Destination Point Kenya

Financing of Capital Formation  
  
Capital formation is financed by domestic savings, grants and net borrowing from abroad. In 2008, the economy was able to finance capital formation from grants and domestic savings alone. Grants from abroad recorded a growth of 37.8 per cent. The impact has been stimulated by grants that are being channeled to private non-governmental organisations other than the government. Grants through the government contracted by K£ 45 million pounds while private grants expanded by K£ 650 million pounds.

Factor Incomes and Gross National Product.  
  
During the period under review, total factor income payments to employees increased by 9.9 per cent compared to an increase of 21.9 per cent in 2007. Despite the fact that annual inflation edged down from 6.6 per cent in 2007 to 3.5 per cent in 2008, the employee’s real incomes deteriorated considerably.

Real Gross Fixed Capital Formation (GFCF) by asset shows that only “Other Construction” recorded a slight growth of 1.6 per cent in 2008. This is attributable to the ongoing reconstruction of roads through the El Nino Emergency project fund. Transport equipment and plant machinery and other equipment combined, which contribute over 50 per cent of the GFCF, recorded declines of 8.0 per cent and 7.7 percent respectively. This is partly due to the increasing exchange rate and high cost of borrowing.

Real capital formation declined by 4.5 per cent from K£ million 952.6 million in 2007 to K£ million 910.1 in 2008. This decline was observed in all sectors of the economy save for Finance, Insurance, Real Estate and Business services that recorded a growth of 5.5 per cent. Dilapidated infrastructure, insecurity, high level corruption and general depressed economic performance have contributed to reducing Kenya’ s attraction as an investment destination compared to other countries within the region.