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Bumps on Uhuru's road to expanding economy

By Dominic Omondi and Otiato Guguyu | Published Sun, August 13th 2017 at 00:00, Updated August 12th 2017 at 20:57 GMT +3
President Uhuru Kenyatta 

President Uhuru Kenyatta deserves to be congratulated for the hard-won fight. But after occupying the highest office in the land for the last five years, he does not need to be reminded of the enormity of the task ahead.

He should not even celebrate. He should simply roll up his sleeves and get to work immediately.

The mood out there is sombre, and rightly so. Although Uhuru won by garnering over eight million votes his main competitor, former Prime Minister Raila Odinga, attracted a significant following with close to 44 per cent of Kenyans preferring him.

The President needs to win them over, if only for the sake of nation building. He started by extending an olive branch to Raila, but his job does not end there.

Kenyans want to be immediately assured that Jubilee’s second term will be devoid of the ills that characterised its first term. Ills such as runaway graft, mounting debt, unemployment and high cost of living should be dealt with urgently. Here are some of the critical issues:

1. Uniting the country

As Uhuru enters his final term in office without the pressures of facing another opponent at the ballot, his focus should be on uniting the country.

Jubilee Party, which has come out stronger in the election with slightly over eight million votes, has left a deep gulf between Kenyans, with those who voted for the winners ecstatic while those that did not despondent.

The Constitution, the document that most Kenyans thought would be the silver bullet for most of our problems, is ironically to blame for the cliff-hanging politics.

“Up to now, we are still polarised. Political parties thrive on ethnic lines, and that is not good for national cohesion,” said Francis Muthaura, the chairman of Lapsset. He said the document that was promulgated in 2010 has not put a stop to ethnic division.

While that is expected in an electoral contest, the two camps must go back to living together as relatives, neighbours, colleagues and citizens.

As such, uniting the country after a protracted election that saw almost half of Kenyans vote for Raila should be the President’s first task as he returns to his work station at Harambee House.

“Here in Kakamega, most mechanics are Luos, most spare part shops are owned by Kikuyus and most matatu drivers are Luhyas, so they need each other,” George, a voter at Ifwetere Primary School polling station, told Weekend Business.

After an intense campaign period in which both sides exploited the country’s tribal cleavages, Kenya badly needs healing. Uhuru must seize upon the presidency, a symbol of national unity, to bring Kenyans from all backgrounds together.

With a united nation, he can then do what is good for this country — develop its economy. And there are several economic challenges.

2. Jobs

While on the campaign trail, President Kenyatta promised to create about 6.5 million jobs in the next five years. While that was powerful rhetoric, it is a reality that Government has frozen public service employment and the national government has little capacity to create more jobs.

In fact, in the last five years when he promised to create a million job opportunities in the first 100 days,  this did not happen.

As a result of massive infrastructure development, State job have largely been split between Chinese contractors and locals, with Kenyans getting the short end of the stick by getting menial jobs while the Chinese handle the technical, well-paying work.

That is the reason why the economy has been growing but the benefits have not been trickling down to wananchi. Over 700,000 youths graduate from colleges and universities every year, but they find a saturated market. Except for jua kali jobs, the economy has not generated enough decent jobs for university graduates.

Job creation is in the private sector, especially the manufacturing industry that has stagnated as a result of the high cost of electricity and cheap imports.

It is not clear what fraction of the country's population that has reached working age is unemployed. Data from the Kenya National Bureau of Statistics does not give the breakdown. However, some have estimated that about 40 per cent of able and willing Kenyans, mostly young people aged 35 years and below, are unemployed.

According to the World Bank, unemployment in Kenya increased from 18.8 per cent in 1991 to 22.2 per cent in 2016. The global lender says that although the economy has been churning out an average 800,000 jobs annually, over 80 per cent of these jobs have been low-paying informal engagements that can barely sustain workers.

On the other hand, many firms have been laying off staff in droves citing a tough business environment, with some forced to close shop and move their operations overseas. This leaves a huge gap for the new Head of State to fill.

3. Mitigating the looming debt crisis

The rate at which the country’s debt levels have been growing is worrying. Although, Kenya’s stock of debt has not yet reached unsustainable levels — what the International Monetary Fund (IMF) calls debt distress — it is headed there.

The IMF notes that the space for manoeuvre is fast getting constrained, with the debt-to-GDP ratio standing at 53.1 per cent.

Government figures put total public debt at Sh4.2 trillion as at end of May 2017. In the 2017/18 financial year, the country will spend about Sh621.7 billion in debt repayment, clawing into the country’s ordinary tax collection that would have gone into development.

Uhuru has in the past been quoted saying that most of the money his Government has borrowed has been used to build roads, railways, ports and energy projects and as such there should be no cause for worry.

Critics have accused Jubilee of ignoring critical short-term goals such as dealing with the cost of living in pursuit of grandiose projects whose impact will be felt some years to come.

The President needs to work on a balance between delivering tangible growth and addressing the cost of living and unemployment.

4. High cost of living

A curious coincidence caught the country’s fancy when just after completion of the Standard Gauge Railway (SGR) the country’s silos started running short of maize, an important cereal for the preparation of ugali, which is a staple in most households.

As a result, a joke started doing the rounds that in their obsession with the SGR, the Jubilee Government forgot about the old SGR (strategic grain reserve). It is in the strategic grain reserve that the country stores excess grain in case of a shortfall.

However, with a crippling drought the strategic grain reserve was at some point depleted, with the country running out of unga.

The high price of unga as well as its scarcity was a talking point during the elections, with the price hitting the roof before the Government decided to subsidise it. Close to four million Kenyans faced starvation with Uhuru forced to declare drought an emergency.

Generally, prices of most produce, including vegetables such as sukuma wiki and potatoes, went up with inflation hitting a five-year high of 11.7 per cent.

This was partly attributed to lack of a strong response when experts warned as early as mid last year that the country would face food shortages in 2017.

According to the Kenya Meteorological Department, in the next five years — when the country will be holding another election — there is likely to be another drought.

Uhuru will need to put in place strong measures to ensure that failure of rains does not stop food from reaching the table in Kenyan households.

5. Corruption and wastage

Corruption is perhaps the most stubborn stain on Kenya’s conscious. It has been likened to cancer.

In the last five years, the Jubilee Government has been rocked by corruption scandals. From the National Youth Service scandal in which taxpayers lost close to Sh1 billion in dubious projects, to Afya House where close to Sh5 billion was said to be lost through dodgy deals. Corruption has haunted Uhuru’s administration, just like Mwai Kibaki’s administration before him.

The Auditor General’s reports showed that expenditure worth billions of shillings could not be accounted for by both the county and national governments.

Rather than throw up his hands in the air like he did during the Corruption Summit at State House Nairobi, Kenyans will expect the President to be more clinical in his fight against graft. There should be no sacred cows in the fight against corruption now that he is not seeking re-election.

Uhuru blamed institutions such as the office of Director of Public Prosecutions and the courts for frustrating his efforts to combat corruption. He said his hands were tied and there was not much his office could do other than just sack government officials implicated in graft.

But now, the President needs to do better.  He needs to back Ethics and Anti-Corruption Commission boss Eliud Wabukala in hunting down corrupt individuals. He might need to borrow a leaf from Tanzania’s John Magufuli to personally crack down on government functionaries that have escaped the anti-corruption body’s net.

6. Credit to the private sector

Credit to Kenyans is at an all-time low with the value of loans growing by a mere 2.1 per cent in May from a double digit growth in a similar period last year. This has had a negative effect on economic growth, which has also contracted in the last year. The country’s gross domestic product grew by 4.7 per cent in the first three months of 2017, the slowest first-quarter growth since 2013.

Experts blame the Banking Act, 2016 — which capped the interest charged by banks on loans to a maximum four per cent above the Central Bank Rate —for the reluctance by banks to lend, especially to the retail sector.

Central Bank of Kenya Governor Patrick Njoroge said corporate borrowers were able to bargain for favourable rates of less than 10 per cent, way below the market rate, and might not have been affected by the caps.

The crux of the problem are the small and medium enterprises trying to keep their doors open and small-scale farmers trying to recover from the ravages of drought and armyworm attacks. Key sectors — agriculture, mining, manufacturing, finance and insurance — all saw the lending extended to them from commercial banks contract.

SMEs have been substituting formal employment and boosting growth. The Government needs to intervene with banks to open up the dams to this crucial sector, including embracing initiatives like the one proposed by the Kenya Bankers Association of guaranteeing a special kitty to be lent at a lower rate.

7. Ensure good working relationship between national and county governments

Ensuring that national and county governments work in harmony might not be difficult now that the President’s party has bagged majority of the seats.

There are, however, differences between the two levels of government that need to be ironed out. The roles and responsibilities of the two governments should be clear.

Areas of conflict in agriculture around subsidies and levying licences on cash crops, and workers’ pay and promotions, timely disbursement of money and leased medical equipment in the health sector need to be addressed.

8. Persistent strikes

In the heat of elections, most Kenyans forgot that nurses had downed their tools, leaving thousands of patients in public hospitals unattended.

In the last five years, the country has experienced numerous strikes, including protests by teachers and doctors that nearly brought the two critical sectors to their knees.

There must be a way to minimise the strikes and Uhuru should try and find a solution to the problem.

“This is just a matter of coming up with a labour relations strategy. But the wage bill issue is so historical that it’s hard to think of a short-term strategy,” Dr Fredrick Ogola, a senior lecturer in Strategy and Competitiveness, told Weekend Business.

“This rise in wage bill isn’t necessary good for the economy since it makes Kenya uncompetitive, but by addressing the cost of living, through inflation, it’s not justifiable to continuously increase salaries.”

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