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Find out why the big brands are taking off

By Francis Karugu | Published Thu, June 14th 2018 at 13:05, Updated June 14th 2018 at 13:07 GMT +3

The rate at which Kenya is losing its investment allure is alarming, and the Government owes Kenyans an explanation. I have argued before there is a direct correlation between the ineptitude of the Jubilee Administration and deterioration of our economy.

So much is the incompetence of this administration that it does not see the calamity of capital flight that has hit the Kenyan economy over the past six years, in which the administration has been at the helm.

But should we be surprised that our leadership is not concerned about this sorry state of affairs, when their advisers and holders of sensitive policy organs are political consorts?

When Mwai Kibaki took over the leadership of this country, he inherited major debris of an economy in shambles, and embarked on a reconstruction that saw the GDP grow from $14 billion in 2002 to $55 Billion in 2013.

During those 10 years, the economy stabilised and become very attractive to both local and foreign investors. Many international companies opened shop in Kenya, but more importantly, many public corporations that had all but collapsed prior to 2002 were invigorated.

Private capital in Kenya could easily be deployed, and business activity could be seen to blossom by both expert and pedestrian analysts. But perhaps the masterstroke was the opening up of private lending, where credit became available to virtually every citizen in Kenya.

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Good economy

This led to a massive sprouting of micro and small businesses across the whole country. Kenyans have to interrogate the substance of the achievements of the Kenyatta-Ruto administration.

In my reasoned judgement, Jubilee honchos have squandered a good economy inherited from Mwai Kibaki, a spectacular failure whose malodorous mess they conceal with the stellar art of grandiloquence. First off, the Jubilee court poets say that the Kenyatta-Ruto administration has grown the GDP from $55 billion in 2013 to $70 billion in 2018.

This is a big fat lie, because what they conveniently forget to tell Kenyans is that the reason those GDP numbers shot up in 2014-2015 was a result of rebasing. In plain speak; rebasing refers to the changes effected in the manner in which the GDP numbers of a country are computed. What rebasing does is to weed out exaggerations from the GDP numbers, as well as ensuring that those facets of the economy that were not included previously are included. This is how Nigeria overtook South Africa as Africa’s largest economy in nominal GDP terms.

Since moved

In essence therefore, after rebasing, the nominal GDP of Kenya stood at $70 billion in 2014/2015, an increase of 25 percent. However, it is important to note that it is not that new industries were established, or that agricultural production increased, rather, it was a simple computation of numbers to “better reflect the state of the economy.”

It is for this reason that the fat lie from the Jubilee blogger-type policymakers must be called out. The truth is that there has been no significant economic growth or expansion under Jubilee.

If anything, things have gotten worse and investment has shrunk, as characterised by the increasing cases of capital flight in the country. None other than the Work Bank was among the first to point out the steady loss of capital since 2013 when President Kenyatta took over. Just last month, multinational foods maker Nestle announced the closure of its Nairobi office.

Kenyans will remember a few months ago that multinational confectionery maker Cadbury closed shop in Nairobi, choosing to serve the Kenyan Market from other geographies in Africa. Others who have since moved their operations from Kenya in favor of alternative markets include Bridgestone, Unilever, Procter and Gamble, Reckitt Benckiser, Johnson and Johnson, and Colgate Palmolive.

This is very ironical, given that among President Kenyatta’s Big Four agenda, is the creation of jobs through manufacturing. The exit of these multinationals does not inspire faith in Jubilee’s commitment to increasing manufacturing capacity to create jobs.

The reasons such reputable brands would choose to leave Kenya is not hard for anyone to understand, but Jubilee advisers seem to have no grasp of how corruption, perpetual politicking and fiscal indiscipline leads to capital flight.

The owners of capital will never say that they are running away from high voltage politics, thoughtless taxation and corruption. They will choose such flowery language as “we are restructuring our operations in the region, and unfortunately, we will have to close our Nairobi office.”

In truth, what they are running away from is unfair competition from immoral companies fronted by agents of political leadership for tenders, Government officials extorting bribes from multinational executives, poor transport networks characterised by massive potholes, and cartels at ports of entry.

Mr Karugu is a management consultant (strategy and analytics) based in Nairobi. [email protected]


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