The European Commission’s · The European Commission’s science and knowledge service Joint...

The European Commission’s

science and knowledge service

Joint Research Centre

The structure of the

Kenyan economy Kenya Social Accounting Matrix

Workshop on Modelling Impacts of National

Policies on Kenyan Economy

Nairobi, April 28, 2016

Alfredo Mainar Causapé

Outline

•Introduction

•2014 Kenya SAM estimation

•Analysis of the Kenyan Economy structure with SAM data

Introduction

Simulations and the applications of CGE model developed in this study needs to be calibrated to a specific SAM that requires an ad hoc structured database.

We estimated a virtually new SAM for Kenya (base year 2014) with an unusual structure, incorporating specific accounts for the treatment of HPHC (Aragie (2015), McDonald (2010)) and a high level of regionalization based on agro-economic zoning and social characteristics.

Accordingly, it would be feasible to address specific issues such as semi-subsistence economic systems, agricultural production, mobility of factors, and other elements with a regional dimension.

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Kenya SAM estimation

Data from different sources and applied updates in specific structural relationships. This generated new original values, consistent with latest available national statistics.

2014 Kenya SAM is a novel contribution as it is estimated from the new rebased National Accounts (including a short version of Supply and Use Tables) for Kenya (KNBS, 2015a, 2015b) as well as the micro-data from Kenya Integrated Household Budget Survey (KIHBS) 2005/06 (KNBS, 2007).

Other relevant databases related to agriculture (Government of Kenya, 2015), and labour markets (KNBS (2015a, 2015b)

Use auxiliary the production structure of previous SAMs elaborated by the International Food Policy Research Institute (IFPRI), i.e. (Kiringai et al. (2007), Thurlow et al. (2007), Thurlow and Benin (2008)).

4


2014 Kenya SAM is based on the standard structure that considers activities and commodities separately.

However, there are peculiarities that make Kenya SAM 2014 deviate from other classical structural assumptions.

HPHC concept is introduced in the SAM by assuming that each household also has a "productive activity". Besides the classic Representative Household Groups (RHG) that collect household behaviour as consumers of goods and services and as providers of factors of production (and receptor-contributors of transfers), in the Kenya 2014 SAM new accounts are presented showing the behaviour of households as units of production of commodities.

These accounts incorporate the economic behaviour of households as producers of food commodities (agricultural and livestock products for food) as well as cash crops.

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This requires also separate accounts for commodities produced by these households for own consumption (HPHC as input or as a final product) and other marketed commodities (produced both by households and by conventional productive activities).

Households considered as producers have been broken down regionally, while commodities produced are taken at national level in unique accounts.

In order to form the RHG, households as institutions have been further disaggregated into rural and urban, according to the area of residence, moreover the two metropolises, Nairobi and Mombasa, have been broken down by income quintiles. As a result, the 2014 Kenya SAM contains 24 RHG, a number allowing for a good analysis of redistributive aspects and specific impact of different policies.

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Regional breakdown in the 2014 Kenya SAM is based on agro-ecological characteristics. The country has been divided into seven agro-ecological zones, in addition to the two major metropolises, i.e., Nairobi and Mombasa. The nine regions considered are:

Nairobi

Mombasa

High Rainfall

Semi-Arid North

Semi-Arid South

Coast

Arid North

Arid South

Turkana 7


Nairobi Mombasa High Rainfall High RainfallSemi-Arid

North

Semi-Arid

SouthCoast Arid North Arid South Turkana

Nairobi Mombasa Kiambu Bondo Nyeri Taita Taveta Kilifi Isiolo Tana River Turkana

Kirinyaga Nyando Mbeere Kitui Kwale Marsabit Garissa

Muranga Bomet Mwingi Makueni Lamu Moyale

Nyandarua Keiyo Nyambene Kajiado Malindi Mandera

Thika Kericho Tharaka Narok Wajir

Maragua Koibatek Laikipia Baringo

Embu Marakwet Samburu

Machakos Nakuru

Meru Central Nandi

Meru South

Gucha

Homa Bay Buret

Kisii Bungoma

Kisumu Busia

Kuria Mt. Elgon

Migori Kakamega

Nyamira Lugari

Rachuonyo Teso

Siaya Vihiga

Suba

Trans Mara

West Pokot

Trans Nzoia

Uasin Gishu

Butere/Mumias

Agro Ecological Zones in Kenya SAM 2014. Districts and provinces (old)

Nairobi Mombasa High Rainfall High RainfallSemi-Arid

North

Semi-Arid

SouthCoast Arid North Arid South Turkana

NAIROBI COAST CENTRAL RIFT VALLEY CENTRAL COAST COAST EASTERN COAST RIFT VALLEY

EASTERN WESTERN EASTERN EASTERN NORTH EASTERN NORTH EASTERN

NYANZA RIFT VALLEY RIFT VALLEY RIFT VALLEY 8


In terms of agricultural production, the SAM accounts for three types of production agents:

9 household agricultural activities (one per each AEZ region) that produce 18 "subsistence commodities" not marketed and consumed at home and 17 marketed crops.

3 regional households produce only one or more of the 6 exported crops (cotton, sugar, coffee, tea, tobacco and other crops manly flowers).

Business enterprise sectors which at national level produces food and cash crops. These activities represent the market oriented larger holder producers.

Three types of labour in the SAM: skilled, semi-skilled and unskilled labour. Each labour factor is also regionalized, giving the nine regions of reference plus a rest of the world account. Hence, the SAM takes into account 30 different types of labour.

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Kenya SAM 2014 activities and commodities

HPHC RHG as activities (food)

Maize Maize Other livestock Metals and machines Nairobi Food crops Chemicals

Wheat Wheat Fishing Non metallic products Mombasa Cotton Fertilizers Nitrogen

Rice Rice Forestry Other manufactures High Rainfall Sugarcane Fertilizers Phosphorus

Other cereals Other cereals Mining Water Semi-Arid North Coffee Fertilizers Potassium

Roots and tubers Roots and tubers Meat and dairy Electricity Semi-Arid South Tea Metals and machines

Pulses and oil seeds Pulses and oil seeds Grain milling Construction Coast Tobacco Non metallic products

Fruits Fruits Sugar and bakery… Trade Arid North Others crops Other manufactures

Vegetables Vegetables Beverages and tobacco Hotels Arid South Livestock Water

Beef Cotton Other manufactured food Transport Turkana Dairy Electricity

Dairy Sugarcane Textile and clothing Communication Fishing Construction

Poultry Coffee Leather and footwear Finance RHG as activities (cash crops) Mining Trade

Sheep, goat… Tea Wood and paper Real estate High Rainfall Meat and dairy Hotels

Other livestock Tobacco Printing and publishing Other services Semi-Arid North Grain milling Transport

Fishing Others crops Petroleum Adminsitration Semi-Arid South Sugar and bakery… Communication

Sugar and bakery… Beef Chemicals Health Beverages and tobacco Finance

Beverages and tobacco Dairy Fertilizers Nitrogen Education Other manufactured food Real estate

Other manufactured food Poultry Fertilizers Phosphorus Textile and clothing Other services

Water Sheep, goat… Fertilizers Potassium Leather and footwear Adminsitration

Wood and paper Health

Printing and publishing Education

Petroleum

Marketed commodities Activities

10


In summary, the 2014 Kenya SAM consists of 193 accounts:

54 activities (12 of them accounts of households as producers)

52 marketed and 18 HPHC commodities

3 types of labour (skilled, unskilled and semi-skilled) in 10 regions (30 labour accounts in total)

3 types of capital (agricultural, non-agricultural and livestock) and 2 types of land (irrigated and non-irrigated).

5 types of taxes: direct, indirect, sales, factors and imports taxes.

24 regionalized RHG.

Respective accounts for margins, saving-investment, enterprises, government and rest of the world are also included.

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Kenya SAM 2014 (abbreviated version). Kshs '000 million

ch cm m ahf ahc a flab fland flivst fcap_ag fcap_na hh enter gov dirtax indtax saltax facttax imptax i_s row Total

HPHC commodities (ch) 150.7 161.1 0.9 313

Marketed commodities (cm) 292.5 293.9 50.1 3,158.5 4,162.0 750.4 1,144.2 954.0 10,806

Margins (m) 292.5 292

Households as activities food (ahf) 312.7 1,045.8 1,358

Households as activities cash-crops (ahc) 197.7 198

Activities (a) 7,087.1 7,087

Labour factor (flab) 92.7 14.6 1,545.9 15.9 1,669

Land factor (fland) 536.2 113.7 206.8 857

Livestock (flivst) 141.2 33.6 175

Capital agricultural (fcap_ag) 98.7 19.3 77.3 195

Capital non-agricultural (fcap_na) 45.1 1,912.3 1,957

Households (hh) 1,600.2 856.1 174.7 195.2 455.4 1,048.5 41.6 324.3 4,696

Enterprises (enter) 0.3 1,501.0 505.4 2,007

Government (gov) 554.0 152.7 207.0 7.9 160.7 25.7 1,108

Direct taxes (dirtax) 311.6 242.4 554

Indirect taxes (indtax) 152.7 153

Sales taxes (saltax) 207.0 207

Factor taxes (facttax) 6.6 0.3 0.1 0.1 0.9 8

Imports taxes (imptax) 160.7 161

Save/Investment (i_s) 51.3 715.8 -213.9 592.0 1,145

Rest of the World (row) 1,815 62 10 25 1,912

Total 313 10,806 292 1,358 198 7,087 1,669 857 175 195 1,957 4,696 2,007 1,108 554 153 207 8 161 1,145 1,91212

Analysis of the Kenyan Economy structure with SAM data

119.7%

18.4%

38.0%

Domestic absortion Exports Imports

Domestic absorption, exports and imports as % of GDP

13


Private

consumption

69.5%

Investment

18.4%

Government

consumption

12.1%

Composition of domestic absorption

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Analysis of the Kenyan Economy structure with SAM data Distribution of Labour factor and Value Added by aggregate activities

Distribution of Labour factor and non-agricultural Capital by aggregate activities

21.8%

0.8%

1.3%

5.0%

11.9%

1.1%

8.2%

49.8%

7.7%

0.8%

1.1%

1.7%

6.0%

0.9%

7.6%

74.1%

Crops

Livestock

Natural

Resources

Food

Industrial

Utilities

Construction

Services

Value Added Labour

Crops +

Livestock

Natural

Resources Food Industrial Utilities Construction Services

Labour 8.6% 1.1% 1.7% 6.0% 0.9% 7.6% 74.1%

Capital (non-agricultural) 2.3% 1.0% 3.1% 13.3% 1.8% 6.9% 71.7% 15


Value Added/Gross Output ratio by aggregate activities

71.2%

75.3%

71.5%

22.7%

36.4%

58.9%

38.5%

62.9%

Crops

Livestock

Natural Resources

Food

Industrial

Utilities

Construction

Services

16


Labour factor/Value Added ratio by aggregate activities

9.5%

24.7%

22.6%

29.2%

26.4%

26.7%

46.4%

45.2%

Crops

Livestock

Natural Resources

Food

Industrial

Utilities

Construction

Services

17


Share of HPHC activities in production factors

6.5%

75.9%

80.8%

60.4%

2.3%

21.3%

Labour Land Livestock Capital

(agricultural)

Capital (non-

agricultural)

Value Added

18


Share of inputs in intermediate consumption in agricultural activities

HPHC

(food)

HPHC

(cash) Activities

Total

agricultura

l sector

HPHC inputs 0.34 0.00 0.00 0.28

Chemical products 0.07 0.11 0.03 0.09

Fertilizers 0.04 0.09 0.00 0.05

Other Marketed inputs 0.55 0.80 0.96 0.58

Irrigated land

2.5%

Non-irrigated land

97.5%Share of use of irrigated / non irrigated land in agricultural sectors

19


Imports and exports composition

Agricultural products, 12.5%

Manufactured and others,

58.0%

Petroleum and mining,

26.5%

Services, 3.0%

Imports

20


Imports and exports composition

Agricultural products, 39.5%

Industrial commodities,

23.5%

Services, 37.0%

Exports

21


8.6%

38.0%

69.6%

1.3%

17.4%

8.2%

7.4%

10.6%

24.0%

8.9%

Agricultural products

Manufactured and others

Petroleum and mining

Services

Total economy

Imports dependency Imports tax rate (implicit)

Imports dependency and implicit imports tax rate

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Distribution of households' income

Factors income Transfers

Labour Land Livestock Capital

(agricultural)

Capital (non-

agricultural) Enterprises Government

Rest of the

World

Kenya 34.1% 18.2% 3.7% 4.2% 9.7% 22.3% 0.9% 6.9%

Rural 35.5% 30.7% 6.3% 2.7% 6.6% 11.4% 1.2% 5.6%

Urban 32.3% 2.9% 0.6% 5.9% 13.6% 35.8% 0.5% 8.5%

Nairobi 32.3% 0.2% 0.0% 7.4% 8.3% 38.8% 0.6% 12.4%

Mombasa 55.5% 2.3% 0.0% 3.5% 4.4% 29.0% 0.3% 4.9%

High Rainfall 32.7% 24.6% 4.4% 3.3% 12.4% 17.7% 0.5% 4.4%

Semi-Arid North 33.1% 33.5% 8.6% 2.7% 2.6% 12.9% 0.5% 6.1%

Semi-Arid South 31.0% 30.2% 9.6% 2.0% 6.8% 12.7% 2.1% 5.6%

Coast 45.5% 3.7% 0.8% 3.6% 2.4% 25.2% 5.5% 13.3%

Arid North 47.5% 16.7% 4.0% 2.8% 6.1% 8.7% 4.5% 9.7%

Arid South 46.3% 2.4% 0.5% 3.2% 4.0% 11.9% 9.5% 22.1%

Turkana 78.2% 2.4% 0.5% 3.3% 2.2% 6.9% 3.6% 3.0%

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Households consumption pattern

Food, 41.6%

Textile and clothing, 4.1%

Other industries,

10.6%

Energy and

water, 9.1%

Transport and

communications, 14.2%

Services, 20.5%

24


Households consumption patterns (global, by rural/urban habitat and by AEZ)

41.6%

48.4%

33.1%

29.5%

42.6%

42.9%

50.4%

49.2%

56.0%

57.8%

65.4%

72.8%

4.1%

4.7%

3.3%

2.9%

4.1%

4.3%

4.0%

5.6%

3.8%

4.8%

7.4%

4.1%

10.6%

11.3%

9.6%

9.6%

11.8%

10.8%

10.4%

11.0%

12.3%

11.3%

8.6%

8.2%

9.1%

7.3%

11.3%

12.9%

10.2%

7.8%

7.7%

8.4%

9.5%

6.2%

5.8%

9.2%

14.2%

11.5%

17.6%

20.8%

18.7%

12.1%

9.3%

15.2%

10.7%

8.2%

6.8%

3.1%

20.5%

16.8%

25.0%

24.2%

12.7%

22.1%

18.2%

10.6%

7.6%

11.8%

5.9%

2.5%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Kenya

Rural

Urban

Nairobi

Mombasa

High Rainfall

Semi-Arid North

Semi-Arid South

Coast

Arid North

Arid South

Turkana

Food Textile and clothing Other industries Energy and water Transport and communications Services25


HPHC food consumption rate of total food consumption (global, by rural/urban habitat and by AEZ)

8.8%

12.8%

1.5%

0.6%

0.2%

11.3%

15.6%

7.9%

5.2%

5.5%

6.3%

2.8%

Kenya

Rural

Urban

Nairobi

Mombasa

High Rainfall

Semi-Arid North

Semi-Arid South

Coast

Arid North

Arid South

Turkana

26

Analysis of the Kenyan Economy structure with SAM data Principal food commodities consumed as share of total food consumption

(global and by rural/urban habitat)

13.4%

12.2%

9.3% 9.3% 9.2%8.7% 8.7%

6.1%

5.0%

16.1%

10.4%

6.2%

11.3%

12.8%

8.3%8.8%

5.5%

4.5%

8.4%

15.4%15.1%

5.4%

2.5%

9.5%

8.4%

7.2%

6.1%

Pulses and oil seeds Meat & dairy Fruits Maize Grain milling Beverages and

tobacco

Roots and tubers Vegetables Dairy

Kenya Rural Urban

27

The European Commission’s

science and knowledge service

Joint Research Centre

The structure of the

Kenyan economy Kenya Social Accounting Matrix

Workshop on Modelling Impacts of National

Policies on Kenyan Economy

Nairobi, April 28, 2016

Alfredo Mainar Causapé

The European Commission’s · The European Commission’s science and knowledge service Joint...

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