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Kenya ranked rich, but key indicators show it is poor

By Dominic Omondi | Published Tue, April 17th 2018 at 00:00, Updated April 17th 2018 at 10:47 GMT +3
Women at  work: Kenya is both rich and poor. [File/Standard]

In summary

  • Majority of Kenyans in unproductive farms and low-paying jua-kali jobs languish in poverty

Early last year, rice farmers in Mwea, Kirinyaga County, watched helplessly as drought ravaged their main source of livelihoods. The drought affected many other Kenyans in various regions.

Swathes of paddies that are part of the extensive Mwea Irrigation Scheme had turned blonde - rice’s colour of death.

The future of over 100,000 that people that depend on the Mwea Irrigation Scheme looked bleak, it got bleaker with each day that the rains failed.

Rice production dwindled to less than 10 per cent its normal harvests. Each day that went by without the rains brought them closer to misery and destitution. Farmers were enraged.

Some were angry at Mother Nature for not opening up the skies, but most of them were angry at the Government and politicians for reneging on their promise to build for them a dam.

“If we had a dam, this problem would not be there,” said Elizabeth Anambiu, a rice farmer.  In a way, a dam was supposed to be their way of defeating the vagaries of nature.

For over five years, farmers and residents of Kirinyaga have waited for the construction of Thiba Dam.

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The ambitious Sh20 billion project would not only help double rice production in the area but also ensure a steady supply of clean drinking water to residents. Demand for rice is still high, so they would not have to worry about the availability of market.

BANK ACCOUNTS

The dam would certainly have arrested the advance of destitution and left them richer. But it was just a promise, good to embellish politicians’ manifestos but not their bank accounts.

In fact, the dam’s memory has been kept alive by a sing-song of false promises by politicians. While projects that cushion farmers, who make up the majority of Kenyan population have been ignored, those which favour wheeler-dealers have been expedited.

In less than five years, the Government was able to complete a Sh327 billion standard gauge railway (SGR), a record time according to contractors.

And this was despite concerns about its costing and tendering process that some observers feel warranted an investigation. The SGR has not only been marred with controversies of corruption and plunder, it has saddled Kenya with heaps of debts.

It has been dismissed by some economists as a white elephant, one that is unlikely to yield the hyped 1.5 per cent increase in the country’s gross domestic product (GDP), at least not in the near future.

Its proponents can only speculate on when it will begin paying off.

Yet, farmers in Mwea, like many other parts of the country are not speculating: a dam or fertiliser plant would certainly pay-off, increase their income and lift thousands from poverty.

Unfortunately, that is not how Kenya’s economy has been run. The country’s economy has been growing, by an average of 5.5 per cent in the past ten years - driven by massive public investments such as the SGR.

Unfortunately, all the cash in these capital-intensive projects has been gobbled up by a few connected individuals, popularly known as tenderpreneurs.

UNPRODUCTIVE FARMS

As these individuals have lined their pockets with billions, the national statistician has gleefully recorded this as an uptick in the country’s economy, even as the majority of Kenyans in unproductive farms and low-paying jua-kali jobs languish in poverty.

No wonder, even as the going got tough for most Kenyans in 2017, the country’s super-rich increased their wealth.

Despite a prolonged electioneering period, reduced credit and a crippling drought that significantly slowed down the economy, Kenya produced 10 more people worth over Sh50 billion and 180 more worth Sh50 million, according to a wealth report by consultancy firm Knight Frank and Stanbic Bank.

For long, Kenyans’ complaints that they are not feeling the so-called economic growth have been dismissed by hard-nosed economists as a mere rant from ignorant masses, with liberal economists pointing to flawed GDP growth as evidence that the country was growing richer.

 However, last week in its 17th Kenya Economic Update, the World Bank confirmed Kenyans’ fears - that the benefits of economic growth are not trickling down to wananchi.

The World Bank noted that compared to other countries of the same economic stature as Kenya’s, lower-middle-income, current poverty incidence is relatively high.

In essence, the global lender blasted Kenya for being rich on paper while poor in reality. “Moreover, in Kenya poverty is less responsive to growth compared to other countries where equivalent growth rates result in higher levels of poverty reduction,” said the World Bank in its report.

More than 50 years ago, poverty reduction was among the three vices that the first Kenyan President Jomo Kenyatta promised to eradicate.

Poverty, ignorance and disease, were the country’s greatest enemies, declared Kenyatta. He said their eradication was a key priority for his government.

The call made its way into the country’s first economic policy agenda and even his successor Daniel Moi promised to carry on with the fight.

Following in the footsteps of his predecessor, he promised to make life better for the millions of poor Kenyans.

More than half a century later, however, President Uhuru Kenyatta finds himself up against the same challenge his father promised to eradicate. And this time, the challenge has morphed in scale and complexity.

Last year, President Uhuru Kenyatta was forced to eat humble pie and declare a drought that swept through the Horn Africa threatening millions with starvation, a national disaster.

This admission did not come easy. After all, a middle-income country should be able to comfortably feed itself. For a while, the government insisted that it was in control, saying not even a single Kenyan would die of hunger.

However, despicable images of scrawny children clutching on empty bowls or hungrily feeding on wild fruits, carcasses of livestock strewn over scorched fields and browning farmlands, were beamed live on TVs and splashed on newspapers.

The Government was forced to drop its hardline stance. 

About Sh11 billion was set aside to tackle the drought which had affected people, livestock and wildlife in 23 of Kenya’s 47 counties.

And then President Kenyatta unleashed the begging bowl, an embarrassment that most Kenyans had hoped would go as the economy picked up.

“Support from our partners would complement government’s efforts in mitigating the effects of drought,” said Kenyatta in a statement. It was an admission that our growth had not kept hunger at bay.

The World Bank’s update revealed that more Kenyans today are languishing in poverty despite years of growth. So much that even poor countries such as Uganda were doing better than Kenya in poverty alleviation.

Ghana, Kenya’s economic peer, is incomparable when it comes to bridging the gap between the rich and poor.

POVERTY REDUCTION

Kenya has achieved some milestones on poverty reduction. “Kenya recorded a poverty reduction rate of 0.8 per cent each year between 2005 and 2015,” explained Utz Johann Pape, World Bank’s economist specialised on poverty and equity.

“This is progress in terms of reducing poverty but still too low compared to the rate at which other low income developed countries are building wealth and reducing inequality,” he explained. According to the World Bank, one in three Kenyans lives below the international poverty line of below $1.90 (Sh191). However, Kenya’s re-basement in 2014 pushed the country into the lower middle-income country where the poverty line is considered below $3.21 (Sh321) per day. This puts the number of those living below the poverty line at 67 per cent. The World Bank now warns that Kenya will not achieve ambitious poverty reduction targets at the current pace, leaving millions of households trapped in the vicious cycle.

This has prompted criticisms of the effectiveness of the economic policy the country has relied on in its distribution wealth.  In 2016, a team of Japanese economists punched holes into Kenya’s economic model.

They said the model did not promote inclusive growth and had failed to redistribute wealth to the poor.

“Growth-leading sectors have not been broadly based in terms of poverty-reduction through employment creation. In short, the way of growth is not inclusive,” said Kyoto University Graduate School of Asian and African Studies professor Takahashi Motoki.

He is one of the lead authors of the book, ‘’Contemporary African Economies: A Changing Continent under Globalisation.’ “If you go by the data in the Kenya Integrated Household Budgets Surveys, then there is no case to be made for the trickle-down economy being effective,” explained Prof Michael Chege, part-time lecturer at the University of Nairobi. He is also a board member at the Kenya Institute of Public Policy and Research.  “In much of the developing world the pass out rate of poverty is faster in the agricultural sector,” explained Prof Chege. This is particularly the case in rural households where subsistence farming is the main economic activity.

Yet, despite evidence that investments in agriculture would reduce the pangs of hunger, policymakers have continued to ignore the sector, allocating it, on average, less than three per cent of budget.

Instead, mega infrastructural projects such as the SGR and roads have taken a huge chunk of the country’s budget. Unfortunately, the expected multiplier effect, where a dollar invested in these projects, yields even more, has not been achieved.

PUBLICLY FINANCED

The Institute of Economic Affairs Chief executive Kwame Owino says that much of these publicly financed, capital-intensive investments have benefited a few individuals - those who won the tenders. “The money has not gone to the majority of poor Kenyans,” said Owino.

And the majority of Kenyans are in farms, employed or self-employed. Moreover, agriculture constitutes over 30 per cent of the country’s economy and is the main pillar of the manufacturing sector which is mostly agro-processing.

As a result, a shock such as a drought, an expected phenomenon in a tropical climate with the dry and wet seasons, will always leave the economy in bad shape.

Last year, during his State of the Nation address, President Kenyatta agreed that most wananchi cannot relate to the colourful economic indicators of GDP growing at an average of 5.5 per cent. “Wananchi want to know what these economic indicators mean to their lives. They cannot relate to how GDP impacts on the price of unga,” he said.

“Many of our citizens are wondering why their children are still struggling to find jobs. These concerns are legitimate and they are questions that every citizen is entitled to have answers from their government,” said Uhuru.

The World Bank says that Kenya’s poverty data for the last 10 years shows a decrease of 2.2 per cent for Kenyans living in households engaged in agriculture.

Households engaged in agriculture dropped from 50.7 per cent in 2005 to 47.8 per cent in 2015.

“The large share of households in agriculture combined with a high pass-through rate in the sector drives the poverty reduction impact also because most poor are in the agricultural sector,” explained the Bretton Woods institution in part.

However, growth in Kenya’s agricultural sector for the past two decades has lagged behind other sectors, dragging behind not only overall economic growth but also making income re-distribution difficult.

Construction sectors

Data from Kenya National Bureau of Statistics indicates that the agricultural sector grew by 4.4 per cent on average over the past five years.

This is much less than the 13 per cent and 10.7 per cent growth posted by the mining and construction sectors respectively over the same period of time.

POLICY REVIEW

This is why the World Bank has recommended the review of several policies in the agricultural sector to better align them with the needs of the rural poor.

This includes adding the budgetary allocation going to the sector, reviewing some subsidies in maize and fertiliser as well as introducing higher land rates for idle agricultural land.

This is however just one aspect of a multi-pronged approach necessary to improve the pace at which the economy is bridging the gap between the rich and poor.

Another is working to effectively implement devolution, another policy tool meant to help redistribute income from the centre to the grassroots, albeit with mixed results.

Data from the 2018/2019 Budget Policy Statement released by National Treasury earlier this year indicates that county governments’ reliance on national government transfers and external aid is rising instead of reducing, despite overall increased disbursement over the years.

In the 2014/2015 financial year, own-source revenue from the 47 counties represented 16 per cent of the overall revenue basket.

This share reduced to 15 per cent in the 2015/2016 financial year and fell sharply to just 9 per cent last year.

“The underperformance could be attributed to administrative inefficiencies as well as gaps in policy and legislation in respect of county own source revenue,” explained the Treasury in the report in part.

Dr Jane Kiringai, a commissioner at Commission for Revenue Allocation (CRA) says counties should urgently build their own-source revenue rather than rely solely on the central government.

“The results for devolution have been mixed with some counties showing good results and others still showing some inefficiencies,” explained Kiringai, who is an economist.

“The central issue is how to build potential for own source revenue because different counties have different resources.”

 

 

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