Kenya is a country located in East Africa with a population of about 47.6 million people. The official languages are English and Swahili, although many other local languages are also spoken. The economy of Kenya is primarily based on agriculture, tourism, and manufacturing. However, the country is also working to develop its information technology and telecommunications sectors. In this blog post, we will do a PESTEL analysis of Kenya. This will help us understand the political, economic, social, technological, environmental, and legal factors affecting the country.
1. Political factors
The Republic of Kenya is a presidential representative democratic republic. The President of Kenya is both head of state and head of government and serves as commander-in-chief of the Kenyan Defence Forces. The National Assembly is Kenya’s unicameral legislature. The government exercises executive authority. Legislative power is vested in both the government and the National Assembly. The Judiciary is independent of the executive and the legislature.
Kenya is a founding member of the East African Community (EAC), and also belongs to the Commonwealth of Nations and la Francophonie.
2. Economic factors
The Kenyan economy relies heavily on agriculture, which accounts for approximately 26% of the GDP and employs about 65% of the workforce. The country’s topography presents significant challenges to agricultural production, with only 8% of the land suitable for cultivation. Kenya also has a large informal sector, which is estimated to account for approximately 50% of the GDP.
Kenya’s economic growth has been strong in recent years, averaging 5.6% between 2010 and 2015. However, this growth has not been evenly distributed, with the majority of it concentrated in the capital city of Nairobi and other urban areas. This has led to increased inequality and pockets of poverty, particularly in rural areas.
Inflation has been a persistent problem in Kenya over the past few years, reaching a peak of 18.7% in 2011. This was largely due to high food and fuel prices, as well as government expenditure on infrastructure projects ahead of the 2013 general elections. Inflation has since moderated to an average of 7.4% between 2012 and 2016 but remains a concern for policymakers.
The Kenyan government relies heavily on revenue from taxation, which accounts for around 35% of total revenue. However, tax collection is inefficient, and many people are able to avoid paying taxes through informal arrangements with corrupt officials. As a result, the government struggles to raise enough revenue to fund basic services or invest in long-term development projects.
3. Social factors
Kenya is a country located in the Eastern African region with a population of about 47.6 million people. The official languages spoken in Kenya are English and Swahili. The capital city of Kenya is Nairobi.
The social factors in the PESTEL analysis of Kenya that can affect business in the country include:
- The country’s demographics include the population’s age distribution, literacy rate, and health status.
- The level of economic development of the country. This can impact a business due to factors such as the purchasing power of consumers and the availability of infrastructure.
- The culture and values of Kenyan society can impact businesses through things like consumer preferences and work ethic.
4. Technology factors
The technological factors in Kenya that could affect business include:
- The level of technology infrastructure and access to it. This includes things like the quality of the roads, telecommunications infrastructure, and power availability.
- The level of technology adoption. This refers to how widely used and accepted various technologies are within Kenya.
- The rate of technological change. This is the speed at which new technologies are being adopted and integrated into society.
Kenya has made great strides in improving its infrastructure and access to technology in recent years. The country has seen a significant increase in mobile phone ownership and internet access and an expansion of its road network. These developments have made it easier for businesses to operate in Kenya and reach their target markets.
However, there is still room for improvement regarding the quality of roads and telecommunications infrastructure and the availability of power. The country also lags behind other nations in terms of technology adoption, with only a small percentage of the population using computers or the internet regularly. Nevertheless, the rate of technological change is very high in Kenya, meaning businesses need to be prepared to adopt new technologies to stay ahead of the competition rapidly.
5. Environmental factors
Kenya is located in East Africa and is one of the most populous countries in sub-Saharan Africa. The country has a tropical climate with two rainy seasons. Kenya’s natural resources include gold, copper, limestone, and soda ash. The country also has the potential for oil and gas exploration.
The Kenyan government has emphasized environmental conservation, and there are several national parks and reserves in the country. However, environmental issues remain a concern in Kenya. These issues include deforestation, soil erosion, water pollution, and wildlife conservation.
6. Legal factors
The legal framework in Kenya is relatively stable and predictable, making it a relatively easy place to do business. The country is a member of the World Trade Organization (WTO) and has signed a number of free trade agreements (FTAs), which provide preferential access to Kenyan exports to certain markets.
Kenya is also a member of the regional East African Community (EAC), which has its own customs union and common market. The EAC provides for the free movement of goods, capital, and people within the region. Kenya is currently ratifying a comprehensive Economic Partnership Agreement (EPA) with the European Union.
However, there are some legal uncertainties that businesses should be aware of. For example, Kenya’s Intellectual Property Act does not yet fully comply with international standards, and enforcement of intellectual property rights remains weak. There are also concerns about this factor of PESTEL analysis of Kenya about the independence of the judiciary and the rule of law in general.
Overall, the PESTEL analysis of Kenya highlights several opportunities and challenges that the country faces. On the plus side, Kenya has a young and rapidly growing population, which offers a potential market for businesses to tap into. Additionally, the country is relatively stable politically and has strong relationships with key international partners. However, some significant challenges need to be addressed, such as high levels of poverty and inequality and security concerns in some parts of the country.