Hard truths about Kenya’s state of the economy

NAIROBI: Every student of Kenyan economic history knows about the November 1972 International Labour Organisation (ILO) Report on Employment, Incomes, and Inequality in Kenya. The report was a shocker, and quickly became the focal document that informed discussions on the structural distortions in the Kenyan economy that concentrated benefits of wage employment among a small subset of the Kenyan public – mostly along ethnic lines. Needless to say, the government of the day ignored the ILO report and its recommendations. And the country lived to pay for this through numerous conflicts over “historical injustices.”

This week the World Bank released a similarly important report on the state of the Kenyan economy. The report puts Kenya’s growth trajectory over the last 15 years in perspective, and finds it wanting. For example, the increase in per capita income in Kenya has lagged the Sub-Saharan African average over the same period. Our savings rate is significantly lower than in our peer economies. And investment as a share of Gross Domestic Product (GDP) is well below what is required to meet our goal of becoming an upper middle-income economy by 2030. Finally, the report pointedly notes that Kenya has two economies – one fueled by consumption and investments in real estate; and another marked by stagnating productivity and incomes.