Economy

Agriculture plays an important role in Kenya’s economy. Although its share of GDP has declined—from more than two-fifths in 1964 to about one-fifth in the 2020s—agriculture supplies the manufacturing sector with raw materials and generates tax revenue and foreign exchange that support the rest of the economy.

In the first years after independence, the government sought to redistribute the land on which most of the agricultural exports were produced. Although there are now thousands of large farms, ranches, and plantations, the majority of the farms are smaller than five acres (two hectares). Tea and fresh flowers are the key foreign-exchange earners. Sisal, cotton, and fruits and vegetables also are important cash crops. Coffee, historically an important foreign-exchange earner, still contributes to the economy but began declining in importance and earnings in the 1990s, owing in part to market instability and deregulation. Pyrethrum (a flower used to create the nonsynthetic pesticide pyrethrin) is also grown in Kenya. National boards that controlled key export crops such as coffee, tea, and cotton were deregulated beginning in the early 1990s.

The major crops for domestic consumption are corn (maize), wheat, and rice. Sugarcane is also grown. Livestock (including cattle, goats, and camels) is raised and dairy goods are produced primarily for domestic use, and the government maintains a reserve supply of milk powder. Surplus animal and dairy products are exported.

Despite the importance of agriculture to the economic well-being of the country, the lack of water, infrastructure, and arable land (about one-tenth of Kenya can be used for agriculture) seriously constrains further expansion. Although the government has made efforts to increase irrigation, it is estimated that only about one-fifth of potentially irrigable area has been developed.

Forests occupy only a small portion of the land but are important in the domestic economy. Most of the area of forest reserves is wooded bush, bamboo, and grass; the remainder consists of planted softwoods, which now support a domestic paper industry. Forests are vital for conserving Kenya’s soil and water resources, but they are increasingly threatened by a fast-growing population that constantly demands more fuel and settlement areas. As fuel, wood is used primarily for domestic cooking, but deforestation threatens the supply. Tree-planting programs have been initiated to grow quick-maturing indigenous and exotic species in ecologically suitable areas.

Fish and marine products represent a small but growing portion of Kenya’s economy and are locally important. Freshwater fish from Lakes Victoria and Turkana constitute the bulk of the catch. The encroaching water hyacinth on the surface of Lake Victoria threatened this fishery in the 1990s, although this nuisance was countered by several strategies, including the introduction of weevils into the environment. Most of the weed was successfully eliminated, but that which remained has fueled resurgences in the 2000s. Efforts to prevent water hyacinth from completely taking over the lake have led to the fast-growing plant being harvested and repurposed into innovative products.

Resources and power

Soda ash (used in glassmaking) is quarried at Lake Magadi in the Rift Valley. Limestone deposits at the coast and in the interior are exploited for cement manufacture and agriculture. Salt, gold, rubies, and garnets are also mined. Deposits of heavy mineral sands were found in multiple locations northeast of Mombasa and to the south of the city; since 2013, rutile, ilmenite, and zircon have been mined in the latter location. Deposits of niobium and rare earth elements have also been found near Mombasa. Exploration for petroleum has so far met with limited success.

Almost all of Kenya’s electricity is generated from renewable sources, with geothermal energy alone accounting for almost one-half and hydroelectricity about one-fifth. There are hydroelectric plants located on the Tana and Turkwel rivers, and geothermal resources in the Rift Valley have been tapped since the early 1980s to generate electricity. Traditionally, access to electricity has been limited in rural areas, though the rate of electrification has increased. Because of expansion efforts, which have been aided by grants from the International Monetary Fund and the World Bank, more than three-fifths of the rural population had access to electricity in the early 2020s, as did almost all of the urban population. Overall, access to electricity increased from about one-fourth of the total population in the mid-2010s to about three-fourths by the mid-2020s.

Manufacturing

Kenya is the most industrially developed country in East Africa. Much manufacturing is based on processing imported goods, although the government supports the development of export-oriented industries. Major industries include agricultural processing, publishing and printing, and the manufacture of textiles and clothing, cement, batteries, paper, ceramics, and leather goods. Assembly plants, which utilize imported parts, produce various kinds of commercial and passenger vehicles, some of which are exported. Steel processing for reexport and for the construction industry has had a sustained growth trajectory and continued to expand in the 2020s.

Finance and trade

The state-run Central Bank of Kenya, established by legislation in 1966, regulates the money supply (the monetary unit is the Kenyan shilling), assists in the development of the monetary, credit, and banking system, acts as banker and financial adviser to the government, and grants short-term or seasonal loans. There also are a large number of commercial, merchant, and foreign banks in Kenya. The Nairobi Stock Exchange, founded in 1954, is one of the largest in sub-Saharan Africa.

Agricultural products such as tea, fresh flowers, fruits and vegetables, and coffee constitute the greatest proportion of Kenya’s exports. Other exports include apparel and clothing, cement, vehicles, and gold. Imports include machinery and transport equipment, chemical products, petroleum and petroleum products, fats and oils, plastic, and iron and steel. Among Kenya’s chief trading partners are India, China, and Uganda. Kenya is a member of the East African Community Customs Union.

Services

Kenya is home to some of the rarest and most interesting species of wildlife in the world. Because of this, tourism is one of the country’s major sources of foreign exchange. Tourism revolves around a basic framework of national parks, game reserves, and game sanctuaries, where a wide variety of animals and cultural attractions can be enjoyed.

Labor and taxation

The Central Organization of Trade Unions, an association of Kenya’s workers’ unions, was founded in 1965. Many professions are unionized, including metal workers, airline pilots, game hunting and safari workers, jockeys and betting workers, journalists, teachers, and textile workers. Government revenue is derived from taxes on income and profits and on goods and services, from excise duties, and from value-added taxes.