BSE 4120: Development Economics

Group Assignment by:

135453 Woldeyesus Danait FE

134633 Yebyo Sandra FE
135103 Njoroge Victor FE
134348 Nyamai Sonia FE

30th May 2023

 “Kenya’s Economic Development Journey: From Underdevelopment to
Takeoff and Beyond.”
Kenya, as an African country, has made significant strides towards economic development,
but which stage of Rostow's model does it currently fall under? After analyzing Kenya's
current economic situation, it can be argued that the country is currently in the “Takeoff”
stage (Stage 3) of Rostow's model, with some elements of the "Drive to Maturity" stage
(Stage 4) beginning to emerge. The Takeoff stage is characterized by countries which
experience significant industrialization and investment, rising productivity and incomes,
leading to sustained economic growth. The Drive to Maturity stage is characterized by a
further expansion of industrialization, technological advancements, and improvements in
education and human capital.
However, it is important to note that the evolution through Rostow's model stages is not
necessarily linear or exactly consecutive. Countries may exhibit traits of various stages at the
same time, or their development journey may suffer variations. Kenya's progression from one
stage to the next has been impacted by multiple factors.

Kenya's Historical Progression through the Stages of Rostow's Model of

Economic Development.
Traditional Society
The Traditional Society stage (stage one) is predominantly agrarian with agricultural serving
as the backbone of the economy. Kenya was in this stage during the period before its
independence in 1963 and early colonial periods.
It is characterized by limited industrialization and infrastructure development and majority of
the Kenya’s population been engaged in subsistence farming. Before gaining independence
from the British, Kenya’s economy was predominated by agriculture as it was the principle
occupation of the people. Although Kenya citizens were working hard, there was a limit to
how much they could produce due to lack of science and technology. It was a primitive stage
where there was no surplus in production, no savings and therefore society produced merely
to feed itself.

Preconditions for Take-off.

The Preconditions for Take-off stage (stage two) is when Kenya established necessary
conditions and infrastructure for sustained economic growth and industrialization. This stage
of growth embraced societies in the process of a shift from agriculture to manufacturing-
began to develop roads, power networks were expanded, and international trade was
implemented. Kenya was in this stage post-independence, in the 1960s and 1970s.
The government focused on laying the foundations for economic development. Efforts were
made to invest in: a) Education- for example, the initiative to introduce Free Primary
Education in 2003 aimed to increase enrollment, b) Infrastructure development- in sectors of
the economy such as transportation, energy and telecommunication and c) Healthcare.
Policies were implemented to stimulate agricultural productivity, promote export-oriented
industries, and attract foreign investment.

Factors Supporting Kenya’s Placement in the Takeoff Stage of Rostow’s

Model
1. Urbanization & Urban Centers
Urban centers such as Nairobi, Mombasa and Kisumu serve as business centers and have
witnessed urbanization and economic growth, attracting investment and infrastructure
development. Nairobi hosts regional offices of multinational corporations, for example,
Coco-cola company, international organizations such as United Nations and numerous startup
incubators and innovation centers which attract investments and infrastructure development.

According to Statista, Kenya’s urbanization rate has been steadily increasing, reaching its
highest value of 28.49% in 2021. Urbanization is closely linked to economic growth, as it
concentrates economic activities and attracts investments. The growth of urban centers
created employment opportunities and enhanced infrastructure.

2. Industrialization & Diversification

Kenya’s manufacturing sector’s real value added grew by 6.9% compared to a growth of
negative 0.4% in 2020. The share of manufacturing sector to GDP was 7.2% in 2021, while
sector’s volume of output expanded by 6.0% in 2021 from a revised growth of 0.2% in 2020
with an average annual growth rate of 4.2% from 2015-2019. Sub sectors that registered
major growths in volume of output in 2021 are: Other Non-metallic Mineral Products which
includes cement; Leather and Related Products; Dairy Products; Motor Vehicle, Trailers and
Semi-Trailers; Sugar and, Meat and Meat Products.

Kenya has recognized diversification beyond traditional sectors such as agriculture and
services into areas like textiles, (In 2021, the textiles sub sector recorded a growth of 1.6%
and manufacture of wearing apparel sub sector registered a 5.0% growth), automotive
assembly (The motor vehicles, trailers and semi-trailers sector registered a significant growth
of 18.9% in 2021 as a result of an increase in the number of assembled vehicles by 29.3%)
and agro processing (Agro-processing currently contributes 2.4% to national employment and
3.2% to Kenya's gross domestic product, while accounting for 8.5% of exports with
opportunities in commercial irrigation, grains milling and marketing (maize and wheat),
sugar, dairy, fruits (mangoes, pineapples and oranges), poultry, pigs and oil crops (sunflower,
sesame, canola and groundnuts).

3. Infrastructure Development
The value and volume of construction activities in Kenya are key indicators of the general
economic performance due to the significant contribution of the sector to the total GDP.
Kenya has undertaken significant strides in infrastructural development over the years with
implementation of several major infrastructure projects such as:
 The Thika Superhighway, a modern highway of approximately 50 kilometers
completed in 2012, which improved the transportation network between Nairobi &
Thika.
 The Standard Gauge Railway (SGR), a modern railway line connecting the port of
Mombasa to Nairobi city completed in 2017, which enhanced cargo and passenger
transportation and boosted trade activities.
 The expansion and renewal of Terminal 1A at Jomo Kenyatta International Airport in
Nairobi was completed in 2014. The project involved the construction of new check-in
counters, duty-free shops, immigration & customs duty areas and lounges.
 The most recent project, the Nairobi Express Way, is a 108.4-kilometer lane length
and the country’s first major public-private partnership (PPP) project with the China Road
and Bridge Construction Corporation (CRBC). The project was 82% complete as of 31 st
December 2021.
Kenya has also made progress in the energy sector, with investments in geothermal power
plants such as the Olkaria Geothermal Power Plants (I, II, III), located in the Rift Valley,
which have significantly reduced the country’s reliance on fossil fuels; wind farms and solar
energy projects.

4. Human Capital Development

Kenya has undertaken various projects and initiatives to promote human capital development
which focus on increasing access to education, improving healthcare services, skills
development and creating job opportunities for the youth. These include:
 The National Health Insurance Fund (NHIF) which is a government program
established in 1966 to provide affordable and accessible healthcare services to all Kenyan
citizens.
 The introduction of free primary education in 2003 and free secondary education in
2008 with the aim of increasing enrollment rates and improving educational opportunities
for children.
 The Kenya Youth Employment and Opportunities Project (KYEOP) which is a
government transformational project aimed at addressing and empowering the well-being
of Kenyan youth by equipping them with essential training, internship and business grant
opportunities.
  The Kenyan government has expanded Technical and Vocational Education and
Training (TVET) programs to address the country’s skill gaps and promote technical
skills development.

5. Economic Growth
Kenya has experienced continued growth in GDP over the last few years, supported by
ongoing public infrastructure projects, strong public and private sector investment and
appropriate economic and fiscal policies, high financial inclusion in the region & globally
and significant macroeconomic stability, reflecting the broad-based and diversified nature of
the Kenyan economy. According to the World Bank, the country’s average GDP growth rate
has been 5-6% per year over the past decade.
In 2007, the Kenyan government pronounced “Vision 2030” as its long-term plan for
attaining middle income status as a nation by 2030. To ensure implementation of the
Vision 2030, the government prepared successive medium-term plans (MTPs) that outline the
policies, programmes and projects that the government intends to implement over a five-year
period. In addition, the “Big Four” Agenda was designed to help achieve the social and
economic pillars of the Vision 2030.

6. Constitutions and The Bill of Rights

The constitution of Kenya, adopted in 2010, has played a significant role in supporting the
take-off stage by protecting fundamental rights and freedoms, balancing power and resources,
encouraging good governance and creating an inclusive environment the supports economic
activity.
Through the protection of property rights, the constitution has encouraged investment in land
and other tangible assets, thereby simulating economic activity and fostering growth.
Businesses and individuals have been able to acquire and develop properties due to a sense of
confidence created by the guarantee of law. The devolution of power has led to efficient
resource allocation as counties have been able to prioritize economic projects tailored to their
specific needs. For example, some counties have invested in agricultural initiatives, while
others have focused on tourism such as Nakuru, hence promoting regional development.
The Bill of Rights found in chapter four of the constitution, is an integral part of Kenya’s
democratic state and is the framework for social, cultural and especially economic policies.
The Bill of Rights has supported economic development by protecting individual liberties,
fostering a conducive environment for innovation and entrepreneurship.

7. Affirmative action programs

Affirmative action programs are policies that aim to address historical inequalities that were
present in stage one and stage two of Rostow’s model of economic and promote inclusivity
by providing targeted support and opportunities for marginalized groups.
Through these programs, efforts have been made to address historical gender imbalances,
physical segregation and regional disparities, with the goal of promoting equity. Some
examples of such programs include:
a) Women Enterprise Fund (WEP)
 The WEP was established in the year 2007 under the Ministry of public service, gender
and affirmative action. The fund targets women with provision of accessible and
affordable credit to start or expand businesses for employment creation. The program,
which aims to reduce gender imbalance, is implemented under the Vision 2030 initiative
and is aligned with the Sustainable Development Goals, particularly goal 5: gender
equality.
 The government recently remodeled the WEP to advance financial inclusion and promote
economic empowerment of women. As part of the new plan, women will be able to
access cheaper loans instantly, eliminating the lengthy processing time of 45 days, with
an annual interest rate of 6%.
b) Uwezo Fund
 The Uwezo Fund was as established in the year 2014. It is a program under the Kenya
Vision 2030 aimed at enabling youth, women and person with disabilities to access
finances to nurture business, thereby enhancing economic growth. The Fund promotes
economic development by focusing on the Sustainable Development Goals, particularly
goal 1(no poverty), goal 2 (zero hunger) and goal 5 (gender equality)
 By facilitating access to finance, the fund has enabled entrepreneurs to start and expand
their business, leading to increased economic activity and job creation. The fund’s focus
on marginalized groups has played a crucial role in promoting inclusive and sustainable
economic development in the country.
c) Access to Education
 The implementation of initiatives that provide individuals with access to quality
education equips them with necessary knowledge, skills and opportunities to contribute to
the country’s economic growth.
 Free primary and secondary education, together with Technical and Vocational Education
and Training (TVET) programs, have all considerably aided in the country’s economic
development by fostering a skilled workforce creating employment opportunities and
improving competitiveness.
 The Competency-Based Curriculum (CBC) is a significant reform in the country’s
education sector that focuses on developing students’ skills and competence, moving
away from the traditional content-based approach. According to the “Kenya Economic
Update, Edition 25: Aiming High, Securing Education to Sustain Recovery,” this reform
has made Kenya a top education performer in Eastern and Southern Africa.
Implementation of the CBC will contribute to the country’s economic development by
equipping its citizens with the skills and mindset necessary for workforce readiness,
entrepreneurship, and improved productivity. By aligning education with the needs of the
economy, the CBC supports the country’s efforts toward sustainable economic growth.

Accelerating development in Kenya

The Rostow model does not really consider technological progress of the world.
The model, however, supports Foreign Aid. Foreign Aid tools such as the UNDP, World
Bank, USAID, IFC etc.
Outside intervention from institutions such as the UNDP, most likely in the form of loans.
This is more in line with Rostow’s model, where an external element is needed to develop or
accelerate a country’s current disposition.
UNDP specifically has signature solutions to help achieve the SDGs and thus accelerate
development. These solutions include:
1. Keeping people out of poverty
2. Governance for peaceful and just societies
3. Crisis prevention and increased resilience
4. Nature based solutions.
5. Clean affordable energy
6. Women’s empowerment
In Kenya this may be a viable option for regions of low output, or rather non-self-sustaining
regions, but we already have a huge amount of loans including the loan due in 2024.

The general outlook for the conversation around development is determination and a sacrifice
of short-term benefits for longer-term and societal goals.
Key areas for development include:
 Increasing literacy and education
 Increasing health
 Reducing gender inequality
 Improved food nutrition
 Investment in infrastructure

Major developments areas in Kenya based on the vision 2030 and outsider
comments.
1. Infrastructure
Improvement in this sector can be done by:
- Starting to transition into clean energy.
- Rebuilding or improving roads, the public transit systems and airports.
The above will enhance connectivity, reduce the cost of doing business and attract
investments from within the country or internationally.
 2. Industrialization
In this sector, further enhancement can be achieved by:
- Improving the manufacturing sector by diversifying the products being made or
increasing their complexity. Textiles is one good example of the sectors that are
driving industrialization in the country recently.
- This can also be looked at as a way of driving job creation in the country, hence
helping to reduce unemployment rates in the long run.

3. Financing Mechanisms
- One of the main challenges Kenya faces is inadequate financing and a lack of clarity
on how to source the necessary finance. Better implementation will require more
effective financial resource mobilization and innovative thinking in the way finance is
leveraged and utilized.

4. Digitalization
Digitalization is one-way African countries can leverage the African Continental Free
Trade Area (AfCFTA) boost manufacturing and create more productive jobs.
AfCFTA is one of the flagship projects of Agenda 2063: The Africa We Want. It is a
high ambition trade agreement, with a comprehensive scope that includes critical
areas of Africa’s economy, such as digital trade and investment protection, amongst
other areas. By eliminating barriers to trade in Africa, the objective of the AfCFTA is
to significantly boost intra-Africa trade, particularly trade in value-added production
and trade across all sectors of Africa’s economy. By lowering the unit costs of
production, information exchange and transactions, digital technologies can help
African economies to develop new value chains, as well as strengthen existing ones.
- Kenya can leverage its strategic location and actively participate in regional
integration efforts, such as the East African Community (EAC) and the African
Continental Free Trade Area (AfCFTA). This will expand market access, encourage
cross-border trade, and boost economic cooperation.
- In vision 2030, they included laptops in school, thus, to improve the technological
literacy, to increase diversification of work.

References
Rostow's model and India's development - Case study - emerging and developing country -
India - OCR - GCSE Geography Revision - OCR - BBC Bitesize
What can be done to accelerate development? | Development: A Very Short Introduction |
Oxford Academic (oup.com)
Development challenges and solutions | United Nations Development Programme (undp.org)
Five new ways to promote African industrialisation | ODI: Think change