Twists and turns that await economy in the new year

A hawker pushes a wheelbarrow loaded with plumps along Thika Super Highway on January 1, 2023. [Denish Ochieng, Standard]

Unlike the New Year, 2022 was very symmetrical. 

But 2023 has a secret that will outdo its non-symmetry. It will be 60 years since Kenya’s independence and 128 years after getting some semblance of a nation by becoming a British protectorate.

The normalisation of the school year will also make 2023 more joyous, never mind the hiccups of the competency-based curriculum (CBC). Domiciling junior high school in primary school was a stroke of genius.

They saved parents boarding expenses and made part of high school education easily accessible to a majority of Kenyans, hopefully raising their aspirations and level of skills if the content is enriched.

Enough with history. What do we expect from 2023? Let’s accept that 2022 was a much better year than the previous two years when Covid-19 made our lives hard and full of fear.

Except for the war in Ukraine, 2022 was a relatively normal year. Elections were expected and occasional droughts have become part of our lives. 

The loss of Azimio la Umoja in the presidential polls was the highlight of 2022. The hustler movement carried the day. In the fullness of time, the truth will emerge about how the system lost. What was the “invisible hand” that tilted the political scale? Was it internal or external? Here are a few things to watch in 2023 in no order of prevalence. 

One is that the war in Ukraine could drain the world economies further. One paradox is why Russian President Vladimir Putin should be waging war in Ukraine. He is 70, the age at which any man would be making peace in the world or among his family members and with himself. 

We must be prepared for the fallout from the Ukraine war with high energy and food prices. But the world has learnt to adjust and the effect will be less severe. But you must not discount Ukraine in your 2023 plans. Two is the end of Covid-19 restrictions in China. This could unleash some growth in the Asian powerhouse, and the rest of the world could benefit from increased demand for oil and a subsequent rise in its price. 

Three, and nearer home, there are prospects of peace in the Democratic Republic of Congo and Ethiopia which are key markets for Kenya. They are some of the biggest countries in Africa and we have hardly penetrated their markets.

We have tried banking in DR Congo and M-Pesa in Ethiopia. We need to do more. Gravity’s theory of trade dictates we trade more with our neighbours, including Somalia. When are we building a superhighway from Garrisa to Mogadishu and another from Dar es Salaam to Kismayu? Somalia should have joined the East African Community (EAC) before DR Congo and South Sudan. 

Four, let’s have more integration within EAC this year. We still have too few education and cultural interactions.

Few Kenyans take holidays in Uganda, Tanzania or the other way around. And there are too few intermarriages! When are we reviving the university of  East Africa? Devolution has overshadowed EAC Integration. 

Five is Rutonomics. We had predicted that after about six months, Rutonomics would self-define. It could take the whole of this year. Interest rates are still high, dampening growth. The Hustler Fund could help moderate high rates. Even at eight per cent, we are yet to borrow enough money to start a business or a factory.

Government borrowing is still high. If Kenya kwanza hits the Sh5 trillion tax revenue target, it will be a game changer, which would reduce our appetite for borrowing. 

I have argued that one easy way to raise more taxes is to reduce the tax rate. Remember the Laffer’s curve?  We also need to play music to taxpayers. The Kenya kwanza administration has signalled it will not abandon mega projects and will extend SGR to the Ugandan border. Such projects are good economic stimulus.

The new administration is, however, not clear on subsidies- what it should keep and remove. The government is also silent on cash transfers to the most vulnerable members of society.  We are yet to see Rutonomics, distinct from Uhurunomics, which itself was a subset of Kibakinomics.

The International Monetary Fund (IMF) and its conditions must be factored into Rutonomics. We rarely heard of IMF in Kibakinomics.

Rutonomics runs the risk of disillusionment. The voters might feel change is not coming fast enough. Remember political promises are rarely filtered by economic reality, particularly in the campaigns.

Prices do not come down after the polls and jobs are not created overnight. Voting is easier than turning around the economy. 

The growth rate is expected to remain around five per cent says, according to the World Bank without lots of trickling down.

The bottom-up mantra is yet to take root. The mindset of its key players - the hustlers - must change to see possibilities cross-pollinated by patience. The trickledown system will not be dismantled overnight.

Maintaining the momentum built during the campaign is Kenya kwanza’s biggest task.

The new administration must think beyond 2023. I wish you a happy 2023, but it’s your responsibility to make the year prosperous.