the highlands. Agricultural land is the country's main asset and farming the dominant occupation for its nine million inhabitants, 97% of whom are Africans. Population growth is about 3% annually. In recent years, the African contribution to the monetary economy has been increasing rapidly, mainly through higher sales of coffee, cotton, pyrethrum, tea and sisal, and the marketing of livestock products. Europeans and Asians control most of Kenya's monetary economy, which includes an efficient large-scale farming sector providing 80% of - cash agricultural production and exports, and a small but important industrial establishment producing a variety of goods for the East African market. Transport, banking and other services are also sigIficant. Asians play an important role in commerce and provide skilled manpower in industry and - government. Europeans are engaged in farming and plantation industry, manufacturing, government and professional services.

2, Independence was achieved in December 1963. The present government, drawn from the majority party, the Kenya African National Union (KANU), is led by Mr. Jomo Kenyatta as Prime Minister. It strongly supports the - East African common market. Africanization of the civil service is rapidly pursued. An African take-over of parts of the large-scale farming sector is under way to relieve landlessness. Development efforts are pushed on a broad front to increase agricultural output and attract new industries - with a view to raising living standards and reducing the pressure of unemployment.

3. Economic growth since the war has been uneven. Extensive capital formation financed by an inflow of foreign funds made possible a boom in production and exports in 1954-59, which was followed by setbacks from bad weather and a loss of confidence among the non-African community as a result of political- uncertainties. Per capita income stagnated at about $80 per year in 1960-62. Normal weather and a partial return of confidence has made possible a renewal of economic expansion in 1963. The improvement was aided by a rise in export income partly as a result of higher sisal prices,

4. Any evaluation of Kenya's economic prospects must be surrounded by a wide margin of uncertainty because of the many unpredictable political factors involved. Present fairly satisfactory economic performance is - to a great extent based on the maintenance of European large-scale farming and the retention of expatriate officers in the government services. Too rapid Africanization of these sectors could lead to a serious drop in production which might be difficult to regain. The border dispute - ii - with Sonalia, tensions between racial groups or between tribes may force the- government to actions not conducive to economic progress. Much of the reviv- al of confidence by the non-African groups has stermed from the faith they place in the fairness of the Prime Minister.

5. Export prospects are good for sisal, tea and cotton, at least in the forseeable future. They are less encouraging for pyrethrum due to-previous overstocking, and Kenya coffee may be heading for a crisis of over-production.- Kenya has considerable livestock potential which could be utilized for increasing exports as well as improving the local diet. An expansion of the manu- - facturing and service industries could take place on the basis of a maintained and strengthened East Africa common market. Provided economic development is not seriously impeded by political factors, therefore, real growth rates of 1-2jo per year on a per capita basis should be within reach.

6. In the longer run,economic growth will be increasingly dependent on an increase in capital formation, which must be supported by a renewed inflow of funds. The government's new economic development plan for 1964/67 follows in the main the recommendations by the 1962 Economic Survey Mission. Emphasis is placed on agricultural schemes such as a continuation of the successful consolidation and development of African smallholdings, resettlement of Africans on former European farms, and opening up new lands by means of irrigation. 17ost of the L70 million required for the execution of the plan during the first three years would have to come from abroad, since the capacity for domestic savings is limited and the financial situation of the government is not strong, in spite of a series of economy measures and tax increases, the most recent being the imposition of export taxes on coffee and sisal. The United Kingdom is being looked to for the provision of funds and high level manpower, of which the country's own supply is very restricted. IDA, the United States and other countries will also be turned to for finance for the plan.

7. Kenya's external public debt is already large, and debt service amounts to 10; of both export proceeds from overseas and government revenue. In addition, Kenya has a contingent liability for a notional third of the debt of the East African Common Services Organization, whose servicing would require another 2% of export receipts.

8. - Kenyats performance has been quite good in the year following internal self-government and in the six months after independence. The government has- scored high in its handling of the many difficult and pressing issues, includ-- ing tribalism which is now less of a problem than a year ago. Racial relationships have also improved, and the confidence of investors appearsto have been partly restored. Growth in production and exports has been satisfactory and wages and prices have remained stable. Schemes such as settlement and smallholder tea are showing an encouraging measure of success. The fiscal position, on the other hand, remains under considerable strain as the forces of transition work themselves out, and the outlook for the next few years call for strong government measures to close the budget deficit and to start producing savings for development. Prospects for further economic growth are good provided political stability is maintained and external financial and technical aid can be obtained. Kenya's new development plan,should provide a largely acceptable frameiiork for economic expansion. Considering the already heavy burden of foreign debt and the precarious public finances, the emphasis should be on non-conventional torea in &ny direct aid to Kenya. I. BACKGROUND

Country and People

1. Kenya's 225,000 square miles, an area comparable to that of France, contain a wide range of climates and soils. The highlands in the south- western quarter of the country, which generally lie between 5,000 and 9,000 feet, have mean temperatures of 55-65o F. and a rainfall of 30-50 inches per year. Four-fifths of the population live in this temperate zone, while most of the remainder are concentrated on the shores of Lake Victoria and in a narrow fertile belt along the Indian Ocean. The rest of the country - over half its area - is hot and arid with rainfalls of 10 inches or less, and suitable at best for extensive grazing. Between the rains many wells and watercourses dry up and a prolonged drought can be disastrous. Towards Kenya's northern and eastern frontiers, the grasslands turn into lava plateaus and barren desert.

2. Except for soda ash, extraction of minerals is not important, and no large economic depceits are known. Some forested areas which now provide fuel and timber could form the basis for pulp and paper production. Ample power resources are available in the Tana River, and fishing is an important activity locally. The climate, the landscape and the wild game are valuable assets for the expanding tourist industry.

3. The estimated mid-1964 total population is 9 million, of which 8.8 million or 97% are Africans. Forty main tribes are recognized within the four major racial or linguistic groups. The Bantu group is the most numerous with two-thirds of the African population. It includes the Kikuyu (1.6 million or 19% of all Africans) and related tribes such as the Embu, Meru and Kamba. The Bantu are predominantly cultivators but also keep some livestock; the larger highland tribes in particular have attained a high level of social organization and subsistence, and they provide the most progressive element in the economic development. The Nilotic luos of the Lake Victoria shore are the second largest tribe (13%). Swahili is a common second language in addition to the vernacu- lar, while English is primarily used in government and business.

4. Kenya's population is growing at a rate of about 3% per year. At this pace there will be 15 million people in Kenya by 1980 and over 25 million by the end of the century. The government does not favor birth control, however. Some parts of the country are among the most densely populated in Africa with 1,000 people or more to the square mile. The large towns are few: Nairobi, the capital city, has less than 300,000 inhabitants and the port of Mombasa about 180,000. The towns are growing by nearly 6Z per year and are confronted by problems of urban unemployment and of finding capital for investment in urban infrastructure.

5. The Arabs number about 35,000 and own much of the land in the coastal. belt. The main Asian immigration came in connection with the construction of the Mombasa-Lake Victoria railway at the turn of the century. The - 2 -

Asian community, now some 175,000 strong, plays an important role in commerce, and also provides skilled labor for private and public services. The European railway builders were followed by administrators, traders and settlers, who introduced modern large-scale farming in the highlands and established the towns. After the last war growing numbers of .uropeans have been employed by the industrial and financial sector. In 1960, the European comnunity numbered 61,000; in 1963 the figure had been reduced to 53, 000.

Constitutional and Political Developments

6. Kenya was declared a Protectorate of the United Kingdom in 1895 and was made a Colony after World War I. The first African was appointed to the Legislative Council in 194h, and to the Executive Council in 1952. From 1960 onwards, successive steps were taken to hand over political power to the African population and to bring the country to independence. In 1962 the framework of the new constitution was set up under which powers were divided between the Central Government and Regional Authorities. Agreement was subsequently reached on giving Kenya internal self-government after general elections in April 1963 and full independence in December 1963

7. The complex independence constitution gives the country a three-tier structure of central government, regional assemblies, and local government authorities. The Central Government, organized on the British Parliamentary pattern with a Governor-General as representative of the Queen, and a Cabi- net collectively responsible to the two Bouses of the National Assembly, has power in relation to defense, the judiciary, economic planning and development, and external borrowing. The Regions have competence over services such as education and health. Special provisions are laid down for agricultural extension, marketing and control of crop production, and the powers of the central government to fix standards in education. The Regions are responsible for local authorities within their area. All residual power remains with the Central Government. Higher central government or regional officers are appointed by an independent Public Service Commission. The constitution also embodies a Bill of Rights. Changes in the powers con- ferred on the Regions can be made by a two-thirds referendum vote, in the structure of regions, districts and tribal authorities, and in the constitutional rights of individuals by a three-fourths vote in the House of Representatives and a 90% vote in the Senate.

8. In the elections, the Kenya African National Union (KANU), which is mainly a Kikuyu-luo coalition, defeated the Kenya African Democratic Union (KADU) whose support is drawn from various minor tribes,and formed a government with Mr. Jomo Kenyatta as Prime Minister. Apart from a few speci- ally appointed members, the National Assembly now consists of Africans and there is only one non-African in the Cabinet. Although the strength of the KADU opposition has declined after the elections, they still command 23 out of 129 seats in the Lower House, and have the majority in three regional assemblies. - 3 -

9. Independent Kenya pursues a policy of non-alignment and positive neutrality. Biplomatic, trade and aid relations have been entered into with Soviet bloc countries and mainland China as well as with Western countries. Under a recent defense agreement with the U.K., British forces will continue using Kenya as a training and staging ground, and will assist in training the Kenya army and creating an air force and navy. Trade and other relations with South Africa and Portugal have bcon cut off. Relations are strained with the Somali Republic over the N*orteastern Region, where the Kenya army and police are engaged in a struggle with small gangs of terrorists for supremacy over the Region's 270,000 nomads.

10. With Tanganyika and Uganda, Kenya forms a customs union and a currency area, and shares a number of basic services such as railways. On Kenya's achievement of internal self-government in June 1963, the three East African Heads of State declared their intention to seek a political federation before the end of the year. A working party of Ministers was formed to formulate a federal constitution. However, many practical obstacles were found to stand in the way, and Uganda in particular showed reluctance to force the issues. The army uprisings following the Zanzibar coup in January 1964, although quickly put down with the aid of British forces, appear to have accentuated the political differences between the three countries. In response to Tanganyikan pressure, agreement has recently been reached permitting each country to introduce import quotas and licenses in inter-territorial trade and on the allocation of major industries. Talks are expected to be resumd about replacing the East African Currency Board with a central bank. The prospects for early political federation have diminished, however. An apparent lack of agreed ground rules as well as of machinery and resources for continuous liaison and coordination between the governments could in the long run be a serious threat to the maintenance of economic cooperation in East Africa.

11. Domestically, the government is faced with the task of welding into a nation a number of economically and socially segregated societies. Were the non-Africans to leave, Kenya would be deprived of many of its assets, including most high-level manpower. The present imbalance in economic influence and living standards between the racial groups is therefore to be corrected only gradually and with as little loss to the country as possible. An African takeover has started in agriculture, and the higher ranks of the public services are being as rapidly "localized" as the availability of trained staff permits. African participation will be promoted in trading, small-scale industries and services, where Asians so far have dominated. The Asian community is divided into many national and religious groups with little contact with each other, but they are likely to be united in a reluctance to give up their traditional spheres of influence. 12. Although the !Lropean settlers have seen a reversal of their fortunes since 1960 and many have left or are waiting for an opportunity to go, others wish to remain at the government's request that the Europeans stay and farm in Kenya. Farmers bought out under the settlement schemes have purchased land elsewhere in the country or I-ave joined the settlement administration. In the public sector, Zhropeans will continue to be required for the foreseeable future. Africanization of leading jobs on plantations and in large- scale industry and business is not contemplated at this time. So long as there are no serious anti-European disturbances, the European community is therefore likely to remain and to adjust to the new situation.

13. Tension between African groups is another obstacle to nation-building. The elections were mainly fought on the issue of regionalism. The government now appears intent on achieving a revision and simplification of the constitution by reducing the regional element. While leading KADU politicians generally have taken a cooperative attitude so far, it remains to be seen to what extent they will accept a revised constitution. The Prime Minister, Mr. Kenyatta, has shown great strength as a national figure, able to balance his cabinet and to handle the various political, racial and tribal groups.

14. Over the last year the KANU government has presented a number of plans to reconstruct Kenya as an African country and to tackle its various pressing problems. In general terms the aim is to develop a democratic society based on African socialism, which is defined as the use of wealth for banishing poverty rather than for domination of others. Communal ownership of land and the social security provided by the extended kinship system are regarded as basic traditional foundations of this socialism. African development will therefore lean heavily on cooperative efforts. Beyond the primary task of maintaining law and order, the main target is economic progress and rising African living standards in accordance with the KANU election platform which promised an advanced welfare state. Self-help schemes are introduced as part of a comprehensive drive for community development, including training courses and cultural activities. Land consolidation and settlement, irrigation, agricultural credit and other schemes are pressed to relieve landlessness and increase production of foodstuffs and export goods. Unemployment is tackled by the recently concluded tripartite agreement for increasing the number of em- ployees by 10-15%. For the growing number of workless school-leavers, a National Youth Service is being established, with an initial recruitment of 3,000 young men for a one-year period.

15. So far the plans and efforts have been favorably received by the expatriate establishment, the foreign investors and the United Kingdom, and the African electorate. The shortage of trained Africans for running essential services remains the government's greatest handicap. The real test will come if and when European farming and European civil service staff - particularly in the field - are reduced in accordance with present prospects for the next few years. This may well coincide with increasing impatience and tribal tension among the electorate and a less forthcoming attitude among foreign investors, particularly if the East African Common Market were in danger. Perhaps more important still is the fact that independence has been assisted by a substantial economic improvement from the low levels of 1960-61, for which good weather and sustained export demand are mainly responsible. These favorable factors are not likely to be permanent and Kenya, already badly over-stretched in budget and foreign borrowings, has few if any reserves to cushion a serious setback in production, income and enploymont. II. THE ECONOMY

Structure and Growth

16. The mass of Kenya's African population is predominantly engaged in subsistence agriculture or stock raising, contributing only 26% of the total gross domestic product and living not far from starvation in bad years. Of marketed agricultural output 78% comes from "large farms" (the former Scheduled Areas) which are still mainly in non-African hands. Commercial and manufacturing enterprises are run by bropeans or Asians. less than 10% of the African populatJon participate in the monetary economy as wage earners, most of them unskilled, and there is a wide gap between their remuneration and that of other racial groups. This dualism makes crude concepts such as GDP per head of total population - estimated at Z29 or about $80 in 1963 - rather mis- leading, particularly in comparison with neighboring African territories with more homogeneous population.

17. While more than 85% of the Africans and about one-third of the Europeans are engaged on the land, farming - including subsistence - contributed only Z109 million or 46% of a total GDP of about Z260 million in 1963 (Table 2). Three-fifths or f67 million of tiis amount was the imputed value of subsistence activities. On the other hand, over £40 million or 80% of marketed agricultural output is exported, making agriculture responsible for some 85% of export earnings. Coffee, tea, sisal and pyrethrum are the major earners of export income from overseas, while a variety of grain crops are produced to supply the East African market. Livestock production based on exotic stock and modern techniques is also a growing export industry.

18. Manufacturing now contributes nearly 13% of monetary GDP. The major part of the industry consists of agricultural processing in fairly small plants, but there is an expanding sector of larger units producing soft and semi-durable consumer goods. Construction, less important than some years ago, accounts for about 3%. The service industries account for no less than 62% of Kenya's money GDP. Basic economic services such as water, electric power., and communications (15% of GDP) are fairly well developed or in the process of being expanded to meet the demand. A good rail network links most of the highlands with the main line from port of Mombasa to Nairobi and into Uganda. Some main roads are paved and there are good gravel roads between main points. The East African airline runs both international and domestic schedules. Wholesale and retail trade, banking, insurance and real estate account for some 19% of cash production, reflecting the country's central role within the Common Market. Tourism is another important service industry and earner of foreign exchange.

19. Kenya's economic growth since the war has been uneven. The subsistence economy is strongly influenced by variations in the weather; in normal years such as 195l6/59 production has increased in step with the growth of population or by an average 3% per year. The abnormal weather in 1960 and 1961 reduced output in the subsistence sector by nearly 10%, while population rose by another 6%, implying a substantial measure of hardship for the majority of the people. In 1962 and 1963 subsistence production recovered again, by 31% and 6% respectively, thanks to good crops. The monetary economy received - 6 -

heavy capital inflows from the United Kingdom and India and substantial immigration in the years from 1947 onwards. The impetus was later sustained by the Kbrean boom and government activities during the Mau Mau Emergency. Real growth during this period may have been of the order of 6-8% per year, with most of the expansion accounted for by large-scale farming and secondary industry. The period 199- 6 3 brought a culmination of the boom followed by stagnation and setbacks as a result of the weather and as the transition from colonial to independent status affected the incentives for investment and expansion. Average GDP growth at current prices in this period was 5.5% per year. However, since domestic prices rose by an average of 1.75 (Nairobi Wage Earners Index) and population by nearly 3% per year, real per capita income increased by around 1% per year only. In 1958-60 real income was probably falling by perhaps as much as 1% annually on a per capita basis and the drop was accentuated in 1960 and 1961 when total GDP at current prices remained practically constant in spite of increases of 2%1 in prices and 3% in population. Real per capita income did not regain its 1960 level until 1963.

20. During the last ten years exports have more than doubled in volume, and since prices have fallen by less than 20% the increase in export proceeds was not much less. It now accounts for nearly a third of monetary GDP. Imports, on the other hand, have risen very slowly and have therefore fallen as a percentage of money GDP from 56% in 1954 to 43% in 1963; the overall trade deficit fell from 33% to 6%. In part this development is due to the growth in Kenya's production of import substitutes but it also reflects a drying up of foreign direct investment. The latter trend is also behind the drop in gross capital formation from a level of about bP5 million in 1955-57, when it represented over 30% of cash GDP, to £29 million in 1963 or 155. Both private and government investment have fallen drastically from previous peaks.

A,riculture

21. Only 10% of Kenya is high potential land consistently receiving a rainfall above 35 inches annually and otherwise suitable for intensive agriculture. Marginal lands with a rainfall of 25-35 inches occupy an area of similar size and are mainly suitable for sisal and ranching. Crop production is restricted to some 26 million acres in the coastal strip and the south-western part of the country. The higher rainfall zones have considerable variety of temperatures because of altitude, and soils range from very fertile volcanic to those which require extensive fertilization. The variety of crops and livestock made possible by these conditions is not an unmixed blessing. Diversification calls for research efforts on a broad front and for specialized extension services. W.hile these have so far been available in sufficient supply in Kenya., their future is much less assured.

22. Large-scale farming and plantation agriculture is pursued on the 7.7 million acres (1/5 of all high potential land) which used to be the Scheduled Areas (now called "large farms"). Some 2 million acres or 30% of this land is suitable for cultivation. The actual cropped acreage in 1963, however, was only 1 million, the rest being used for grazing. Most of the 3,650 large farms are held as freehold or on very long leases. About 60% are less than -7-

1,000 acres in size, but some 300 units of 5,000 acres or more occupy nearly 60% of the former scheduled land area. Permanent crops such as coffee, sisal, tea and wattle account for about 40% of the crop acreage, and cereals (wheat, maize, barley) for nearly as much (Table 4). Other crops gro-n are pyrethrum, sugar cane, coconut, groundnuts and oilseeds, pulses, vegetables and fruit. There were about 920,000 cattle in 1963 including 200,000 dairy cows, some 500,000 sheep and 280,000 poultry. The mechanical equipment included 6,400 tractors and over 1,000 combines. The large farms give employment to 2,000 Europeans and Asians, and a quarter of a million Africans. Revenue is de- rived mainly from coffee and tea (34% in 1963), livestock and dairying (24%), and sisal (20%) (Table 8). The large farms account for four-fifths of marketed agricultural production and total exports.

23. Large-scale farming production expanded by about 5%per year in 1954- 60. Since 1960, the pattern and value of production have remained largely unchanged. Increased wheat growing is generally regarded as a temporary ex- pedient for keeping farming assets liquid. Pyrethrum output has been reduced as a consequence of earlier over-production. Intensified slaughtering has increased livestock deliveries but depleted the herds and flocks by 10% or more from 1960; this is in spite of the great demand for dairy cows from African farmers and rising prices for dairy stock. The steep rise in sisal prices boosted large farm revenue to E40 million in 1963 or 11% above the preceding two years. Nevertheless, African employment on plantations and large farms continued to contract and was more than 15% below 1960 levels. Capital expenditure in 1963 was running nearly 50% below 1959, at a level which permits of little expansion of output and may even imply a run-down of farms and equipment. Since independence increasing numbers of redundant workers (usually Kikuyu) and dispossessed labor from farms resettled by other tribes have created problems on European farms. The agreement on a 10 increase in employment as from March 1, 1964 (discussed later) may relieve some of the pressure and the government has also taken firm action to evict Squat- ters from certain farms. However, the large number of squatters as well as the social and political implications of evictions make it increasingly hard to enforce law and order.

24. Of the former African agricultural areas, only about 10% or 11.65 million acres receive sufficient rainfall for growing crops. Large parts of this area are, however, among the most productive lands in Kenya with a high carry- ing capacity in terms of livestock and human beings - it is estimated that they contain four-fifths of the country's total acreage of high-potential land. In recent years, there has been a rapid increase in the sale from African agriculture of surplus food crops and of cash crops such as coffee, tea., pyrethrum, sisal, cotton, tobacco, oilseeds and sugar. In 1963 the share of African farms ("small farms" in Tables 4-8) in total output was one-third for pyrethrum and one-fourth for coffee, and they produced almost all the cotton and rice marketed. A considerable additional acreage of coffee and tea had not yet come into bearing. Cash revenue, at M11.5 million, has nearly doubled since 1956, in spite of the crop failures of 1961/62. The average annual growth rate has been higher than in the European farm sector or about 8%, and it is accelerat- ing. As a result the share of small farms in total gross farm revenue has risen from 18% in 1954 to 22% in 1963. - 8 -

25. This expansion has been aided by successful attempts to overcome non- productive land tenure customs. Land registration was introduced in the Central Region as part of the resettling after the Fmergency, together with consolidation of fragmented holdings, enclosing of individual plots and in- troduction of appropriate farm lay-outs including measures for soil conserva- tion. As of June 1963, altogether 2.75 million acres had been consolidated. Consolidation was an important element of the comprehensive Swynnerton Plan for which the Bank made a loan in 1960. The Plan envisaged an annual cash target for a farmer of £100 above requirements for subsistence and service of development loans. It still forms the basis of current policy for the development of African agriculture. The production pattern, howevers has been revised in view of market developments. In the areas where the Plan was originally introduced, provision of individual farm plans together with agricultural credit and continuous assistance from the extension service have proved essential for success. Well over 3 million acres of African farming country are as yet unconsolidated, and the full potential of African land in terms of production and employment is thus far from developed.

26. Nine-tenths of all medium rainfall land is in the former African Areas. It is mainly suitable for plantation production of sisal, for nching and - in certain places - for irrigation schemes. Much of this land is deteriorat- ing from being over-stocked with inferior cattle, which is regarded as an individual savings account rather than a productive asset, and the people live on the brink of starvation. A number of schemes for better utilization of the land are in a planning stage, araong them a project for wheat and barley on one-quarter million acres of Masai land. The East African livestock scheme to be studied by the U.N, Special Fund may create the framework for an expansion of African ranching.

27. Resettlement. At the 1960 Lancaster Eouse conference the United Kingdom Government acknowledged the long-standing claims of the Africans to lands in the Scheduled Areas, and its responsibility to provide finance so that Europeans could dispose of their assets without serious losses and an orderly African take-over be arranged. The first plan for land resettlement gave priority to settlement on under-utilized high potential land by 7,800 smallholders or assisted owners, whose cash targets would be L100-250 per year above subsistence and loan service. In addition, 12,000 Africans with limited capital and farming knowledge were to be settled on high density schemes where the net cash income would be as low as £25 per year. The Bank and CDC agreed to finance the first two schemes. In July 1962, the U.K. Government announced a major expansion of the high density settlement scheme to 1 million acres over a five-year period up to 1967, and an extension over the same period of the two other schemes. In all, 1-1/4 million acres of mixed farming land - including land of lower quality - would be resettled by some 60,000-70,000 families, at a cost of E25-30 million. As experience has been gained, further changes have been made in the plans. World market developments thus have made necessary a reconsideration of production of coffee and pyrethrum, and the schemes are now based on dairying and beef production, maize and other food crops, while pyrethrum is grown only where quotas are available. The cash target has been raised to Z1CO per year for all settlers outside the Central Region. It now takes on the average 27 acres of land to reach the cash target, which means that only 36,000 families will be settled on - 9 -

L.h million acres at a somewhat lower cost (about Z25 million, one-half of which is for land purchases). In addition to the official settlement program, there are private schemes designed to assist Africans to acquire land. With the aid of Land Bank credit and advantageous prices, Africans have also taken over some 300 former European farms intact and are running them on their own account or as collective enterprises.

28. The Economic Survey Yission pointed to the risk that the deliberate replacement of large-scale with small-scale production might mean the des- truction of capital assets and the adoption of less efficient forms of production and lead to a fall in output, nor would it appear that any great increase in the number of people engaged in agriculture could be expected because the European farmers were large employers of labor. The high density settlement in particular had man doubtful aspects, among them the low income target. Another danger was that the specialized manpower required for super- vising settlement would be drawn away from the African areas where the main development opportunities lie. Overall, the Mission saw a real danger of a decline in production and export earnings in the years immediately ahead.

29. As settlement is working out so far, however, rmany of the dangers appear to be avoided, at least on the Bank/CDC schemes. The government claims that yields from settled land will be raised by an average 500 and the number of people supported by 100%; on the first nine schemes, gross income from land has in fact doubled and the number of people supported has tripled. While it is admitted that some land now taken over for settlement is not suitable for small-scale farming, in the end most of the land thus suited. would be settled and the most economic farming pattern applied, so that the net effect would be positive both on production and employment. This would be possible because European farming as a matter of fact was far from having achieved optimum land use. Only one-half of the land suitable for cultivation had actually been put under crops and - as pointed. out by the Survey Mission - there was a wide variation in efficiency between farms. Eoreover, it appears that an orderly and economically justified resettlement by means of an African take-over of exdsting large farms could not have been achieved at anywhere near the rate at which settlement has proceeded, since very few Africans ith sufficient capital and knowledge are available. Attempts at cooperative or communal farming have so far not been very successful. While settlement may experience difficulties from the reliance on highly productive but only recently introduced European livestock, requiring strict veterinary control, on pyrethrum and tea which may later experience a less favorable world market, on cooperatives for tasks which they have not so far been successful in performing in Kenya, and on a qualified extension service, the future availability of which may be in doubt, most of these problems will not be exclusive to settlement but part of African agriculture generally. Given the political realities of the country, the measure of failure or success of settlement should be taken not from the maximum production that could theoretically be achieved from the Scheduled Areas by skilled European farmers with capital and technical know-how, nor from the actual level of output from European farms during the peak years in the 1950's., but from the type of African agriculture which is frequent in the former non- Scheduled Areas and which has barely begun to realize the potentials of the land. Another way of judging, at least in the short run, is by the degree to - 10 -

which settlement is successful in assisting the Africans to take over the assets that European farming has brought to the country instead of their being re-exported or wasted; this is more important for the livestock, tractors and combines, and know-how than for the European-type farm buildings, fencing, etc. which may be largely lost in the process of settlement. From the point of view of the African farming community, this is as much an import of goods and services as if the assets were bought from abroad, and far more useful.

30. The next step in the African take-over, to be implemented by l1965/66 onwards, will be the transfer of mixed farms still in the hands of non-Kenyan citizens to _frican ownership as rapidly as economic and technical considera- tions permit. This process, which would involve another 1.2 million acres, is judged to take six years. The program would exclude 200,000 acres of mixed farming land ouned by Kenyan citizens of European descent and also non-African ranching schemes and large plantations growing sugar cane, tea and sisal (coffee plantations would be taken over, however). Instead of further subdividing land, farms will be developed as they are bought or even consolidated into larger and more economic units. European farmers will be encouraged to maintain their farms in full production up to the day of purchase, after which they will be operated as state farms until effectively taken over by individual African farmers, partnerships, farming companies or cooperatives. The total purchase cost for this scheme would be Z24 million. The Kenya National Farmers' Union has welcomed the new program, and preliminary talks on financing has been initiated with the United Kingdom.

31. In the absence of studies of farm plans and actual operating results it is difficult to forecast the net effect of the settlement programs over the next few years, and even more so over 5-10 years. It is assumed in this report that the settlement areas will be able to conform to the average growth rate in agriculture and thus be neutral in their overall result, although they may have a significant effect on individual products.

32. Irrigation. Kenya at present has less than 20,000 acres irrigated out of a potential of perhaps 1 million acres. In addition to some 10,000 acres irrigated by primitive means a number of schemes sponsored by the government are working with encouraging results. At the 1-ea-Tebere rice- growing scheme 1,340 previously landless and untrained tenants produce 12,000 tons of rice paddy for sale per year at the high yield of 2-1/4 ton/acre from 4-acre holdings. Annual net incomes to tenants average F100-140 and the scheme is financially self-liquidating. An extension of 2,000 acres is under way; the full potential is 12,000-15,000 acres. There are other irrigation schemes where cotton, onions and foodstuffs, etc. are grown. Despite the high capital costs involved (an estimated f200/acre including storage) and the extensive need for training and continuing super- vision of farmers, irrigation ranks high on the government's list of priorities. A United Nations Special Fund survey of the Lower Tana is expected to recommend the development of a 75,000 irrigation scheme for growing cotton, sugar and foodcrops. Other plans cover an acreage of about 25,000-30,000. The capital cost for 100,000 acres by 1970 would be F11-12 million but the gross yield is estimated to be as much as £6-1/2 million per year and 25,000 families could be settled. Since the schemes would be on unused - 11 - land, the production and income generated would be net additions to the economy. However, large-scale irrigation schemes entail many problems of production, maintenance of facilities, marketing, etc. and not all farmers have the aptitude for this type of agriculture. Present plans might therefore take considerably longer than expected to implement.

33. Agricultural Policies. Independent Kenya with an increasingly important African agricultural sector has already found that adjustments in policies previously followed is required. Maintenance of an adequate agricultural extension service is essential to agricultural development. In recent years the departure of European officers has coincided with heavy demands on staff particularly for the resettlement and tea schemes and for assisting the Afri- cans who have bought large European farms. As such, an Africanization of the extension services may make it easier to influence farming traditions and attitudes, particularly if the general approach to the farmer can rely less on regulations and restrictions to be enforced by extension officers and more on price incentives to encourage qua1ity improvements. In spite of intensified training, however, there are not enough qualified Africans to fill the vacancies. The greatest need is for agricultural instructors, who are supplied by the Agricultural Training School at Embu now undergoing expansion. In some sectors of heavy staff losses such as veterinary services temporary relief is provided by staff made available by foreign countries under technical assistance contracts. A dozen centers are giving 10-14 day courses of farmers' training.

34. The marketing of staple foodstuffs and major cash crops is organized through statutory bodies that take delivery of products, distribute them to processors, hold reserves to meet seasonal shortages and arrange for marketing of surpluses overseas. Prices for major products are fixed by the inister for Agriculture and the organizations concerned. Kenya's marketing system is highly developed to the extent of being, in the opinion of the Economic Survey Mission, heavily "over-boarded". A step towards simplification has already been taken by the replacement of the former Boards of Agri- culture for Scheduled and Non-Scheduled Areas by a new Central Agricultural Board (CAB) to act as a link between the farming community (represented by the Kenya National Farmers Union) and the government. There are no less than twelve specialized cormodities boards at present represented on the CAB, and in addition private or cooperative bodies fulfill important marketing functions. About 600 cooperative societies, supported by a recently founded national federation, represent an important outlet of products for the small farmer, and the Kenya Farmers Association handles most of the wheat and maize trade as agent for the boards. Membership of a cooperative is mandatory for coffee, pyrethrum and dairy farmers. Not all producers' cooperatives have been successful and well managed.

Forestry

35. Kenya's forests represent only about 3% of the country's area but they have important natural functions as land cover and water catchment. They could also supply all of Kenya's needs of forest products. For the time being, the forests yield firewood and timber sawn by small - and generally ineffic.ent - samills. Exports were valued at E340,000 in 1962. Since Kenya imports - 12 -

substantial quantities of paper and board, trade in forest products results in a deficit (f1.9 million in 1962). In addition to a forestry staff of 1,100 there is a permanent labor force of 9,600, engaged in the planting program, supporting thenselves and their families by growing food and cash crops on the plantations. Under the program, 12,000 acres of indigenous trees are replaced each year with exotic softwoods such as cypress and pines. The first plantings, made in 1927, are now beginning to give large quantities of mature timber. The government has entered into discussion with private firms and with IFC about the establishment of a pulp and paper mill.

Tourism and Wildlife

36. Income from over 50,000 tourists and other travelers was estimated at about Z5.2 million in 1962. In recent years efforts have been made to pre- serve tourist assets and to develop facilities for the tourist trade, such as roads and lodging. Provided political stability is maintained, tourism should continue expanding as fast as resources permit. Game shooting licenses and the export of animal parts and products are worth about '300,000 per year, employing a considerable "safari industry". In addition, game might become an important regular source of protein through cropping schenes.

Mining and Manufacturing

37. Known mineral resources are not important to Kenya, and mining production accounts for less than 1% of GDP. Lake Magadi's soda ash is the most important product, representing more than half of the output (Table 9). Ex- ports of soda ash have been affected in the last two years by the embargo on sales to South Africa, but new markets are now being found in Asia. In the short run mining production is likely to remain at about the same level as in the past five years.

38. Manufacturing accounts for nearly 10% of Kenya's GDP. Its expansion by 6% in 1963 compares favorably with the 3% average annual increase in the last five years. Kenya's industry consists mainly of small and medium-size establishments, and its production is well diversified (Table 10). Import substituting industries have developed faster, and are now more important than the traditional activities such as sawmills and local crops processing. About 25% of manufacturing production is exported within the East African common market, where Kenya seems to be in a favorable position for attract- ing new industry. A large paper plant and a light-bulb factory, aimed at supplying the whole East African market, are to be constructed in Kenya. Several textile projects are under way which, if fully realized, will raise production to about the level of domestic consumption within five years. A 2,000,000 ton oil refinery built in Mombasa by BP Shell is now operating. A Z2.5 million sugar factory is under construction, and sixteen tea factories are to be built in connection with the smallholder program. There are apparently good prospects for expansion in many fields of manufacturing.

39. In order to attract new industries the government offers protection through custom duties and industrial licensing. Machinery, raw materials and other products employed by local industries are either free from dut 4.es, - 13 - or else refunds are granted. The Development Finance Company of Kenya (D.F.C.K.) with a capital of Z1.5 million, one-third of which is subscribed by the government, has been created to finance and assist medium-size industries; the government-owned Industrial Developrnt Corporation is being reorganized to provide financing for small enterlrises, The rate of taxation on companies is 37.5%; an investment allowance of 2053 can be written off over and above regular depreciation. The legislation on foreign investment, which is now being introduced, will allow unlimited repatriation of profits and capital.

Construction

4O. Activities in the building and construction industry have declined progressively during the last six years, ending in a sharp recession (Table 11). From 1957 to 1963 thO number of enterprises dropped by h%, employment was reduced to about one-half and the share of construction in the GDP fell from 4.7% to 1.8%. Prospects are for a slow recovery: new orders are coming from the public authorities while demand from the private and the building societies continues to lag.

Electricity and Water

4l. This sector accounts for 1.3%o of the total GDP. Its share doubled in nine years, while the production of electricity increased at an annual rate of 10% (Table 12). A slowing down occurred in 1962 and 1963 when the amual increase was not quite '%. 1owever, an increase by 8.9" has been recorded in the first months of 1964. The government has decided to build, at a cost of £8 million, the 30 MW first stage of the Seven Forks hydroelectric scheme, which will reduce the relative dependence on supply from Uganda, now covering 40% of Kenya's requirements. The scheme would include transmission lines to Nairobi and Mombasa, permitting an interchange of thermal and hydro power. Further expansion of Seven Forks can be made as demand requires and in cooperation with power development in Uganda.

Transportation

42. Transport services account for 9.5% of GDP, their output increasing in 1963 by 11.7, over the previous year (Table 13). The East African Rail- ways and Harbours (EAR&H) operate 3,566 miles of meter gauge track,of which 1,282 miles are in Kenya. The railways administration received a $21 million IBRD loan in 195- and is now seeking finance from the Bank for a renewal and expansion program. In Kenya., the EAR&H also operate the ports of Mombasa and Kisumu, the boat services on Lake Victoria and the Nairobi Workshops for rolling stock repair.

43. The 26,000 mile road network in Kenya may be considered adequate for short and medium distance transport within the most populated regions. For long distance hauling, problems of coordination may arise for the connections already served by rail. in 1960 the Bank financed feeder roads as part of a. £2 million loan for agricultural development. IDA is now considering appli- cations for financing of trunk roads and tea roads. Five major centers of Kenya have commercial airports with scheduled services operated by the East ifrican Airways and several international airlines service in Nairobi. - 14 -

Government Services

LL. Between 1954 and 1963, the value of government services more than doubled to nearly f30 million or 15%of monetary GDP. Education and health services have expanded particularly rapidly and now accounts for one-third of the total (Table 14). The school system has been opened to all races, and by 1966 some 143,000 or well over three-quarters of the age group are expected to be in primary schooling. The greatly expanded output of primary students in turn creates pressure for more opportunities for secondary education, at the same time as such education is required for many purposes, including the increase of the supply of African teachers. Present plans indicate that by 1966 over 6,000 students will complete Form 4 as compared to 3,200 in 1961 and 5,000 in 1963. This would still be less than 2% of the population, a low rate for any country. Beside secondary education, efforts are concentrated on vocational and technical training. Higher education is provided by the University of East Africa., of which the Royal College in Nairobi is a constituent part. An Education Commission has recently been appointed to make proposals for educational policies and their implementation. h. Although Kenya does not face an overwhelming problem of dealing with specific tropical diseases, malaria, bilharzia, hookworm, leprosy, etc., are still prevalent outside the highlands. The rapid concentration of population in urban areas has increased health hazards, particularly from water supplies, and nutritional deficiencies. Health promotion efforts are hampered by the low level of general education. Kenya ranks with the less developed countries in the supply of hospital beds and doctors., about one per 1,000 and per 10,000 of the population, respectively.

46. A policy of "localization" or replacing expatriates with local officers (mainly Africans and Asians) has been in force during the last few years. The total number of European officers declined from about 6,050 in June 1960 to 4,130 in June 1963. In the professional classes alone, the reduction was from 4,300 to 2,650. About 1,800 Europeans are expected to retire through June 1964, or approximately half the strength a year earlier. A certain reduction in civil service strength on Kenya's independence can be regarded as natural and even desirable to save on scarce manpower. How- ever, in view of the shortage of trained Africans a rapid loss of qualified senior civil servants could be harmful to economic development. The government attempts to retain key expatriates by means of long-term contracts, and to' recruit new expatriate officers, mainly under technical assistance arrangements, in addition to placing continued reliance on schemes for training Africans. Staff losses are also partly compensated for by greater use of consultants and contractors. Training of Africans has been stepped up under departmental schemes and at various institutions. A considerable number of Kenya students are on scholarships overseas. The total costs to the government for localization and training has been of the order of one- half million pounds in recent years, met by grants from the United Kingdom. The training effort is estimated to produce some 3,000 professional officers by 1965, thus closing the gaps left by departing Europeans. On the other hand, new demands from the foreign service, the police force and the army, as well as the private sector, will increase the competition for available staff resources. - 15 -

Foreign Trade and Payments

7. Kenya provides port and transport facilities for parts of Tanganyika and for Uganda, productive capacity to meet their needs for a range of consumer goods, and banking and other services. Due to the common market, trade and payments estimates for Kenya alone are somewhat arbitrary. About one-half of East Africa's imports from outside are recorded as des- tined to Kenya. While doubling since 1950, imports as a percentage of GDP have fallen from 51% in 19!6 to 26% in 1963. The composition of imports has changed comparatively little in recent years. One-third of 1963 net imports consisted of iron and steel, base metal manufactures, machinery and transport equipment (Table 18). Fuel and oils, textiles and clothing, chemicals and paper, and cars and consumer appliances each account for about 105.

48. The volume of exports rose by 1567, from 1954 to 1963 (Table 15). However, since prices fell by 18% the increase in value was limited to 112. The terms of trade worsened by 25% from 1954 to 1958-60 but two-- thirds of the loss has since been regained. Total domestic exports (ex- cludi.ng reexports) at Z'3.8 million in 1963 was 26% of East frica's export to outside the area. Since 1996 exports have grown somewhat more rapidly than GDP (about 8% per year) and increased their share from 18 to 21%. Kenya exports, mainly consisting of agricultural products (Tables 16 and 17) have become more dive:sified: in 1956 coffee provided nearly one- half of earnings, in 1963 (with export quantities up by 40") only one- quarter. Meat and meat preparations, tea, sisal and pyrethrum which contributed about 20% in 1956 have raised their share to over 40% in 1963.

49. Considerable shifts in markets for exports and sources of imports have occurred (Table 20). The decreasing dependence on the United Kingdom (her share of Kenya imports was down from 6/ in 1954 to 33% in 1963, of exports from 315 to 25%), is in contrast to rising shares of EEC countries (German coffee purchases) and Japan (textiles and consumer appliances). A steady rise in Kenya's exports to neighboring countries of Africa and the Middle East has taken place.

50. Rapidly growing exports have helped improve Kenya's overseas trade balance markedly, from deficits of around Z40 million in 195-57 to about Z25 million in 1963 (from 33% to 230 of GDP). Net outflows of funds for insurance, profits and interests, etc., add up to 10-11 million, but these have so far been matched by net receipts from travel and tourism and from contributions to United Kingdom forces in Kenya. The overseas deficit is partly covered by private and public transfers, largely from the United Kingdom, for current and investment expenditures. In 1960-62, however, recorded capital inflows (Z17, 6 and 4 million, respectively) were balanced by a negative item for errors and omissions. The remainder of Kenya's deficit with countries outside East Africa., or approximately Z20 million, can be regarded as financed by her sales of goods and services to Tanganyika and Uganda, or by drawing on sterling balances (Z12.6 million in 1960 and F2.8 million in 1963: in 1961 and 1962 the balances rose by about F[.5 million). East Africa as a whole carnot run an overall deficit for long: this would force banks to restrict credit, which would hit imports in particular. - 16 -

31. Economic relations with her two partners in the economic union have become increasingly important to Kenya (Table 21). In 1960 she exported 23.6 million and imported 03.4 million locally produced goods: by 1963 exports had reached Z19.8 million and imports f9.2 million, or taken together, the equivalent of about one-fifth of all the country's trade. 1ajor commodities involved were manufacturers and dairy products going out and sugar, cotton textiles and tobacco coming in (Table 22). Kenya services - transport, storage, insurance, etc. - on transit trade with the other two amounted to about £11 million. Tanganyika bought for E10.4 million from Kenya and sold for F2.9 million; Uganda, F9.4 million and Z6.2 million, respectively. The large volume of area trade has permitted a rapid diversification of production, particularly of processed foods and light manufactures, and a more remunerative expansion of exports from each country than if they had been limited to the international markets for primary commodities. Kenya has attracted more specialized production than the others, but it is uncertain what effect this difference might have had on national growth rates which are still highly dominated by the primary sector developments.

$2. Trade Policies. The basic framework of Kenya's trade and payments policies are provided by her membership in the East African Common Market and currency area, and by her adherence to internatlonal arrangements and treaties. As a commonwealth country she enjoys certain tariff preferences in the United Kingdom market, whereas under the Congo Basin Treaty she gives no preferences of her own; this position is now confirmed by her membership of GATT. Imports from most cointries enter under Open General License. Inside the sterling area Kenya upholds exchange restrictions similar to those of the United lingdom and mainly designed to prevent unauthorized capital movements; the East African shilling is convertible on external account.

53. Together with Uganda and Tanganyika, Kenya has approached the EEC about arrangements similar to those proposed by Nigeria, which would give East Africa a no less favored position than the 18 associated African countries. At present, the main benefits to Kenya would be a preference on coffee of 9..6% and the right to be considered when EEC's agricultural policies are formulated. Reciprocally, EEC would enjoy preferences in East Africa to the extent that infant industries or revenue duties were not jeopardized. East Africa shuns the political implications of association, nor would GATT rules permit a simple preferential arrangement for selected. goods. Possible repercussions of new preferences on third country groupings such as the Commonwealth and the 18 associated countries are being studied.

51. Kenya has concluded bilateral trade agreements with Soviet Bloc countries, Yugoslavia and the UAR, to which she hopes to expand exports particularly of coffee and soda ash, partly to compesate for the loss of South African trade. Although the agreements are based on most favored nation treatment and imports into Kenya take place under O.G.L. through existing connercial houses, trade with each country is expected to be balanced within rather narrow limits and to be paid for in convertible currencies. - 17 -

55. Foreign Exchange Reserves. As a member of the East African Currency Board, Kenya's main foreign exchange reserves are her claim on the sterling assets of the Board, which have increased by some £10 million in the last three years, standing at nearly Z65 million in June 1963 (Table 24). On the basis of the formula used in distributing the Board's surplus, an amount of £18.3 million of the reserves might be attributed to Kenya - a sum equivalent to three months' imports from overseas. In addition, net investment by government and other public bodies (excluding sinking funds) were about £11 million.

Capital Formation

56. The data on gross capital formation refer to the monetary economy alone and leave out most of the capital formation in the African farming sector which may be highly significant for the development of agriculture. The figures thus mainly serve to highlight the activities and expectations of the expatriates communities in Kenya in cooperation with outside commercial and financial interests. Total gross fixed capital formation climbed from F35.3 million in 1954 to around E45 million during the investment toom in 1955-57 and then remained at Z40-41 million through 1960 (Table 3). The change in political climate brought about a fall to about L32-33 million in 1962-63 and a further decline to 929.0 in 1963. As percentages of monetary gross domestic product - which climbed rather steadily during this period except for the 1961 setback - gross capital formation varied between a high of 32.5 in 195 and a low of 15% in 1963.

57. Private investment, which had risen to £30.7 million in 1956 and then tapered off to £27 million in 1960, fell steeply to E17.5 million in 1961. In the last two years, private capital formation appears to be stabilizing around Z20 million. Most of the increase in the first few years was for buildings, later for machinery and transport equipment. The new oil refinery at Mombasa has been an important single project in this development, together with purchases of motor vehicles and commercial aircraft. Invest- ment in non-African agriculture has flattened out on a level one-third below its previous peak. Estimates by the Kenya Treasury indicate that part of the investment in 1954-62 resulted in the substitution of capital for labor and that production techniques for the country as a whole tended to become more capital intensive. Public capital formation was high in 1996-5- mainly due to heavy expenditures by EACSO, particularly the East African Railways. When these declined, expanding outlays by Kenya public authorities, mainly for education, roads, etc., provided compensation. In 1962-63 the shortage of funds led to a drastic cut in public investment, which was only £7.8 million in 1963. Because of these diverse trends, the ratio between private and public investment widened from nearly 1:1 in 1954 to 2:1 in 1963. 58. Calculations by the Kenya Treasury suggest that if Kenya's capital output ratio were to remain what it appears to have been in 1954-62 or 2.5- 3.0, a growth rate of 60 would require a net capital formation of about E30 million and a gross formation of Fh8 million. Present levels of investment may thus contribute less additional productive capacit.? than necessary to ensure a steady rate of growth in per capita output. For the immediate future the low level of net capital formation may not be crucial, since - 18 - substantial idle capacity must exist as a result of the economic stagnation. Moreover, self-help schemes, which might give the greatest effect in terms of employment and a widely distributed improvement in living standards, wili not figure prominently in the statistics. In the longer run, however, a sustained economic advance can hardly be achieved without a resunption of higher levels of capital formation in large-scale farming and manufacturing. fEmploym arnings and Prices

59. The labor force employed in Xenya's monetary economy - excluding peasant farmers - was 535,000 in 1963, of which 480,000 were Africans (Table 25). About 40% were in agriculture and forestry, and approximately one-third in each of industry and commerce, and public services. Employment rose during the 1950's to 522,000 in 1960, and the subsequent decline reflects the economic setback. Only a minority of the population is in wage-earning employment, largely in economic activities managed by the expatriate communities. The labor force therefore reflects the variations in labor demand of this sector and bears no relation to, e.g., changes in the size of the adult population. Thus, the fall in African employment from the 1960 peak has been 80,000 or 155, wuhile simultaneously the adult Af2ican population has expanded by 300- 00,000. Since the turnover of workers appears to be slowing down the num- bar of work opportunities has contracted even more. This has made the unemployment problem acute.

60. Unemployment in Kenya is largely structural, deriving from the pattern of peasant subsistence farming, which prevents the full utilization of manpower. In particular, few of the 80,000 young people who leave school each year, some of whom have secondary training, find that they can make a living in subsistence agriculture. The non-agricultural sector is small - at normal attrition rates it provides perhaps 20,000 employment openirgs per year, of which 2,COO-3,000 are for skilled jobs. So far industrial development has failed to provide new employment; the labor force engaged in commerce and industry was 15,000 fewer in 1963 than in 1954 and 36,000 below the peak years 1956-57. Investment in manufacturing has tended rather to have a labor-saving effect.

61. In an attempt to stem the decline in employment a tripartite agreement was signed in February 1964 between the government, the Federation of Kenya Employers (FE) and the Yenya Federation of Labor (KFL), providing for an increase from the beginning of March in the unskilled labor force of each private employer by 1OZ and of the government by 251. In return, KFL agrees to observe a wage freeze and not to strike against employers who cooperate. Maximum prices for a list of basic foodstuffs and other necessities were established by the government. 177,000 people registered as work-seekers under the scheme before registration was suspended. By June 22,000 work- seekers had been placed. The government, regarded as one employer, had made plans for recruiting 8,000 people. EACSO has been exempted from the obligations. By and large, the agreement has been well received as a stabilizing factor, but it should clearly be regarded as a temporary measure with prob- able negative consequences for productivity and investment. - 19 -

62. The annual wage bill was £91.7 million in 1963, of which agriculture and forestry contributed 13%, public services 40%, and commerce and industry 07%.The Africans, who are 90% of the labor force, account for one-half of the wage bill, a somewhat higher share today than ten years ago. Average monthly earnings are Sh. 157 for Africans, 936 for Asians. African monthly earnings have more than doubled since 1954; the improvement in purchasing power is perhaps 15-20% less due to price increases. Still, however, Afri- can wages are too low to be conducive to the establishment of a permanent force of skilled labor. Ninimum wage rates - at Sh. 115 per month in 1963 for adult unskilled workers in Nairobi and Mombasa - are well below average earnings.

63. The rise in consumer prices and in the cost of living for Europeans which has occurred since 1958 is mainly the result of higher import prices and indirect taxation. The larger spending power of African wage earners is believed to go to some extent into savings - durables under hire purchase schemes, homes, etc. - but is chiefly directed towards better food, housing and clothing, education for the children and various consumer goods and services.

Money and Credit

6L. Together with Uganda, Tanganyika and Zanzibar, and Aden, Kenya belongs to the currency area managed by the East African Currency Board as part of the sterling area (Table 26). The Board holds the main part of its reserves in sterling securities in London. It may, however, make a fiduciary issue up to a limit of £25 million in order to take up local securities and treasury bills By June 1963 this authority had been used to an amount of £10.7 million, equivalent to about 10% of the annual budgets of the three East African governments. Kenya is accorded approximately one-third of the issue. Despite the fiduciary issue, sterling coverage of the East African shilling (Sh.20=21 sterling) was 108% in June 1963. The Currency Board also has the power of financing crop processing and marketing in East Africa up to £10 to provide the capital required for 3ast African membership in the international organizations such as the Fund and the Bank Group; and it distributes £2 million of its annual earnings on investments to its members. To some extent the Board thus acts as banker to member governments and performs certain tasks of a central bank, but its ability to take initiatives in economic policy - e.g., to counteract a contraction of the currency supply caused by an outflow of funds - is strictly limited and its powers over the banking system insignifi- cant.

65. The Economic Survey Mission to Kenya recoraended in favor of the establishment of a central bank as soon as there was a central political authority in East Africa. The Blumenthal proposals for a two-tier system of one central bank and individual state banks in member countriesl! have evoked a decision in principle to establish an East African Central Bank, but the issue has been left pending further progress towards political federation.

1/ For details see "Current Economic Position and Prospects of Tanganyika" dated November 29, 1963. - 20 -

66. Commercial banking caters mainly to the expatriate sectors although some progress has been made in recent years in soliciting African savings and lending money to African cooperatives and larger farmers. The three major commercial banks (Barclays Bank D.C.O., National and Grindlays, and Standard Bank) are branches of large British institutions. Other commercial banks are affiliated with Indian, European and American interests. A substantial proportion of the banks' lending is for short-term financing of trading. Loans and advances to industry in December 1963 was 9' of the total, to agriculture 11% (one-third of this is normally for seasonal purposes). Bank deposits are the principal element in the money supply of East Africa, particularly in Kenya where demand deposits amount to more than one-half of the total for the area and the sum of demand and time deposits exceeds the whole of East Africa's currency circulation.

67. In recent years there has been a substantial withdrawal of funds from East Africa., accompanied by a fall in bank deposits and a rise in borrowing. The year 1960 was particularly critical: balances held abroad deteriorated by £15 million to a net position of indebtedness (to head offices) of E6.6 million. The banks raised interest rates and took direct action to bring down advances. As a result, the banks' liquidity improved markedly through 1961 and the improvement contInued in 1962; at the end of the year net overseas balances stood at Lh million. The banks were able to adopt a more liberal attitude with regard to advances and to lower 1interest rates somewhat. Deposits rose further during 1963 but so did advances, so that the liquidity ratio again declined and banks moved into deficit with their head offices. The political unrest in January of this year caused another outflow of funds, but short-lived. The present position is one of greater tightness than in the 1950's, since the reduction in the banks' overseas assets give them much less room for maneuver; interest rates are 7-9% for commercial credit, 6% for government borrowing. 68. The range of credit institutions is wide in Kenya. There is a Savings Bank operated by the Post Office, with £5.8 million in deposits, mainly from Europeans and Asians; the bank also has over 300,OO0 African accounts. Agri- cultural credit is supplied by the Kenya Land Bank, which provides mortgage loans primarily to European farmers (balance of loans Z3.8 million in Decem- ber 1963) and is playing an important role in the present readjustment of the large-scale farming industry, and the Agricultural inance Corporation (AFC), formed in September 1963 by the amalgamation of a number of loan funds to act as the main provider of credit to African farmers. The building societies have experienced considerable financial difficulties in the last few years and their operations are now restricted by the depressed state of building activity in Kenya. Of the 130 insurance companies operating in East Africa in 1961 only three were incorporated in Kenya. In that year, their gross profit (premia over claims plus income from investment) was £7 million. After deducting expenses of management of L3.1 million, an amount of U1.4 million of the remainder was added to the F32.2 million already in- vested in East Africa or in East African securities in London. Some trading in industrial shares takes place in the small Nairobi stock market. Special finance mainly for industry is provided by a number of institutions described in paragraph 38 above. - 21 -

Public Finance

69. Four levels of government provide services for Kenya's population: the East African Common Services Organization, the Kenya Government, the seven Regional Authorities and the 4O f1unicipal and County Councils. The regional and local authorities will assume their full responsibilities under the new constitution only in 1964/65. EACSO services are mainly self-supporting out of their own revenue. To the non-self-contained services are allocated one-half of the so-called Distributable Pool, consisting of 40% of company tax and 6%of customs and excise revenue of East Africa. The other half of the Pool is distributed equally among the three governments. The receipts collected in Kenya for the Pool in 1963/64 are estimated at Z2.08 million or 47.5%out of a total of L.38 million; her share o, the distributable surplus is £0.73 million.

70. In recent years central and local government revenue and expenditure have corresponded to about 200 of monetary GDP. The Central Government has been responsible for roughly three-quarters of public sector outlays, and County Councils, African District Councils and municipalities for the rest. The Central Government budget, divided into recurrent and development sec- tions, has increased from about M0 million in the middle 1950's to over £60 million in the current fiscal year (Table 27). Expenditure has consistently exceeded revenue raised in Kenya and the balance has been made up by the United Kingdom.

71. Recurrent revenue has risen by one-third since 1954-55, or from £36.3 million to nearly F50 million in 1963/64. Before the changes in the country's administrative and fiscal system which have followed independence, taxes provided about 38% of recurrent public revenue in Kenya, corresponding to 12$ of money GDP. For the Central Government, the proportion was 95. Direct and indirect taxes contributed approximately one-half each of government tax revenue through 1957/58 (Table 28); since then, however, receipts from direct taxes have stagnated or fallen under the impact of the economic depression while indirect taxation has been strengthened so that it now provides nearly two-thirds of all tax proceeds.

72. Government gross expenditure for current and capital purposes was over S56 million or 30% of monetary GDP in 1962/63. This is double the figure of Uganda per head of population and several times more than in Tanganyika. If spending by other tiers of government is added (estimated at over £12 million) public gross expenditure in the last year for which final figures are available, was responsible for 375 of monetary GDP. Recurrent expenditure doubled from 196 to 1952, and again from 1952 to 1955 to about £38 million as a result of the "emergency". As spending of an emergency character tapered off, outlays on regular government services and for financial obligations continued to climb rapidly. :xpenditure on economic services, particularly agriculture and roads doubled from 1954/55 to 1962/63, social services (education and healthi rose by 130%, and debt and pension payments nearly tripled from £2.1 to £8.9 million.

73. With the government unable to borrow on the local and London capital markets. increasing reliance has to be placed on the U.K. Government for finance of development and the current budget deficit. Outside the budget, - 2' - -

the U.K. also made substantial contributions to defense and the emoluments of overseas civil servants. An Economy Commission, set up in 1962, pointed to the very high standards of certain services and of administration generally, some of which the Commission found excessive even in the colonial context. With the impending departure of perhaps a major part of the European officers, a simplification and pruning of the government machinery was urgent. In addition the Commission made concrete proposals for reducing government grants and subsidies and for drastic cuts in government building and construction. These proposals, amounting to initial savings of about 11-1/2 million increasing to about Z3 million by 1965/66, were partly accepted by the government in the 1963/64 budget. In spite of this, and of higher receipts from new company taxation, the reintroduced estate duty and increased customs duties, the 1963/64 recurrent estimates showed a deficit of £9 million, to be covered by grants from the United Kingdom. Extra-budgetary contributions amount to some ill million. The development estimates included Z6.2 million for settleaent, mainly to be paid by the United Kingdom together with IBRD and CDC. For other development expenditure the United 1ingdom was expected to contribute E5.1 million. The sum total of grants and loans fro the United Kingdom would thus amount to £25 million for 1963/64.

7. The recurrent estimates for 1964/65 have just been presented to Parlia- ment but few details are available. Revenue from income tax is expected to rise, and there will be new sources of finance such as the recently introduced export taxes on sisal and coffee (l.4 million, of which one-half will be de- voted to the recurrent budget) and increased duties on certain foodstuffs, textiles and petrol. However, expenditures will also rise for purposes such as defense, debt service and pensions, localization and training, agricultural extension services (some of which have been taken over from development), external representation, unemployment measures, and general salaries revision. The budget is therefore expected to be in deficit by £1.25 million, which will be met by a United Kingdom grant. United Kingdom loan funds will be available for pensions and compensation payments, and special grants for OSAS assistance.

75.. Over the next few years, recurrent revenue may tend to fall as a result of the gradual transition to an African-run economy with lower individual incomes than in the present European and Asian communities. Moreover, implementation of the regional elements of the constitution would mean that the tax revenue in the governments hands would be reduced by one-third by transfer to the Regional Authorities. On the other hand, pressure for increased public services to the African population is likely to grow. The new development plan is expected to increase debt service, which at £5.3 million in 1963/64 already represents over 10% of government revenue, by £1.1 million (gross) by 1967/68, and other recurrent expenditure by Z3.5 million. In addition to finding finance for new development expenditure, installments are falling due in 1964/67 on a number of contractor-financed schemes totaling nearly £7 million, and Zh million of the £16 million of stock issued locally will have to be converted in 1965. These refunding operations are expected to raise debt servicing by Z0.7 million by 1967/68. The government may have to scrape all available reserves, primarily the funds now held in london for pensions and as assets of various public bodies, and also utilize Kenya's remaining margin in the Currency Board fiduciary issue to tide itself over the difficulties of the next few years. However, the fiscal situation is clearly untenable and the government is aware that strong measures are required to bring the budget into balance and to make it an instrument of providing savings for investment in development. - 23 -

III, THE DEVELOPVENT PLAN

76. The Kenya Government's new development plan, 1964/70, is aimed at raisirg incomes and welfare, as well as increasing African participation in the economy by providing equal opportunities, more education and training, and spcial financial and institutional resources0 The emphasis is on developing agriculture, which will provide the quickest returns in employment and increased exports. Private investors will be encouraged to develop manufacturing and services, largely aimed at providing import substitutes for the East African market. Throughout, projects will be promoted which make best use of, or tend to augment, scarce capital and high-level manpower resources while utilizing to a maximum extent plentiful unskilled labor. While every attempt will be made to attract foreign capital, efforts will also be directed towards increasing domestic savings, both public and private,, New economy measures and taxes are considered, as well as more vigorous efforts to borrow locally.

77. The plan appears more ambitious than the one proposed by the Economic Survey Mission (Table 30). Direct comparison between the two plans is made difficult by differences in coverage. The new plan projects ]132,577,000 for public sector expenditure for the six-year period, or an average annual investment of about v22 million. The first three years of the plan would require total public sector expenditure of ;69.6 million (1,62 million if land purchases are excluded) compared to ;42.1 million as suggested by the Survey Nssion, However, excluding amounts for power, post and telecommunications, and railways and harbors for which the Survey Mission suggested a separate program, public expenditure would be lz9.7 million or only about 8 million above the Survey Mission's proposal, the main difference being higher allocations for industry and basic and social services. Generally, therefore, the 1964/67 plan can be said to be fairly closely aligned to the suggestions of the Economic Survey Mission, and the deviations are explained more by the assumed availability of special finance and executive capacity than by any difference in priorities. However, in cases such as the Seven Forks Hydroelectric dam or the Nairobi-Mti- basa toll road, the economic justification is not clear. The following shows planned expenditure 1964/67:

J Tillion %

Agriculture and lands: settlement 8.2 13 other 10,2 18.4 16 29 Other natural resources 4.0 6 Industry, trade and tourism 3.2 6 Transportation: railways 7.5 12 other 5.6 13.1 9 21

Power 1009 17

Social and other services: education 4.3 7 other 8.3 12,6 13 20 6*2 100 - 24 -

78. On the assumption that certain expenditure totaling about Il million, which was previously paid for out of CDEW funds and shown on the development budget, should be moved to the recurrent budget in connection with financing being taken over by the Government, the following is financing envisaged for the first three years of the government program. ; Million

1964/65 1965/66 1966/67 Total % Local contribution 1.25 1.27 1.27 3.80 9 External available: settlement 6.98 3.69 .1.57 12.44 29 other 5.13 o59 0.35 6.07 L To be found 3.14 8.45 879 20-37 48 IT- 1141.20 11. 9tT 72. 100 79. Of the 120,4 million to be found, !16 million are believed to be "in prospect" since they are now under active discussion with various governments and agencies. Heavy reliance is likely to be placed on United Zingdom funds, but important amounts are also anticipated from Bank/IDA, AID and others (IDA has already been approached, in addition to tea, for trunk roads, tea roads, forestry, secondary schools and agricultural credit). Any remaining gaps will be filled, it is hoped, by loans or grants from governments which have indicated an informal interest in Ienyals development, Of the ;26.9 million to be spent by other public sector bodies in the 1964/67 period, at least half is considered as either available or in prospect. For the last three years of the plan, it is hoped that the National Provident Fund will provide 12 million per year in additional domestic finance.

80, The plan is expected to bring an increase in GDP of 50% from 1962 to 1970. This would require a growth in money GDP of 5.7% per year, as compared to growth rates of around h% in 1954-62. Two-thirds of the increment in production would be taken up by the growth in population - estimated at 2 million or 400,000 families - but there would still be room for an annual rise in African family income by 2-35' (from L170 in 1962 to 1200 in 1970) or even more, since Africans should benefit from the policy of income redistribution.

81. Agricultural production is expected to achieve a growth rate of 6-7% per year, raising output by over ;30 million by 1970a Over two-thirds of this amount would come from coffee, tea, sisal, sugar and cotton, and the rest would be provided by pyrethrum, rice, cereals, wool and dairy products. Exports of fan products would be increased by one-half or ;20 million. Manufacturing output is planned to expand by about 5% per year. The economic activity envisaged under the plan would barely suffice to provide a 3 annual increase in employat. 82. The plan is dependent on the provision of capital for public and private investment in an average amount of ;53 million (gross) per year (of which 131 million would be in the private sector) rising to 166 million in 1970. Capital formation would then represent 23% of money GDP or substantially more than in earlier years. Over one-half of net investment would have to be financed abroad The plan also presupposes external and domestic demand for agricultural and industrial products; projections are for a widening of the external deficit by only 'M million to 1970, largely thanks to the expected growth in exports nearly matching an expansion of imports by ]32 million, and to income from tourism and transport offsetting higher investment payments and a loss of contributions from the United Kingdom. On the other hand, for every 5% fall in average export prices, revenue would diminish by 19 million. The successful execution of the plan is dependent on the availability of skilled and high-level manpower, and since Kenya cannot expect to meet more than half the requirements by 1970 from her own resources, heavy reliance must be placed on outside aid. Finally, the plan calls for a rise in recurrent public expenditure including debt service by at least ;4.5 million by 1967/68 and z,2 million by 1970/71, 30-0% of which would have to be found by regional and local authorities out of their own revenue.

83. The first few years of the plan will be heavily influenced., both as regards projects and financing, by the contents of the 1960/64 program. Large projects such as land resettlement will continue according to prearranged plans, as will technical assistance activities such as the Overseas Service Aid Scheme and the "Teachers for East Africal program. The United Nations is also providing aid on a continuing basis through experts in various government depart- ments, and the United Nations Special Fund is spending about U1.3 million on programs for engineering training, agricultural and geological surveys (Lower Tana), and the East African livestock scheme. U.S. AID, Germany, and Sweden are assisting in training. Capital contributions already agreed by IBRD and IDA, the United Kingdom (110 million for 1964/65), U.S. and Germany, will be disbursed for settlement, tea and other agricultural purposes, DFCK, roads, secondary schools, water supplies and other local authority works. Soviet Russia, Yugoslavia and Mainland China have announced their intention to give technical aid and export credits.

84. It appears that aid offers received are not entirely matched with development priorities, nor are the economic implications of some of the recent offers clear. The new plan, which has been put together in a fairly short time in a year of great strain on the government, may therefore have to be revised when there is more knowledge of the resources that will become available. A continuous checking of the sector elements of the plan for consistency will also be instituted by the Government as part of a process designed to achieve a rolling plan which can be implemented by the annual budgets of the central and regional governments and other public bodiese Planning is the responsibility of the Minister for Finance and Economic Planning and of a Development Committee of which he is chairman, and ministers with economic portfolios are members. To assist in advising the Government, a Planning and Development Advisory Com- mittee has been established which includes members from outside the Government. Machinery for cooperation with the Regions and with other ministries is now being established in a Directorate of the Hinistry of Finance and Economic Planning. Planning officers will be posted to all economic ministries. Coordi- nation with EACSO services will also be given greater attention. - 26 -

IV. PROSPECTS AND CONCLUSIONS

85. The production outlook for the next few years is uncertain since so much depends on the maintenance of output from large farming and of a minimum of extension services in African agriculture. The forecast on these depends in large part on a political evaluation. As of the present, if Kenya were insulated from the rest of Africa and the Prime iinister proved to be long-lived, the conclusion would be that the chances are quite good that kenya will be able to get through the transition period fairly well and the total marketable output from the large farms and African agriculture will continue to grow, Un- fortunately, Kenya is not insulated from the rest of the continent and it is reasonable to expect that as a result of events elsewhere having repercussions on Kenya the large farms will be taken over more rapidly than they can be handled by the new African owners and the extension services will deteriorate with the too rapid departure of expatriates, If this also coincides with the death of the Prime Minister and a consequent struggle for power or passage of power into irresponsible hands, the net result could well be a great deal of damage to the Kenya economy and call into question even its long-term future. The foregoing is a risk that must be taken seriously but which cannot be evaluated precisely,

86. Even without a drastic rundown of the European farms and estates or a general reduction in agricultural efficiency, prospects for major crops are mixed, As for coffee, output from plantings already made will grow by over 80% to some 67,000 tons by 1968, whereas Kenyats quota under the ICA (including her exports to the United Kingdom) is about 30,000 tons less. Kenya is likely to get a small share of the reallocation of the 1963/64 "shortfall" which is currently being decided, but only a major revision - as in the case of Ethiopia- would bring her quota anywhere near projected output. Thus, for large quantities of Kenya coffee, no market is assured.and they nay have to be sold at little or no profit. Coffee prices are generally expected to start declining from present levels in a year or two, and although Kenya coffee should prove less vulnerable than some other types, it is likely to suffer, Since production costs are low, physical output may go on rising as forecast. 87. In tea, yields from present plantings and firm plans, particularly in the small farm sector, will increase by as much as 8-9% annually over the next few years. Kenya tea being of medium quality may be less affected by any setback in prices resulting from possible over-production, and the rising output should therefore provide the country with a steadily growing income. Sisal has considerable potential in Kenya, but is a fairly capital intensive crop mainly suitable for plantation agriculture. Even with some decline in present high prices and in spite of the new export tax an expansion of production would be profitable; but a rise in output would be dependent on private investment which may or may not be forthcoming. The scope for expanding cotton production is also large and this could prove a comparatively safe source of export income. However, substantial efforts by qualified extension staff and considerable development cost would be required as envisaged in the new plan. The outlook - 27 -

for pyrethrum is clouded: there will be no significant increase in production, while stocks are being run down and the subsequent expansion is likely to be cautious; but the long-range prospects appear to be good. In the food crops, sector maize and wheat both have a good chance of profiting from an improvement in quality which might lead to increased production and sales. Output of rice and sugar is expanding towards self-sufficiency and may later be able to gener- ate some additional export income. Subsistence production, disregarding temporary setbacks and advances, is likely to continue rising at the rate of population growth. All told, agricultural output, ceteris paribus, may grow by 3-4% per year or slightly less than in 1954-62. An acceleration in growth to the 4.5"% envisaged by the new development plan would appear possible, provided the extra effort in capital and manpower can be made and markets are available. 88. Other branches of the economy are likely to show differing trends, For the next year or two, however, real growth rates of 5-6% as suggested by the development plan might be within reach in the monetary economy, resulting in annual increases in total production of 4-5% or 1-2% on a per capita basis. Extending the perspective over a few more years, however, produces a less satisfactory picture. The future of large-scale farming then becomes increasir- ly in doubt, as does the efficiency of government services with chances good for an exodus of expatriate officers before a sufficient number of Africans have been trained. If capital formation does not pick up, mainly by a renewed inflow of funds on private and public account, it is unlikely that production growth can continue unchecked. In exports, Kenya t s coffee surplus could prove an embarrassment rather than an asset. To maintain past growth rates and achieve the plan targets would then require a very substantial effort including an appreciable strengthening of the budget and a possible reallocation of development expenditures to achieve maximum effect on current production. On the other hand, provided Kenya's political problems can be overcome and sound economic and financial policies are adopted, the long-term perspective for 1970 and beyond is not bad. The country is reasonably well off in terms of production potential and could develop a range of products which would assure it of a satisfactory growth performance, Whether this will be possible depends overwhelmingly on how Kenya comes out of the transitional period immediately ahead. 89. Exports should continue to rise but presumably at a slower rate than in 1962 and 1963 when there was a substantial recovery from previous low levels, An annual growth in overseas export values of 3-5% - which would be roughly in line with the assumptions under the development plan - does not seem unduly optimistic on present prospects for available quantities and prices, particularly if the new markets now sought by Kenya should prove to be profitable. The importance of maintaining trade within East Africa need hardly be stressed. Outside the trade balance, the withdrawal of British troops from Kenya will mean a loss of receipts only partly compensated by external assistance for Kenya's own military forces, and by a possible rise in tourist revenue. The outflow of funds representing profits and interest on loans will increase. For the foreseeable future Kenya will continue to rely heavily on capital imports from abroad to balance her deficit on current account, Her own sterling reserves are not significant and largely tied up for various purposes; nor can - 28 - the holdings of the Currency Board be freely disposed of. The commercial banks no longer have overseas balances to accommodate a major deficit on the balance of payments.

90. The fiscal position of the Kenya Government, although strengthened by economy and new revenue measures in the last three budgets, remains under considerable strain. Not counting extra-budgetary borrowings from the United King- dom for commuted pensions and compensation payments to retiring expatriates, and grant support for overseas allowances to remaining British civil servants, the 1964/65 recurrent budget is expected to be in deficit with at least ;1.25 million. Local finance can be expected to provide only about one-tenth of development revenue. For the next few years, recurrent expenditure is expected to continue rising by at least bl million a year, while a corresponding growth in revenue is not assured. On the contrary, revenue from taxation and from import duties on consumer goods may tend to decline as a result of economic and social changes. Even assuming new government measures to produce public savings, therefore, contributions to development from this source are likely to remain modest, Nor do the chances of raising significant amounts of private capital for public investment in Kenya appear promising in the foreseeable future, although the establishment of a National Provident Fnd could provide some funds in the latter part of the 1960's.

91. In recent years, private investment, now at about L20 million or two- thirds of the total, has been financed by domestic savings (there may even have been a net outflow of private capital of the order of Z3-h million in 1961-62). For the near future a pick-up in private capital formation based on domestic resources might therefore be possible, but for a renewal of sustained rapid growth recourse to increased capital imports of a substantial magnitude would again be necessary. In relation to present levels of gross capital formation (15% of GDP in 1963), a gross savings ratio of around 12% of GDP is not out of line; but in the longer run an increase in both these ratios would and should ba possible to provide a sounder basis for development and economic growth, The new plan aims at raising gross investment to 18% of GDP by 1970,

92. Kenya is already saddled with a considerable foreign debt, which is the counterpart of a comparatively extensive infrastructure. In April 1964, Kenya's external public debt, including undisbursed amounts, was estimated at about $173 million equivalent (Table 32)a Adding her contingent liability for a notional one-third or about $57 million of the EACSO debt of $173 million (legally, she might be held responsible for the whole of the debt) would give a total external debt burden of $231 million. Debt service payments abroad as of January 1, 1964 were estimated at $12.1 million, or about 10o of 1963 overseas export receipts. Including her notional third of the EACSO debt - to the servicing of which Kenya's economy will have to contribute - the amount is $16 million and the relation to export is 13%. Service on the 1964 debt reaches a maximum of $21.4 million ($27.7 million including EACSO debt) in 1970, a peak due to use of the sinking funds system. In relation to government recurrent revenue 1963/6h, the foreign public debt service of Kenya alone amounts to about 10% on January 1, 1964. Including internal debt, the public debt provisit - 29 -

in the 1963/64 estimates represents 12% of recurrent revenue. Further extensive borrowings are envisaged under the new development program. A most unsatisfactory element in the present debt structure is the contractor finance schemes for main roads, for the Mombasa water supply and for a Nairobi housing project. Kenya has borrowed on short term for projects which will benefit the economy over a long period, but will produce little extra revenue during the next few years when repayment is to be made, Together with finance for development, conversion of this and other debt will raise annual debt service payments by at least another $10 million by 1970, thus further increasing the ratios indicated above, Should the development effort fail to produce the increase in production and exports which is planned for, or government revenue fail to expand, the position would be even less satisfactory. Considering the heavy reliance on the United Kingdom for financial support over or outside the recurrent budget, Kenya cannot at this stage be considered creditworthy for Bank loans.

93. Kenyats performance has been quite good in the year following internal self-government and in the six months after Independence. The Government has scored high in its handling of the many difficult and pressing issues, includJng tribalism which is now less of a problem than a year ago Racial relationships have also improved, and the confidence of investors appears to have been partly restored. Growth in production and exports has been satisfactory and wages and prices have remained stable. Schemes such as settlement and smallholder tea are showing an encouraging measure of success, The fiscal position, on the other hand, remains under considerable strain as the forces of transition work themselves out, and the outlook for the next few years calls for strong government measures to close the budget deficit and to start producing savings for development. Prospects for further economic growth are good provided political stability is maintained and external financial and technical aid can be obtained, Kenya's new developnent plan, produced after recommendations by the Economic Survey Mission, should provide a largely acceptable framework for economic expansion, Considering the already heavy burden of foreign debt and the precarious public finances, the emphasis should be on non-conventional terms in any direct aid to Kenya. STATISTICAL APPENDIX

1. Population: Growth, Composition and Distribution 2. Gross Domestic Product at Factor Cost 3. Gross Fixed Capital Formation 4. Acreages under Principal Crops 1960 and 1963 5. Production of Major Cash Crops 6. Livestock Production 7. Prices Paid to Producers for Principal Crops and Livestock Products 3. Gross Farm Revenue 9. 1ineral Production 10. Manufacturing Industry 11. Building Activity 12. Electricity Generation and Distribution 13. Transport Services 1h. Public Services 15. Foreign Trade: Value, Volume and Prices 16. Volume of Domestic Exports 17. Value of Domestic Exports 18. Selected Net Imports 19. Retained Imports 20. Principal Trading Partners of Kenya 21. Interterritorial Trade 22. Principal Exports to Tanganrika and Uganda in 1963 23. Balance of Trade and Payments 2t. Sterling Assets of Kenya 25. Employment, Wages and Prices 26. Money and Banking 27. Kenya Government Gross Revenue and Expenditure 28. Kenya Government Revenue 29. a. Kenya Government Expenditure: Recurrent Expenditure b. Kenya Government Expenditure: Development Expenditure 30. Expenditure on the Development Plan 31. Financing of the Development Plan 1964/65-1966/67 32. External Public Debt

Statistical Sources:

Tables are based on the Statistical Abstract, 1954-1963, the Kenya Trade and Supplies Bulletin, May 1963, the Economic Survey, 1963, Kenya Statistical Digest, December 1963, Review of Agriculture, 1963, the Annual Reports of the East African Currency Board, 1954/5-1962/63, and Capital Formation in Kenya, 1954-1960, as updated by the Abridged Annual Trade Statistics for the year 1963 and data provided by the Economic and Statistics Division of the Kenya Treasury and by the East African Statistical Department. TABIE I Population: Growth, Composition and Distributioni) (Thousands)

A. Population estimates by race

1948 a954 1955 1956 1957 1958 1959 1960 1961 1962 196 African and Somali 5,5T 67i2 6,769 6,97 7 =81 7,93 7W 777 8,02 8 7 European 30 45 49 54 58 59 60 61 59 56 53 Arab 24 28 29 30 31 32 33 34 34 34 35 Asian and Other 101 138 146 153 162 165 169 173 177 180 184 Total 5,406 6,783 6,993 7,209 7,432 7,652 7,880 8,115 8,352 8,595 847

B. Population of Regions 1962 C. Major African Tribes, 1962 Coast - 741 Kikuyu 1,642 North-Eastern 269 Luo 1,148 Eastern 1,558 Luhya 1,086 Central 1,324 Kaiba 933 Nairobi 344 Kisii 538 Rift Valley 1,751 Meru 439 Nyanza 1,634 ijikenda 415 Western 1,015 Kipsigis 342

D. Population of main towns, 1948 and 1962. 1948 - 1962 .African Non-African Total African Non -African Total Nairobi 64 55 119 156 111 267 Monbasa 43 42 85 112 68 1C0 Nakuru 13 5 18 30 8 38 Kisumu 5 6 11 14 9 23 Eldoret 5 3 8 15 5 20

1)Population censuses were held in 1948 and 1962 (with somewhat differing coverage). Figures for intervening years are mid-year estiates based on.1962 census.

Source: Statistical Abstract 1963 Economics and Statistics Division TABLE 2 Gross Domestic Product at Factor Cost (b million at current prices)

1963 Percent. Moneta economy 1954 195 1956 1957 1958 1959 1960 1961 1962 1963

Agriculture 19.8 20.0 24.9 23.8 24.8 25.3 29.4 28.3 28.9 33.1 12.8

Livestock 6.4 6.9 7.7 8.1 8,3 8.6 9.2 9.0 9.6 9.4 7.6

Forestry 0.6 0.8 0.8 0.7 0.7 0.8 0.8 0.9 1.0 0.8 0.3

Fishing & hunting 16 1.5 1.6 1.0 0.9 0.9 0.5 0.5 0.8 0.9 0.4

Mining & quarrying 0.9 1.3 1.4 1.3 12 1.1 1.1 0.9 0.3 0.9 0.4

Manufacturing 14.1 17.4 18.2 19.8 20.5 20.2 21.6 22.7 23.0 24.4 9.4

Construction 6.3 8.0 9.3 9.6 8.4 7.9 7.9 7.8 6.8 4.9 1.8

Electricity & water 1,2 1.5 18 2.1 2.4 2.6 2.8 2.3 3.3 3.6 1.3

Transport, etc. 11.8 15.2 15.8 18.6 17.7 19.0 20.3 21.2 22.3 24.8 9.5

tiolesale & retail 21.6 25.3 25.8 27.5 26.4 27.7 29.0 29.6 30.1 31.9 12.3 trade

BanIdng, insurance 1.4 2.2 2.5 2.8 3.3 3.5 3.5 3.9 4.0 4.2 1.6 & real estate Government services 13.9 19.3 18.8 20.2 20. 21.5 2.91)27.0 28.1 29.7 11.5 Other services (i. rents) 13.7 15.4 16.5 18.8 20.6 22.6 24.2 22.3 22.6 24;8 9.5

TOTAL - - 112.5 134.7 146.2 154.2 155.5 161.8 175.3 176.8 180.9 193.4 74.4

Subsistence aL- ture ahd r6latoa 45.6 45.8 48.0 51.7 E2.6 53.0 50.2 47.9 63.2 66.7 25.6 activities

TOEA PRODUCT 158.1 180.5 193.2 205.9 208.1 214.3 22 . 224.7 243.7 260.1 100.0

1) Incl. Government Officers' Salaries Revision

Source: Economic Survey 1963 Economics and Statistics Division TABLE 3 Gross Fixed Capital Formation 1)

(L million, at current market prices)

2) 2) 1963 195b 195 1956 1957 1958 1959 1960 1961 1962 1963 Percent

Residential buildings 5.9 7.4 9.9 8.0 7.1 7.2 6.8 4,5 3.0 2.1 7.2

Non-residential buildings 5.1 6.8 8.3 7.8 7.1 7.1 6.4 4.4 3.7 2.7 9.3 Construction & works 10.0 9.9 7.7 11.5 10.1 10.2 9.9 9.,2 11.8 8.1 27.9

Transport & equipment 8.4 11.7 9.4 9.1 8.5 8.4 10.7 6.2 7.6 8.6 29.7

Machinery & other equip- 6.1 8.0 10.4 9.2 7.2 7,4 7.6 716 7.2 75 2(.9 ment 6.1 8.0 10.6 9.2 ?.2 7__ 7.6 ?,6 7.2 7. _ 2_.9 TOTAL 35.3 43.8 45.7 45.6 40.0 40.3 41.4 31.9 33.3 29.00 100.0

Of which:

Government 8.6 9.8 10,3 10.9 9.6 10.5 12.3 12.4 10.8 7.8 26.9

EACSO 8.2 9.2 4.7 5.5 3.7 3.2 2.1 2.1 2.0 1.6 5.5

Non-African agricul- 4.4 4.4 4.8 5.5 5.7 5.7 5.4 4.6 3.6 3.7 12.8 tire Other private 14.1 20.4 25.9 23.7 21.0 21.0 21.6 129 16.9 15.9 54.8

1) )African agricultural sector not included 2 Preliminary.

Source: Capital Formation in Kenya 1954-1960

Statistical Abstract 1963

Economics and Statistics Division TABLE 4

Acreages under Principal Crops 1960 and 1963 (thcuscnd Arcs)

Crops Large r arns Sall Farms Total 1960 1963 ) 1960 196311 1960 1963

Coffee 71 76 50 95 121 171 Tea 37 h4 3 8 40 52

Sisal 245 269 11 25 256 29h

Wattle 85 66 99 55 184 121

Sugar 42 46 65 47 89 93 Pyrethrum 40 29 11 21 61 50

Wheat 248 270 4 11 259 289

Maize 142 112 n.aa2/ ncak 142 112

1) Preliminary 2) Available figures not comparable Source: Statistical Abstract 1963 Economics and Statistics Division TABLE 5 Production of Hlajor Cash Crops A=smal %IFi,8W,dd= e farms

1954 1955 1956 1957 1958 1959 1960 1961 1962 1963

Coffee A 0.1 1.0 0.8 1.5 2.3 3.6 4.6 7.9 8.1 9.3 B 12.2 11.6 23.1 17.0 18.5 19.6 18.3 25.2 19.3 26.4 12.3 12.7253.9 18.9 20.8 23.2 23.4 33.1 27.4 35.7

Tea A - - - - - 0.1 0.1 0.2 0.3 0.6 B 7.8 8.5 9.5 9.3 11.2 12.3 13.5 12.2 15.9 17.2 7.8 8.5 9.5 9.8 11.2 12.4 13.6 12.4 16.2 17.8

Sisal A - 0,3 0.8 0.1 - 1.5 3.0 6.3 2.0 4.4 B 34.4 37.6 38.8 41.o 46.o 53.7 59.6 56.0 56.7 65.7 34.4 37.9 39.6 41.1 46.0 55.2 62.6 62.3 58.7 70.2

Wattle A 4O.5 46.9 38.2 25.8 25.4 18.1 19.0 16.8 22.0 22.3 B 19.0 20.2 23.8 23.6 36.1 28.3 31.0 37.1 39.0 26.5 59.5 67.1 62.0 I9.4 61.5 46.4 50.0 53.9 61.0 48.8

Pyrethrumi A 0.2 0.3 0.3 0.4 0.4 0.6 1.8 2.8 2.7 1.8 B 1.9 2.4 2.3 3.0 3. b.2 6.7 7.5 7.3 3.9 2.1 2.7 3.1 3.4 3.8 4.8 8.5 10.2 10.0 5.7

Theat A ------0.7 0.2 1.0 (1.1) B 132.6 132.6 120.9 125.1 102.1 96.2 126.7 99.5 83.1 136.5 12'.D 132. 120.9 125.1 102.1 96.2 127.4 99.7 4.1- (137.6) Maize A 129,0 116.0 58.1 57.0 69.6 79.7 73.2 62.7 71.3 (98.0) 61.3 89.3 96.5 80.0 87.5 76,5 70.4 76.4 85.4 119.7 190.3 205.3 1.7 137.0 157.1 156.2 143.6 139.1 156.7 (217.7) Cotton ]int A - 2.8 3.5 1.8 2.5 3.7 4.1 2.8 1.6 (2.6) Rice Paddy A n.a. 5.6 2.8 4.3 5.4 4.2 9.8 14.6 14.3 12.4

Cashew nuts A 0.9 1.5 2.3 1.7 1.7 1.9 4.8 5.4 2.8 (4.4) Castor seed B 4.3 3.4 2.5 4.2 4.6 1.8- 2.7 3.6 3.6 (3.6)

Baarley B n.a. 12.6 24.9 27.6 30.2 24.0 20.7 13.3 9.9 (19.2)

Sugar cane B n.a. n.a. n.a. n.a. n.a. 290.0 335.0 438.0 483.0 545.8

Scurce: Statistical Abstract 1963 Economics and Statistics Division A Iational Cash Crops Policy for Kenya TABLE 6. Livestock Prduction

A=small farms, B=large farms

1954 1955 1956 1957 1958 1959 1960 1961 1962 * 1963

Sales of livestock for slaughter (thousand heads)

Cattle A 29.7 42.9 34.4 23.8 25.3 43.5 53.8 59.0 62.4 (60.7)

B 46 .. 46.3 50.8 53.5 81.9 96.8 100.9 116.0 111.1 (104.1

TOTAL 76.1 89.2 85.2 77.3 107.2 140.3 154.7 175.0 173.5 (165.3)

Sheep and goats A 105.2 101,6 128.6 115.2 130.2 108.4 104.4 89,5 120.9 (12. 6)

B 370 38.7 32.2 32.3 34.6 48.1 56.3 69.2 70.1 ( 51.5

TOTAL 142.2 140.3 160.8 147.5 164.8 256.5 160.7 158.7 191.0 (176.3)

Pigs 55.2 46.2 52.3 68.4 92.6 94.0 83.4 60.9 48.8 48.3

Dairy Produce

Butter (mill. lbs. 9.1 9.9 10.9 10.8 13.3 12.5 12.6 11.5 12.3 12.1

Cheese (mill. lbs-P 1.3 1.1 1.3 1.3 1.2 2.0 1.3 1.4 1.5 1.3 Ghee (mill. Ibs.) 1.6 1.8 1.9 1.9 1.9 2.0 2.0 2.1 207 (2.0

Milk (mill. gal.)2) 12.8 14d2 15.6 15.8 17.1 18.'4 19.0 17.9 17.9 17.5 Eggs (mill. doz.)2) 1,. 1.3 1.4 1,5 14 1.4 1,9 2.0 2.1 1.9

1) Factories and large farms

2) Large farms only

Source: Statistical Abstract 1963 Economic Survey 1963 Economic and Statistics Division TABL

Prices Paid to Producers for Principal Crops and Livestock Products-1/

1954 195 1956 1957 1958 1959 1960 1961 1962 1963

Clean coffee, 7 per ton 509 427 437 521 438 393 389 315 340 280

Tea, Sh. per lb. 2.36 2.90 2.69 3.40 3o87 3.,92 4.26 4.17 4.49 4.13

Pyrethrum, Sh. per cwt. 276 293 292 288 285 303 314 261 242 271

Sisal, i per ton 65 59 60 53 53 68 81 74 78 118

Wheat, Sh. per bag 53 52 51 53 52 52 49 47 47 47 Maize, Sh. per bag 39 35 35 38 35 27 32 36 36 24

"A" Grade meat, Sh. per lb. 1,10 1,10 1,18 1,20 1.20 1.20 l.25 1*30 130 1e30

Butterfat, Sh, per lb. 3.33 3.21 3.15 3.07 2.38 2.77 2.83 2.82 2.89 2.92

1/ Production in crop years applied to calendar years in which crop year ends.

Source: Statistical Abstract Kenya Trade and Supplies Bulletin Economics and Statistics Division TABLE 8

Gross Yarm Revenue (, ItillIion)

Composition A. Small farms 1956 1957 1958 1959 1960 1961 1962 1963 1963 (%)

Crops:

Coffee 0.5 0.9 1.3 1.8 2.2 2.8 3.3 3.0 26.1 Cereals 1.1 1.5 1.4 1.2 1.3 1.5 1.5 (1.9) 16.5 Pyrethrum 0.1 0.1 0.1 0.2 0.5 0.6 0.5 0.4 3.5 Cotton lint - Oa4 0.3 0.5 0.5 0.5 0.5 (0.5) 4.3 Tobacco, sugarcane,) oilseeds, tea ) - O 0.3 0.1 0.3 0.1 (0.7) 6.1 Sisal - - - 0.1 0.3 0.4 0.2 o.6 5.2 Wattle 0.5 0.3 0.3 0.2 0.2 0.2 0.2 0.2 1.7 Other crops 1.1 1.3 1.5 1.7 1.6 1.7 1.3 (1.3) 11.4 TOTAL 3.3 4.5 5.3 6.0 7.0 8.1 7.9 (8.6) 74.8

Livestock and dairy products: Cattle and calves 1.6- 1.8 1.9 1.8 1.9 1.8 2.1 (2.1) 18.3 Other 0.6 0.7 0.7 0.5 0.5 0.5 0.7 (0.8) 7.0 TOTAL 2.2 2.5 2.6 2.3 2.4 2.3 2.8 (2.9) 25.2 TOTAL GROSS REVENUE 5,5 7.0 7.9 8.3 9.4 10.4 1Or7 (115) 100

B. Large farms

Crops:

Coffee 9.6 8.9 8.3 7.7 7.2 7.6 6.2 7.1 17,7 Tea 2.9 3.0 4.0 4.4 5.3 4.8 6.6 6.6 16.5 Sisal 2.4 2.2 2.4 3.6 4.7 4.1 4.4 7.9 19.7 Wattle 0.3 0.2 0.14 0.3 0.2 0.3 0.3 0.3 0.7 Cereals 6.2 6.8 6.2 4.9 5.7 4.8 4.5 (4.7) 11.7 Pyrethrum 0.8 1.0 1.0 1.2 2.1 1.9 1.7 1.2 3.0 Sugar 0.4 0.6 0.7 0.7 0.8 1.0 1.1 (1.2) 3.0 Other crops 1.8 1.7 1.7 1.9 2.1 1.8 1.7 (1.4) 3.5 TOTAL 24.4 24.4 24.7 24.7 28.0 26.3 26.5 (30.4) 75.8 Livestock and dairy products:

Cattle and calves 1.9 1.9 2.2 2.4 2.7 2.8 2.7 (3.0) 7.5 Milk 2.9 2.6 2.6 2.8 3.0 2.8 2.9 (2.6) 6.5 Butter and cheese 1.6 1.6 1.4 1.7 1.7 1.6 1.7 (1.5) 3.7 Other 1.2 1.2 2.1 2.3 2.4 2.1 2.3 (2.6) 6.5 TOTAL 7.6 7.3 8.3 9.2 9.8 9.3 9.6 (9.7) 24.2 TOTAL GROSS REVEITE 32.0 31.7 33.0 33.9 37.7 35.7 36.1 40.1 100

Sources: Statistical Abstract Economic Survey 1963 Econmic anm Statistic3 Division TABLE 9

Mineral Production

1954 199 1956 1957 1958 1959 1960 1961. 1962 1963-

Soda ash and soda, '000 tons 96.1 124.7 146.3 1184. 111,0 1533 127.0 1 44,7 125,0 104.2 1 Million 1,25 1,31 1.59 1.34 1.28 1.76 1,43 l,60 137 1.30

Salt, '000 tons 18.8 25.4 21.9 22.6 18.7 19.2 21.9 22,6 18,6 327 11oco 156 201 186 179 147 146 167 183 150 278 LAme and limestone, '000 tons 15.3 18.4 13.3 15.7 158 167 24o9 20.0 18,0 16,2 L'000 81 75 82 88 100 106 147 106 110 97

Cement copper tOO tons - - 0.9 2.1 2.0 2,0 1,8 2,5 2,2 2,2 T1000 - - 189 422 384 48 413 533 5o5 505 Gold, '000 troy ounces 6.6 9.5 13.8 7.4 7.8 9.1 8.6 123 9*3 10.2 00CO 82 120 173 92 97 114 108 154 116 129

l/' Preliminary

Source: Statistical Abstract Economic and Statistics Division TABLD 10

Manufacturing Industry

- Number of Nunbers Gross Production Net-Production INDUSTRY Establishments Fmployed (r000) L Mill. Lill. 19 7 1961 197 1961 1957 1961 11957 1961

Food Processing

Meat, dairy & canned 32 34 3.0 4.1 7.2 10.7 0.8 1.5 products Grain mill products 50 45 2.3 2.2 7.2 8.6 1.1 1.5 Sugar 4 4 1.8 1.7 0.9 1.6 0.3 0.4 Baking, confectionery 58 S 1.9 2.0 2.1 2.5 0.4 0.5 and misc. foods Beverages and tobacco 3 40 4.1 3.8 7.5 7.8 3.6 3.5 TOTAL 187 177 13.1 13.8 24.9 31.2 6.2 7.4

Textiles & Footwear, etc. Textiles and clothing 11 23 2.0 3.9 1.2 2.6 ( ) Footwear 1 2 0.6 1.0 0.9 1.4 0.7 1.5 Leather & rubber products 13 17 0.5 0.7 0.5 0.9 0.1 0.2

TOTAL 25 42 3.1 5.6 2.6 4.9 0.8 1.7

Wood Processing Tixber & wood products 85 77 8.4 6.1 1.6 1.3 0.7 0.7 Furniture & fixtures 114 79 1.7 1.2 1.0 0.9 0.4 0.4 Paper products & printing 64 76 2.3 3.2 2.3 3.7 .1.1 1.5 TOTAL 263 232 12.4 10.5 4.9 5.9 2.2 2.6

Chemical Products 48 57 3.7 3.7 4.4 9.9 1.5 2.3

Clay & Cement Products 33 28 3.0 2.4 3.3 3.8 1.5 2.1 IMetal & Machinery Metal products 67 52 2.3 2.5 2.6 3.7 0.6 1.1 MYiachinery 51 60 1.0 1.1 0.7 0.9 0.2 0.4 Tiansport equipment, 142 126 9.2 9.7 4.3 4.7 1.9 2.0

TOTAL 260 238 12.5 13.3 7.6 9.3 2.7 3.5 MiscellaneousNanufacturin& 24 22 0.4 0.4 0.5 0.5 0.2 0.2

GRAND TOTAL 840 796 48.2 49.7 48.2 65.5 15.1 19.8

Source: Statistical Abstract 1963 TABLE 11

.Building Activity

1954 1955 1956 1957 1958 1959 1960 1961 1962 1963

Nuber of new rivate buildings completed:

Residential 416 577 830 773 636 675 562 123 56 76

Non-residential 134 180 292 276 205 200 15 93 91 80

TOTAL 550 7571.122 1.o49 841 876 716 216 147 156

Estimated cost (L Million)

Residential 2.0 2.7 5.2 4.9 3.5 3.8 3.3 0.8 0.3 0.4

Non-residetial 1.9 216 3.6 3.2 2.6 3.9 2.3 1.6 1.1 0.6

TOTAL 3.9 5.3 8.8 8.1 6.1 7.7 5.6 2.4 1.4 1.0

Source: Statistical Abstract

Eccnomcs and Statistics Division TABLE 12

Electricity Generation and Distribution

1954 195e 1956 197 1958 1959 1960 1961 1962 1963

Installed Capacity ('000 kW): ThArmal 36,9 40,8 5As 49*1 56.3 55.1 56.4 56 c4 74o 92.2 Hydro 17.3 25, 26.0 26,0 26,0 26,C,0 25,9 25.9 26,4 25,3 TOTAL 54,2 66,3 81. 8561 82.3 81. 82,3 82.3 100,4 117.5

Generated and Imported (Million kWh): Gonerated 179,4 208,9 245.6 267,9 213.7 212,2 2213 215,2 240.4 263,4 Imported 18.8 22.3 23.1 23. 114.0 151,1 181.3 211,0 208 204,6 TOTAL 198.2 231.2 268.7 291.3 327.7 363-3 402.6 426.2 448.5 468.0

Sales (Million kWh); 162,1 194m6 223.1 242.8 266,6 301.1 335,8 356.9 373.5 393,4

Source: Statistical Abstract 1963 Economics and Statistics Division TABLE 13

Transport Services

1954 1955 1956 1957 1958 1959 1960 1961 1962 1963

Rail traffic 1)

Passenger train miles 1.2 1.6 1.9 2.6 2.6 2.6 2.6 (million) 2.5 2.5 2.8 Gcods traffic tons miles 1.688 1.482 1.687 1.680 1.743 1.807 1.850 1.832 (million) 1.886 2.0 Ports

Cargo handled at 11ombasa (million tons) n.a. n.a. n.a. 265 26gn.a. 2.7 2.8 2.9 n.a. Air traffic (Nairobi & Mombasa)

Passengers handled (1000) 204 228 255 257 273 309 384 486 533 n.a.

Freight (million kgs.) 3.6 4.2 4.3 4.5 3.9 4.7 5.5 6.5 6.7 n.a.

Road traffic:

Motor vehicles licensed ('000) 50.0 56.9 63.6 67.7 73.4 77.7 89.5 84.5 87.1 n.a. New registrations ('000) 8.9 1.2.2 12.2 11.0 12.1 12.8 14.1 10.6 11.5 11.5 Post & telecommunications

Letters etc. handled (million) 68.7 73.8 68.7 76.7 66.7 72.5 74.2 73.1 73.9 72.0 Telephones in use ('COO) 24.1 27.1 29.4 32.5 36.3 39.7 42.7 45.0 45.9 n.a.

Total traffic carried by the East African Railways

Source: Statistical Abstract 1963

Economics and Statistics Division -TABIE 14

Public Services

1954 1955 1956 1957 1953 1959 1960 1961 1962 1963 Education:

Pupils enrolled ('000) Primary 386.2 432.7 486.9 548,o 651.8 719.5 781.3 870.4 935.8 891.6 Secondary 9.1 10.0 10.9 11,3 15.1 18.0 19.4 21,. 25*9 27a5 of which: African 2.1 2.2 2.6 3ol 3.9 4.9 5.4 6.4 9.1 10.6 Health Hospital beds (ooo) 7.8 7.8 7.8 7.8 9,2 9M? 10.4 11,0 10,6 11.0 Cases treated (million) 1.42 1.36 1.49 1.21 L,09 1.19 132 1.33 1.6 nea, Justice

Convictions ('000) 84.4 86,9 93.2 112.3 120,7 119.3 120.7 124,2 133,2 n9a.

Source: Statistical Abstract 1963 TABLE 15 1) Foreign Trade: Value, Volume and Prices

(1954=100)

1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 2)

A. Value

Exports 100 127 143 130 145 163 172 172 185 211

Imports 100 115 112 119 101 102 116 114 116 n.,a.

B. Volume

Exports 100 133 151 i4l 170 185 195 204 225 256

Imports 100 118 104 108 95 95 105 114 112 n,a.

C. Prices

Exports 100 95 94 92 85 88 88 84 82 82

Imports 100 98 108 110 106 107 110 100 104 n.a,

3)e- .1J Terms of trade 100 100 114 120 125 122 125 119 108 n.a.

1/ East African trade not included 2/ Provisional 3/ Ir.,ports over exports

Source: Statistical Abstract East African Statistical Department TABLE 16 Volume of Domestic Exports 1) (1000 tons)

1954 1_ 1956 1957 1958 1959 1960 1961 1962 1963

Meat and preparations 2.0 1.0 0.8 1.6 6.0 8.4 7.1 7.3 9.0 8.6

Butter and ghee2) 1.3 1.5 1.9 1.5 3.3 2.6 2.5 2.2 3.3 ?.9 Maize, unmilled 45.9 77.2 4.2 22.6 97.8 54.3 9.2 0.2 59.2 86.0 Pineapples 2.4 4.1 6.2 5.2 5.1 5.0 4.5 4.5 7.4 9.4 Coffee, not roasted 10.8 19.4 26.7 22.3 25.0 25.8 27.8 32.2 30.5 36.8 Tea 4.8 4.8 7.0 7.2 8.1 9.4 10.7 9.8 13.2 14.7 Hides and skins 4.4 5.0 4.6 5.6 4.3 5.4 6.6 7.2 6.3 5.5 Wool, raw 0.5 0.6 0.7 0.7 0.7 1.0 0.9 1.1 1.4 1.5 Cotton, raw 2.7 2.3 3.1 1.4 2.2 3.2 3.5 2.5 1.8 1.9 Sisal, fibre and raw 32.2 33.5 25.2 39.6 42.1 51.0 57.0 57.5 56.0 63.8 Pyrethrum, flowers 1.1 0.9 1.3 1.7 1.8 1.0 3.1 2.5 1.5 1.7 Sodium carbonate 102 117 137 116 104 148 115 143 111 106.9 Wattle bark extract 24.2 33.2 21.8 26.3 19.0 19.3 14.3 17.0 16.4 13.8 Cement - - - - 4.0 25.1 42.4 93.6 103.9 108.9 Copper and alloys unwrought - - - 2.5 3.3 3.2 3.1 3.7 4.o 3.0 1) Exports beyond East Africa, excluding re-exports. 2) 1954-1957, excluding ghee Source: Statistical Abstract Abridged Annual Trade Statistics, 1963 TABlrE 17 Value of Domestic Exports-i

Value (I illion) Percentage of Total Value

1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 19; 1955 1956 1957 1958 1959 1960 1961 1962 196"

4eat and preparations 0.3 0.2 0.2 0.Ij 1.2 2.0 1.8 2.3 2.8 2.3 1.5 0.7 0.6 1.5 4.1 6.0 5.1 6.5 7.-4 5.3 3utter and ghee 2) 0.5 0.5 0.6 0.5 1.0 0.Y 0.7 0.7 0.9 0.8 2.5 1.9 2.0 1.8- 3.4 2.1 2.0 2.0 2.4 1.E qaize, unmilled 1.0 1.7 0.1 0.5 1.9 1.1 0.2 - 1.0 1.6 5.0 6.6 0.3 1.8 6.5 3.3 0.6 - 2.6 3.7 Pineapples 0.3 0.5 0.8 0.6 0.6 0.5 0.4 0.5 0.7 0.8 1.5 1.9 2.7 2.2 2.0 1.5 1.1 1.4 1.8 1.8 coffee, not roasted 5.7 8.9 13.7 10.8 10.4 10.6 10.3 10.6 10.6 11.0 28.1 3.5 47.2 40.9 35.5 32.0 29.3 30.0 28.0 25.1 rea 2.1 2.8 2.6 2.9 3.2 3.6 14. 4.0 5.2 5.7 10.4 10.8 8.9 10.9 10.9 11.0 12.5 11.3 13.7 13.0 Rides ani skins 1.4 1.3 1.2 1.5 1.0 1.6 1.8 1.6 1.4 1.2 6.9 5.0 4.1 5.6 3.4 4.8 5.1 1.5 3.7 2.8 Wcool, raw 0.2 0.3 0.3 0.3 0.3 0.4 0.4 0.4 0.5 0.6 1.0 1.1 1.0 1.1 1.0 1.2 1.1 1.1 1.3 1.L cotton, raw 0.8 0.7 0.9 0.4 0.5 0.7 0.8 0.6 0.4 0.4 4.0 2.7 3.1 1.5 1.7 2.1 2.3 1.7 1.1 0.9 Sisal, fibre and raw 2.0 2.0 2.1 2.1 2.3 3.5 4.6 4.2 L.3 7.5 9.9 7.7 7.2 7.9 7.8 10.5 13.1 11.9 11.4 17.1 Pyrethrum, flowers and extract 0.9 1.2 1.2 1.1 1.8 2.2 3.0 3.1 3.2 3.0 46.5 4.6 4.1 4.1 6.1 7.0 8.5 8.8 8.4 6.9 Sodium carbonate 1.1 1.3 1.5 1.4 1.2 1.7 1.3 1.6 1.2 1.2 5.4 5.5 5.1 5.3 4.1 5.1 3.7 4.5 3.2 2.8 Wattle bark extract 1.7 2.3 1.5 1.5 1.0 1.0 0.7 0.8 0.7 0.8 8.4 8.9 5.1 5.6 3*4 3.0 2.0 2.3 1.8 1.6 Ceent - - - - - 0.1 0.2 0.4 0.5 0.5 - - - - - 0.3 0.6 1.1 1.3 1.2

u alloys, - - - 0.4 0.4 0.4 0.5 0.5 0.5 0.4 - - - 1.5 1.3 1.2 1.4 1.4 1.3 0.9 Other goods 2.3 2.0 2.3 2.0 2.5 2.2 4.1 4.0 4.0 6.0 10.9 8.1 8.6 8,3 8,8 8.9 11.6 11. 10.6 13,< TOTAL 20.3 25.7 29.0 26.L 29.3 33.3 35.2 35.3 37.2 43.8 100 100 100 100 100 100 100 100 100 100

1) Exports beyond East Africa, excluding re-erports. 2) 1954-57 excluding ghee

Source: Statistical Abstract Abridged Annual Trade Statistics, 1963 TABLE 18

Selected Yet Imrs 1) (L million)

1954 1955 1956 1957 1958 1959 1960 1961 1962 1963

Motor spirit and fuel 4.8 6.0 6.9 7.3 5.8 5.8 5.2 oils (excl. kerosene) 5.5 5.0 4.8

Crude oil ------1.1 Cotton textiles 3.8 2.7 2.7 2.9 2.1 2.6 3.0 3.1 2.7 2.6

Synthetic textiles 1.9 1.0 1.4 1.9 2.4 1.0 1.5 1.6 1.1 2.3

Iron and steel n.a. n.a. 5.4 5.5 4.1 3.7 4.4 3.5 4.4 4.3

Anricultural machinery 1.0 1.6 1.6 1.2 and tractors 0.8 1.3 1.6 0.6 0.6 1.1 Industrial and commercial macninery n.a. na. 6.7 5.7 4.5 5.8 5.9 5.5 5.2 6.2 Electricnachinery and aplcaice rn.a. 1.8 1.9 2.2 2.2 1.9 appliances n.a. n.a. n.a. 2.2 Cars 2.2 2.5 2.6 3.0 3.0 2.9 3.9 2.1 3.0 3.3

Commorcial vehicles 2.1 3.3 3.1 3.0 2.6 1.9 2.6 1.6 1.6 2.2 and chassis

1) Imports from outside East Africa, including re-exports.

Source: Statistical Abstract

Economic and Statistics Division TABTEL 19 'Ietained Imports 1)

Value (; ILillion) Percentage of Total Value 2) 19M 1955 1956 1957 1958 1959 1960 1961 1962 1963 1954 1955 1956 1957 1/58 1959 1960 1961 1962 19 Food, beverages and tobaccc 5.3 4.2 5.2 6.0 4.9 5.7 4.4 7.4 7.0 2.3 9.2 6.1 7.9 8.9 2.6 10.1 6.3 11.8 11.3 3.5

M-1ineral fuels, lubrI -I cants, etc. 5.6 6.7 7.1 7.0 6.6 5.9 6.14 5.6 5.7 4.6 9.7 9.7 10.8 10.4 11.6 10.5 9.8 9.0 .2 ,.9

Chemicals 2.2 3.6 3.4 4.3 4.2 )1.3 5.1 5.0 5.1 4.4 3.8 5.2 $.2 6.4 7-h 7.6 7.8 8.0 3.2 6.6 Machinery and transport equipment 15.6 23.2 19.7 18.2 13.6 14.9 19.4 16.7 16.3 16.4 27.0 33.5 22.9 27.1 23.9 26.4 29.8 26.7 26.2 24.6

Yanufactured goods 23.6 2J.7 24.8 26.8 23.0 22.2 26.0 23.2 23.2) 140.8 35.7 37.7 4o.0 0.14 39.4 39.9 37.1 37.58 Other 5.5 6.8 5.6 4.8 4.6 3.4 3.8 4.6 4.8 9.5 9.8 8.5 7.2 8.1 6.0 5.9 7.4 7.7

TOTAL 57.8 69.2 65.8 67.1 56.9 56.4 65.1 62.5 62.1 66.6 100 100 100 100 100 100 100 100 100 100

1) Net imports from outsideEast Africa, minus re-exports

2) Not comparable to previous years

Source: Statistical Abstract Abridged Annual Trade Statistics, 1963 TABLE 20

Principal Trading Partners of Kenya eretag

Destination of Domestic Exports 195617 l99- 1956'0-1961 1962--1-96&3

United Kingdom 31.0 24.3 25.1 24cl 26.9 24.8 Other EFTA 2.0 2.3 2,7 3.4 3.3 4.5 Other Commonwealth 25.8 19.l 19.7 16.6 15.o 15.8 West Germany 15.8 24,0 18.4 16.6 19.7 15.6 Other EEC 8.4 10.4 10.9 9 6 9.6 12.7 U.S.A. 8,2 8.2 11,2 14,2 9.9 7.0 Japan 1.4 4.0 4.0 4.0 3.2 3.8 South Africa - - - 3.4 2,9 4.3 Other 7.4 7 -7 8.0 8.1 9.5 11 5

TOTAL 1000 100.0 10000 100O0 100.0 100.0

Origin of Direct Danorts 195- 1959 1960 1961 1962 1963

United Kingdom 44.7 3903 3o.6 36.1 34.8 33.0 Other EFTA 2,5 3,4 3.2 3.2 3.0 3,9 Cther Commonwealth 19.1 19,8 15.6 14.1 11.8 13.2 West Germany 5.0 6.4 7.1 5.1 5.7 6,6 Other EEC 11,8 10.5 11.3 9,6 10.3 11.1 U.S11A. 2,8 3.8 5,8 600 7.6 5.4 Iran - 8.3 8.5 7.1 8.9 7.7 Japan 0.6 58 10.3 1010 11,1 13.4 South Africa - - - 5.2 3.8 2,6 Other 13.5 2.7 2.6 3.6 3.0 3.1 TOTAL 10010 100.0 100.0 100O0 100.0 100.0

1/ Net Imports.

Source: Annual Trade R1eport of Kenya, Uganda and Tanganyika. Abridged Annual Trade Statistics for 1963, Table 21

Interterritorial Trade 1) (illionT

1954 1995 1956 1957 1958 1951 1960 1961 1962 1963 Tangaal,ika:

Imports 0.8 1.2 1.5 1.5 1.5 1.8 1.9 1.8 1.9 2.9

Exports 2.8 2.5 4.4 5.4 5,6 6.5 7.6 8,9 10.0 10.4

Balance 2.0 1.3 2.9 3.9 4.1 4.7 5.7 7.1 8.1 7.5

Uganda:

Imports b6 .3 2. 3.0 3.h 306 5.1 5o2 5.h 6.3

Exports 3.0 35 1.6 So 5.1 74 6.2 7.0 7.3 9.4

Balance --1- -1.3 2.1 2.5 1.7 2cl 1,0 1,8 1,9 3.1

Visible Balance 0.5 - 5.0 6.4 5,8 6.8 6,8 8.9 10o 10,6

1 )Prior to 1959 excise duty on excisable commodities was included in the valuation. The figures from 1959-1962 are not comparable with those of previous years. It may be assumed that the 1963 figures are comparable to the 1962 figures.

Source: Statistical Abstract Abridged Annual Trade Statistics, 1963 TABLE 22 Principal Exports to Tanganyika and Uganda in 1963 (L '00)

Tanganyika Uganda Total

Milk and cream, fresh 15 444 459 Butter, including ghee 266 251 517 765 208 973 Cereals. unmilled Wheat meal and flour 186 383 569 Coffee roasted, including ground 289 110 399 Beer 581 100 681 Tobacco, unmanufactured and manufactured (including cigarettes) 1,155 1,096 2,251 Soaps and cleansing preparations 550 457 1,007 492 Insecticides, disinfectant, cattle dips 104 388 364 702 Articles made of pulp, papor and paperboard 338 Sisal bags and sacks for packing 79 266 34.5 Metal manufactures 1,046 1,227 2,273 Clothing 830 568 1,398 1,200 Footwear 683 517 Other 3,78 3 046 6,524 TOTAL 10,365 9,425 19,790

Principal Iqmp;rts. from. Tynganyika and Uganda in 1963 (A 1000)

Tanganyika Uganda Total 156 95 Cereals, unilled 156 17 173 Beans, peas, lentils and pulses, dry 204 1,836 2,040 Sugar, not refined, including jaggery 27 1,018 1,045 Tobacco, unmanufactured and manufactured (including cigarcttes) - 217 11 228 Oilseeds, oil nuts and oil kernels 111 672 783 oil Vegetable 1113 goods 83 1030 Cotton piece 184 - 11 Blankets of all materials 356 17 373 Footwear 1,46o 1 552 3,012 Other 916 TOTAL2,

Source: Abridged Annual Trade Statiotics for 1963. TABTE 23 Balance of Trade and Payments (L MillionT A. Balance of Trade

Overseas Trade:1) 1959 1960 2961 1962 1963 Exports (incl. reexports) 36.7 385 39.6 42.5 48.5 Net inports 61.2 71.9 66.7 69.9 73.1 Balance -24.5 -33.4 -27.1 -27.4 -24.6

East African Trade: Exports 12.3 13.8 15.9 17.3 19.8 Imports 5.5 7.0 7.0 7.3 9.2 Balance 6.8 6.8 8.9 10.0 10.6

Margin on Transit Trade 5.8 6.6 6.6 7.1 7.6

Over-all Trade Balance -11.9 -20.0 -11.6 -10.3 -6.4

B. Estimated Balance of Payments

1959 1960 1961 1962 1963 Current Account

Merchandise trade 2) -11.8 -19.9 -11.4 -10.2 - 6.3 Travel and transportation -7.5 6.4 -7.9 9.6 9.4 Insurance -3.0 -3.0 -1.4 -1.6 Profits and interests -7.6 -8.8 -7.4 -7.5 Public transactions3) 2.h 7.6 8. 7.1 Liscellaneous -0.8 -0.9 --1. --2.2 Current Account Balance -13.3 -16.6 - 7.. N.A.

Donations: Private - 0.3 -0.2 -0.5 Public 2.4 1.2 9.1 7.3 N.A. Famine relief - - 1.6 2.5 Capital Account Public capital: longterm 0.5 5.7 8.1 3.1 Public capital: shortterm -1.7 1.6 -2.0 0.6 Private capital: longterm 3.9 9.4 -0.3 0.1 Private capital: shortterm 0.4 0.5 0.5 0.3 Capital Account Balance 3.1 -17.2 6.3 Z.1 N.A. Net errors and omissions 8.2 -12.7 -7.0 -4.2 -N.A. TOTAL BALANCE 0.4 -12.6 4.5 4.4 -2.8

Chcnge in monetary reserves4) -0.4 12.6 -4.5 -4.4 2.8 Source: Economic and Statistics Division 1) Including coverage and valuation adjustiaents. 2) Including non-monetary gold. 3) Mainly the support of United Kingdom military forces. 4) - = increase, + = decrease. Table 24

Stering As sets of Kenya

June June June June 1960 1961 1962 1963 1/hh Kenya Government: Special funds 1/4 4 4. 4-8 5.3 ,Liquid assets 0.8 0.4 P.O. 0.2 1.3 Savings Bank 5.1 4.6 3.1 3.5

TOTAL 10.3 9.4 8.1 1001 Nairobi City Council2/ - Oc7 100 0.2 Cotton LSM: Investments-/ - 08 c.8 0.6 Currency Board: Securities and bill2/ 15,6 16.0 16.0 18.3 Commercial banks 6.7 16 1.5 3.5 Government Sinking Funds 6.5 4.3 4.8 59

1/ Investment at market values. ID-4nya' s share, if the Board a assets were to be distributed in the same way as its annual surplus incore.

Source: Economics and Statistics Division TABLE 25. nt Fa n d Prices A. Employment 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 Reported employment ('000): Agriculture & forestry 223 248 235 2c3 250 2L1 272 252 216 220 Industry & commerce 173 192 194 194 186 185 189 171 167 158 Pu1blic services 148 176 168 167 158 160 161 167 168 TOTAL 544 616 597 614 594 596 622 590 $581 of which: African 1) 493 558 540 555 535 537 561 530 525 481 Reported African unemployment ('000) N.A. 2.5 3.5 5.0 7.8 4.5 7.6 7.7 8.3 6.5 Be Wages Annual wage bill (L'000): Agriculture & forestry N.A% 9.2 9.3 10.6 10.8 10.8 12.5 12.3 11,6 12.1 Industry & commerce 31.3 23.4 36.6 36.9 38.0 40.1 40.2 40.0 43.1 Public services 26.6 26.1 29.6 29.8 30.7 2*3 37.2 37.3 365 TOTAL N.A. 7. 687. 9 775 79.6 84*9 89c7 88 9 917 of which: African 29.3 30.3 33.5 33.6 34.6 38*3 40.2 42.1 45.4 Statutory mimimum wages for Africans 2) (Sh.. per month): Nairobi & Mombasa 63 72 83 85 85 85 95 102 107 115 Other major towns 57 65 76 79 83 88 94 98 103 109 Average monthly earnings (Sh.): Africans 74 88 93 101 10 107 114 127 133 157 Asians 652 727 759 798 808 811 814 Europeans 847 882 936 1,551 1,689 1,768 1905 1962 1990 2022 2275 2332 2420 C. Prices - - Wage earner's index of consumer prices- - - - - Nairobi (1958=100) 100 101 103 105 108 108 st,o vinj r Europeans in Nairobi 259 275 279 288 288 290 292 299 315 317

1) Registered workeeekers as at end of June; the figures should not be uncnp1cyrcnt. regarded as an indication of the absolute level of 2) For adults, excl. housing allowance (Sh. 26 month in Nairobi 1962). Sou,ca: 3tatijtical Abstract 1963 Economic and Statistics Division TABLE 26 Money and Bankin (LMillionj'&

SL.7,6 -197 16 6i 16 A. East African Currency Board (as at June 30) Currency in circulation in East Africa 1) 45.5 53.7 54.2 54.3 Reserve Fund 52.2 50.1 52.5 52,7 53,,7 59.3 57.6 65.8 63.3 63.9 66.0 65.2 of which: 68.4 67.5 68.4 75.2 sterling assets 51.0 60.3 59.9 56.9 57.1 55.0 54.5 55.8 55.7 63.9 East African assets 6.6 5.5 3.4 7.0 8.9 10.2 13.9 11,7 12.7 113 B. Commercial banks (as at December 31) Deposits: demand 46.8 51.9 43.4 42.9 time/savings 39.9 44.0 40.3 41.2 45.2 46.7 6.1 6.0 8.0 10.1 12.2 12.9 10.9 11.3 14.1 15.8 TOTAL 52.9 57.9 51.4 53.0 52.1 56.9 50.2 Loans, advances 52.5 59.3 62.5 & bills discounted 31.0 41.3 35.7 Cash 39.2 34.3 37.5 42.2 39.0 41.7 50.4 2.0 1.9 Net 2.2 2.5 3.0 2.3 3.0 3.1 3.2 balances due: from East Africanbranches - 1.4 2.5 2.2 4.3 1.7 3.2 6.-4 6.7 5.2 from abroad 16.9 10.2 8.3 3.7 5.5 Liquidity 8.7 8*4 - - 4.0 - ratio (%) 36 23 25 20 26 24 6 17 23 12 C. Kenya Savings Bank Deposits 3.1 3.9 Withdrawals 3.3 3.1 3.1 3.2 3.4 3.4 3-3 3.1 2.8 3.2 4.0 4.1l 3.6 3.4 5.3 Balance (as 4.0 3.7 3.8 at December 31) 9.4 10.3 9.8 9.0 8.7 8.7 7.0 6.5 D. Kena Land Bank 6.3 5.8 Loans issued during year 0.35 0.45 0.50 0.73 0.27 0.39 0.63 0.46 Repayments 0.36 lj 0.11 0.13 0.14 0.17 0.13 0.19 0.25 0.23 0.26 09 Balance of loans (as at December 31) 1.60 1.93 2.29 2.85 2.99 3.20 3.56 3.77 3.83 3.8

1) Kenya, Tanganyika, Uganda and Zanzibar; in addition, the East African shilling is legal tender in Aden (until 1961 also in British Somaliland). Circulation outside East Africa is about L5 nllion, Source: Statistical Abstract 1963 Annual Reports of the East African Currency Board TABLE 27 Kenya Government Gross Revenue and Expenditure ( 1ili1or,) 1) 1954/55 1955/56 1956/57 1997/58 1958/59 1959/60 1960/61 1961/62 1962/63 196/64

Revenue: Recurrent 36.3 hh.8 36.7 38.0 38.3 381.3 .6 6 .2 9.5 Development 2.3 9.3 4.7 5.5 6.1 7.6 9.2 9.3 1114 13.3 Total 38.6 5l1 41.4 43.5 L4.h 6.1 50.5 53.9 57.6 62.8 Expenditure: Recurrent 38.9 40.0 38;0 38.5 38 1 38.3 43.2 45.3 70 -05 Development L.2 7. 8. 6.0 8.0 89.1 7.7 7.2 9.4 1hI Total 46.1 47.1 46. 41t.h 6.1 464 50.9 52.5 56.h 65.2

Suxplus or Deficit -7.5 +7.0 -4.8 -0.9 -1.7 -0.3 -0.4 +1.3 +0.9 -2.4

ChanC-es in Cash Balances nca, n.c. -0. 4 -0.4 +2.5 +1.7 -1.1 -1.2 -1.1

Exchequer Surplus or Deficit noaa n.a. -5.2 -1.3 +0.8 +1.4 -1.5 +0.1 -012

Accumulated Deficit n.a. nea. -2.9 -4.2 -3.4 -2.0 -3.6 -3.5 -3.7 met by: short-term borrowing n.a. neac 241 2.1 2.8 1-3 1.1 1,5 11,9 internal resources nfa* n,a. 0.8 2.1 o.6 0.7 2.5 2.0 1.8

1) Estimates, incl. supplementaries

Source: Statiatical Abstract Economic and Statistics Division TAB-E .28 Ken a Government Revenuel) A. Recurrent Account U. 1954/55 1955/56 1956/57 1957/58 1958/59 1959/60 1960/61 1961/62 1962/63 1963/64

Direct Taxation

Income Tax 8.1 9.1 10.4 11.3 11.3 10.4 10.0 10.3 11.1 12.3 Graduated Personal Tax 1.7 2.0 2.0 2.2 2.2 1.9 1.8 1.7 1.3 0.7 Other 1.1 1.9 0.4 0.3 0.2 0.1 - 0.1 - 0.4 TOTAL 10.9 13.0 12.8 13.8 13.7 12.4 11.8 12.1 12.4 1314 Indirect Taxation

Iport Duties 7,5 9.4 8.5 8.1 9.5 10.7 10.0 11.7 13.8 12.9 Excise 2.1 2.8 2.6 2.9 3.2 3.2 3.6 3.9 5.4 6.0 stamp Duties 0,5 0.6 0.6 0.6 0.6 0.7 0.5 0.5 0.5 0,7 Petrol Tax 0.4 0.5 0.5 0.5 0.5 0.6 0.9 1.1 1.1 1.1 Other 1.0 1.8 2.0 2.1 2.0 2.0 2.2 2.1 2.1 2.0 TOTAL 11,$ 15.1 114.2 14.2 15.8 17.2 17.2 19.3 22.9 22.7

Charges for Goods and Services 3.4 3.7 4.3 4.2 L.1 4.3 Loan Charges ) ) 1.2 1.1 1.5 1.8 1.8 2.0 Reimbursements *9 )10.0 0.9 0.8 0.7 1.1 1.3 1.? Miscellaneous 1 ) 1.8 1.7 1.6 1.4 1.7 1.4 TOTAL DOMESTIC REVENUE 7 3379 7.1 39.9 Aid from U.K. Government 9.0 12.0 5.8 3.2 1.5 1.6 4.3 4.8 1.9 4.1 B. Development Account From abroad: Grants (UK and US) n,a. 2.1 1.9 26 1.2 1,0 1.6 2.1 1.0 1.1 Loans: UK Exchequer and CDC n.a. 4.0 0.-1 - - 3.0 5.3 4.4 5.4 6.2 BR n.a. - - - 0.4 0.7 0.6 1.4 Other n.a. - - 0.3 0.6 0.4 0.4 0.2 0.7 0.8 Total n.a. 6.1 2.0 2.8 1.8 4.4 7.7 7.7 10.7 12 8 Frorn East Africa: Loans nka. 2.5 2.5 2.2 3.7 2.2 0.4 0.4 0.1 M1iscellaneous n.a. 0.7 0.2 0.5 0.6 1.0 1.0 1.2 06 0.5 Total development revenue 2.3 7.3 7.7 79.2 9.3 1 13.3 1) Gross revenue, incl. appropriations in Aid Applied but excl. short-term fi.aDc4n of deficit;. 2) Estimates, incl. supple mentaries. Sogc; Statistical Abstract; Economies and Statistics Div1s1o0 Table 29a

Kenlya Governient Lx? enditurcl/

A. Recurcnt Exponditure

1955/ 1956/ 1957/ 1958/ 1959/ 1960/ 1961/ 1962/ 196341 % 1563/ 1954/ 1964 1955 19 6 1957 1958 1959 1960 1961 1962 1963 1964- 11.5 123 1301 12.8 12.6 12.7 )4.6 29.0 Administration, Law, Order and Defence 8.4 9.6 10.5

Economic and Community Services 3,1 3,5 3.4 5.1 5.3 6.4 5.7 11,3 Agriculture, Forestry, Game, etc, 2,6 2.5 2.7 113 1.6 1o8 1.7 18 1,9 2.2 205 2.3 1.9 3.8 Transport 3.2 1.1 1,3 15 1.4 1,3 1.3 1.8 1.6 1,5 1.6 Other, including water 9e3 3 Total 5.* 9.1 9. 10.2

Social Services 7.9 8c4 16,7 EducaVion 3.6 3*9 4.6 5,2 5.8 6.3 7.4 8.0 l.6 1.7 1.9 2,1 2,2 2,8 3.,2 3.3 3 2 3,0 6.6.o Health 0.9 1,8 Other 0.2 Ol1 0,3 0.4 04 0.8 1.1 1.4 1.2 Total T.T 777 7*. 7*7. . 9.27*9 11. 1 12.3 . 2

Financial Obligations Public debt 1.7 1.8 2,1 2,5 2.7 2"8 3.4 t.2 4.7 5.3 10%5 Pensions and passages 1.2 1.5 1.8 2.1 2,1 2.1 2.2 2.7 3.4 4.9 9.7 Transfer to local authorities 0 0 1.0 1.2 L.4 0.8 0,9 0.8 o,9 O,9 l7 Total 3.00 6.2 .7 6.2 7.7 90 11.1 21.9

Unallocable 0.7 1.5 2.7 3.0 2,9 2.8 3.2 2,9 2 8 3,1 6.2 - - Emergeacy, exp. 16.o 14,0 7,5 4,3 1,7 - - - Grand Total 38.9 40.2 3 0 3 3T = 43.3 100.0

1/ Gross expenditure including appropriations in aid. 27 Estimates, including supplementaries. Sourcc: 3tatistical Abstract Economics and Statistics Division TA3IE 29b B. Development Exenditure

1954/55 1955/56 1956/57 1957/58 1958/59 1959/60 1960/61 1961/62 1962/63 196?/64 63

Adninistration, Law and Order, Defense: 0.6 1.0 1.0 0.7 0.5 0.5 0.9 0.5 0.6 0.9 5.9

Econoiric and Community Services:

Agriculture, forestry, game 2.3 2.5 2.7 1,4 2.1 2.2 2.0 2.6 5.3 10.0 67,8 Transport 1.4 1.1 1.0 1.5 0.8 1.2 1.5 1.4 1.4 2,0 13-4 Other incl. water 0.3 0.3 0.8 1.3 2.5 0.4 0.4 0.2 0.3 C.3 2.1 Total 4.0 3.9 4.5 3.3 5.4 3.8 3.9 4.2 7.0 12.2 83.3

Social Services

Education 0.7 1.0 0.8 0.7 0.5 0.8 0.7 0.6 0.5 0.5 3.4 Health 0.2 0.2 0.3 0.3 0.1 0.3 0.3 0.2 0.2 0.2 1.3 Other 0.3 0.1 - 0.3 0.9 0.8 0.5 0.4 0,3 0.3 214

Total 1.2 1.3 1.1 1.3 1.5 1.9 1.5 1.2 1.0 1.0 7.1

Transfers, Unallocable etc. 1.3 1.2 1.5 O.M6 0.4 1.9 1.3 1.2 0.8 0.6 3.8

Grand Total 7.2 7.4 8.3 6.0 3.0 8.1 7.7 7.2 9.4 1L,.7 100M0

1) Estimates, incl. supplementary

Source: Statistical Abstract Economics and Statistics Division TABLE 30

Expenditure on the Dovelopment Plan (; 'OCO)

AFriculture 1964/65 1965/66 1966/67 196/68 1969/69 1969/70 Total % A,F.C.7Land Bank 1,950 1,950 2,000 2,100 2,100 2,100 12,200 9.2 Cash crops 1,127 829 895 675 471 92 4,089 3.1 Livestock 500 305 245 87 375 452 1,964 1.5 Irrigation 569 384 232 932 2,300 3,200 7,617 5.7 Land Reclamation 282 354 357 250 450 450 2,143 1.6 Total ,072 3,729E 7,-57 ,67 6294 28,013 21.1 Lands E=n consolidation 418 418 418 418 418 413 2,503 1.9 Lpnd settlement 6,976 3,981 1,572 555 - - 13,0864 9.9 Government lands 25 25 25 25 25 25 150 0.1 Total 7,1-9 47T 2,0T1 199173 7~ 15,737 1:L.9 Natural Resources Water Supplies 360 855 995 1,110 1,125 1,110 5,555 h.2 Forests 515 515 525 535 545 565 3,200 2.4 Mines and geology 134 83 46 - - - 263 0.2 Fisheries 10 16 8 120 88 8 250 02 Total 1,019 1,7 T117 177 175 T69T26u 7.0

Cormerce & Industr DeF.CoK, 750 750 750 750 750 750 4,500 3.4 Small Ind. & Comm. 108 106 116 102 99 92 623 0.4 Total 757 97 UK 2 BF72 B12 K1, T T8

Tourism 162 198 184 158 140 110 952 0.7 Basic Services Ronds17 1,115 1,385 1,395 1,425 755 745 6,820 5.1 Airports 2 25 99 65 330 330 05 1,214 1.0 Railways & harbours 2,050 2,550 2,850 2,450 2,100 2,200 14,200 10.7 Posts and Telecom. 478 400 653 282 234 263 2,310 l7 Power3Y 1,000 3,400 6,500 4,400 4,000 1,200 20,500 15.5 Inf, & broadcasting 10 81 170 200 203 20 684 0.5 Other buildings 523 335 280 435 465 415 2,453 1.9 Local auth. works 7GO00 00 1 000 1 100 1,100 1.100 6 000 4.5 Total > 901 9,210 12,913 10,622 9,1 17t,3W 17t 4.9 Social Services !eTation 959 1,199 2,113 1,900 1,807 1,805 9,783 7,4 Health 300 550 650 815 815 815 3,945 3.0 Horsing 410 410 410 410 410 410 2,460 1,9 Other 95 50 50 50 50 50 345 0.2 Total 1,76T 2,209 3,223 3,17 3,02 3,090 16,533 125 SecuritX & Defence Police & prisons 210 250 252 258 255 235 1,460 1.1 trmy 150 180 235 235 210 160 1,170 0.9 Other 7 30 33 29 33 8 140 01 Total 367 To- 50 22 476 03 2,770 2.1 Public Sector Expenditure 21;918 22,648 25,024 22,136 21,653 12198 132,577 100.0 17 IcTi. Xombasa Tbll Road, wni;ch is taken outside the Governxient Dev. Estimates, 2/ Incl. One-third of new rolling stock, 31 Tana River Developmrient Company. Note: The figureb for education do rot iiclude primary education. Source: Kenya Treasury TABLE 31

Financing of the Development Plan 1964/65 - 1966/67.

(L '000)

Government Sector: 1964/65 1965/66 1966/67 Total Local contributions:

Available 1,150 925 875 2,950 4.2 In prospect 100 350 400 850 1.2

TOTAL 1,250 1,275 1,275 3,800 5.6

External contributions: Available: Settlement 6,975 3,890 1,570 12,435 17.9 Other 5,135 590 350 6,075 8.7 TOTAL 12,110 4,480 1,920 18,510 26.6

To be found 3,082 8,h99 8,788 20,369 29.3 (of vhich in prospect 1,420 7,320 7,180 15,920 22.9)

TOTAL GOVERMENT 16,442 14,254 11,983 42,679 61.3

Non-governent Bodies,76 8,389 13,031 26,896 38.7

GRAID TOTAL 21,918 22,648 25,024 69,59o 100

1) At least one half is judged to be available or in prospect.

Source: Kenya Treasury Table 32

External Public Dobt (_U 5mllion equivalents)

External Public Debt outstandin, December 31 1962 with Major Reported Additions, January 1-April 30, 1964

Amount out standing_ Net of undisbursed Including undisbursed Additions 1/3 of EACSO dbt Type of Debt including undisbursed

Publicly-issued bonds 77.7 77.7 41.2 Privately-placed debt 7.8 9.2 0.3 0.7 IBRD loans 4.o 14.0 6.3 Loans from U.K. Government 63.7 63.7 8.8 9.4 Total 153.2 177. 9.1 57.6

Estimated Service Payments on External Public Debt, 1963-77

Net amount outstanding Kenya's payments during year Year (as of January 1) Amortization Interest - T-a 1963 160.5 3.3 7.2 10.5 1964 165.4 4.2 7.9 12.1 1965 160.2 4.5 7.9 12. 1966 154.7 6,8 7.8 14.6 1967 146,8 5.2 7.6 12.8 1968 lo.5 5.1 7.3 12.4 1969 134.3 5.2 7,2 12,4 1970 127.8 14.5 6.9 21.4 1971 112,0 4.8 6.5 11.3 1972 105.9 4.0 5.9 9.9 1973 100.9 4.1 5.8 9.9 1974 95.7 5.8 5.6 11.4 1975 88.8 4 3 5.4 9.7 1976 83.3 6.6 5.2 11.8 1977 75.4 4.5 4.9 9.4 General Note: In the event of default by the EACSO, the Governments of Tanganyika, Uganda and Kenya are jointly and severally liable for the debt and itS servi2e. Under an administraLive arrangement, the three governments agreed that each would meet one-third of any such payments. Source: TBRD Statistics Division.