Kenyan Economy – Term Paper

One of the key goals of economics is the determination of the factors that influence economic growth. Traditional neoclassical approach claims that the economic development of a nation is affected by the supplies of both capital and labor it possesses as well as the level of technology present in the country. Developing countries are recognized as the most favorable in implementing or transferring an entrepreneurial idea (Oira, 2015). Precisely, these countries are referred as developing because they are open to many development ideas, opportunities, and projects. However, not all entrepreneurial ideas are viable or feasible in these countries because of various factors such as lack of enough capital, resources, infrastructure, expertise, and the policies within these countries (Odero, 2016). Therefore, before implementing an entrepreneurial idea in developing countries, it is important to undertake an economic analysis to assess the feasibility of such idea into that particular country. One of the growing technologies in the developing countries is the use of public transport transit cards for payment (Smith, 2010). This is a system that has already been developed in many developed countries. Therefore, this paper provides a theoretical and an analytical framework of the economic impact of public transport transit cards system in Kenya. Transportation system plays an essential role in the development of the Kenyan economy (Smith, 2010). Therefore, it is important to assess the economic impact of public transport transit cards in Kenya.

Kenya Economy

Kenya is one of the most resource-rich countries in the Sub-Saharan Africa. Additionally, it has the largest GDP in East and Central Africa and has revealed signs of positive growth in the past years. Kenya’s population stands at approximately 46.1 million (Oira, 2015). The World Bank estimated that the country;s economy would rise by 6% in the year 2016. The primary economic sectors in the country are agriculture, forestry, transportation, fishing, real estate, whole, and retail trade (Oira, 2015).; Despite its growth, 46% of Kenyans live below poverty line. Although the country is recognized as the largest economy in East Africa, it has the most significant unemployment rate of 17.3%. Other East African countries have an unemployment rate of about 6% (Oira, 2015).;

Figure 1: Percentage of Unemployed people in Kenya compared to other Countries

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Transportation in Kenya

The transport sector accounts between 5 to 15 % of the GDP in the nations in the Great Lakes Region (Paddington ; Tarry, 2011). Nonetheless, the impact of transport goes well past its portion of the economy as it functions as an intermediate service to all divisions and is, thus, essential to poverty alleviation and economic growth. Hence, it is of pre-eminent importance that the sector affords the society with efficient, adequate, and effective services. The sector should avail these services at minimal costs to the society including guaranteed minimum adverse effect on environment and society (Tourism ; Transport Forum, 2010). The Government of Kenya (GOK) as well as the Economic Recovery Strategy for Wealth and Employment Creation 2003-2007 (ERS) recognize the contribution of the transport sector to poverty eradication and achievement of rapid economic growth (Paddington ; Tarry, 2011). Comparing with other nations in the region, the transportation sector in Kenya is moderately well-developed concerning both services and infrastructure. The transport industry in Kenya links universal quality services and operators, a somewhat weak infrastructure and some ineffective and inefficient organizations (Smith, 2010).;

Public transportation sector provides mobility as well as access to areas of interest to persons. People engage public transport services for access to areas of education, employment, retail, community facilities, health as well as recreational facilities (The Republic of Kenya, 2009). A majority of the people in Kenya use minibus taxis, locally known as Matatus (Oira, 2015). The Matatu Industry is the common Paratransit industry in Kenya that offers public transport amenities to millions of people every day. Kenya;s transport system is renowned for corruption, chaos, and carnage on the roads (Odero, 2016). The standard payment method is where passengers carry their cash in their pockets and pay either before boarding the vehicle or along the way. Several people are robbed of their money, and it is also this system of payment that facilitates the traffic police to illegally accept small amounts of money (kitu kidogo) from the Matatu drivers when they are caught in traffic offenses (Oira, 2015).;

Figure 2: 14-seater and a 33-seater vehicles operating in Kenya

Figure 3: Matatu Stage

Rail sub-sector

Rail sub-sector is another public transport means used in Kenya. The system links major population as well as production centers. Mainly, the railway system connects the port of Mombasa and serves both Kenya and other East African countries (Paddington ; Tarry, 2011). The mainline connects Mombasa to Malaba via Nairobi. The current operational system uses the narrow gauge track gauge of 1000 mm. Mainly, the railway transport system in Kenya is used for cargo transport. However, passengers also use the rail system. The primary passenger carriages are the ;Jumbo Kenya Deluxe,’ which connects Nairobi to Mombasa and the ‘Port of Florence Express,’ which connects Nairobi to Kisumu (Smith, 2010). The railway system in Kenya is under improvement, and currently, a new standard gauge railway (SGR) is under construction. The 609km-long project will shorten the passenger travel time from Mombasa to Nairobi from the current 14 hours to about 5 hours. Cargo trains will take approximately eight hours to complete the journey.;

Economic Impact of Investing in Kenya Public Transport

Cities are the capitals of the economy, they contribute over 80% of the world economic output as well as 50% of the world;s inhabitants (Odero, 2016). Public transport is one of the leading contributors to the cities economies as well as the national economy as a whole. Public transportation services are significant in different ways. They can shape land use, provide mobility, generate jobs, and support public policies concerning air quality, carbon emissions as well as energy consumption. All these factors can be essential when considering the costs, benefits, and optimal levels of public transportation. Additionally, investment in public transport influences the wages, business income, as well as employment. Investment in the public sector may have three economic impacts namely: spending impacts, travel improvement impacts, and access recovery impacts. Spending impacts emanate from the direct and the indirect spending within the sector (Tourism ; Transport Forum, 2010). For instance, purchases of capital such as rolling stock, control equipment, the vehicles, and so on. Travel improvement impacts are economic benefits or costs influenced by investment in the public transport sector. They include travel time savings, travel cost savings, reliability improvement, and safety improvement. Access development impacts are the accessibility implications influenced by public transport investment (Smith, 2010).;

However, although any investment in the public sector may seem feasible for every economy, some investments might be detrimental for different economies, especially the developing ones (Paddington ; Tarry, 2011). For instance, depending on the economy and the transport system in a country, an entrepreneurial venture may lead to job losses, intricacy in adopting the new technology, among other factors (Oira, 2015). Therefore, it is important to assess the economic benefits of an entrepreneurial venture before implementing it.;