The Big Flop: Uhuru’s jobs pledge stuck in first gear

President Uhuru Kenyatta at a past event.

With only two years left of President Uhuru Kenyatta’s second and final term, his Big Four Agenda has failed to take off.

In the last three years, the Government has endeavoured to breathe life into the President’s legacy project.

The Head of State hopes that by the time he leaves office in 2022, the share of manufacturing as a fraction of total national output will have increased to 15 per cent from the current 9.2 per cent; that all citizens will enjoy food security and nutritious food.

The Jubilee administration would also like to build half a million affordable homes and provide critical healthcare service to every Kenyan by 2022. So far, it is just a step better than a pipe dream.  

Save for the passage of a few laws and regulations, the Big Four plan has barely shown signs of life.

“It is worth noting that the realisation of the Big Four agenda is in two years and key sectors such as agriculture and manufacturing continue to under-perform,” said the Parliamentary Budget Office (PBO) in its assessment of the 2019/20 budget.

Manufacturing, the sector Uhuru believes will help cut youth unemployment, has made little if any progress. The Government says it has scaled up reforms to encourage investment in the sector.

State officials also insist the heightened fight against illicit trade and contrabands has gone a long way in protecting genuine businesses and traders.

Yet manufacturing, which Uhuru is banking on to create 800,000 jobs by the end of his term, has not improved.

Instead of the share of manufacturing as a fraction of gross domestic product (GDP) edging up towards 15 per cent, it has declined.

Two years after the Government outlined its agenda of increasing value addition, manufacturing as a percentage of GDP stands at 7.6 per cent as of June 2019, which is lower than 7.9 per cent in the same period in 2018. 

Among the raft of policies that Treasury put in place to crank up the fledgling manufacturing sector included protectionist tax measures, which the Government hoped would cushion the industry from foreign competition.

With imported products reaching the Kenyan market at a higher price after being hit with increased duty, it was expected that local manufacturers would have the playing field to themselves.

A bigger market for local producers could then nudge local suppliers to produce more and thus employ more.

Unfortunately, official data shows that the tax measures were ineffective, with the quantity of the affected goods flowing in at an even increased rate.

Of the items that were slapped with increased import duty, only new clothes and wire products declined significantly, with analysts blaming it on the crackdown on illicit trade and tax evasion, which saw containers belonging to small traders held for long at the port of Mombasa.

The high tariffs never played a major role in stemming the inflow of these goods.

Samuel Nyandemo, an Economics lecturer at the University of Nairobi, says Kenya has not been effective in implementing its policy.

“Most of the tax policy is just on paper,” he said, noting that a lot of corruption has led to tax evasion with importers sneaking goods into the country at a lower cost.

However, adds Dr Nyandemo, there is also no local capacity to supply what is required in the market.

Import duty

While it is common knowledge that the proliferation of second-hand clothes, popularly known as mitumba, dealt a blow to the textile and apparel sector, Uhuru went ahead and reduced import duty on these items - perhaps afraid of rubbing US President Donald Trump the wrong way and jeopardise Kenya’s access to the lucrative American market through the African Growth and Opportunity Act.

This came even as suspended National Treasury Cabinet Secretary Henry Rotich, in his Budget speech for Financial Year 2018/19, gave the impression that second-hand clothes had been slapped with punitive taxes.

In 2018, Rotich proposed to introduce an import duty of Sh500 per unit or 35 per cent, whichever was higher, on cheap imported textiles.

“Our textile and footwear sector is closing down due to increased unfair competition from cheap imported textiles and footwear,” he said.

“In order to encourage local production and create jobs for our youth in the sector, I have introduced a specific rate of import duty of Sh500 per unit or 35 per cent, whichever is higher.”

Treasury did not increase duty on second-hand clothes but instead increased duty on new fabrics.

The result has been an increase by nearly a third of the quantity of imported second hand clothes from 147,353 tonnes in the 2017/18 financial year to 189,180 tonnes in the year to June 2019.

On food security, the PBO noted that most commercial banks favour large-scale farmers than small-scale producers, who happen to form over 70 per cent of the country’s agricultural output.

“Food security in the country can be achieved if small farmers are given more credit so as to buy modernised farm equipment as well as fertilisers,” said PBO in the report.

Furthermore, they noted, because the country is prone to drought, enhanced credit may lead to farmers investing more in irrigation.

“The slight pick-up noted in credit flow to the agriculture sector could have been occasioned by farmers taking up loans in preparation for the long rains that failed. As such, it is likely that credit to agriculture may contract in the coming months,” said PBO.

Meanwhile, the World Bank, in a report published in August, also noted that the Big Four agenda was crowding out resources from other expenditure items.

Already, the Government has frozen all new development projects save for those related to the Big Four. Moreover, Treasury recently announced cost-cutting measures aimed at saving money for Uhuru’s pet project.  

The Government insists that it has made achievements on the Big Four. To enhance food and nutrition security, its says in its official documents that it had aligned all policies under the agriculture sector towards increasing production, boosting smallholder productivity and reducing the cost of food.

To make Universal Health Coverage a reality, Government said it had launched the pilot phase of the programme in four counties- Kisumu, Machakos, Nyeri and Isiolo.

And on housing, the Government said it had established the National Housing Development Fund which will be responsible for mobilising capital to finance the affordable housing project.

It has also since launched the Kenya Mortgage Refinance Company that will be used to give loans to banks, which would then lend to mwananchi at favourable rates.