Last week, the 53rd World Economic Forum (WEF) took place in the snow-filled city of Davos, Switzerland. This year’s forum attracted the largest number of delegates comprising corporate and political leaders, economists, scholars, civil society and A-class artists.
With the theme, “Cooperation in a Fragmented World”, the forum concluded without attracting any meaningful local media attention. Yet, according to an article posted by the consulting giant McKinsey, the five key take-home action points have weighty policy implications for the domestic economy.
Based on the McKinsey’s summary of the forum, ongoing and unforeseen economic disruptions are not expected to slow down anytime soon. Thus, organisations and nations must make building resilience a priority today to survive tomorrow. This means that even as Covid-19 eases out, the economy is not out of the woods yet. Policy choices have threfore to factor in these risks both in the medium and long term.
Secondly, the forum affirmed the fact that in today’s interconnected world, there is no single region or nation that can operate as an island. This implies that the future of globalisation lies in increased diversification as opposed to disengagement from the world economic systems. Our decisions must therefore lead us towards regionalism and serving the global market as opposed to inward-looking ones.
Thirdly, a mutually beneficial future demands that leaders find a balance between energy transition and building energy resilience. This is particularly important for the country as it grapples with high cost of energy that has robbed the country of any competitive advantages in manufacturing and other basic productions. I still wonder what competitive advantage we can dream of if taxes and levies account for 63 per cent of electricity bills to consumers.
The fourth and fifth take-homes from Davos offer interesting and thought-provoking ideas on the future of economics. It raises curiosity that McKinsey argues that companies are finding programmes that target inclusion are not only helping them tap into underserved markets, but also providing them with opportunities to develop a competitive advantage.
This could perhaps be challenging the notion of lack of purchasing power in developing and poor markets as globalisation drives integration of consumption habits beyond national and regional boundaries. It also alludes to the beneficial impacts of social investments that traditional capitalistic economic models are willing to accept.
On the fifth point, the WEF projected that the emerging space economy will open a vast potential to change the modern world economy. This implies that economic sectors that will offer opportunities for growth in future are those that provide innovations in related value chains. It is a sad reality that as the world is turning available global capital into space technologies, we have not even figured out how to feed our people sustainably.
The resounding message from this discussion is that it cannot be business as usual for any country, enterprise or individual who aspires to be relevant and competitive in the economy of tomorrow. Thus, one can only imagine what the generations of our great-grandchildren will think of us when they find other parts of the world making money in space while they have no food.
Following hot on the heels of the WEF deliberations was news that the Kenyan economy is projected to drop from the third largest spot in Sub-Saharan Africa to the fifth, giving way to Angola and Ethiopia. The International Monetary Fund estimates our economy will close at Sh14.58 trillion this year, after ceding ground to Angola and Ethiopia that are projected to post impressive growth rates at 8.6 and 13.5 per cent, respectively, in 2022.
While I can bet this will pass like just any other news item to the political and bureaucratic elites in the country, there are enough grounds to worry at a policy level. This is because it follows a growing trend of negative pointers of an economy in serious turbulence. Months ago, I demonstrated in this column a systemic trend where the country has lost out to her neighbours on the share of intra-regional trade based on recent African Union trade data.
Our immediate East African Community neighbours have pulled out of joint projects without batting an eyelid; several international companies have pulled out of manufacturing in the country in favour of other countries in the region, leaving behind only marketing and distribution offices; our neighbours have successfully ventured into making cars while we can only import; and our farmers now need protectionists policies from competition in the region.
What everybody in the national leadership seems to forget is that countries do not lose their competitiveness overnight. Instead, it is a slow meltdown of one company, one industry at a time over several years. Not long ago, no country in the East African region would have dared to provoke Kenya into a trade war. We were the bread basket for processed food items and industrial supplies. As of today, it is a fact that local traders are importing the very items we exported abroad to the very same neighbour we exported to.
Options moving forward
The Hustler Nation started on high-octane economic diplomacy, especially within the region. However, months down the line, it appears the steam has run out or there was no underlying concrete strategies to reclaim our lost former glory, save for the attendant political bonga points.
It is unthinkable with all this evidence we are entertaining the thoughts of letting loose power bills to pay for the distributor’s inefficiencies and corruption. The National Treasury continues to perpetuate alarmist market sentiments at both the fiscal policy and debt pricing levels. I think we are the only country in the region that has successfully led itself back into the disastrous Structural Adjustment programmes and debt conditionalities from international lenders.
As indicated in my last week’s article, it is time this country’s political leadership – both in government and opposition - understood the times and put a stop the ongoing political shenanigans. The narrow path to reset the economic trajectory of the country requires a broad-based approach to restore consumer confidence, calm market jitters and unlock both domestic and Foreign Direct Investments.
While it is true the country has to raise revenues both in the short and long run, this cannot happen by wiping out any semblance of disposable income left to consumers through taxes. Equally true, choking the local economy out of government spending programmes is a true measure of a lack of economic ingenuity.
I still do not understand how the macroeconomic policymakers imagine they could get adequate milk from a cow they refuse to feed and rob through pending bills.