THE EFFECT OF POPULATION GROWTH ON THE ECONOMIC GROWTH OF KENYA

2010

ABSTRACT Although many are the problems that Kenya is experiencing, social and human capital deterioration, a declining economy and an institutional crisis are a reflection of Kenyas increasing complication of socioeconomic situation. The country has further been hit hard by the increase in its population size and according to the 2009 national census, it reached 38.6 million; an increase of a million people annually. This made Kenya to appear among the most populated countries of Africa after Nigeria and Gabon etc. As a result of this rapid increase in Kenyas population, the levels of economic growth went down drastically for the period between 1969 and 2009 as indicated in the World Banks annual reports on economic development and growth indicators for the year 2009. In order to find out how this big rate of population growth affects the countrys economy, we undertook a study and conducted a research on the main effect of population increase on the economic growth and development of Kenya. The main objective of this study was to help the country devise appropriate mechanisms towards controlling the rate of population growth as a measure of improving its economic growth levels. This is in line with the implementation of the millennium development goals (MDGs) as well as Vision 2030 even as the country aspires to implement Agenda 4 and alleviate poverty by the year 2015.

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CHAPTER ONE: INTRODUCTION 1.1.1. Background Economic growth can be defined as the quantitative increase in a countrys income or output accompanied by expansion in the countrys labor force, consumption, capital and volume of trade. Economic development, on the other hand, can be said to encompass both the quantitative and qualitative changes in the economy of a country. For a country to realize any meaningful growth or development of its economy, it is inevitable for that country to take precautions on the determinants of economic growth. Economic growth and development of a country may be measured by the use of measures like Gross National Product (GNP), Gross Domestic Product (GDP), GNP per capita, social indicators and welfare. Thus it is common knowledge that economic growth of any country is a function of growth of population in that particular country. A change in population growth can bring about changes in any of the measurements of economic growth and development. It will be paramount to note here that for any country to achieve meaningful economic growth it will be paramount for it to be able to control its population growth using any means possible. Kenyas population has been growing steadily at a rate of 3.5% p.a. over the last three decades. For instance, the population figures according to the 2009 national census indicated that Kenya had a total of 38.6 million people up from the 1999 figure of 28 million people and the 15.5 million people according to the 1979 national census. This thus means that Kenyas population grows by at least 10 million people every decade translating to a million increase p.a. (KNBS, 2010). One of the main pillars of Kenyas vision 2030 is the economic pillar whose main aim is to maintain a sustainable economic growth of 10% p.a. over the next 25 years. The social pillar of vision 2030 maintains that by 2030 Kenya will be a just and cohesive society enjoying equitable social development in a clean and secure environment. The stated pillars cannot be achieved with a 10 million increase in population over a decade. It is therefore clear that a lot will need to be done in the governments efforts to analyze the negative effects of population growth on the economic growth of the country. Pressure on the available resources like water, social amenities, infrastructural facilities and hospitals are among the most common effects of a rapidly growing population. The pressure on the available resources leads to environmental pollution, a case in

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hand, pollution of the Nairobi River. The pollution of resources may result to affirmative action from environmental organizations like NEMA, UNEP etc in their efforts to avert the problems. According to the data provided on the Kenya National Bureau of Statistics (KNBS, 2010) website, the population trends in Kenya from the year 1969-2009 has been on an increasing rate as shown by the high fertility rates in the country coupled with a reduction in the mortality rates of the country. From the national income model, per capita income is a function of population size i.e. Per capita income (GDP Per Capita) = National Income Total Population Therefore, an increase in population holding national income constant (since majority of the people are children and old aged who are mostly dependants) will mean that per capita income will diminish. This results to high levels of poverty witnessed in the district and the country as a whole. According to the 2009 national census, majority of Kenyans, approximately 67.7% are those living in rural areas and 32.4% in urban areas. From the findings, it is clear that the rural areas in Kenya are the most densely populated. This can be attributed to the low levels of education of the residents, lack of knowledge and information, archaic beliefs and traditions and high rates of unemployment experienced in the rural areas. These result to high levels of poverty coupled with low living standards experienced in rural areas of Kenya, pressure on land leading to subdivisions of land into smaller pieces (for instance, in Kisii) poor nutrition and lack of health facilities are other problems associated with this problem of increasing population growth rate (KNBS). According to UNs program of poverty eradication in Africa, to realize a 10% growth rate in the economy, the country should be able to control its population growth rate up to around 1.5% p.a. Kenya should at no exception try to adopt these guidelines in order to achieve its vision 2030s economic and social pillars. A research gap exists in the Kenyan case in terms of the policies laid down to control population growth since the policies are not stringent and strict as they are elsewhere. Owing to the fact that high population growth rate affect Kenyas GDP, Kenya should therefore adopt the policy of a maximum number of children to be sired like China. If this is done, vision 2030 can be a reality. This research, therefore, aims at establishing the relationship between high population growth and the decline economic growth in Kenya.

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1.2. Problem statement It is clear that high population growth is not good for any country as it has many negative effects associated with it when compared to the positive effect that accompanies it. An analysis of the population trends in Kenya since the year 1969 shows that Kenyas population has increased geometrically whereas the living standards of people decrease or continue o deteriorate. For instance, Kenyas poverty index has been on the increase from the year 1969 to 2009 (World Bank). Kenyas minister for planning and national development, Hon Peter Anyang Nyongo, while addressing a United Nations meeting in New York stated categorically that rapid population growth in Kenya was impacting negatively on its economic growth. He said that rapid population growth in the country had seen increased unemployment due to increase in the labor force, increase in demand for education and increased pressure on both financial resources and health services (Republic of Kenya, 2005). It is therefore clear that the government must have slowed down in its efforts towards the achievement the goal of poverty alleviation in Kenya as the millennium development goal number two states. The 38.6 million figure of the 2009 national census indicates that Kenya indeed over the past one decade has not succeeded in its efforts (if any) to curb the problem of population growth. The main reason for the high growth in population in the rural areas is the lack of knowledge and education on the ways and methods of population control and the benefits of having manageable families right from the villages. It is very clear that the government of Kenya has failed in its duty of educating the public on the impending danger caused by high population growth. This research aims at enlightening the public (especially people from the district of study) on the consequences of increased population vis avis their living standards, poverty levels and economic growth. At the end of the research, various recommendations will be proposed to the ministry of planning, ministry of housing and the ministry of sports and youth affairs as well the Kenyan government on the public enlightenment about family planning and population control. These recommendations will be of great help to the government in making planning decisions and budgetary allocation decisions. For instance, a larger proportion of the budget should be devolved to those counties that experience high population growth rates to aid them in improving their standards of living. Knowledge of the negative effects of high population growth rates on

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2010

the economic growth of the country will be of great help both to planners and the policy designers and implementers. 1.3. Research Questions This study will aim at answering the following important questions; i) ii) What is the nature of the relationship between population growth rate and the economic growth experienced in Kenya? What strategies can the Kenyan government put in place in order to control its vastly growing population? 1.4. Objectives of the study This study will aim at achieving the following objectives; i) ii) To find out the effect of population growth on the economic growth of Kenya. To determine the various recommendations to policy planners and decision makers on how to control population growth and enhance economic growth in the Kenya. 1.5. Significance/ justification of the study This study will be aiming at bringing about a number of social, scientific and developmental significance both to the district of study and the Kenyan nation as a whole. Socially, knowledge of the effects of high population growth rates on the economic growth in the district and the country will help it succeed in laying down strategies that will reduce social crimes through creation of more employment opportunities. This will in turn lead to improvement of the living standards of the people living in the district. Increased security will boost GNP of the area through increased production levels. Of important significance will be also the devising of a model that will relate the level of economic growth with the rate of population increase in the district. The model will give a limelight towards the achievement of the economic pillar of Kenyas vision 2030. This study will also be important in the attainment and implementation of Agenda 4 and vision 2030 mainly in the district of study. In regional terms, the study will impact positively on them education of the residents of the district since the recommendations from the study will be of help in educating the people on the fundamentality of having manageable sizes of families. The Kenyan government can also use the recommendation to educate its citizens in its efforts to ensure that population growth rate in the country is checked for the benefit of the citizens and the growth and development of the economy. Adoption of the one child policy applicable and successful in China will aid the

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government of Kenya in its efforts to check population growth rates, hence economic growth can easily be realized in the district and the nation at large. 1.6. Scope and Limitation of the study This study will encompass a wide scope ranging from classroom work to secondary data collection and the analyzing the data, presentation of the analyzed data and the recording and storage of data. The choice of this topic is very timely and significant since Kenya is in its earlier stages of vision 2030 implementation and also the Agenda 4. The recommendations from the study will be of great help to the government in timely planning and implementation of policies aimed at making Agenda 4 and vision 2030 a reality especially vis avis the district of study. A wide range of research materials will be available ranging from written sources and written journals and articles (secondary sources). However, a number of limitations may be inevitable in the course of this study. Some of them may include my level of expertise of which will be overcome by doing wide and broad reading so as to widen my expertise level. Time and financial constraints will also present a challenge to this study. This will be overcome by relying mostly on secondary sources for data collection and analysis. Lack of or inadequate data might also present with itself a big challenge. This is because some information might lack or some sources for referencing might also prove very hard to get. This will slow down the research process and pose serious challenges.

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2010

CHAPTER TWO: LITERATURE REVIEW 2.1. Introduction In Kenya, there is high population growth compared to economic growth and weak integration of population concerns into development. There are dramatic changes taking place in the area of population and development. There are also increasing levels of poverty and HIV/AIDS pandemic eroding many earlier health and development gains. This has been reflected in the studies undertaken in this area. The studies are aimed at providing up-to-date information on: the profile of the population -population size, composition and distribution of population, levels, trends and differentials of fertility, mortality, migration and urbanization and establishing the macro-economic implications of demographic changes on fertility decline, globalization, MDGs, population and sustainable development challenges. These studies are important for policy makers, planners, researchers and program managers in planning, implementation, monitoring and evaluation of population and development programs in Kenya. According to the World Bank, population growth refers to the average annual percent change in the population, resulting from a surplus (or deficit) of births over deaths and the balance of migrants entering and leaving a country (World Bank, 2010). The rate may be positive or negative. The growth rate is a factor in determining how great a burden would be imposed on a country by the changing needs of its people for infrastructure (e.g., schools, hospitals, housing, roads), resources (e.g., food, water, electricity), and jobs. Rapid population growth can be seen as threatening to economic growth and development of any country especially developing countries like Kenya (KNBS, 2010). During the first phase of the implementation of the vision 2030 (2008-2012) and Agenda Four, Kenya has achieved considerable progress in various demographic and health indicators and made important strides on the policy front, by adopting policies, frameworks, guidelines and action plans in major areas of concern. Others are currently under development. However, studies show that some development indicators that have deteriorated over the decade are infant mortality, life expectancy, school enrolment and poverty levels. Economic growth virtually stagnated for most of the decade. This shows clearly that Kenyas population has been on the increase and the impacts of this on its economic growth have been many as this study will prove later.

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2.2. Empirical Literature According to the data provided by the ministry of planning, national development and Vision 2030, Kenya is currently adding one million people yearly to its already high population. This high rate of population growth has adverse effects on spending in infrastructure, health, education, environment, water and other social and economic sectors. In order for the Government to achieve Vision 2030 goals, there is need to invest in education to meet the demands of the growing school age population and the demand for future manpower. In addition, critical investment will be required in family planning services, health and other social and economic sectors to improve the welfare of Kenyans (Ministry of Planning, 2010). Different studies have shown that Kenyas population is youthful and over 60% of population was largely dependent upon a productive 40% for survival. Kenya has a mixed population composition of different groups in terms of sex, race, ethnicity and socio-economic status. KDHS suggests that Kenyan women have longer life expectancies than the men. The study further shows a decline in almost all indicators of health: the fertility rate, which has been declining since 1980s, reversed from 4.7 to 4.9 in 1998 and 2003, respectively; contraceptive prevalence rate stagnated at negative effect on ideal number of children for Kenyan families (KDHS, 2003). The 39% in 2003 as was in 1998, infant and under- five mortality rates continued to increase; mortality is expected to rise because of AIDS pandemic, such that life expectancy at birth will fall to 53 years for both sexes by 2010; it is projected that fertility will continue to decline to reach a slow TFR of 4.0 births in 2010 and medium decline of 3.25 and fast decline of 2.5. In the absence of AIDS, the picture would be different. Population will, however, continue to grow in spite of reduced TFR due to inbuilt-momentum to population growth arising from age structure (World Bank, 2010). Kenyas population growth rate currently stands at 2.462% (2011 estimate). Some studies reported that Kenya is undergoing a demographic transition due to decline in fertility. A peek at the population structure in the country shows that it is not undergoing a rapid change, although when one puts the economy in that equation, the picture changes. The 1989 and 1999 Population and Housing Censuses show that Kenya has a young population. Similarly, the composition of the population has shifted, and there is now a significantly higher proportion that is under age 20. Fertility decline has not been brought about by economic growth and technology such as modern contraceptive methods but, mainly by

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active government pursuit of the population policy. There is a likelihood of population of Kenya growing even faster considering the poor performance of most indices as shown from the KDHS website (KDHS, 2003). In addition, WHO projected that in Kenya HIV/AIDS risk perception has statistically been found to have insignificant positive effects on desire for more children. However, there is a statistically significant negative effect on ideal number of children for Kenyan families. Despite the governments population control efforts and strategies in the last two decades, the studies show that Kenya's population growth rate is still among the highest in the world. Until recently when a decline was recorded, the growth rate had remained high over a long time. Adolescents have been contributing greatly towards this high growth rate. This places formidable difficulties on the governments ability to meet the economic and social needs, and general development of the nation (WHO, 2010). According to the World Bank, if subsidies, mis-pricing, and inadequate taxation of environmentally damaging products continue to provide the wrong incentives for consumers and producers in the rich world, and if the developing world emulates the consumption patterns in rich countries, we can expect great damage to the environment and its ability to sustain growth. A major transformation, starting in the rich world, will be needed to decouple population growth and environmental impacts and to radically change the composition of the worlds output toward high-input efficiency and environmental responsibility. Future patterns of consumption and production must become a part of the global public policy dialogue (World Bank, The Road to 2050). 2.3. Theoretical Literature It is observable here to say that Kenya leads Africas population growth. The population has doubled over the last 25 years, to about 40 million people, and rapid population growth is set to continue. Kenyas population will grow by around 1 million per year 3,000 people every day over the next 40 years and will reach about 85 million by 2050. Many think this is a big problem. There are three reasons why I am less certain that the rapid population growth in Africa, especially in Kenya, is the fundamental development challenge: First, despite Africas rapid population growth and Europes stagnation (even decline in few countries) the old continent remains much more densely populated than Africa. If we look at Western Europe, there are on average 170 people living on each square km. In Sub-Saharan

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Africa there are only 70 today. This gap will narrow in the next decades but even by 2050, Western Europe is expected to be more densely populated than Africa. Following the population debates in Europe, especially in Germany you will realize that something serious need to be done with Kenyas rate of population growth. Second, while the speed of population growth remains unchanged, its sources are different. In the past, population growth was driven by increasing numbers of children. Today, and in the future, it is driven by longer life expectance and the base effect of the previous population boom. There are just many more young families which have children in Kenya. The number of children per family has fallen sharply from 8.1 children in 1978 to 4.6 children in 2008, and by 2050 it may reach 2.4. As a result, the fastest growing group in Kenyas population is not anymore young children but adults which will almost triple in size from 21 million today to about 60 million in 2050 (World Bank, 2011). Third, population growth and urbanization go together, and economic development is closely correlated with urbanization. Rich countries are urban countries. No country has ever reached high income levels with low urbanization. Population growth increases density and, together with rural-urban migration, creates higher urban agglomeration. And this is critical for achieving sustained growth because large urban centers allow for innovation and increase economies of scale. Companies can produce goods in larger numbers and more cheaply, serving a larger number of low-income customers. Kenya has companies which have been benefitting from increasing population growth and density in targeting the large numbers of lower and lower-middle income groups the bottom of the pyramid .Kenyas business model is viable because it can serve a multi-million customer base, which has increased by 25% over the last 10 years and which continues to grow rapidly. Are we thus ahead of golden age of development in Africa? It is possible but there is no guarantee. This will depend on many other factors as well. As the last decades have shown larger population and increased population density are no guarantee of success. However, it seems that the current pattern of population growth is not the main constraint to Africas development anymore and can even be a positive force. This study will mainly focus on testing the following hypothesis: Null Hypothesis (Ho) The null hypothesis will be stated as;

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High population growth in Kenya is directly related to the slow pace of economic growth in most districts of Kenya. This study will focus mainly on finding the truth about the above stated null hypothesis and testing the validity of the hypothesis. Alternative Hypothesis (Ha) The alternative hypothesis will be stated as; the relationship between high population growth in Kenya and its slow pace of economic growth is not direct (is inverse). 2.4. Overview of Literature By 2050 or so, the human population is expected to reach nine billion, essentially adding two Chinas to the number of people alive today (and may hit 10.1bn by the year 2100 according to a recent United Nations projection). Those billions will be seeking food, water and other resources on a planet where, scientists say, humans are already shaping climate and the web of life. Economic growth is seen as being a pre-requisite for the well-being of this increased global population. There is a growing global awareness that the Earths resources are finite - resource depletion (e.g. peak oil), water scarcity, food shortages etc. - is an increasing challenge to economic growth and geopolitical stability. At the same time, there are increasing concerns about the effect of human-induced climate change over both the short- and long-term time horizon. This study will therefore aim at finding solutions to questions such as will Kenya really achieve a double figure economic growth rate with a more than 2.5% growth rate in its population? How does economic growth continue to decline or how is it slowed down by the high rates of population growth in the country? These questions will then be narrowed down and recommendations be made on what should be done to reduce the increasing population growth.

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2010

CHAPTER THREE: RESEARCH METHODOLOGY 3.1. Research Design This research will employ the use of two main analysis strategies namely the regression analysis and correlation analysis of data. The main source of data will be secondary sources where empirical data available in written books and other published journals will be used. The modules will include analyzing of the population trends in Kenya since the year1969-2009 as well as comparing it with the trends in growth of GDP of Kenya for the range of the years. This research allows for the building of research models basing them on the variables being measured. The buildup models will aid the study in that it will be easier for the analyst to compare and contrast as well as find out how the represented variables relate to each other. Additionally, the information obtained from the models will be applied in making conclusions and recommendations to the government on how to fight population growth as a means of improving economic levels of the country. Although the modules will present a complete battery of questions that would reduce unobserved factors, they may lack one relevant and special feature: non-cognitive abilities. As already stated earlier, economic growth is both beneficial and attractive in a country. Each country aspires towards the achievement of an economic growth rate that will see it achieve full employment of labor and reduce the levels of poverty in it. This study will aim at connecting the economic growth rate of Kenya with its population control strategies as . 3.2. Model Specification My model for this study will be based on the general formula of calculating the Gross Domestic stated as follows: GDP=C+I+G+(X-M) where C=Co+CiYd G=Go I=Io+Ii X=Xo M=Mo Therefore; GDP= Co + CiYd + Io + Ii + Go+ Xo Mo

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KEY: GDP = Kenyas gross domestic product which measures economic growth of the country; C = the countrys consumption level, whereas Co =autonomous consumption and Ci = the induced consumption; Yd is the disposable income; G= the government expenditure in terms of Kenya shillings; I =the level of investment in Kenya, whereas Io = the autonomous investment and Ii = the induced investment; X = the countrys exports and M= the countrys imports GDP Per Capita = National income (GDP) Total Population 3.3. Description and Measurement of Variables The variables in my model will be calculated based on the data that will be collected from secondary sources and will be calculated based on a number of years so as to compare the trends over years and conclude on how population growth has affected Kenyas per capita income over the years. We will also calculate per capita income of the country over several years and compare the trends in per capita income as the population of Kenya continues to increase over time. GDP will be calculated from given figures and the population figures will be obtained from the KNBS website and publications. Given the calculated GDP and the population figures, we will then calculate the GDP per Capita which is a measure of the quality of the living standards of people and also their poverty levels. 3.4. Sources of Data The main sources of data for this research will be the secondary sources which are believed to be available in written books and other publications. The following publications will serve as the main sources of data for the study:
Economics Textbooks Newspaper articles and magazines Journals World Bank publications Government documents and reports like Agenda 4, Vision 2030 and MDGs. WHO reports and publications

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Internet sources and other search engines like google and Wikipedia GTZ, IMF, UNEP, UN reports and documents

3.5. Data Analysis Collected data from secondary sources will be analyzed using closely related operations such as establishment of category, coding the data, cleaning of the collected data, tabulating the data as well as making conclusions guided by the findings of the study. Additionally, regression and correlation analysis may be done to those variables that will apply so as to determine the nature of the relationship between them (either direct or indirect).

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References Central Bureau of Statistics, Ministry of Planning and National Development, (2004a). Economic Survey. Nairobi: Government Printer. Central Bureau OF Statistics, Ministry of Finance and Planning, (2001b). Counting our People for Development: Socio-economic Profile of the Population. Volume 1. Nairobi: Government Printer. Government of Kenya, (2008). Agenda Four: Kenya National Dialogue and Reconciliation mediated by H.E Kofi Annan, chair of the Panel of Eminent African Personalities. Nairobi: Government printer. Karori, N. Gabriel & Ali, J. (1998). Macro-Economic Implications of Demographic Changes in Kenya. Nairobi: African Economic Research Consortium (AERC). Kenya National Bureau of Statistics, (2004). Kenya Demographic and Health Survey (KDHS) 2003. Nairobi: Government Printer. Meadows, H., Randers, J. and Meadows, D. (2004). The Limits to Growth - the 30 year Update. ISBN 978-1-84407-144-9: Earth scan. Ministry of Planning, National Development and Vision 2030, (2010). 2009 population and Housing Census Results: The Population Report. Nairobi: Government printer. Republic of Kenya, (2005) Statement by Hon. Prof. Peter Anyang Nyongo: Minister for Planning and National Development To The United Nations Thirty-Eighth session of the Commission on Population and Development on 4th-8th April, 2005 held in New York, U.S.A. Turner, G. (2008). A comparison of the limits to growth with thirty years of reality, SocioEconomics and the Environment in Discussion. London, UK. World Bank, (2011). Africas Poverty Index and Economic Indicators. New York, U.S.A.

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