Excerpt : The legacy of Uhuru Kenyatta and the cautious hope of Kenyans as he exits
INCOMING LEADERS MUST LISTEN MORE
As President Uhuru’s second term comes to an end, many Kenyans are less sanguine about the future, and for good reasons. Covid-19 impact, economic meltdown and the high cost of living has driven many into gloom amidst declining incomes and rising joblessness. The constant messaging from political leaders and government officials that Kenyans ‘must brace for tougher times ahead’ has heightened fears that the worst that is yet to come. With global recession from Ukraine war already hitting many Western nations, uncertainty indeed looms for Kenyan businesses.
Perhaps nothing creates fear and uncertainty in the economy more than the outcome of the general election due in a couple of weeks. Since 2007, the prospects of political violence and fallout over election results has slowed business investments, increased dollar outflows and dampened hopes for peaceful transition. This year is no exception. The President’s fallout with his deputy and frequent remarks that he will not handover to ‘thieves’ and ‘unsavoury’ characters, as well as his deputy’s claims on attempts by Government to rig the election, have not been helpful.
In a 2019 global optimism outlook survey conducted by Dubai Expo 2020, Kenyans were ranked the most optimistic globally about the future, driven by ‘new opportunities being created by a thriving digital technology landscape, decentralised system of government, and a continued uplift in socio-economic conditions across the country.’ That optimist is fast eroding, courtesy of bad economic policies, misplaced government priorities, external shocks and rising corruption in both levels of government. The government’s insatiable appetite for binge borrowing to finance ‘legacy’ projects has fuelled tax increases, devaluation of the shilling and reduced our competitiveness in the region.
As expected, the high cost of living has dominated political debates. Whilst the causes are shared, the proposed solutions in their manifestos and pronouncements are not only diverse but are in many cases unrealistic. Their common denominator in turning around the economy is increased public spending through social welfare, MSMEs support and agricultural subsidies, all of which require substantial funding. With huge public debt already at unsustainable levels, and an overtaxed economy, it is hard to see how these ambitious interventions will be financed.
In an attempt to rescue its image and possible impact on the election race, the Government last week maintained the fuel prices at current levels through further subsidies, and announced new subsidies on maize flour that will reduce prices by half. It is not lost on discerning Kenyans that these measures were announced directly from the State House, a reflection of the high stakes involved. Last month, the Government announced subsidies to lower fertilizer prices amid outcry by farmers. Earlier, it also provided huge subsidies to Kenya Power & Lighting in an attempt to reduce the high cost of energy. The short-lived subsidy strategy is Government’s knee-jerk attempts to remedy its policy failures whose impact may not be adequately mitigated by the next administration in the short term.
For instance, food security which ranks top in the Big 4 Agenda, has remained elusive despite billions spent by this administration on agriculture. Kenya's annual maize production, averaging 40 million bags over the past decade, has been on the decline due to persistent poor planning and unsound policies. Just before end of President Kibaki’s term in 2012, maize flour prices hit sh 130 per 2kg bag, leading to demonstrations in Nairobi. In 2013, Jubilee administration pledged to reduce prices to sh 60 but prices were at sh 153 at the end of their first term. The Government fumbled to provide sh 6 billion subsidy to the millers to manufacture the special 2kg packs with fixed prices of sh 90. The subsidy was scrapped in 2018 when cheaper maize imports from Uganda saved the situation. First forward to 2022, the script is the same as prices reach sh 240.
But it is not only in maize that we performed dismally. Mumias Sugar, the country’s main sugar miller also collapsed. Similarly, poor performance in tea, coffee, milk, livestock reflect Govt’s lack of focus on its key priorities. In particular, failure to enhance value addition and expand market opportunities amid rising cost of inputs adversely hit agriculture sector. Horticulture which earned sh 150 billion in 2020 and employs over 6.5 million equally faced challenges of competitiveness, and over-reliance in the EU market. Manufacturing too has been on the decline, due to uncompetitive business environment.
All these has led to reduced exports, now at a quarter of our imports. This imbalance, coupled with rising cost of imported raw materials has dwindled our forex reserves, with the shilling at an all-time low against the dollar. Businesses have been hit by lack of dollars for their imports as a parallel market drove the dollar rate to sh 125. With IMF conditionalities, and weighed down by its own demand for loan repayments, the Government has opted to bury its head in the sand on the matter.
The war against corruption, elusive as ever, has become the scapegoat for the Government’s policy failures and misplaced priorities. Clearly, the next administration has its work cut out for them. It must address public deficit by rationalizing its structure and operations and limiting its appetite for binge borrowing. More importantly, it will increasingly be put to integrity test as Kenyans demand more accountability for its actions on rising poverty and hunger. It must also create an enabling business environment to enhance our competitiveness and curb the exodus to regional countries.
As Kibaki said at his 2013 swearing-in ceremony, “government exists to serve the people, not the people who serve the government." That statement does not resonate with a majority of Kenyans today as the Government remained out of touch with reality by continuing to pound them with high taxes, levies and regulatory framework that sapped their efforts to expand their economic potential.
The incoming government will need a paradigm shift in its engagement with the citizens. It will need to listen to Kenyans more, and redraw its priorities.