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How Kenya can reduce economic inequality

By Mbatau wa Ngai | Oct 29th 2016 | 3 min read
By Mbatau wa Ngai | October 29th 2016
Mathare slums in Nairobi. A recent United Nations Economic Commission for Africa research report showed that Kenya is among countries with the highest number of citizens trapped in poverty in Sub-Saharan Africa despite posting impressive economic growth rates.

A recent United Nations Economic Commission for Africa (ECA) research report should be receiving more attention from the Government and its development partners than it seems to be getting.

For a start, the report reveals that Kenya is among countries with the highest number of citizens trapped in poverty among the Sub-Saharan region despite posting impressive economic growth rates. While it is true that the Government, assisted by the World Bank, has stepped up efforts to becoming a welfare state two years ago with the launch of an expanded social protection plan, the reality is this plan may do more harm than good.

At the very least, a poorly designed and implemented plan might turn into a curse across the country by taking funds away from productive investments. In addition, there is a real and present danger that the rise of a welfare state could breed an entitlement mentality that could grip an increasing number of people. This would have the unintended consequence of reducing the entrepreneurial spirit that Kenyans have come to be know for around the world.

One way of nipping this problem in the bud is to first accept the proposition that age and disability do not automatically translate into inability to fend for one’s needs. This means every recipient of the stipend must be interrogated to find out their levels of skills and abilities. The amount of money given would then be matched to the kind and size of the income-generating venture they would be encouraged to start.

Needless to say, this would require the Government people running the programme to do more than simply dishing out the money. Indeed, it would require that many of them be based in the rural areas where the majority of the poor live. The Government officials may also need to be equipped with new skills that would make their work more cost effective. The flip side is that these efforts would re-integrate the elderly and disabled members of society into the economy both as producers and consumers.

The other Government officials who may need to re-think their work are those working in the country’s sprawling co-operative movement. But, first, the Government, right from State House to the Cabinet level, need to appreciate the potential presented by the movement that is one of the largest in the world. With 12 million members of 15,000 registered co-operatives, the sector controls over Sh400 billion and represents 45 percent of Kenya’s Gross Domestic Product (GDP).

Perhaps, even more significant is the realisation that Savings and Credit Co-operative Societies (Saccos), commanding Sh375 billion, draw the majority of their membership from relatively well-educated and skilled Kenyans. The challenge the Government needs to take up is to come up with measures that would foster a paradigm shift in this group of investors who have overwhelmingly put their money in plots of land mostly in urban areas.

Help bridge the gap

Yet, a little research shows that the members would get higher returns on investment, employ more people and play a bigger role in the country’s development were they to invest in agribusiness, transport, food processing and education.

A research on Kenya’s meat industry done for a Dutch investment company should be an eye-opener, first, to the Government and then to ordinary Kenyans particularly those in Saccos. The research shows that beef, chicken, mutton and goat meat consumption is set to more than double over the next two decades because of the country’s rapidly urbanizing population. The entire value-chain, including deboning, slaughtering, packaging, veterinary services, animal feeds, storage and transportation presents huge opportunities to individuals and groups with investment funds and skills.

This is where a greater government and non-government organisations (NGOs) activism might help to make all the difference. Or is the NGOs’ only role to criticise Government, much as it may deserve the criticism? The Government does not need to walk this road alone. Neither does the new role present an insurmountable difficulty because the bulk of people being released to the market by down-sizing banks could be hired and re-assigned. Re-directing the treasure trove held by co-operatives could help bridge the gap needed in investments to grow the economy by 10 percent.

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