More guns, more problems: Why increase in military spending could choke Kenya’s economy

NAIROBI: Since Al Shabaab militants kidnapped two tourists in Lamu and killed another in October 2011, Kenya’s military expenditure has ballooned.

The country is now the seventh-largest spender across all of Africa.

And since 2005, Kenya has spent a cumulative $8.8 billion (Sh884billion) on military hardware and operations, making it the fifth-highest spender in sub-Saharan Africa, which excludes North African nations.

Recent data from the Stockholm International Peace Research Institute (SIPRI) indicates that Kenya has beefed up resource allocations to its military, with the largest spikes recorded in the last five years.

These findings come just as the country prepares to mark three years tomorrow since men armed with assault rifles and grenades stormed the Westgate shopping mall in Nairobi.

What was first thought to be a robbery turned into a four-day stand-off between the men, later identified as Al Shabaab militants, and Kenya’s police and military forces.

At the end of it, more than 60 people were killed, dozens injured, and the mall was reduced to a bullet-riddled, smoldering shell that was boarded up for two years. It reopened last July, and has since got back to 100 per cent occupancy.

Terrorist attacks

With more than Sh7.8 billion worth of property destroyed, the Financial Times placed the Westgate siege among the top 20 most expensive terrorist attacks from an insurance perspective.

The Somali militant group said its members staged the attack to protest the presence of Kenya’s army in Somalia.

In October 2011, former President Mwai Kibaki announced that the Kenya Defence Forces (KDF) had launched an operation in Somalia to pursue suspected Al Shabaab terrorists, following the attacks on tourists in the resort town of Lamu.

KDF personnel during the Mashujaa Day 2015 celebrations at Nyayo National Stadium, Nairobi. PHOTO: STANDARD/FILE

That same year, Parliament approved a motion to have KDF join the African Mission in Somalia, (Amisom).

The following year, Kenya’s military spend jumped 12 per cent, from Sh80 billion to Sh90 billion – the largest spike since 1992.

Since then, Kenya’s military expenditure has continued to rise, with recent data indicating a 22 per cent year-on-year increase between 2014 and 2015.

This response to the threat of terrorism has now raised concern, with economists cautioning that the country could be sacrificing long-term economic growth by spending scarce resources on stockpiling the military.

But this might not be the easiest news to digest, particularly as Al Shabaab militants continue to attack Kenyan soldiers and raid Somalia’s government forces close to the Kenyan border.

Further, increased military expenditure in developing countries has been associated with improved education and discipline of the labour forces.

It also improves national security, which encourages private investment and growth.

Negative impact

However, these benefits are not always realised, as military units in many developing countries often operate almost in autonomy to the rest of the economy, with specialised procurement and tendering channels.

According to a joint study by the World Bank and the International Monetary Fund (IMF), titled Military Spending Cuts and Economic Growth, an increase in military expenditure could have a dampening effect on a country’s growth.

This means that economic trade-offs from the acquisition of military resources benefit only a handful of weapon manufacturers, and government and military officials, creating a military industrial complex.

Researchers at the World Bank and IMF further argue that a rise in military spending exerts a negative impact on the rate of investment in public and private productive fixed capital.

“This occurs because of well-known crowding-out effects: an increase in military spending must be financed either by raising current taxes or by borrowing (future taxes),” reads the study in part.

While presenting the 2012-13 Budget before Parliament, then Finance Minister Njeru Githae conceded that Kenya’s military foray into Somalia had contributed to widening the Budget deficit.

“Due to revenue shortfalls and spending pressures from security interventions in Somalia and salary awards, the Budget deficit in the revised Budget is not expected to reduce in the current financial year,” he told the House.

Mr Githae added that Operation Linda Nchi, the Somalia intervention, was a “one-off” expenditure item, and one that was necessary to improve the country’s economic fortunes in the long term.

“Most of these expenditures are necessary for long-term economic growth in light of the changing economic conditions,” he said.

“For instance … the intervention in Somalia will enhance security and eliminate incidents of piracy that had increased the cost of shipping along the East African coast line.”

An analysis of the data on terrorism and related activities before and after Kenya’s incursion into Somalia, however, indicates the economy has taken a couple of expensive hits in the war on terror.

Travel advisories

Before 2011, Kenya had experienced less than six terrorism attacks in 40 years. After Operation Linda Nchi, this increased more than 10 times over.

Kenya’s key source markets, led by the US, Britain, France and Austria, have issued travel advisories to their citizens in the wake of the increasing terror attacks, leading to the worst slump in the tourism sector since the 2007-08 post-election violence.

From 1.8 million tourist arrivals in 2011, this number dropped to 1.1 million last year, with billions of shillings in lost revenue and more than 25,000 layoffs, particularly in the coastal region.

Paul Collier, a professor of economics and public policy at Oxford University, notes that military expenditure is very costly for developing countries and hurts development.

“Developing countries have enough problems without either the waste of resources constituted by military expenditure, or the social and economic destruction brought about by warfare,” Prof Collier argues in a paper titled ‘War and Military Expenditure in Developing Countries and Their Consequences for Development’.

Collier added that military expenditure not only diverts government resources that could be used to improve public services, infrastructure or lower taxes, it also leads to an arms race.

“To the extent that a past war raises military expenditure because of a perceived higher risk of further war, it reflects fear of neighbours, or aggressive intentions towards them,” he said.

“Each time one country raises its military expenditure, there will be a ripple effect across the region. Further, as neighbours respond to the initial increase, the country that increased its military expenditure may itself respond with further increases – the classic process of an arms race.”

Should this scenario play out in Kenya, taxpayers could be in for a punishing regional race. Already, early this year SIPRI reported Kenya is set to acquire a Sh1 billion military drone from the US government.

Further, the Government is yet to outlay an exit strategy for the military operation in Somalia, even as another deployment of KDF soldiers into South Sudan looms, following a UN Security Council recommendation last month.

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