By Frankline Sunday

On this day in 1993, inflation figures had hit a record high of 50 per cent and the Kenyan Government was going bust.

GDP had stagnated for three years on end and agriculture — the mainstay of the economy — had shrunk to an annual growth rate of 3.9 per cent.

To make it worse for the country, bi- and multi-lateral donors had suspended aid in the wake of the 1992 General Election, which the opposition claimed had been rigged in favour of President Moi, the incumbent.

The Bretton Woods institutions were also dissatisfied with the Government’s lack of commitment to the infamous Structural Adjustment Policies.

The Kenyan economy was witnessing its worst performance since independence, and with a ballooned expenditure, high public wage bill and virtually no foreign direct investment, the Government was broke.

The then new Finance minister Musalia Mudavadi led a government panel made up of Permanent Secretaries and ministers from the ministries of Information and Broadcasting, Commerce and Industry and the Treasury on a round of shuttle diplomacy to Europe.

The trip took the Government team to a donor convention in France and later on to Britain, where Kenya engaged reluctant donors in an ardent attempt to convince them that the country was currently undertaking economic and political reforms.

Mr Mudavadi and his colleagues told donors “there will be no backtracking on reforms this time and that Kenya will turn to dialogue in all areas of difficulty”.

Painful consequences

He further assured donors that Kenyans were aware the reforms would have some painful consequences in some areas such as the ongoing civil service retrenchments meant to reduce the wage bill.

The Government followed through its words with a raft of economic reforms, which entailed privatising State assets, eliminating price controls, removing foreign exchange controls and retrenching civil servants to reduce the wage bill.

However, despite the minister’s promise of single digit inflation figures, Kenyans found themselves crushed by a record 100 per cent inflation rate two months later. Even a 4 per cent growth in GDP over the next three years following the reforms did not improve matters for the general masses, and the living standards of Kenyans sunk to an all-time low.

Employment creation shrunk to 1.9 per cent, more Kenyans than ever before fell below the poverty line, the inequality gap widened, crime rates and ethnic animosity soared.

The Government had only made it easier for the rich to grow their wealth and the poor to sink deeper into abject poverty.

Twenty years to the day and Government policy makers have not learnt from the mistakes of their predecessors.

The Government last week presented the 2013 Economic Survey with a projection of a 6 per cent economic growth over the next 12 months. But even as the Government moves to assure its citizens of improved fortunes, the prospect of sustainable job and wealth creation still remains bleak, at least for the next few years.

Jobless growth

The country’s growth trajectory over the last decade notwithstanding, Kenya has been unable to employ more of its skilled and educated youths — an aspect termed by economists as “jobless growth”.

According to Dr Stephen Omolo, an economist and labour policy analyst at the Kenyatta University, for the country to register significant job creation for the large unemployed masses, there needs to be a sustained GDP growth of at least 7.5 per cent over a period of 15 years.

This means that the 6 per cent GDP growth projection floated by the Government last week will barely scratch the huge unemployment wall if it is not sustained and bumped up to 7 per cent.

Since poverty eradication is a factor of employment creation, Kenya still has a long way to go before the millions of people living below the poverty line can attain sustainable wealth creation.

In this light, erratic GDP growth will not serve to improve the living standards of majority of Kenyans, but will only lead to a widening of the inequality gap. In addition to this, the Government is yet to address important weaknesses that hinder capital flow from local and international investors.

The high cost of energy coupled with inadequate infrastructure particularly in rural areas has seen fewer companies and individuals want to start businesses that could employ significant numbers of personnel across various sectors.

The situation has been made worse by the lengthy process of obtaining business registration and work permits, making Kenya one of the most expensive countries to do business.

If the Government is serious about pulling its masses out of poverty, it needs to stop doing things the same way and hoping for different results.