Many Kenyans worked from home last Monday. Working from home became standard during COVID-19. Many companies were surprised by the rise in productivity, good evidence that freedom is a catalyst for entrepreneurship.
Oversupervision reduces productivity and innovation in both public and private sectors. The vast majority of Kenyans, the so-called frontline workers, reported to work. But in the late afternoon, roads became impassable.
Taxis charged a premium, more than what the apps indicated. Many “good Samaritans”, including schoolchildren, offered information on “hot spots” for a fee. Rent-seeking or nepotism has devolved that much?
What is really going on? Why demos? One, the government did not pre-empt a volatile situation. Even a rumour about prices going up would have prepared us psychologically.
And no convincing reason has been given for higher diesel prices. Conspiracy theorists came in handy to punish matatu owners because of their ethnicity and political alignment!
The truth is that we consume more diesel than petrol, and higher prices yield the government more tax revenue.
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We need that money to pay our debts, which take about 70 per cent of our tax collections. And we don’t want to default.
Remember, some revenue from fuel sales is securitised to pay bondholders, which is one of the reasons for the rigidity in fuel pricing. Two, the sharp rise in fuel prices came when the cost of living was already an issue.
And everyone knows high fuel prices will lead to inflation. Thank God, it’s raining; inflation could rise further. Some could argue that with no money to spend, inflation is muted. Remember, the 2024 protests were about the high cost of living.
We suppressed the protests, but the underlying economic causes remain unemployment, hopelessness, and exclusion. Kenyans simply went quiet with bitterness and anger. Who can contest that?
Three, the events around the demonstrations were muted. No sharing of photos or videos. This is the clearest evidence that fear is the newest currency in Kenya. Did abductions work?
Freedom to share information and news has been curtailed. I fear that is a precursor to the 2027 poll period. I also fear such censorship could hide human rights abuses. Curtailing freedom to share information, censorship, self-imposed or imposed by the government, is an economic worry.
The vibrancy of the Kenyan economy is premised on that freedom. We do not just share muchene (gossip); sharing ideas increases the chance of someone exploiting an idea economically.
Want evidence? Check the rise in the number of patents granted in Kenya after 1990, when economic and political freedom flourished.
There was an upsurge. Freedom leads to higher productivity and growth. That is why working from home leads to high productivity; workers become creative and innovative with home freedom.
Four, why did boda bodas (motorcycle taxis) operate as matatus downed their tools? Was it divide and rule? The operation of boda bodas made me suspect there was an “invisible hand” in the demonstrations.
Five, never waste a good crisis. The “inactivity” of the Cabinet Secretaries, MPs, and senators as this crisis raged left no doubt who is in charge. That presidential trip to Central Asia might have coincided with demonstrations, but it was well leveraged!
Six, the demonstrations lasted for less than two days. There will be suspicions that someone was paid. It is hard to prove, but check the career progression of those who “negotiated” with the government, including political posts, after 2027. It seems in every crisis, a handshake works. Noted how someone just became famous?
Seven, the government won. One week is a long time in politics, and the government wasted no time in running the show. The meeting with transport leaders, in addition to reducing the tension, has another silver lining: it has shifted attention away from the opposition! Eight, the suspension of demos was all economics. Kenya’s Gross Domestic Product (GDP) for 2026 is about $147 billion (Sh21 trillion). Do your maths; you lose about Sh52 billion a day if the economy stops.
It’s more if weekends are excluded. Remember, most Kenyans live from hand to mouth, and the government collects taxes every day. That bubble had to be pricked. The government learnt something from the 2024 protests, including surveillance. Do not forget we are all children of KANU and its way of doing things.
Where do we go from here? The government intervenes when the market fails. It intervened in the Government-to-Government (G2G) fuel deal.
That has not lowered the fuel prices. Time to return to open tender systems? Time to free the fuel prices? Where has competition ever failed to lower prices?
Out of curiosity, why is lower-standard fuel not cheaper? Don’t we have bei ya jioni (end-of-day clearance sale) for low-standard sukuma wiki (kale) and nyanya (tomatoes)? Why not oil?
The government should subsidise fuel prices like fertiliser. While we can change our lifestyle to cope with rising prices, there is a limit; car owners can shift to matatus. How about those who already walk to work? Money for subsidies can come from taming waste and corruption. Has anyone seen a GK, a county Vitz, or a Demio?
Reduce the taxes and levies on fuel. Why a road development levy when we have an infrastructure fund and a bond? Why an anti-adulteration levy? There is a new levy that can be eliminated. As for the Energy and Petroleum Regulatory Authority (EPRA) levy, we already know the price next month!
The government needs money to pay our debt, with fuel taxes making about 15 per cent of that revenue. The inelasticity of fuel makes it a popular and predictable tax source. We could raise that revenue or more through increased economic activities with cheaper fuel. Can we experiment?
Why are we not exploiting our oil and cashing in on the high oil prices? Accelerate the shift to electric cars powered by electricity from renewable sources such as wind and geothermal. China has tried that with great success.
The ultimate solution is faster economic growth. That will create alternative tax sources and remove over-reliance on fuel taxes. Hopefully, there will be no delay in adopting electric cars because there is no “fuel tax”.
Higher economic growth will give the government more corporate tax, income tax, and VAT. Think of Safaricom or Google’s contribution to taxes. Economic growth is driven by expanding existing firms and spawning new ones through innovation. We need a market for goods and services. You can only crack global markets through quality and innovative products and services. Citizens can’t be innovative, be creative, and seek global markets when fear is a stronger currency than the shilling.
Finally, and in whispers, as long as the Iran war is not over, the possibility of higher oil prices remains. But the 2027 polls could moderate the prices with subsidies and lower taxes; the government can deal with the IMF later.