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Ethiopia may have grown but Kenyans are better off

By Dominic Omondi | Jun 24th 2017 | 5 min read
By Dominic Omondi | June 24th 2017

Kenyans and Ethiopians cross river Dawa on a makeshift canoe at the boarder of Kenya and Ethiopia. (Photo: Boniface Okendo/Standard)

As the world woke up to news that Ethiopia had overtaken Kenya to become Eastern Africa’s largest economy, a number of conflicting developments were also taking place in Addis Ababa.

An article carried by the Weekend Business on June 11, 2017 showed that Ethiopia’s economy had outpaced Kenya’s to become the largest economy in Eastern Africa.

This was happening at a time Ethiopia when was finding it difficult to adequately feed its population. The United Nations has noted that about 7.8 million Ethiopians who had been receiving food aid are in danger of sliding into hunger with relief food expected to run out next month.

It was an embarrassing indictment of a country that had just achieved seminal economic success. Even as millions went without food, Ethiopia, which was the first to launch an electric cross-border railway line in Africa, continued with its signature growth of investing in eye-popping projects, achieving yet another first. It introduced the first smart parking system at a cost of $2.2 million (Sh220 million).

Meanwhile, analysts say Prime Minister Hailemariam Desalegn's administration does not want to admit that things are going wrong.  “There is the making of a real potential disaster here ... because the government will simply not acknowledge the number of people who need help,” an aid worker told the Financial Times.

Living standards for Ethiopians continue to trail those of Kenyans, with the latter enjoying a higher per capita income. Ethiopia, with one of the fastest economic growths in the world, is also, ironically, one of the poorest countries. According to the World Bank, Ethiopia’s per capita income of $619 (Sh63,757) is lower than the regional average. Kenya’s per capita at $1,376 (Sh141,728) is more than twice that of Ethiopia.

“We should not worry over our GDP being overtaken, let us focus on living standards,” said XN Iraki, a lecturer at the University of Nairobi.

There have been claims that Ethiopia’s fast gross domestic product (GDP) growth is masking the ugly reality of poverty in the country. GDP is monetary value of all the finished goods and services produced within a country’s borders in a specific period, usually a year.

Although GDP remains the main measure of a country’s well-being, it has its faults. “But there’s a big, elephant-like problem with that: GDP only accounts for a country’s economic performance, not the happiness or well-being of its citizens. With GDP, if your richest 100 people get richer, your GDP rises, but most of your citizens are just as badly off as they were before,” said Micheal Green, the man who invented the social progress index which tries to go beyond the use of GDP to measure a country’s well-being.

The index looks at three factors: Basic human needs including nutrition, water and sanitation, shelter and personal safety; foundations of well-being including access to basic knowledge, information and communication, environmental quality, and; opportunity which includes personal rights, freedom and choice, tolerance and inclusion and access to advanced education.

Although Kenya (99th) and Ethiopia (126th) are both ranked low in the Social Progress Index 2016, Kenya outshines Ethiopia in all of the three measures of basic human needs, foundations of well-being and opportunity.

Relative to the country with similar per capita income, Ethiopia is doing badly in undernourishment, depth of food deficit, upper secondary school enrollment and rural access to improved water, and basic freedoms such as of speech and movement.

The country also has low mobile subscriptions and press freedom is constrained. No wonder, even as news came out that Ethiopia had overtaken Kenya to become the largest economy in the region, a lot of Ethiopians did not get the news as the government had blocked all access to Internet as students sat for their national exams.

Kenya, on the other hand, is doing well in most of these areas relative to countries with the same per capita income. It has high performance compared to countries in the same income band in areas such as access to basic knowledge, lower secondary school enrollment, internet use and life expectancy.

The country is also doing well in electricity supply, outdoor air pollution, waste-water treatment, access to advanced education and contraception. Notably, Kenya is doing badly in areas of corruption, access to electricity (not to be confused with access to ‘quality’ electricity), violent crime, perceived criminality, political terror and traffic deaths.

Another way of looking at the well-being of a people of a country is through the United Nation’s Human Development Index which “focuses on the richness of human lives rather than on the richness of economies,” according to the 2016 report.

Human development emphasises such values as self-determination, decent standard of living, human rights, access to knowledge, good health, dignity and non-discrimination, which the report thinks are universal.

On this front, again, Kenya ranks ahead of Ethiopia. It is ranked in position 146 while Ethiopia is ranked 174. Kenya might have better living standards than those of its neighbour, but that does not mean Kenyans should rest on their laurels. Ethiopia’s fast-paced economic growth has not been vain.

The high and consistent economic growth has seen the share of people living in poverty decline by 33 per cent from 44 per cent in 2000 to 30 per cent in 2011, according to a 2015 World Bank report.

Dr Martyn Davies, Managing Director of Emerging Markets & Africa at Deloitte Africa, notes that Ethiopia’s stellar growth will soon be felt widely in Ethiopia. “The magic growth number is ‘seven per cent’ because at this rate, GDP doubles every 10 years,” he said.

“Of course, Kenya has a far stronger business sector but is losing out to Ethiopia in attracting foreign direct investment and, in particular, into the value-adding manufacturing sector. Ethiopia has created an ‘effective state’ which is able to drive growth,” said Davies.

“Kenya’s challenge is to restructure and reduce the cost of its public sector bureaucracy and increase efficiency.”

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