What is in store for Wanjiku as we start the New Year?
By XN Iraki
| Jan 4th 2022 | 4 min read
The African Development Bank (AfDB) projects that our economy will grow at 5.9 per cent this year, much better than 2020 and 2021.
Sophisticated economists and entrepreneurs easily understand what this means.
When an economy grows, we should have more money in our pockets, sell more goods and services, get more government revenues from tax and more public services thereof.
We assume five things are in order - inflation is in check, waste and corruption are controlled and underground or shadow economy is minimal.
The Kenya Revenue Authority (KRA) website says the weighted average size of the shadow economy (as a percentage of Gross Domestic Product or GDP) is 37.6 per cent in sub-Saharan Africa.
The site should disclose Kenya’s percentage.
Regulations should be facilitative not punitive. Finally, we assume the growth is shared. An economy could grow with only a few benefiting when inequality is high.
This inequality has popularised bottom-up economics and a stipend of Sh6,000 for the disadvantaged.
Progressive taxation and subsidies for necessities like food and shelter ought to reduce inequality. We assume the governments, both county and national will address these factors.
Back to the New Year. This year will continue with the recovery recorded in 2021. We hope the worst of Covid-19 is over. But will Wanjiku feel this growth? Should she look at the New Year with joy or trepidation?
Perhaps, we should start by asking what sectors will do well this year and if Wanjiku will reap from them.
Economic survey 2021 puts agriculture as the leader in contribution to GDP growth with 23 per cent in 2020, transport and storage with 10.8 per cent and followed by real estate with 9.3 per cent.
Wholesale and trade contribute 8.1 per cent, manufacturing 7.6 per cent and construction 7 per cent.
The last two big contributors are financial and intermediation with 6.5 per cent and lastly public administration with 5.5 per cent. This makes a total of 54.8 per cent of the contribution to GDP.
Is Wanjiku in these sectors? She is but does she appropriate enough value from supply chains? An example, she farms but who makes the money from milk, maize, potatoes and other crops?
Her position at the start and end of the supply chain makes her vulnerable to manipulation and economic misfortunes.
In transport, she is a passenger. In real estate, she is far removed from key activities in urban areas. In fact, real estate statistics forgets that Wanjiku owns her house in the countryside no matter the quality.
In wholesale and trade, she is a consumer, at the end of the supply chain. It’s the same on the other key sectors outlined above.
Will 2022 change that? I have no illusions no. The presidential contenders are selling a message that once in power they will change Wanjiku’s fortunes.
That message has been preached since the dawn of capitalism.
Even communism was themed on the end of work and drudgery. Most religions have a similar theme. The reality is that Wanjiku will still work in 2022.
Economic transformation goes beyond political promises.
How would you shift Wanjiku from the ends of the supply chain to somewhere in the middle?
How would you turn consumers into producers? How would you formalise the dominant informal sector?
In other countries, this transformation took centuries but in the East, read Japan or South Korea, it has taken a shorter time.
China took less than 50 years to transform its economy. We set a timeframe of 22 years; from the time Vision 2030 was conceived to 2030. It’s only nine years away.
The New Year should be a continuation of the transformation journey espoused in Vision 2030. Polls could transform politics overnight within the constraints of constitutional order, but economic transformation takes time.
It often takes a generation to transform an economy, when children improve on their parents either by starting new enterprises or professions.
Wanjiku is rarely a beneficiary of old money or inheritance.
It takes time to grow a business or get yourself a name in the profession.
Going through shortcuts, called nepotism or rent-seeking create emotional dissonance and insecurity. Do not try it.
Wanjiku should listen less to political promises but focus on what she does for a living.
She should be proud of it, improve on it, no matter how humble, extrapolate that into the next generation.
Think beyond 2022, it too will come to pass. In your own small way, transform this economy, one day, one year at a time.
Take time to reflect on where you have come from and far you can go.
Happy New Year.
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