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Who will break politics’ tight grip on economics?

FINANCIAL STANDARD
By XN Iraki | December 8th 2015
By XN Iraki | December 8th 2015
FINANCIAL STANDARD

It is quite clear that our politicians are now focused on the 2017 polls, with the already heated political debate likely to be amplified as we approach the election year. This will have repercussions on our economy. Noted the uncanny resemblance between President Kibaki’s first term and President Uhuru’s first term?

It seems this time that politics and economics are closer and more intertwined than in the past. If you listen to the current political rhetoric, there are lots of economic issues involved, from SGR and the Eurobond to the Galana irrigation scheme, Lappset and NYS. Add also the weak shilling and talk of a Government without money.

One could argue that these big projects are political with economic implications. Even NYS has economic implications. Keeping the youth busy has political dividends; they are less likely to cause trouble.

Curiously, oil has not been in the political discourse. Could it be an admission that low prices will postpone the day Kenya becomes an oil exporter? Or are politicians leaving the best for last?

Why this focus on economic issues this time round? Have our politicians suddenly become economists? It seems to me that they, particularly the Opposition, have realised that economics is at the heart of politics.

That is both good and bad. It is good because a focus on the economy will ensure it improves and more Kenyans enjoy better living standards.

It is bad because politicians could make bad economic decisions. Economists tend to think long term, politicians think short term to get votes — they would even oppose what makes economic sense. A good example is the weak shilling, which has led to good returns for tea farmers, yet everyone was up in arms against it.

Easy target

There may be more than meets the eye in the focus on economics. Take the envisaged Okoa Kenya referendum and its bait — more money to the counties. That would mean less money for the Government, which is already struggling to meet its obligations. A government without money is a weak government.

Could the talk on the misuse of Eurobond money have the same objective? To make it hard for the Government to raise funds abroad?

In the run up to 2017, a Government without enough money would be an easy target for the Opposition. How will the Government react to this? What are the expected new sources of funds? Turning East?

You can be sure that whenever issues of money are involved, lots of people lose their rationality.

Some have argued that the focus on corruption is economics, too. If you ensure all loopholes are sealed, it will become harder to get money to run 2017 campaigns, which are expected to be hugely expensive. One way to seal loopholes is to instil fear in those who run Government agencies by having a few run out of their offices.

There is more. If the mega projects on the ground are complete by 2017, they will be selling points during campaigns. If they can be stalled, they would be a political eyesore in the run up to elections. It is no wonder that some of these projects are being contested in courts and Parliament.

If you look at Kenya’s economic growth rate patterns since independence, you can pinpoint key political events, including the deaths of Tom Mboya and JM Kariuki, the attempted coup, introduction of multipartyism, land clashes and post-election violence.

Will this closer tie between politics and economics smoothen our growth pattern or create more volatility?

That will depend on how the key economic player, the private sector, reacts.

So far, the political noise has been drowned out by economic optimism, going by growth data and what is happening on the ground. The number of foreign investors flocking into the country, led by South Africans and Americans (some say to counterbalance China), shows that economic prospects are brighter. My travels around Nairobi and the countryside seem to indicate that things are improving economically.

What do you think?

Food prices

The reaction of the general population matters, too. So far, they are enjoying the dividends of devolution. Good rains will keep food prices low and ensure a surplus to pay for extras like school fees. How come, despite all the political noise, the general population is quiet?

What about in the long run?

Economic growth is likely to cut the Gordian knot between politics and economics. If the economy grows fast enough and Kenya gets a critical mass of middle class citizens, politicians will become irrelevant, as happens in other countries.

The new and assertive middle class will serve as a countervailing force to the excesses of politicians. You cannot be assertive without money. No wonder they say in some parts of the country that if a rich man farts, no one notices.

Perhaps politicians know this day of reckoning is coming and are trying to follow the middle class by focusing on economic issues.

Believe me, politicians have better survival instincts that most of us. They may have realised a fact few of them want to admit: economic realities are making them followers.

The shift to economic issues, distilled off political emotions, may be the paradigm shift we have been waiting for for more than 50 years. Cutting the Gordian knot could make Kenya a Swahili tiger in our lifetime.

The writer is senior lecturer, University of Nairobi School of Business.

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