Economics is a science that deals with production, distribution, and consumption of goods and services. It deals with the theory of human welfare which includes all the commercial activities in society. Trade is an economic system involving the buying of goods and services with the aim of compensation between the parties (buyer and the seller). On the other hand, monetary environment refers is a system used to stabilize exchange rates and balance of payment in a country. The macro environment is the uncontrollable factors that affect performance and strategies of a nation. These factors include the political, economic, legal, social cultural factors, trade and of course monetary environment. Today, we are scaling down our study to some of the macro environmental factors affecting Kenyan economy.
Political factors
The internal fight in 2007 created a political instability that scared many investors away and GDP growth fall from 7.1% to 1.7%. The economy has since been gradually improving, but every time there is an election (“Kenya Economic Update, December 2012,” 2012). In August 2017, all Kenyans voted, but the presidential elections were nullified by the supreme court of Kenya. The prolonged campaign periods have seen the economy destabilizing because of regular demonstrations conducted by the opposition in the town centers and the formidable stands embraced by the incumbent government. It poses a high risk to start a business in such a politically charged country during the election periods.
Legal factors
As one of the developing economies, it lacks proper regulatory and legal environment that curtail thriving and development of businesses in particular small medium enterprises and macro enterprises. A study conducted in Nairobi (capital city of Kenya) indicated that (84.2%) of the entrepreneurs were not happy for the adverse legal and regulatory environment, tedious and exorbitant process of acquiring a permit, hefty fines imposed for failure to meet some business regulations, and poor service delivery by relevant authorities. These scenarios squeeze revenues for those already in operation as well as scaring away potential domestic and international investors. (“Kenya Economic Update, December 2012,” 2012)
Cultural factors
Culture affects consumer behavior, local demand, buying decision, brand image and even business negotiations. Commodities in the market sell best in certain cultures than others. Islam is one of the cultures in Kenya who inhabits more substantial part of the northern Kenya. According to their religion, pork is a taboo, and hence such business cannot develop in their area. The trend is prevalent in different communities who don’t consume different products.
Trade
Trade entails the exchange of goods and services through a medium (money). Kenya has a market-based economy and is known as the logistics and commercial hub in East Africa. Kenya revenue authority imposes restrictions, tariffs, and policies affecting both imports and export. Besides being an economic hub in east Africa, Kenya experiences a trade deficit as a result of international prices and weather conditions since it majorly relies on agriculture. As a growing nation, it must diversify its exports to experience balance of trade (Kenya & Emtsuru Investments, 2011,).
Monetary environment
Monetary policies and fixed exchange rates are essential economic management tools that stabilize growing economies. Low inflations and international competitiveness are key policy targets for stability. Kenya exchange policy has been changing since the early 1970s. A general increase in prices of products is felt in Kenya during stiff political temperatures that result to a weak shilling (Kenya Institute for Public Policy Research and Analysis, 2009).
- Kenya Economic Update, December 2012. (2012). doi:10.1596/26660
- Kenya Institute for Public Policy Research and Analysis. (2009). Implications of the global financial crisis on the Kenyan economy. Nairobi: Author.
- Kenya, & Emtsuru Investments. (2011). Ministry of Trade: Investment opportunities in Kenya. Nairobi, Kenya: Ministry of Trade.
