Measure of Ruto's performance by Kenya Kwanza wrong, misleading

President William Ruto at State House, Nairobi, during a past Cabinet meeting. [PCS]

This past week, the president’s communication team courted controversy on social media in attempting to draw comparatives between the Mwai Kibaki and Uhuru Kenyatta eras using the tax revenue to GDP ratio.

While this is a popular indicator in economics to track economic activity in the country, the intended objective in this instance is both misleading and intended to deceive.

The contextual intent here targets to rally the populace to buy into Kibaki’s philosophy of ‘kulipa ushuru ni kujitengemea’. This is probably to deflate the perception that the administration has an obsession with taxing anything and everything. It also sought to demonstrate how the Uhuru administration destroyed the economy as measured by the tax revenue to GDP ratio.

These recent efforts, to scandalize the Jubilee administration’s performance while marketing President Ruto as the latter-day Kibakinomics, has and will fail terribly. The two men are worlds apart in their economic conceptual thought, leadership mien and appreciation of what constitutes public interest, even from a casual observer.

This is not to say the former late president did not miss great opportunities to better the country or oversee regrettable memories such as the 2007 post-election violence. Neither does this assertion try to excuse Jubilee’s economic failure that is not only well documented but also that this column has fearlessly been vocal about.

The fact remains it is cheap and deception of the highest order for the KK officials to attempt to dissociate their leader from the failures of a regime that he served as the second in command for its entire ten years. Authentic leadership demands that the leader admits of their past errors of judgement or failure, share an alternative vision of the future and then appeals to those they lead to join on the journey towards this new future. Applying deception can only beget more deception and eventually a definite end of the road.

Indicator limitations

Any good economic analyst understands the limitations of various economic indicators. For example, the World Bank projects that a tax-to-GDP ratio of 15 per cent or higher to be good for economic growth, and therefore can potentially contribute to poverty reduction. Investopedia.com argues that tax revenues are closely related to the economic activity of the country. Thus, they rise during periods of faster economic growth and decline in periods of recession. Since total tax revenue is considered as part of the country’s GDP, this indicator reflects the component of the national output that the government collects.

Ever since the KK administration got into power, the top leadership has consistently attempted to paint the image that as a country, we are collecting far much less in taxes as a ratio to the GDP compared to other countries in our league or those that left us behind development-wise. The question now is: is this assertion evidentially true?

A simple average analysis of the tax revenue to GDP ratio of comparative countries based on the Local Currency Units (LCU) from the World Bank/IMF data seems to suggest that Kenya is not doing badly compared to her peers and globally. This is based on this indicator for the period for which data is available. The Kenyan data is available from 2014 to 2021. From this database, our simple average tax revenue to GDP ratio is 14.6 per cent for the eight-year period. Compare this with Germany, Singapore, South Korea and Canada at 11.3, 13.3, 14.7 and 12.7 per cent respectively which are developed economies. The ratio for China, one of the most advanced, emerging economies, is at 8.9 per cent for the same period.

In the region, Rwanda, Uganda, Ghana and Ethiopia’s average is 14.0, 11.6, 11.6 and 7.6 respectively for seven years for which data is available. Tanzania’s is an average of 11.4 for five years for which data is available. Ghana and Ethiopia defaulted on their sovereign debts in the recent past if this was anything to go by. The best-performing economies in Sub-Saharan Africa, as per this indicator for the period, are Lesotho, Namibia, South Africa and Botswana at 33.2, 31.1, 24.7 and 23.3 per cent respectively. Denmark and the UK are among the best-performing economies based on this indicator at 34.2 and 25.3 per cent respectively for developed economies.  

Based on this simple analysis, the notion created by KK that Kenya is doing badly in relation to taxes vis-à-vis GDP, is not entirely true. The data indicates that we could be doing much better than some of the advanced and emerging economies. Figuratively, it would imply that our problem, as a nation, may not be about tax revenue but the application of the taxes so collected.

Better Measure

In all fairness, the performance of a president can never be quantified into a single economic indicator. Furthermore, the GDP is not a precise measure of an economy, it is only that economists are yet to find any other better, single measure. History teaches us that there are presidents of consequence and presidents of no consequence. This is based on a set of parameters beyond a single economic indicator. Factsarefirst.com tracks the performance of US presidents based on key policy choices, stock market, job growth and GDP growth indicators.

Thus, if we were to attempt to draw a comparison between President Ruto and the late Kibaki, we must go beyond the tax indicator. For instance, notable policy choices that cemented the Kabaki legacy were Free Primary Education; the six billion seed capital for Micro, Small and Medium Enterprises, Kazi kwa Vijana initiative, public transport reforms, allowing a free hand for his ministers to lead their dockets and revolutionization of the banking sector. Kibaki also significantly transformed the public service through performance management systems, capacity development and compensation structure. 

It is through these policy choices that key sectors were revitalized, access to capital loosened and many industries emerged. The outcome is easily demonstrable in the growth of the stock market, the opening of the banking sector, the emergence of new frontiers in real estate and increased faith in government systems. Unfortunately and tragically so, the Uhuru era dropped off majority of these achievements in favour of big infrastructure debt-driven and corruption-ridden projects.

The KK is now deep into their first term in office and we haven’t seen any specific transformative policy intervention. The signature programmes of the Hustler Fund is losing vibe in the streets and the default rates are now piling up. The housing levy remains hugely unpopular with the masses, the cost of living drags on, the stock market no longer conveys optimism in the economy and jobs for hustlers is a mirage.

This talk of finding young folks jobs in foreign lands is not only an admission of failure but also a strategic economic policy blunder of sending away the greatest national resource the country has. Many advanced and emerging economies are struggling with the less productive ageing workforce while here we are proposing a defective policy to remove them from production into the domestic economy

Responsible governments create opportunities home to harness the best locally available talents into the productive system of the economy, not sending them away to other countries.