History Jomo Kenyatta

Kenyan economic takeoff

Following the 1969 elections, Jomo Kenyatta was sworn in as President on January 29, 1970 for a second term.

While other countries were in turmoil, Kenya had become both a beacon of stability and had a stable economy despite the Cold War politicking that dogged the region.

The early 1970s were marked by economic expansion, although the agricultural receipts were lower – the result of an inadequate rainfall – for the second year running. This affected Kenyatta’s second term but it was buoyed by good returns from coffee and tea. The oil crisis of 1973, which affected the balance of payments and led to tighter import controls, slowed the economic take-off for not only Kenya but many other nations.

But even with that, manufacturing made gains with production rising in real terms by 13 per cent. The coffee and tea prices in the international market, however, were high and Kenya started off well with the reasonable balance of payment surplus in 1971 of K£16 million. There was a marked drop in the overseas export prices in 1971, which led to a balance of payment deficit of K£28 million. The oil crisis caused crude oil price to shoot up from $1.59 a barrel to $9.66 a barrel in one year. The cost of oil imports had risen to K£50 million a year.

The world currency markets in 1973 were in general turmoil, leading to a further depreciation of the Kenya shilling.

The prices of other imports were also rising and Kenya would have been in serious balance of payment difficulties had the coffee, tea and sisal prices not improved sharply from 1973 to 1974.

There was also a marked decline in foreign exchange reserves. The domestic economy was thrown into a spin as a result of speculation in international monetary markets arising from the US balance of payments deficit. Many nations went into lengthy periods of currency speculation.

The devaluation of the dollar against the gold standard forced Kenya to make adjustments and devalue its shillings vis-a-vis a number of other trading currencies, falling by 16 per cent against the German Mark, nine per cent against the Sterling Pound and 18 per cent against the Japanese Yen.

Thus Kenya devalued the shilling by 7.89 per cent against the US dollar, a move prompted by the devaluation of the US dollar. The Government also barred the Central Bank from issuing foreign currency to businesses wanting to buy goods that could be made in Kenya.

It hoped this would reduce inflationary pressure and imports and protect the foreign exchange reserves. It all followed US President Richard Nixon’s decision to devalue the US dollar.

During the same period, an overextended and monopolistic public sector became involved in both manufacturing and services, forcing the private investors to slow down. Ultimately, the quality of investments in the country deteriorated as the parastatals got preferential treatment.


Import controls

In 1971, the government decided to check a fall in foreign exchange reserves. The Central Bank imposed credit restrictions in 1971 which covered the importation of cars and electrical goods. But it was later realised that the foreign exchange squeeze was a result of a huge increase in the demand for imports by an expanding middle-class taking advantage of the newly nationalised Kenya Commercial Bank, under John Michuki, now offering credit to Africans. The bank had increased its lending by 225 per cent between January and September, 1971.

This created a conflict between African traders and the Government’s pronounced policy of Africanisation. With most industries owned by non-Africans, the African traders felt that without financing the issuing of import licences opened them to undue competition.

During the 1972 Budget, Finance Minister Mwai Kibaki announced that the Government might relax the import control rules since some traders were monopolising that position and taking advantage of the consumers in spite of the price control.

“I do not see the maintenance of import control in this country as a long-term solution to our problems and, as soon as I feel it is safe to do so, I shall propose that we relax the quotas and leave local producers to withstand competition from overseas importers,” said Kibaki.

The Government felt that local producers should compete in price and quality with imports from overseas.

It also wanted Kenya’s manufacturers to go out and compete with overseas counterparts as the long-term answer to the country’s balance of payments problems.

The growth rates experienced in the 1970s were the result of a combination of favourable factors. In agriculture, the Government had successfully distributed productive land to small-holder farmers and promoted the cultivation of cash crops such as tea, coffee and hybrid maize and the development of dairy farming.

Import substitution was the strategy adopted to support industrial development. The strategy promoted capital-intensive technologies and kept Kenya out of the labour-intensive manufactures, such as garments, footwear and light assemblies. Protection of local industry gave rise to an over-regulated, over-concentrated and uncompetitive industrial structure. The strategy worked in the short term and delivered annual growth rates of 5 and 11 per cent in the 1970s.

The Government also introduced the Manufacturers Export Compensation Scheme, which was to give impetus to industrial production for export. The opening of the oil refinery plant in Mombasa and the Webuye Paper Mills was supposed to give additional impetus to the economy. The flat rebate export compensation scheme was, however, ineffective and benefited only large exporters. It was only in the late 1980s that more schemes started to be introduced to strengthen the incentive to export.


Free Education

The main highlight of this period was the abolition of school tuition fees in 1971 for districts in poor geographical locations. The 1971 presidential decree benefited North-Eastern Province, the districts of Marsabit and Isiolo in Eastern Province, Samburu, Turkana, West Pokot, Baringo, Narok, Elgeyo-Marakwet and Olkejuado in the Rift Valley, as well as Tana River and Lamu in Coast Province.

The abolition came at a time when the economy was growing steadily. A second presidential decree was issued on December 12, 1973, at a time when Kenya was celebrating 10 years of independence. The Government abolished tuition fees countrywide for all children in Standards One to Four.

The Government also introduced the uniform fee of Kshs60 a child a year in the entire country. The presidential decree providing free education in the early classes was one of the most challenging pronouncements of the Kenyatta era. In 1974, the Ministry of Education started to rethink its priorities on how to cope with the numbers of enrolling pupils. Enrolment in Standard One rose by a million above the estimated figure of about 400,000. The total enrolment figure for Standards One to Six increased from 1.8 million in 1973 to nearly 2.8 million by January, 1974.



One of the problems that faced the Kenyatta Cabinet in this period was the large number of unemployed youth as the population continued to grow at 3.3 per cent every year. There was a growing number of young people in urban areas.

In June, 1970, the Government opened 52  job registration centres which were swamped with thousands of people. This followed months of negotiations between the Government, employers and the unions in which they agreed to employ some 10 per cent more people.

The tripartite agreement also meant that there would be a salary freeze for one year and that strikes and go-slows would not be staged within that period.

The agreement was signed by the Central Organisation of Trade Unions, the Federation of Kenya Employers (FKE) and the Government. Job-seekers were grouped according to skills, level of education, age and sex, but thousands had to be turned away from most centres though many decided to spend nights at the centres still hoping to be registered. But this system failed to tackle the unemployment crisis.


Kenyanisation and the Asian question

During this period, the Africanisation policy continued to accelerate. The labour sector was overhauled and more indigenous Kenyans were employed. It was also to witness growth in the local capitalist system with indigenous Kenyans given incentives to go into business.

Leading in this was President Kenyatta, who lamented that some Africans were being used as “fronts” by foreigners to start businesses through “bogus partnerships”.

The Government had set up corporations and agencies for resource and capital mobilisation and to help transfer capital to citizens.

The trading licences for non-citizens were cancelled and the Immigration Department continued to face a challenge as a result of the massive backlog of applications for citizenship. “Although Kenya is politically independent,” Kenyatta said, “we have to fight for economic independence, for the economy is still in the hands of foreigners.”

By 1971, the proportion of establishments in retail and wholesale trade owned wholly or mainly by Kenyans increased from 48 per cent in 1966 to 80 per cent and in retail alone from 55 per cent to 89 per cent.

Even with this increase, the Kenyanisation policy was also complicated by the Asian question. The most affected were the Asian community who held British passports. Britain  did not know what to do with the huge number of Indians who possessed its passports.

In 1972, Idi Amin ordered all Asians to leave Uganda and Kenya was forced to close its border to stem the influx of an estimated 50,000 Ugandans. Moi said in August 1972: “The Kenya Government will not allow Asian British passport holders from Uganda to flock into the country since Kenya is not a dumping ground for people from other countries to loiter about.” The British wanted to stagger the arrivals in Britain and there was fear that an estimated 23,000 holders of Uganda passports would be stateless. The passing of the British Immigration Act of 1968 had complicated issues concerning Asian commerce in both Kenya and Uganda.

It was one of the dilemmas that faced Kenyatta at a time when he could not cope with the large number of foreigners running business.

Internal tensions

In 1971, the Government foiled a coup attempt. Some 12 men admitted having plotted the coup and the Chief Justice, Kitili Mwendwa, the Chief of Defence Staff, Major-Gen Joseph M. Ndolo and Yatta MP Gideon Mutiso were forced to resign.

The revelations shocked the nation, resulting in massive pro-Kenyatta rallies, a pledge of allegiance from the armed forces and countless proclamations of loyalty to the President from individuals.

During the trial, acting Senior Resident Magistrate S.K. Sachdeva, asserted: “Courts in this country are well and truly independent and zealous of their independence and integrity.”

Although the accused could have faced a treason charge, which carried the death penalty, they were only accused of sedition. The “infamous conspiracy” to topple the Government was planned by former army cadet Joseph Owino, said Sachdeva before sentencing him to nine-and-a-half years in jail: the longest jail term allowed for sedition is 10 years. Owino, the court was told, had been involved in the Kahawa mutiny of 1963, resulting in his expulsion from the Forces. The magistrate expressed astonishment that this “semi-educated” person had managed to involve in his plot men of such high standing and obvious intellect as Makerere University lecturer Ouma Muga. The trial increased tensions in Kenya at a time when a coup had happened in Uganda, leading to the overthrow of Milton Obote in January, 1971.


First university

The University of Nairobi (UON) was inaugurated in 1970. The emergence of UON as a separate university followed the splitting of the University of East Africa into Makerere University, the University of Dar es Salaam, and the University of Nairobi.

The University of Nairobi’s history goes back to 1952 when the Gandhi Memorial Academy Society, whose chief executive was Dr R. K. Yajnik, started fund raising efforts for the Royal Technical College, which admitted its first lot of A-level graduates for technical courses in April, 1956.

The Royal Technical College was transformed into the second University College in East Africa on June 25, 1961, under the name Royal College Nairobi. The college was entitled to a special relation with the University of London whereupon it started preparing students in the faculties of arts, science and engineering for degrees awarded by the University of London. On May 20, 1964, the Royal College Nairobi was renamed University College Nairobi as a constituent college of the inter-territorial Federal University of East Africa. Henceforth, the enrolled students were to study for degrees of the University of East Africa rather than of the University of London. Through an Act of Parliament in 1970, the University College Nairobi was transformed into Kenya’s first national university and renamed the University of Nairobi. Kenyatta was named the first Chancellor while Dr Josephat Njuguna Karanja, then Kenya’s High Commissioner in Britain, was appointed the Vice-Chancellor.

The Gandhi Memorial Academy Society was also instrumental in the construction of the Gandhi Wing and the Gandhi Memorial Library at the University of Nairobi. For his efforts, Dr Yajnik is immortalised with the Yajnik Memorial Fountain (commonly known as the Fountain of Knowledge) at the institution’s Great Court.


In the 1960s, the Government had adopted the Sessional Paper No. 5 of 1966/7, the Housing Policy of Kenya. This paper emphasised the construction of subsidised public housing for rental while at the same time providing for the demolition of informal settlement. The implementation of this policy document was largely carried out in the 1970s when the National Development Plan of 1974-78 was drawn.

But despite Government policies that sought to expand the number of rental houses and the National Housing Corporation programmes that advocated site and service schemes, the number of sites and service plots developed in Nairobi was so low as to be of limited importance in meeting the need.

Some of the rental and tenant purchase housing schemes built during this period in Nairobi included Kimathi Estate (1971), Harambee,  Uhuru and Outer Ring Road estates. Several site and service schemes were opened up in Kiandutu (Thika) and parts of Mathare (Nairobi).

The City Council also demolished a number of squatter settlements in the 1970s and maintained in Council housing a standard of “decent homes” as advocated in the National Development Plan.

Further, the Government allowed the Nairobi City Council, under the advice of the Urban Study Group, to adopt a broader development strategy that supported the adoption of the Government’s policy in Nairobi, proposing a shift to low-income housing programmes, such as site and service, and squatter settlement upgrading schemes.  This policy was approved in 1972. The objectives of the policy were to test the suitability of the sites and services and the squatter settlements upgrading approach to meet the housing needs of the rapidly growing low-income population.

The second was to improve employment potentials in the building industry and raise the living standards for the urban poor.

The Development Plans spelt out the focus on site and service schemes as a means of providing housing for the poor, and preventing unauthorised housing construction.

These site and service schemes were intended to accommodate low-cost single-family units, and in some cases pit latrines were used on fairly big plots. Plot owners were to provide a substantial share of the labour input required to construct their houses. The legal basis for these reduced standards existed in the so-called Grade II by-laws.  From 1970 to 1972, the number of site and service plots completed in all towns reached 3,734 as against 6,114 publicly built houses. Some 54 per cent of these site and service plots were completed in Nairobi and 33 per cent in Thika, far greater than their share of the total urban growth over this period. But the 650 plots a year provided in Nairobi fell far short of the need to accommodate 7,000 families annually.

This was one of the major triumphs for housing during this period, although it would later create major problems for urban planning. The Metropolitan Growth Strategy of 1973 for the development of Nairobi up to the year 2000 made ambitious development proposals, which have been implemented only in a piecemeal fashion over the past 38 years.



When Kenyatta opened the Industrial and Commercial Development Corporation’s new headquarters — Uchumi House — on July 27, 1973, he was sending the strong message that the Africanisation policy would be a pillar of the economy. The ICDC had been established in 1954 but was turned around at independence to offer small industrial loans to African businessmen.

While it had a bias towards smaller projects, dealt with by its subsidiary, the Kenya Industrial Estates, it in 1973 inaugurated the Industrial Development Bank which it owned 51 per cent. The balance was held by the Treasury to raise external loans to finance major industrial development projects.

Some of the important landmark industrial projects during this period included the million-pound vehicle assembly plant in Thika to assemble Land Rovers for sale in the region. Also, the Minister for Agriculture laid the foundation stone of the Mumias Sugar Factory at £7 million, which produced over 45,000 tonnes a year and provided employment for 2,500.

In October, 1973, Elianto Kenya announced that that it was building a sunflower oil extraction plant in Nakuru. At that time, 90 per cent of Kenya’s cooking oils were imported and the Nakuru plant was to give sunflower farmers higher earnings and bring down the price of cooking oil. This was in line with Kenya’s import-substitution industrialisation strategy, whose objective was to protect home-based industries via quantitative restrictions, high tariffs on competing imports and exchange rates.

From 1970, the Government started to emphasise domestic production of previously imported consumer goods that the growing urban wage class demanded. This achieved an impressive growth in manufacturing of 11.7 per cent per annum, achieved during 1970/75.

The idea by then was to tap the potential of agri-business. In 1972, agriculture contributed 36 per cent of the GDP, while industry contributed 17 per cent, with services contributing the balance (47 per cent).

Some of the industries started between 1970 and 1974 included: Triangle Fertilisers (Mombasa, 1970), Cadbury Schweppes (Nairobi, 1970), Kenya Fishnet Industries (Kisumu, 1970), Clayworks (Nairobi, 1970), Steel Rolling Mills (Nairobi, 1970), Galsheet (Nairobi, 1970), Kenya General Industries (Nairobi, 1972), Simbarite (Mombasa, 1972), Mumias Sugar Factory (Mumias 1973), Pan African Paper Mills (Webuye, 1973), Kenya Salt Industries (Nairobi, 1974)  and Rift Valley Textiles (Eldoret, 1975).

Kenya had thus managed to accelerate the pace of industrialisation.


East African Union troubles

The troubled East African Community continued to cause trouble in the 1970–1974 Cabinet. While there was not much left to break up, after the Uganda coup had brought down most of the shared services, the income tax authority broke up in 1973. Also East African Airways started running into financial difficulty in 1973. While Kenya was meeting its contributions to the running of the East African Airways Corporation, the others were largely not interested and by May, 1973, the debate about withholding Kenya’s Kshs23 million annual contribution to the airline surfaced in Parliament. The corporation was also facing serious cash flow problems. Kenya was by then contributing a large per cent of the total expenses. Uganda announced that it would form its own airline. But the Ministry of Power and Communication said Kenya would be the last to leave the East African Airways.

Kenya was the main beneficiary of the East African Community’s shared services and the Minister for Finance started to find it hard to get loan guarantees for the corporations that cut across the three nations.


Land settlements

By 1970 more than two thirds of the old European mixed farms had been given to 50,000 African families, while the remaining third, or one million acres, were still held by Europeans. There were a further four million acres of ranch land and plantations owned by foreign companies. One of the problems that now faced the Kenyatta Cabinet was that the transfer of land did not essentially see any transfer of capital into indigenous hands.  By 1970, a report by the International Labour Organisation pointed to a growing imbalance in the country between regions and different population group. Unemployment, poverty and income distribution differences were disappointing stories within this period.

The Agricultural Finance Corporation had been revamped in 1969 primarily to provide credit for buying or rehabilitating large farms, and by 1972 its credit to some 2,500 large-scale farmers had reached £12 million plus some £2.5 million to 14,500 small-scale farmers.

After 1971, the Cabinet stopped the subdivision of large farms for smallholder settlements as official policy. But the Government decided to settle the squatters on some of the European farms into two schemes known as Haraka and Harambee. These were established on mismanaged large farms but the settlement officials did little work on these farms and, by 1974, both schemes were discontinued. In 1971, the Cabinet also approved the Shirika Scheme to settle landless and unemployed people on large, formerly European-owned farms without subdividing them.

While each family received one hectare to grow crops, the rest was kept as a single unit under a manager, with the settlers paid for their work on it. But this type of cooperative work failed, with the settlers wishing to own their own land by 1974.


Tourism and wildlife

The two most important initiatives in the tourism industry happened during 1971 and 1973. The first was the opening of Bomas of Kenya, a tourist village and conference centre on the outskirts of Nairobi. Bomas was designed as a showcase of Kenya’s traditional cultures where visitors could sample them within easier reach. It was also geared to promote conference tourism. Established  as a subsidiary company of the Kenya Tourist Development Corporation, Bomas of Kenya has had a good reputation ever since and functions to preserve  and promote the country’s  rich and diverse cultural values of various tribal groups. The complex has a 3,500 capacity theatre, one of the biggest in Africa.

The next development was the completion in 1973 of the Kenyatta International Conference Centre, which is today the most conspicuous landmark in Nairobi. The 30-storey building is a venue for conferences, meetings, exhibitions and special events within a walking distance of several five-star hotels. Ever since, it has hosted many international conferences and seminars. There are several well-equipped conference and meeting rooms, the largest having a capacity of over 4,000 delegates.

Along the Coast, several hotels were built during this period as the Government encouraged indigenous investors to venture into tourism.  Hotels such as the Alliance Group emerged during this period while, in Nairobi, there was an expansion of the existing hotels to cater for an expanding middle class and tourists. While elephant hunting was legal and strictly managed by the Government, the country lost almost half of its elephant population between 1973 and 1977, when all game hunting was banned. Elephant hunting was banned in 1973 and this gave a boost photographic tourism.

In August, 1974, the Government announced that it was taking over the sole responsibility for exporting any legal stocks of raw ivory in its stores after elephant killings increased. It was these measures that managed to halt the massive decline of elephants in Kenya. It also helped promote tourism.



In the Sessional Paper No. 10 on African Socialism and its Application to Planning in Kenya, the Government stated that its policy would be directed to eradicating poverty, illiteracy and disease.

This initiated a period of active involvement in water policy by the government, based on the principle that water is a social good to be either provided free of charge or subsidised. As a result, water tariffs were from 1970 heavily subsidised. Rural water supply schemes were set up in programmes operated by county councils under the Ministry of Local Government.

By 1972, about 560 rural supply schemes were running and provided water to a population of about 664,000, according to a Unicef report. Local communities were encouraged to start their own water supplies. In 1970, the Government signed a credit agreement with Sweden to finance rural water supply development, while the World Health Organisation began a study of the national water situation. The study, completed in 1973, showed that Kenya had no trained human resource for the water sector and lacked a long-term plan for development of water supply. In response, a fully fledged Ministry of Water Resources Management and Development was created in 1974. It took over government operated water schemes as well as those operated by county councils. In the same year, the National Water Master Plan Initiative was launched. Its primary aim was to develop new supply schemes and secure access to portable water within a reasonable distance to all Kenyans. The initiative bore the slogan: “Water for all by the year 2000”. While this was not achieved, the ministry managed to open several projects countrywide, especially in the rural areas during that period.

After a fully-fledged Water Ministry was set up in 1974, the training section based at the Hydraulic Department of the Ministry of Public Works to train water supply operators, was upgraded into the Water Development Staff Training School. It later became the Kenya Water Institute.

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