Uhurunomics: Jitters persist over Jubilee policies, ailing economy

Ruth Wanjiku at her grocery shop at Wakulima market, Nakuru County, on October 8, 2018. [File, Standard]

A common joke in economic circles is that almost everything good with economy went with former President Mwai Kibaki in 2013.

It is a joke until one begins to realise that the few economic goodies that lingered on for a year or two after the exit of Kenya’s third President frittered away one or two years into the Jubilee administration.

President Uhuru Kenyatta is now presiding over a far-from-impressive economy, having failed to live up to the pomp and circumstance that characterised his grand entry to Harambee House.

The private sector -- households and firms that are the main source of jobs and taxes -- is on its knees.

After taking over the reins of power, it did not take long before Kenyatta and his deputy William Ruto started sliding from their lofty campaign promises. Almost all the mega projects that the dynamic duo said would help turbo-charge the economy became a cropper, having absorbed billions of taxpayers’ cash.

Lost pole position

Before long, East Africa’s largest economy started losing competitiveness, with Kenyan farmers becoming cry-babies, having been brow-beaten by their peers in Uganda and Tanzania.

Already, Kenya has lost its pole position as the largest economy on this side of the Sahara to Ethiopia whose double-digit growth has left Nairobi at a precarious second position in economic ranking in Eastern Africa. Tanzania is breathing noisily just behind Kenya.

Uhuru and Ruto had promised a competent, professional and apolitical Cabinet. Suddenly the rank of Cabinet was swelling with political apparatchiks. Things would get worse with every turn of the calendar.

And then political hirelings, some with tainted records of violence, found their way into the Cabinet, turning the country’s top policy-making organ into an ensemble of, as Samuel Nyandemo, University of Nairobi Economics lecturer says, “comedians.”

The government, suddenly facing a wave of striking State workers who are keen to cushion themselves against a punitive cost of living, has blatantly told them it will not give them an extra dime. “Let us abandon the habit of crying for more pay. Let us stop thinking about our stomachs without serving the people,” said Uhuru when in a tour to Kisii County.

Most of the money that the striking nurses, teachers and civil servants would have been paid is going to creditors. By the end of this year, Uhuru’s government will pay Sh1.4 trillion in debts, some from dwindling revenues and others from borrowed cash.

Already, The National Treasury has got a Sh100 billion syndicated loan with two regional banks as it seeks to repay the Eurobond it took three years ago – and Kenyans are still waiting to know where that money was used.

A debt burden of Sh5.3 trillion is finally weighing heavily on Kenya’s meager revenues. According to his critics, Uhurunomics -- Uhuru’s way of managing the economy -- has been long on style and short on substance, with fiscal prudence going to the dogs.

Economist David Ndii, a fiery Jubilee critic, says that while Kibaki was “knowledgeable, competent and experienced” Kenyatta had “none of the above.”

Nyandemo says the fact that the Jubilee government was so obsessed with giving laptops to Standard One pupils rather than increasing teacher-pupil ratio or teachers’ salaries is enough evidence that this government’s priorities are lopsided.

“His (Uhuru’s) regime is utopian. He is giving Kenyans unnecessary hope,” says Nyandemo, dismissing the Big Four agenda as a pipe dream.

Kibaki’s record, analysts say, is there for all to see: free primary education, Thika Highway and Safaricom’s M-Pesa, perhaps the best result of Kibaki’s belief in the private sector.

The Standard Gauge Railway, Kenya’s largest project since independence, was touted as a game changer that would significantly change the fortunes by opening up the country, by enabling increased movement of people and goods. It would thus contribute an additional 1.5 per cent expansion in the size of the economy.

Now, the government in its own document has admitted that transporting cargo via the SGR from Mombasa to Nairobi is more expensive than using road.

In some quarters, people see SGR’s fate to be similar to that of the Lunatic Express. There are fears that it might soon join Uhuru’s herd of white elephants.

Ghost projects

The Galana Kulalu, another Sh7 billion project that had allegedly been abandoned by Kibaki’s administration as it was not feasible only to be rashly picked up by Uhuru’s government, is back on its death-bed. This is after reports emerged that the much-hyped food security project has stalled after the Israeli company, Green Arava, abandoned it.

So Kenyans are still one dry season away from hunger. After sinking billions of borrowed cash into ghost projects, the chicken are coming home to roost. Revelations are coming out of government offices thick and fast, offering a rare glimpse into wheeler-dealings that have characterised Jubilee’s stay in power. Palms were greased for phantom projects that never took off.

Under Uhuru’s regime, reckon his critics, only a tiny part of the private sector comprising well-connected individuals known as ‘tenderpreneurs’ has been swimming in cash. While everyone else is broke, a few can afford to carry bag-full of cash to a banking hall.

Businesses are struggling to stay afloat. With the credit taps turned off, few firms are coming off the ground to bloom to profitability. Even fewer are expanding. Instead, most of them are shedding jobs.

The World Bank, in its December 2017 Kenya Economic Update, noted the significant slowdown in credit growth in the country. Private sector credit growth fell from its peak of about 25 per cent in mid-2014 to two per cent in October 2017—its lowest level in over a decade, noted the Washington-based institution.

“Limited credit availability can hinder robust economic recovery, as has been observed in several economies in Europe and elsewhere after the global financial crisis,” World Bank warned.

The Nairobi Securities Exchange (NSE), another critical source of capital for businesses (instead of giving you loans, investors opt to give you cash for a stake in your company), lost its mojo. All efforts to attract new listings at the exchange have come to a naught, with the listing drought raging on.

The NSE 20 Index, a benchmark for performance at the Nairobi bourse, is yet to recover to its 2014 peak of 5,113 points. Instead, it nose-dived to 2,801 in 2018. NSE Chief Executive Officer Geofrey Odundo hinted that the environment might not be conducive for companies to go public, with most fearing that they will not get the right valuation.

But the current government, he said, should have done better to inject some life into the market. Kibaki’s government did just that.

“There was a very big government programme that was catalysing the market,” said Odundo. He explained that about five listings that occurred between 2006 and 2008, including Safaricom, gave the market a good impact.

“In fact, we are telling the government that for us to grow this market, we need to bring in more State-owned enterprises to catalyse the market,” he added, noting that if they do two or three major listings from the government, even the private sector will pick up.

Failed to impress

Some of the policies that the management of the NSE has blamed for the bearish performance of the NSE20 includes the introduction of Capital Gains Tax in 2014, which resulted in creation of more income inequality thus affecting investors decisions.

Registration of new companies has declined six times, with the Registrar of Companies recording 281,973 new businesses in 2013 compared to 46,222 in 2017, according to official figures. Even foreign investors are shunning Kenya. Foreign companies registered in Kenya declined by 56 per cent from 400 in 2013 to 175 in 2017.

Even car manufacturers Peugeot and Volkswagen (VW) have failed to impress two years since they made a grand return to Kenya despite heavy government incentives. After the much-hyped re-entry of the two automakers into the Kenyan market, production of assembled vehicles in the first 10 months of last year was a far cry from the peak of 2015 when 8,713 vehicles were produced in the same period. Instead, a paltry 110 additional vehicles were made from January to October last year, bringing the total to 4,308, according to data from the Kenya National Bureau of Statistics (KNBS).

The only thing people have been best at the Registrar of Companies, according to data from KNBS, is registering names of companies. But as the national statistician says in the footnote, “total names registered include a very large element of dormant establishments.”

Despite Kenya’s ease of doing business improving dramatically, the Jubilee government has not been good for the private sector. Since coming to power, the profits of most listed companies have shrunk by a third, forcing managers to execute painful cost-cutting measures like lay-offs and other panic strategies to stay afloat.

An analysis by The Sunday Standard also revealed that 2013 was the best year for most listed companies in Kenya. Cumulatively, since 2013 when Jubilee under President Kenyatta came to power, the 56 companies whose results Financial Standard analysed, have lost Sh61.27 billion from their earnings.

The National Treasury likes to boast of how the size of the economy between 2013 and 2017 has been remarkably expanded compared to 2008 and 2013, the last of President Kibaki’s term.

However, analysts have wondered why this growth is not translating into more taxes, or what economists call tax buoyancy. Most people have concluded that it is the government rather than the private sector that has contributed to the growth, thus the mismatch between economic growth and revenue growth.

The World Bank in another report on Kenya, noted that even though more goods and services were being produced, very little of these economic activities were resulting into taxes, a situation that saw the government continue to run huge deficits that have been plugged with more accumulation of debt.

Official data shows that Kenya’s exports to the rest of the East African Community (EAC) member states were not any better, pointing to Kenya’s dwindling fortune in the region despite a protocol allowing free movement of goods.

 

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