The making of ‘Kibakinomics’

By MORRIS ARON and TIMOTHY MACHI

He was once a carpenter. Then he tried his hands at the exacting masonry.  When all was not enough to take care of the bills, he even had a stint as a tout in the defunct Othaya African Bus Union fleets.

From Mwai Kibaki’s early experience in the tiny mud hut they shared as a family to the sore nights in an uncomfortable wooden bed only made a little comfy with hay in boarding school, the capitalist in him emerged — resolved and steeled.

In the early school of ‘hard knocks,’ Kibaki picked one vital lesson that endures to date — that to make a living, one must work hard.

This thinking is the very epitome of Adam Smith’s book The Wealth of Nations that forms the basis of modern economics.

Kibaki graduated from Makerere University with a First Class BA degree in Economics, History and Political Science.

He earned a scholarship to the prestigious London School of Economics where he graduated top of the class with in MSc in Public Finance.

Those looking at explaining Kibaki’s legacy say with such credentials, there was no denying he was destined for great stuff.

But now as Kibaki readies to retire from politics as Head of State, economists will be posing the hard questions. What exactly is Kibaki’s economic legacy? Was it all worth the effort?
Boiling Kibaki’s economic philosophy down to bare essentials, James Shikwati, Director of the Inter Region Economic Network, described him as Adam Smith’s half-hearted disciple.

Wild consumerism
“While they both placed a premium on hard work, Kibaki  as President presided over the growth in wild consumerism, credit taking and huge deficits — contrary to Smith’s school of thought,” says Shikwati.

In his book, The Wealth of Nations, Smith challenged people and nations to practice not just hard work and enlightened self-interest but also thrift.

Under Kibaki’s regime, however, Kenyans have witnessed more empty grain stores at both national and village level,” Shikwati, described by Wikipedia as a libertarian economist, says.

“The country’s surging appetite for luxury is epitomised by the many shopping malls dotting streets in cities, increasing number of fuel guzzlers on our roads and the craze for palatial homes,” he says, adding that the fact that Kenyans are rushing in for credit cards point to expenditures that outstrip income and dwindling savings.

Aly Khan Satchu, a Nairobi-based investment analyst, shares in Shikwati’s sentiments, saying Kibaki’s administration has failed to take a knife to the recurrent expenditure.
“In fact, this year for the first time — total projected revenue (Sh956.9 billion) is less than the recurrent spend as captured in the 2012-2013 budget (Sh1.45 trillion),” Satchu says.
Dr XN Iraki, economics lecturer at the University of Nairobi, says throughout his tour of duty, Kibaki stayed on course in his economic philosophy — following the Keynesian model all through. That is, save for the tidings of politics.

Keynesian economics advocate active government intervention in the marketplace — including determining the size and rate of growth of the money supply, interest rates — as the best method of ensuring economic growth and stability.

STATE CONTROL
“Kibaki was a finance minister when the economy was highly controlled, with fixed exchange rates,” says Iraki.

“Now things are better and the market system seems to  be working to some extent but we are yet to see him make specific policy decisions that espouse free enterprise,” he says.
In the marketplace of perceptions, Kibaki is simply said have had a date with luck and not necessarily one who calculated his way to the phenomenal economic growth.

He was finance minister when Kenya was enjoying warm relations with the donor community and the economy was on the roll.

Kenya’s economic growth in 2002 was a miserable 0.3 per cent. A year in power and economy expanded to 2.8 per cent in 2003. It was a steady climb up to 2007 when the economy peaked at 7.1 per cent before dipping to 1.7 per cent in 2008 due to the post-election violence.

Despite the remarkable growth in Kibaki’s first term, some analysts, say he was a fortunate man riding on the spirit of the world’s most optimistic nation then. 
As he ascended to power in 2003, some economists argue, the Kenyan economy had sunk so low it would not get any worse.

Dr Joseph Onjala, a senior research fellow at the Institute of Development Studies, University of Nairobi says inheriting a dead economy was probably the best thing that ever happened to President Kibaki.

“First, it meant that in his quest to revive the economy and put it on a growth path, President Kibaki did not have a benchmark through which he would be measured against,” Onjala says.

“Second, he did not need to employ any special economic philosophy or spend extra energy because any little gain — free primary education programme, revival of collapsed state parastatals or even investing in infrastructure — would all be received with praises.”

“Kibaki took over at a time when the economy was grinding to a halt and it was therefore a lot easier to ride on the national optimism to register some growth — even if marginal,” Onjala says.

Mwalimu Mati, the chief executive of Mars Group is even more candid in his assessment of Kibaki’s economic performance. 

“In am not convinced President Kibaki achieved anything special on the economic front. He just implemented areas that suited him in the Narc manifesto,” observes.
Echoing Mati’s sentiments, Shikwati says for a man who ascended to power on the crest of massive goodwill, Kibaki was expected to do no less than he did.

“For a man who scaled up tax collection in Kenya, he must have had a productive working population in mind, but for some reason, he did less to actually get people to get work and produce,” he says.  

This ‘lucky’ school of thought also seems to bounce its argument off Kibaki’s own management style. President Kibaki is famed for his ‘hands-off, eyes-off and even ears-off’ management style throughout his life in public service.

It is this narrative that seems to inform the portrait that has been drawn of Kibaki over the years. “That he never saw a fence that he didn’t sit on during the period.”

To critics of his legacy, this has made him more of an opportunist rather than economist — taking credit when things work and passing buck when they falter.

Sunil Sanger, an independent analyst, however, cut President Kibaki some slack.
“As finance minister, Kibaki had no meaningful economic legacy largely due to the heavy hand of politics on the economy,” Sanger says, adding that once he assumed power in 2003, Kibaki invested resources building infrastructure and resuscitating weak sectors of the economy.

Infrastructure under Kibaki has clearly received a huge boost — moving from 6.7 per cent of the budget to 22.52 in the 2010-2011 budget.

But its also Kibaki’s investment choices that expose him to criticisms. Shikwati says Kibaki has retained his belief of investing in “high potential areas” philosophy.

“This inadvertently, has bred dissatisfaction from areas that have largely been neglected over the years Like the Turkana,” Shikwati says, adding that the region only started receiving attention with news of huge oil find.

“There has been no radical shift from Kibaki’s mindset on growth in potential areas as opposed to investing in creative growth across the country.”

Kibaki inherited a country ranked among the world’s most unequal nations.  According to a report dubbed Pulling Apart, Facts and Figures on Inequality in Kenya by Society for International Development (SID), Kenya is ranked among the 10 most unequal countries in the world and the most unequal in East Africa

The report observes that the 10 per cent richest households in Kenya control more than 42 per cent of incomes, while the poorest 10 per cent control 0.76 per cent of income. This means that while the top rich Kenyan earns about Sh56, the bottom poor earns Sh1.
This means the gains of economic growth under President Kibaki have largely failed to trickle down to low-income groups.

Far from focusing his energies on addressing the economic divide, Shikwati says Kibaki perfected a system that promotes “state capture” by a few elites to the exclusion of others.
“It is difficult to assume that Kibaki has or is investing to given Kenyans a society that respects pluralism away from the ever dangerous culture of ‘state capture’,” he says.

The one thing analysts agree on is that Kibaki is a hard driving haggler. “From day one in office, Kibaki has maintained the approach of bargaining for exchange of value for the dollar,” says Shikwati.

“If he went begging, it was only for strategic investment projects that will give returns to both Kenyans and the investors.”

Because of his steely stubbornness, Kenya was able to free herself, if only partially, from the yoke of donor dependence.

By 2007, the country was financing 95 per cent of the budget from local resources from a high of 12 per cent in 2002.

STATE CONTROL
The explosion of China onto the scene was particularly relieving for Kibaki, who had roundly dismissed the West for frivolous donor conditionalities in the early days of reign.

The jury is out there on whether this shift to the East delivered value for money or he simply played into the hands of China’s charm offensive through the Forum for China Africa Cooperation.

Staying true to the politician that he is, Kibaki has also on various occasions played roulette with policy. In 2007, against all economic wisdom and caution, he sank Sh15 billion into Kazi Kwa Vijana as a stopgap to unemployment.

Of course the project, which collapsed with an estimated Sh6.6 billion missing, fell short of creating the 300,000 jobs initially targeted.

Even as he takes the homestretch, critics say Kibaki missed the singular opportunity of a lifetime to instil economic discipline in the country. “His failure to prosecute any economic crimes constitute the biggest blot on his legacy,” says Mati.
—Additional reporting by John Njiraini