KENYA has been on a rollercoaster. In the first few years of the 21st century its economy, like many in Africa, grew faster than at practically any point during the previous 30 years. But in 2008 and 2009 growth slumped, first because of widespread tribal violence following a disputed presidential election and then as the global financial crisis took its toll. A new constitution cemented a (fragile) political stability, and output growth picked up to 5.6% in 2010, faster than the region's average. Forecasts for 2011 expect growth of around 5%.

The trouble is that 5% is not good enough. Kenya is on the threshold of a demographic transition, with a young, fast-urbanising population. Gainfully employed, its millions of young adults could fuel far faster growth rates. Left out of work or underemployed in the informal sector and subsistence farming, they are a political tinderbox.

But how to boost growth? Unlike many of Africa's frothiest economies, Kenya does not have a rich bounty of minerals or oil to export. Indeed it is being hit by higher food and fuel costs. So far, the growth gains have come from macroeconomic stability and deregulation. Unfortunately, Kenya's macro policies have been starting to look a little wobbly. Inflation has accelerated while the budget deficit is running above 6% of GDP. The recent retreat in commodity prices will help, but Kenya's top short-term priority will be to keep a grip on the public finances.

That alone will not bring the required dynamism. To accelerate growth sustainably, Kenya needs higher investment rates and faster improvements in productivity. One often mentioned route is the East Asian model of export-led manufacturing. Kenya has the right geography—a coastal location with a quick sea route to Europe as well as reasonable proximity to India and other fast-growing Asian markets.

“Vision 2030”, the government's strategic development plan, sees the country becoming a manufacturing hub. There have been some successes. Thanks to a preferential trade agreement with America, textile exports have soared. The trouble is that infrastructure, especially at the port in Mombasa, is still a mess. The power supply is unreliable, corruption is rife and labour costs, relative to workers' productivity, are quite high. These shortcomings will make it hard for Kenya to become a big centre of just-in-time delivery soon.

A more promising short-term route is regional trade integration. Kenya is the biggest economy in the East African Community (EAC), which also includes Burundi, Rwanda, Tanzania and Uganda. With a market of 130m people and a combined GDP of more than $70 billion, the EAC is no minnow. Since 2010 all trade between its members has been tariff-free. Labour mobility is imminent. Some 45% of Kenya's trade is already with other African countries, a share that is growing fast. From cement makers to vegetable-oil manufacturers, Kenya's big industrial firms are expanding across the region. But infrastructure and red tape are a curse: it takes 24 working days to get a container from Mombasa to Kigali in Rwanda.

Judging by the past few years, manufacturing is unlikely to be the main short-term engine of Kenyan growth, even if these infrastructure problems can be overcome. While manufacturing's share of the economy has stagnated over the past decade, that of services has soared, led by information and communications technology, which has been growing at a whopping 20% a year. In the debate about whether poor countries can leap-frog straight to services-led growth (see Economics focus), Kenya is often cited as an example.

That is largely thanks to its impressive mobile-money revolution. Kenya has one of the highest rates of mobile-phone penetration in Africa, and, dominated by M-PESA, by far the biggest network of mobile-phone-based money transfer. According to the World Bank, Kenyans transferred some $7 billion, the equivalent of 20% of GDP, via their mobile phones in 2010. The explosive growth of mobile money has sharply reduced the costs of financial transactions. This should boost saving and investment as banks begin to offer fully fledged mobile-based banking services. It should also prompt broader productivity gains, as mobile-money agents become conduits for all kinds of commerce and information. One of Kenya's biggest fertiliser firms, for instance, plans to sell small fertiliser pellets through the M-PESA platform.

The transformative effect of cheap bandwidth will be felt well beyond mobile money. Thanks to robust competition, and the recent arrival of several submarine cables, Kenya has seen a collapse in the price and increase in the speed of data connectivity. All manner of services, from independent television stations to one of the region's biggest call-centres, are flourishing as a result. As Wolfgang Fengler of the World Bank puts it, connectivity is beginning to “reshape Kenya's whole economy”. The big question is whether that will be enough.